I don’t want to rain on anyone’s parade, but there’s something fishy about the recent announcement proposing debt relief for Africa’s poorest nations. When the G8 leaders announced the plan, it was greeted with almost universal delight, as well it should.
Crippling debt is an enormous problem for impoverished nations and wiping that debt out is something to be encouraged, lauded, and celebrated. In fact, I’d love to hold hands with Bob Geldof, Bono, and the G8 leaders and sing Kumbaya — okay, maybe not all the G8 leaders, but you know what I mean. I like happy news.
But there’s a problem with the G8 announcement. There are nefarious strings attached — conditions set by the International Monetary Fund (IMF) and World Bank, whose president is neo-conservative Paul Wolfowitz, one of the chief architects of the Iraq invasion.
These conditions have the potential to make the relief worse than the debt itself.
While the idea of debt relief is something to celebrate, we need to inform ourselves about the tactics and pitfalls hinted at in the wording of the announcement so we can keep these leaders true to the spirit and goals of the plan. Here’s a summary of the plan from CNN:
“LONDON, England — Finance ministers from the world’s wealthiest nations have agreed to a historic accord to cancel up to $55 billion worth of debt owed by the world’s poorest nations.
“The Group of Eight (G8) ministers — meeting for a second day Saturday in London — backed a deal that calls for an immediate scrapping of 100 percent of the debt owed by 18 countries.
“Those countries — many in sub-Saharan Africa — owe about $40 billion to the World Bank, the International Monetary Fund and the African Development Bank.”
The problem is with the “conditionalities.” These are described as bringing governments into compliance, stopping corruption, and making the countries open to trade and investment. Again, all worthy goals when taken at face value, but what do the G8 leaders mean by these phrases?
We don’t have to guess. They have been using this same wording for a long time and we have ample evidence of what they intend, as well as precedent on how it has worked out.
World Bank has a program, started in 1996, with guidelines that spell out the details. It’s called the Heavily Indebted Poor Country initiative, or HIPC. Countries have to meet standards for “good governance” to be granted HIPC status. The Bretton Woods Project, an independent British network that tracks monetary affairs, states:
“The HIPC initiative has been heavily criticised by NGOs [non-governmental organizations] for delivering too little debt relief too slowly and for imposing damaging conditions requiring liberalisation and privatisation.”
What’s this? Liberalisation and privatization aren’t at issue here, are they? No one said anything about privatizing anything, did they? Research reveals that’s because they call it something else now — either public-sector participation (PSP) or public-private partnership (PPP).
Here’s what happened when Uganda, considered a model client by World Bank, was given HIPC status. From The Guardian:
“To qualify for World Bank funding, our model client Uganda was forced to privatize most of its state-owned companies before it had any means of regulating their sale. A sell-off that should have raised $500m for the Ugandan exchequer instead raised $2m.”
Okay, but did it stop corruption?
“The rest was nicked by government officials.”
Hmmm, but what in the world could we want from these impoverished sub-Saharan countries?
“Unchastened, the World Bank insisted that – to qualify for the debt-relief program the G8 has now extended – the Ugandan government sell off its water supplies, agricultural services and commercial bank, again with minimal regulation.”
Water is becoming a major global issue and corporations have their rationalizations all worked out:
“Private water companies view federal financial assistance for water and wastewater infrastructure as a “subsidy” that gives cities an unfair competitive advantage over private water companies. They oppose increased federal funding for water and wastewater systems, in the hope that the more financially troubled a city’s system, the more receptive city leaders will be to ceding control over that system to a private operator.”
You may have heard rumbles about this before. Maybe something about there being a water war in Bolivia, one of the pilot countries for the HIPC initiative. World Bank and IMF have been having their wicked way with our neighbors for a long time and that situation hasn’t worked out so well.
