Viewpoint - The Washington Consensus, Chilean water monopolization and the Peruvian draft water law of the 1990s

Miguel Solanes
Former Water Law Advisor to the United Nations and the Economic Commission for Latin America and the Caribbean; Senior Researcher, Imdea Water, Madrid, Spain; miguel.solanes@imdea.org

ABSTRACT: The 1990s were an ideological period whose paradigm was the Washington Consensus. The principles of the Consensus were the guidelines for the privatisation of public utilities, and the dismantling of public service. Dogma and ideology replaced experience and science. The process of the 90s to amend the Peruvian Water Law under the aegis of the Washington Consensus is a good example of this approach. Comparative water law, water economics and anti-trust legislation and economics were ignored.The Draft Law, sponsored by the Ministry of Agriculture of Peru, was based on the Chilean Water Law of 1981, which resulted in the monopolisation of water resources by a few electrical companies and also in negative externalities associated with the structure of water rights and the poor regulation of water marketing. The Draft Law was part of the proposals, and conditions, of a World Bank loan. At the time it was submitted, the Chilean Government was already aware of, and worried about, the monopolisation of water rights in Chile. However, loan officers insisted on the proposal.The managers of two public agencies in Peru were concerned about the impact that the Draft Law was to have on Peruvian public interests, such as agriculture, energy, and water supply and sanitation. They spearheaded a coalition, including United States universities (New Mexico, Colorado at Boulder, California at Davis) the Water Directorate of Chile, the United Nations Economic Commission for Latin America and the Caribbean, agricultural water communities in Peru, and the technical offices dealing with water at the Inter-American Development Bank and the World Bank, to have a critical discussion of the Draft Law. The discussion took several years, at the end of which the Draft was rejected.

KEYWORDS: Water, rights, economics, markets, externalities, monopolies