Impacts of Water Privatization in Guayaquil, Ecuador:

Due to the media campaign paid as much by ECAPAG (Regulatory Agency that Defends the Interests of Interagua-Bechtel) and the company Interagua itself, which also has an information campaign in the media and in its visits to the National Constituent Assembly. We return as we continue to uncover documentation about this great business, and we share the many different reasons for which Interagua must not continue to be the provider of water and sewage services in Guayaquil. Simply because it has not complied, nor will it comply with its contractual obligations, because it prioritizes financial gain. Below you will find the economic, legal and social reasons why the concession must come to an end.

As an alternative for guaranteeing the human right to water, we propse the creation of an autonomous municipal company with the participation of consumers and citizens that manages water and sewage services in an integral fashion.

1.- ECONOMIC REASONS:

1.1. – Interagua does not invest out of its own pocket.

All of the investment for new works and maintenance provided by the consumers, the national government and the municipal government in Guayaquil. It is a business assured for more than $1,000 million over the 30 years of the concession contract. In the contract's clauses, ECAPAG never guaranteed the investment of the $520,000,000 that were required to rehabilitate and provide potable water, sanitary sewage and rainwater drainage services to all people in Guayaquil, and they put the words "It is estimated that the investments will be of $520,000,000 during the 30 year duration of the concession."

1.2 – The cost of water has risen by 180% for the poorest consumers.

During the first 6 years of the concession, the consumers who use water for domestic purposes (between 0 and 60 cubic meters) pay more per unit than the large-scale consumers who use water for business purposes.

1.3 – Interagua charges 80% for sanitary sewage services.

In relation to water consumption by consumers, the paradox is that waste waters and industrial, commercial and domestic wastes are deposited in the rivers and estuaries of Guayaquil without secondary treatment.

1.4 – Interagua illegally charges for average consumptions.

In sectors of the city that do not possess meters, nor count on water services, Interagua charges for estimated consumptions. This violates the Consumer Defense Law.

2.- LEGAL REASONS:

2.1.- The contract itself establish clauses for ending the contract for violations by the concessionaire.

a. Clause 20.3.1.- Serious and repeated breaches of contract in provision of the service.

b. Clause 20.3.2.- When sanctions pass $1 million in one year. Interagua was fined for breaches of contract in 2007 for more than $1.5 million.

c. Clause 20.3.5.- Serious negligence in the execution of its obligations.

d. Clause 20.3.7.- Water rates charged above authorized levels.

3.- SOCIAL REASONS AND REJECTIONS OF CORRUPTION:

3.1.-Illegal structure in the commission that approved bids.

Of the three people who made up the commission for reviewing bids and granting the contract, two of them continue working for the concession, one of them Economist Edgar Naranjo, Executive of Parnell Kerr Foster (External Auditor of the Concession) and the other was Eng. Jose Santos Garcia, Executive of ECAPAG.

3.2.- Interagua bills excessively to consumers all over the city.

The last resolution from the Constitutional Tribunal, in response to a request by the Public Defender's Office, orders that Interagua reimburse illegal collections to more than 40,000 consumers in Bastion Popular. This resolution is linked to other sectors of the city where amounts are billed in excess of what is permitted by the Consumer's Defense Law.

3.3.- Interagua requires consumers to sign "Payment Agreements" imposed upon them by the company.

A payment agreement is an agreement between parties. Interagua imposes the payment agreement on penalty of not re-establishing water services whether cut legally or illegitimately. There is no agreement here: there is only imposition.

3.4.- Interagua does not comply with the principal goal of the contract which is to provide potable water to Guayaquil.

Potable water means water apt for human consumption. In the text of the complaint placed before the CAO are the laboratory tests where it is established that water provided by Interagua is not apt for human consumption.

Absolutely no one in Guayaquil drinks water directly from the tap, which evidences a total lack of faith in this company.

3.5.- The Water Rates are discriminatory.

Those who consume the least water and use it for personal and family use pay more (180% more than what was charged for the same consumption prior to the concession).

3.6.- Interagua has set out expressed contempt to the orders of authorities, including ECAPAG and judges.

Authorities that have ordered the reconnection of services to the consumers, as in the case of Ramon Arreaga Quinto, who managed to obtain a warrant for the arrest of the president and the chief executive of Interagua for contempt of court have been laughed at by Interagua.

3.7.- Interagua provides a terrible and inefficient service to the consumer, the same is ineffective and organized exclusively for the benefit of the company. Irrefutable proof of this is that there are currently 103 cases against Interagua in the Supreme Court of Guayaquil, en 2007 the Public Defender's Office received close to 2,000 compaints (or approximately 6 complaints per day), and 2,100 complaints have been filed with the Observatorio for unreasonably high bills and arbitrary shut-offs of water services. Currently 92,000 poor families in Guayaquil have outstanding debts with Interagua and 32,000 families have the services cut off.

3.8.- It is necessary that the human right to water be guaranteed.

It is important to declare in the National Constitution that water is a human right, public good and public service, without profit goals, administered by the State, the Municipal governments and Community Water Operators with civic participation.

More arguments and more than 2,000 documented cases of Interagua's victims may be found in our offices, located at: Malecon 208 y Juan Montalvo, 3er piso. Phone numbers 2314438-2560241-097922220 or in the book Murky Waters found online at: http://www.micometa.org.ec/descargas/Aguita%20Amarilla%20por%20Emily%20Joiner.pdf.

e-mail: observatorioserviciospublicos@gmail.com, tlf. 2314438 fax 2560241

Guayaquil, June 15, 2008

Cesar Cardenas

DIRECTOR'S COMMITTEE, OBSERVATORIO CIUDADANO DE SERVICIOS PUBLICOS



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Cesar Cardenas Ramirez
Celular 097922220
Tlf. 593-4-2314438-2560241
Malecon 208 y Juan Montalvom Piso 3
Guayaquil-Ecuador
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Marcela Olivera F.
Latin America Coordinator
Water for All Campaign
Casilla 1099
Cochabamba, Bolivia

molivera@fwwatch.org
www.foodandwaterwatch.org
Phone: +591-4.458.8725
Fax US: +1-413.556.3474
Cel: +591-7222.0216