What we call ‘the World Bank
World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.
It consists of several closely associated institutions, among which :
1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;
2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;
3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.
As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.
’ is in fact two bodies, the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The World Bank is a subsection of the World Bank Group, which includes three more bodies: the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID
ICSID
The International Centre for the Settlement of Investment Disputes (ICSID) is a World Bank arbitration mechanism for resolving disputes that may arise between States and foreign investors. It was established in 1965 when the Washington Convention of that year entered into force.
Contrary to some opinions defending the fact that ICSID mechanism has been widely accepted in the American hemisphere, many States in the region continue to keep their distance: Canada, Cuba, Mexico and Dominican Republic are not party to the Convention. In the case of Mexico, this attitude is rated by specialists as “wise and rebellious”. We must also recall that the following Caribbean States remain outside the ICSID jurisdiction: Antigua and Barbuda, Belize, Dominica (Commonwealth of) and Suriname. In South America, Brazil has not ratified (or even signed) the ICSID convention and the 6th most powerful world economy seems to show no special interest in doing so.
In the case of Costa Rica, access to ICSID system is extremely interesting: Costa Rica signed the ICSID Convention in September, 1981 but didn’t ratify it until 12 years later, in 1993. We read in a memorandum of GCAB (Global Committee of Argentina Bondholders) that Costa Rica`s decision resulted from direct United States pressure due to the Santa Elena expropriation case, which was decided in 2000 :
“In the 1990s, following the expropriation of property owned allegedly by an American investor, Costa Rica refused to submit the dispute to ICSID arbitration. The American investor invoked the Helms Amendment and delayed a $ 175 million loan from the Inter-American Development Bank to Costa Rica. Costa Rica consented to the ICSID proceedings, and the American investor ultimately recovered U.S. $ 16 million”.
https://icsid.worldbank.org/apps/ICSIDWEB/Pages/default.aspx
). Let see what is hiding behind those names and acronyms.
The International Bank for Reconstruction and Development (IBRD) was created at Bretton Woods (USA) in July 1944, by 45 countries that had met for the United Nations Monetary and Financial Conference. In 2024, it consists of 189 member countries, with Nauru the most recent new member (since April 2016). [1]] To become members of the IBRD, countries first have to be members of the IMF
IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.
When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.
As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).
The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
http://imf.org
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The Bank’s initial objectives were to provide public money for the reconstruction of Western Europe after the Second World War, to be a reliable ally of Washington and thus to provide an outlet for goods produced by US companies. Later it turned to financing the development of countries of the South, playing the part, in its own words, of ‘a vital source of financial and technical assistance to developing countries’. [2] The financing choices are in fact very selective and questionable.
Four other bodies were created to become the ‘World Bank Group’; they are assigned the following missions:
• 1956: The International Finance Corporation (IFC): financing the private sector in the South;
• 1960: The International Development Association (IDA): lends to the poorest countries;
• 1966: The International Centre for Settlement of Investment Disputes (ICSID): supranational tribunal where a corporation may take legal proceedings against a state if it considers that a decision is unfavourable;
• 1988: The Multilateral Investment Guarantee Agency (MIGA): guarantees
Guarantees
Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee).
the interests of private companies in the Southern countries.
Further mentions of the World Bank will include the IBRD and IDA.
An undemocratic leadership
Each of the member countries names a governor, usually its finance minister, to represent it. They meet once a year (in autumn, two years out of three in Washington) as the Board of Governors, the senior decision-making body, to set the main policies. [3]]The Board makes the important decisions (admitting new members, preparing the budget, etc.) Also, the spring meeting in Washington (in common with the IMF) assesses the action of the World Bank and IMF.
For the day-to-day management of World Bank missions, the Board of Governors delegates its authority to 25 executive directors. Eight countries – the USA, Japan, Germany, France, the UK, Saudi Arabia, China and Russia – name their own executive directors. The other 17 directors are appointed by 17 surprisingly heterogeneous groups of countries: a rich country is grouped with Southern countries and of course it is the rich country that names the executive director to represent the whole group.
The executive directors normally meet three times a week and their meetings are chaired by a president elected for five years. Contrary to all democratic principles, it is understood that the post is reserved for the representative of the United States, chosen by the president of the United States. The executive directors do no more than rubber-stamp the choice.
The connivance between business, US big capital and the World Bank is immediately perceptible when we become aware of where all the 14 US citizens who have succeeded each other at the post have come from.
Eugene Meyer, the first president, lasted no longer than eight months. He was publisher of the Washington Post and was formerly tied to Lazard Frères. The second, John J. McCloy, was a big corporate lawyer well established on Wall Street. He went on to be American High Commissioner for occupied Germany and Chairman of the Chase Manhattan Bank. The third, Eugene R. Black, was vice-president of Chase National Bank and went on to be special adviser to President Lyndon B. Johnson. The fourth, George D. Woods, also a banker, was president of the First Boston Corporation. Robert S. McNamara had been the CEO of the Ford Motor Company, then Defense Secretary for Kennedy and Johnson. His successor, Alden W. Clausen, afterwards became president of the Bank of America (one of the biggest US banks, deeply involved in the Third World debt crisis). In 1986 the post went to Barber Conable, former Republican member of Congress, then in 1991 to Lewis T. Preston, former CEO of the J.P. Morgan bank.
The ninth president of the World Bank, between 1995 and 2005, was James D. Wolfensohn, former director of the investment banking section of Salomon Brothers in New York. After leaving the World Bank, in March 2005, Wolfensohn joined Citibank-Citigroup, one of the world’s biggest banks. He was succeeded by Paul Wolfowitz, formerly second in command at the Pentagon, who was involved in the 2003 invasion of Iraq by a coalition under US orders. Wolfowitz was forced to resign over questions concerning his influence on the career of his girlfriend, who was on the World Bank payroll. He was replaced by Robert Zoellick, who had been the White House deputy chief of staff under George H.W. Bush, United States trade representative, deputy secretary of state, and a top executive of the bank Goldman Sachs. In this latter capacity Zoellick was heavily involved in the July 2007 subprimes crisis. From 2012 to 2019, Jim Yong Kim, also a US citizen, was at the head of the World Bank before resigning to join a private investment fund
Investment fund
Investment funds
Private equity investment funds (sometimes called ’mutual funds’ seek to invest in companies according to certain criteria; of which they most often are specialized: capital-risk, capital development funds, leveraged buy-out (LBO), which reflect the different levels of the company’s maturity.
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David Malpass took over from Kim in April 2019. Malpass had worked for the US Treasury Department and the State Department under Ronald Reagan and Bush Sr before becoming chief economist at the big investment bank Bear Stearns, up to its failure in 2008 as a consequence of its role in creating the subprimes speculative bubble
Speculative bubble
An economic, financial or speculative bubble is formed when the level of trading-prices on a market (financial assets market, currency-exchange market, property market, raw materials market, etc.) settles well above the intrinsic (or fundamental) financial value of the goods or assets being exchanged. In such a situation, prices diverge from the usual economic valuation under the influence of buyers’ beliefs.
. In August 2007, Malpass published an article in the Wall Street Journal reassuring readers on the well-being of the financial markets, going so far as to claim that ‘Housing and debt markets are not that big a part of the U.S. economy, or of job creation.’ In May 2016 he joined the Donald Trump election campaign. He was rewarded by being given the posts of Under Secretary of the Treasury for International Affairs and then president of the World Bank. In June 2023, Ajay Banga, the 14th President of the World Bank, began his term of office. Ajay Banga was born in India and became an American citizen in 2007, and it was partly for this reason that he was elected to the post of President. He was CEO of Citigroup, one of America’s largest investment banks, for its Asia-Pacific operations between 2005 and 2009, before becoming CEO of Mastercard.
Table 1 – The 14 presidents of the World Bank since 1946
Name
Period in office
Antecedents
Eugene Meyer
June 1946 – December 1946
Wall St. investment banker and editor of the Washington Post
John McCloy
March 1947 – June 1949
Director of the Chase National Bank (which became Chase Manhattan)
Eugene Black
July 1949 – December 1962
Vice-President of the Chase Manhattan Bank
George Woods
January 1963 – March 1968
President of the First Boston
Robert McNamara
April 1968 – June 1981
CEO of the Ford motor company and defense secretary for Kennedy and Johnson
Alden Clausen
July 1981- June 1986
President of the Bank of America
Barber Conable
July 1986 – August 1991
Congressman member of the Banking Commission
Lewis Preston
September 1991- May 1995
President of JP Morgan and Co
James Wolfensohn
June 1995 – May 2005
Bank H Schroder, then Salomon Brothers and President of James D. Wolfensohn Inc.
Paul Wolfowitz
June 2005 – June 2007
Deputy Secretary of State
Robert Zoellick
July 2007 – June 2012
Deputy Secretary of State under George W. Bush
Jim Yong Kim
July 2012 – February 2019
Doctor, President of Dartmouth College ; head of the WHO Département VIH/SIDA ; joined Global Infrastructure Partners
David Malpass
February 2019 – June 2023
Chief economist at investment bank Bear Stearns, Under Secretary of the Treasury for International Affairs under Donald Trump
Ajay Banga
June 2023 – present
Former CEO of Citigroup, former CEO of Mastercard
An unequal distribution of voting rights
All member countries are allocated a number of votes that determines the weight of their influence. A basic right of 250 votes is allocated to each country plus a supplementary share
Share
A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings.
determined by a precise and complex calculation. Unlike the UN General Assembly, where each country has one vote (which is not the case with the Security Council, where five countries hold vetoes), this system grants voting power directly related to financial participation. However, unlike a shareholder in a corporation, one country cannot unilaterally increase or decrease its funding level to increase or decrease its voting rights and weigh more. The system is watertight.
Table 2 – Voting rights of IBRD directors, 2024 [4]
Country%Group presided by%Group presided by%
United States
15,99
Belgium
4,69
Sweden
3,22
Japan
7,09
Netherlands
4,15
Algeria
3,20
China
5,92
Australia
4,13
Switzerland
3,10
Germany
4,22
Spain
3,69
Indonesia
2,84
France
3,87
India
3,66
Chile
2,24
United Kingdom
3,87
Canada
3,63
Kuweit
2,22
Russia (+ Syria + Belarus)
3,13
Italy
3,52
Cabo Verde
1,96
Saudi Arabia
2,75
Brazil
3,45
Tanzania
1,82
Nigeria
1,65
Source: World Bank [5]
The Southern countries simply do not measure up against the Northern countries, who maintain their controlling influence and systematically impose their viewpoint.
Countries’ demographic weight and their influence are flagrantly incommensurate.
Table 3 Voting rights of IBRD directors in 2024 compared to population
Country or group
Estimated population in 2023 (in millions)
Voting rights at IBRD in October 2024 (%)
Group presided by India
1,624
3.66
China
1,410
5.92
Group presided by Tanzania
524
1.82
Group presided by Cabo Verde
364
1,96
USA
335
15.99
Nigeria, Angola, South Africa
321
1,65
Russia (+ Syria + Belarus)
176
3.13
Japan
125
7.09
France
68
3.87
Saudi Arabia
37
2.75
Source: World Bank, United Nations
On top of this unfair allocation of voting rights the US has imposed an 85 per cent majority vote for all major decisions. Being the only country to wield more than 15 per cent of the voting rights, that gives them a built-in veto on major decisions. The European Union countries, who between them could make up 15 per cent, generally stay in line with Washington. On the one occasion when they did threaten to use their bloc vote, it was in their own selfish interest
Interest
An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set.
. [6] It is imaginable that one day a group of Southern countries might manage to build a bloc vote to oppose a US candidate for the presidency of the Bank. However, up to now the US Treasury has been the uncontested master on board, with the power to block any change that runs counter to its interests. That the World Bank’s headquarters is in Washington, a stone’s throw from the White House, is no coincidence. Over time, adjustments of the voting rights have allowed China to gain a little more weight. But while the US have agreed to a reduction in their share of voting rights, they have made sure that their share stays above 15 per cent, thus maintaining their veto.
Dubious financing choices
The IDA (International Development Association) is officially an ordinary association, but woven into the IBRD, which directs it. In 2024, the IDA had 175 member countries, of which 78 met the conditions for being granted loans – that is, an annual income per head of population less than $1,335 in 2025 (the figure is updated annually). [7] These countries take on long-term low-interest loans (30 to 40 years with grace periods of 5 to 10 years). The funding comes from the rich countries that replenish the available resources every three years and also from gains on loans made to middle-income countries.
Other Southern countries’ borrowing may be from the IBRD at close to financial-market rates to fund projects that strict banking practices would approve as potentially profitable, just like an ordinary bank. The World Bank’s creditworthiness is guaranteed by the rich countries who are the biggest stakeholders; this makes it possible for it to borrow funds on the financial markets at favourable interest rates
Interest rates
When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…
The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
. The IBRD then lends those funds in 15- to 20-year loans.
This privileged position enables the IBRD to generate margins for its administrative operations and even to post a largely positive operating result: between US$1.144 billion and US$3.990 billion per year for the financial years 2021 to 2024 (after a loss of US$42 million in 2020). Of the US$91.4 billion disbursed by the World Bank in 2023, US$25.5 billion was disbursed by the IBRD. [8]
With indebtedness growing, the World Bank has, in coordination with the IMF, developed its action in a macroeconomic perspective to impose ever more structural adjustment
Structural Adjustment
Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.
Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).
IMF : http://www.worldbank.org/
policies. When providing direct funding of these reforms through its specific loans, the Bank liberally ‘advises’ countries subjected to IMF therapy.
Regional development banks are aligned with the World Bank
Numerous regional banks exist: the African Development Bank (AfDB), the Asian Development Bank (AsDB), [9] the Inter-American Development Bank (IADB) and also the European Investment Bank (EIB). These banks are in no way alternatives to the World Bank. They are almost perfectly aligned with the same policies and the same criteria, and their results are just as negative.
The countries of the North have a strong presence in their capital (and therefore in their decision-making). As far as the African Development Bank (AfDB) is concerned, the 54 regional members represent 58.63% of the capital, the 27 non-regional countries 41.37% (6.53% for the United States, 5.45% for Japan, 1.28% for China and as far as the former European colonial powers are concerned: 4.13% for Germany, 3.70% for France, 2.40% for Italy, 1.88% for the UK, 1.07% for Spain 0.65% for Belgium, 0.24% for Portugal).
At the Asian Development Bank (ADB), the 41 borrowing regional member countries own 33.17% of the capital (6.43% for China), the 8 non-borrowing regional member countries represent 30.22% (15.57% for Japan, 5.77% for Australia, 5.03% for South Korea, etc.), and the 19 non-regional countries 36.61% (15.57% for the United States, 4.32% for Germany, etc.).
At the Washington-based Inter-American Development Bank (IDB), the 26 borrowing member countries own 50.01% of the capital, while the 2 non-borrowing regional member countries (the United States and Canada) own 34.01%, of which the United States alone owns 30.01%. Extra-regional and non-borrowing countries account for 15.98%, including 5.20% for Japan and 1.96% for Spain. [Figures as at 31 December 2023 for the 3 banks, taken from their annual reports].
The growing influence of national and international development banks
Aside from the World Bank, there are other national and international development institutions. In some cases they compete with the World Bank Group, the IMF and the traditional bilateral creditors in the Paris Club
Paris Club
This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.
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One such institution is the New Development Bank (NDB), based in Shanghai. The NDB was officially created on 15 July 2014 at the 6th BRICS
BRICS
The term BRICS (an acronym for Brazil, Russia, India, China and South Africa) was first used in 2001 by Jim O’Neill, then an economist at Goldman Sachs. The strong economic growth of these countries, combined with their important geopolitical position (these 5 countries bring together almost half the world’s population on 4 continents and almost a quarter of the world’s GDP) make the BRICS major players in international economic and financial activities.
Summit held in Fortaleza, Brazil. The NDB granted its first loans from the end of 2016. The five founding countries each have an equal share of the Bank’s capital and none has the right of veto. In addition to the five founding countries, Bangladesh, the United Arab Emirates, and Egypt are also members of the NDB. Uruguay is in the process of making its membership effective. [10] The NBD currently possesses a capital of 50 billion dollars, with plans to raise it to 100 billion dollars in the future. The NBD rotates the position of president. Each country has the right to hold the presidency in turn for a five-year term. Dilma Rousseff, the current president, is Brazilian. The New Development Bank has announced that it will focus primarily on financing infrastructure projects, including water distribution systems and renewable energy production systems. It insists on the ‘green’ nature of the projects it finances, although there are questions about it.
The Brazilian National Bank for Economic and Social Development (BNDES) and the China Development Bank (CDB) are among the national banks that grant loans abroad and can compete with the World Bank Group, the IMF and the Paris Club.
Their influence is not to be neglected, as they are now doing more lending than the World Bank. Between 2005 and 2013 the CDB granted more than $78 billion to Latin American countries alone. In 2017, BNDES’s total claims amounted to USD 175 billion. [11]
China grants loans through various official institutions: its strategic public banks (China Development Bank and China Eximbank), while increasingly drawing on its central bank
Central Bank
The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.
ECB : http://www.bankofengland.co.uk/Pages/home.aspx
(People’s Bank of China) and on State commercial banks (such as Industrial and Commercial Bank of China, Bank of China and China Construction Bank). The total amount of credit was $1,340 billion over 22 years since 2000. [12] This turns China into the main public creditor for countries of the Global South. The volume of China’s loans is higher than the combined loans granted by the IMF, the World Bank and the Paris Club.
These various public lenders also practise public-private partnerships, which favour the interests of large private companies to the detriment of the public interest.
Finally, it is of course essential to audit the debts claimed by private lenders.
The World Bank Group: a web of ever tighter weave
The World Bank’s subsidiaries – the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for the Settlement of Investment Disputes (ICSID) – have been designed to weave a web of ever tighter weave.
Let us take a theoretical example to illustrate the effects of their policies. The World Bank grants a loan to the government of a country on condition that it privatize its water distribution and purification system. The public company is thus sold to a private consortium including the IFC, a World Bank subsidiary.
Then the population affected by the privatization protests against the sudden sharp increase in rates and the deterioration of the quality of the service provided, and the government turns against the predatory transnational company. The dispute is dealt with by the ICSID, which thus finds itself on both sides of the judge’s bench.
A situation has been reached where the World Bank Group is present at every level: it imposes and finances privatization via the IBRD and IDA; it invests in the privatized company through the IFC; it provides the company with guarantees covering it against political risk, through the good offices of the MIGA; and it judges any disputes that may arise through the ICSID.
This is exactly what happened in El Alto, in Bolivia, between 1997 and 2005 (see ‘The example of El Alto in Bolivia’).
The example of El Alto in Bolivia
On 13 January 2005, after three days of mobilization by the inhabitants of El Alto, Bolivia’s president promised the population that he would terminate the 30-year concession granted to the transnational company Suez.
What caused the popular uprising of January 2005 in El Alto?
On 24 July 1997, under pressure from the World Bank and the IMF, the Bolivian government granted a 30-year concession to the company Aguas del Illimani – Suez, for the distribution of drinking water and the treatment of sewage in the town of El Alto and the capital, La Paz. Aguas del Illimani is controlled by the Suez company, a world leader in the commercialization of water, along with Vivendi of France and Thames Water of Great Britain. The concession was attributed fraudulently, as the normal rules of calling for public tender were not respected. The call for tender was launched after a study carried out by the French bank BNP Paribas. Only one company responded: Aguas del Illimani – Lyonnaise des Eaux (Suez). Instead of issuing a second call for tender in order to have several offers, the contract was hastily signed. This concession made to a transnational corporation was the result of the privatization of the public municipal company Samapa, imposed by the World Bank, the IMF and the Inter-American Development Bank (IDB) when Bolivia’s debt was rescheduled in 1996.
The World Bank was furthermore a direct receiver of the privatization since it holds 8 per cent of Aguas del Illimani’s shares through its private investment instrument, the International Finance Corporation. As for Lyonnaise des Eaux – Suez, it holds 55 per cent of the shares.
In El Alto, Suez deprived 200,000 inhabitants of drinking water
Although Aguas de Illimani claimed that the whole population of El Alto had access to clean drinking water, the reality was quite a different story. Around 70,000 people lived in houses which were not connected to the water mains, as the cost of connection was exorbitant. It came to the astronomical sum of $445, i.e. approximately eight months of the minimum wage. Moreover, 130,000 people living on the territory of the Aguas del Illimani concession were outside the area covered by the transnational corporation.
Insufficient investment in the maintenance and improvement of the installations
According to the contract signed in 1997, Aguas del Illimani was under obligation to guarantee the maintenance and improvement of the water pipes and the sewers. In fact, their investments fell far short of meeting these requirements. Between 1997 and 2004, Aguas del Illimani only invested $55 million, mainly raised by loans from the Bank and the IDB or donations from foreign governments as part of their Official Development Assistance
ODA
Official Development Assistance
Official Development Assistance is the name given to loans granted in financially favourable conditions by the public bodies of the industrialized countries. A loan has only to be agreed at a lower rate of interest than going market rates (a concessionary loan) to be considered as aid, even if it is then repaid to the last cent by the borrowing country. Tied bilateral loans (which oblige the borrowing country to buy products or services from the lending country) and debt cancellation are also counted as part of ODA. Apart from food aid, there are three main ways of using these funds: rural development, infrastructures and non-project aid (financing budget deficits or the balance of payments). The latter increases continually. This aid is made “conditional” upon reduction of the public deficit, privatization, environmental “good behaviour”, care of the very poor, democratization, etc. These conditions are laid down by the main governments of the North, the World Bank and the IMF. The aid goes through three channels: multilateral aid, bilateral aid and the NGOs.
. This was the case for donations from Switzerland destined to guarantee access to clean drinking water for the poor. Insufficient investments resulted in pockets of contamination in certain areas due to the distribution of insalubrious water.
Increased water rates
At the beginning of the contract, in 1997, water rates increased by 19 per cent. The cost of connection to the mains rose by 33 per cent. Despite the fact that Bolivian law prohibited the dollarization of prices (Law 2066 of 11 April 2000, art. 8), Aguas del Illimani indexed its rates against the dollar.
Stealing from both the poor and the government
With its exorbitant rates, Suez redeemed its low investments and made a profit
Profit
The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders.
of 13 per cent. As if that were not enough, it used Article 26 of the contract to obtain the guarantee that in case of non-renewal of the concession in 2027, the government would have to reimburse the company for all the investments it had made. Furthermore, while Suez had agreed to pay Samapa $8 million per year, that company claims that it has only received $3.5 million per year.
World Bank: the judge and the judged
For these reasons, the entire population of El Alto took to the streets for three days running, demanding that Aguas del Illimani – Suez leave and that water distribution be returned to the public sector. After the Bolivian president’s decree, Suez announced that it would lodge a complaint with the ICSID (the International Centre for the Settlement of Investment Disputes), one of the five branches of the World Bank Group.
L’auteur remercie Claude Quémar et Maxime Perriot pour la recherche de données et leur relecture
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Publish date : 2024-11-12 11:00:00
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