“In early April the often-forgot country of Bolivia, tucked away in the Andes, grabbed the world’s attention when the city of Cochabamba erupted in a public uprising over water prices. In 1999, following World Bank advice, Bolivia granted a 40 year privatization lease to a subsidiary of the Bechtel Corporation, giving it control over the water on which more than half a million people survive. Immediately the company doubled and tripled water rates for some of South America’s poorest families.”
Bechtel had to pull out of Bolivia due to the popular uprising, leaving the United States without a major player in the water business. The major players now are the two countries pushing the current debt relief plan — Britain has RWE/Thames, and France has both Suez/ONDEO and Vivendi (now Veola).
“Cochabamba, Bolivia — Five years ago the issue of water privatization exploded here when massive public protests forced out the California engineering giant, Bechtel. Within weeks of taking over the city’s public water company, Bechtel hiked up rates by as much as 200%, far beyond what the city’s poor could afford to pay.
“Now a new Bolivian water revolt is underway 200 miles north in the city of El Alto, a growing urban sprawl that sits 14,000 feet above sea level and is populated by waves of impoverished families arriving from the economically desperate countryside.
“As in Cochabamba, the public water system of El Alto and its neighbor La Paz, the nation’s capital, was privatized in 1997 when the World Bank made privatization of water a condition of a loan to the Bolivian government. The private consortium that took control of the water, Aguas del Illimani, is owned jointly by the French water giant, Suez, and a set of minority shareholders that includes, among others, an arm of the World Bank.”
The G8 countries, World Bank, and IMF are up to their eyeballs in helping multi-national corporations pillage poor countries — sad but true. When they announce a plan to help which includes the very program which has been facilitating the pillaging, it bears watching.
Right now, they’re basking in global goodwill over the debt relief announcement. If they later squeeze those countries dry, they’ll try to do it quietly.
It’s up to us to watch, listen, and make a splash if it happens.
Great diary, Izzy. I did a diary a few weeks ago when everyone was still full of praise for the debt relief. I cross-posted it at EuroTrib and Jerome immediately declared it bullshit (he later apologised for that, but still obviously thought it was indeed bullshit).
I agree with you. I read the same article at the Guardian and almost did another diary. I am glad that you posted this. Who in their right mind would ever believe anything that Bush and Blair are in cahoots on?
Poor Africa.
Thanks, nag. I’m glad you weighed in on this one. I remember your diary — that was a good article you linked. I’d been researching this for a post about Bolivia’s water wars, when that happened and I commented and put some links in your EuroTrib diary. Keep up the good work!
Kind of like the finance mob saying to their debtors, “You don’t owe us anything any more–just give us all your water, and we’ll sell it back to you later.”
And what does the price go to when you’re really thirsty?
This will wind up hurting the poorest of the poor in the poor countries, as they will never be able to afford to pay French and British prices for the plumbing hookups to get water to their houses, or they will seldom be able to take a bath–except when it rains.
You hit the nail on the head. When Bechtel took control of the water in the poorest area of Bolivia, one of the poorest countries in South America, they immediately doubled and tripled the monthly rates, charging $20 – $30 a month in a population that averages $100 a month income.
Many could not afford to get their water hooked up at all. Bechtel was charging up to $300 for the hook up — equal to six months’ salary. It truly was a matter of life or death — it’s been described as people having to choose between food and water.
There was also the issue of the spread of disease, as people turned to gathering rain-water and using untreated water from elsewhere. When the population rebelled and Bechtel was forced to leave, they filed suit against Bolivia for 25 million dollars.
We should have known there would be a catch in the fine print! Thanks for pointing this out.
Susanhu did a good diary back on 6/29 on water privatization as well, for anyone that missed it – worth checking out.
Thanks for the link! I had missed that one somehow. And that was a great comment of yours on some of the pitfalls of water privatization. The thread bought out a good point, too — it’s happening here as well. My link to Public Citizen in this post, explaining the rationalizations, was from an action alert to U.S. mayors.
IIRC, Enron was getting ready to move heavily into water trading when it collapsed. It owned some water companies in South America & Europe, and I think they were looking at Africa: