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transportation hubs - It is one of France's busiest the Gare de Lyon in Paris, for trains to the south. principle point of departure September 1, 1994, with a large gym bag two casually dressed travellers head for a morning train. Unfortunately for them had a tip-off the police anti-gang squad

of dangerous criminals. to watch for a couple spotted on security monitors. The men with the bag are Their every move is followed closely. unusual travel accessories - They are carrying some smoke grenades, handcuffs, brass knuckles, a pistol and a sawed-off shotgun. the police decide to check the bag. Before they reach their train, Their train leaves without them.

Their destination was Beziers,

a small town in the south of France. They were hired most prominent corporations by one of the country's of a retired engineer to pay a visit to the home

consulting business here... who has a small ..Jacques Michel. Till then, his most serious conflict by high hedges in his garden. had been with neighbours irritated He would learn in the months to come that he had provoked powerful people in a company that was a global leader in what was at the time rapidly expanding businesses - one of the world's most multinational Vivendi, a subsidiary of the giant now known as Veolia. Their business was water. Water, at the source of life itself. universal rituals of renewal From the dawn of time, the sounds of running water. day begins with three people on the planet For one of every involves a daily struggle. access to the source of life In 20 years, will be a fact of daily life anxiety about water for an estimated 4 billion people. of a corporate strategy This is the story to control the world's water. For most of her domestic water she relies on a polluted spring. Anita Khoza lives in a township major cities. outside one of South Africa's to reach her home. A water pipe has yet it will come with a bill, When it does

problems for Anita. and that will pose Any discussion of water some harsh realities. has to stare down a finite amount of water. The world has as when dinosaurs roamed the earth, We have the same today and we can't make any more of it. It is a stark question. How do we get water to people? And how much should they have to pay can't live without? for something they in the early '90s, In Buenos Aires, Argentina the din of chaos. those questions blared above than the South African township, The landscape seemed so different of offices, hotels and apartments but the columns the same problems. sit astride exactly A bold experiment was tried here even Lydia Bustos, mother of eight. that promised to help from Buenos Aires, She lives a couple of hours a proper water sewage connection and she has been waiting for for 14 years. Half the 9 million people around Buenos Aires huddled in the slums

had no water connections. no sewage disposal systems. Two-thirds had The solution lay in new thinking by the World Bank. that was being pushed Jamal Saghir. that the private sector agenda, There was a recognition has to be looked at. private sector participation,

of the public sectors With the failure water service to the poor, to deliver efficient have to be looked at. other alternative solution was one of the solution And the private sector

that was put on the table. Popular capitalism, is nothing less than a crusade to enfranchise the many in the economic life of the nation. NARRATOR: Mrs Thatcher was a chemist Britain's prime minister. before she was bankers and businessmen In the '80s, the chemistry of the Iron Lady became transfixed by into private enterprises. as she turned public services the price of water. Now the market could determine The water privatisation, I believe,

It will go very successfully indeed. Margaret Thatcher British prime minister has successfully privatised major nationalised industries. more than a dozen NARRATOR: Ronald Reagan American alter-ego. became Margaret Thatcher's private enterprise as the adversary, Instead of looking at see it as their best hope many governments now for progress and development. public money and private initiative, The best hope would be a merger of the Washington Consensus. grandly called

Joseph Stiglitz. Nobel Laureate in Economics kind of ideologies With the Reagan-Thatcher it became all focused on - let trade take care of it, let the markets take care of it, liberalise, privatise, get inflation down, minimise the role of the government, and lo and behold, growth will occur and poverty will be reduced. It had limited appeal, but powerful backers ensured that it dominated public policy around the world. It was a consensus, as the name said, in Washington, between 15th Street and Washington, in fact -

which is where the US Treasury is - and 19th Street and Washington - which is the IMF street - with the World Bank at 18th Street in between. The World Bank and the International Monetary Fund would become twin pillars of the Washington Consensus to privatise public service throughout the developing world. Economist Jeffrey Sachs,

special advisor to the Secretary General of the United Nations, witnessed a powerful marriage of convenience. So, where did this urge for privatisation come from? Partly ideology, and it's partly powerful corporate interests, no doubt. A lot of very powerful companies got into the game,

they thought they were gonna get involved. They find their ways into the votes of the IMF and the World Bank, there's no doubt about it. The US Treasury could now position itself to help the world's poor without bothering the US taxpayer. But as applied to water, the Washington Consensus would also play well in a different capital. A new day, a new beginning. A city rebaptised. For centuries the world has turned to Paris for inspiration in food, in civic management, in culture. In the early '90s France would provide a model for commercial water. CLOCK CHIMES THE HOUR It boasts an historic pedigree - Generale des Eaux, a subsidiary of the commercial giant Veolia, sold its first water in France under the authority of a charter from Napoleon. Veolia's director general Antoine Ferot. We have 150 years of experience. We have three big private water companies in this country, but we have also about 20 smaller water companies. I don't know a lot of countries with more than 20 or 25, er, private water operators in one country. A promotional video by Veolia. Now, courtesy of the Washington Consensus, French water would aspire to the hallowed the status of French wine. Their business would spread to nearly 100 countries. Their water revenues doubled to 12 billion dollars a year. We are working for about, er, between 6,000 and 7,000 cities in the world. And we get a lot of experiences, and we could propose a lot of best practices in term of water or waste water management, to every city in the world. The first place they came to was Argentina. The country was bankrupt and open to experiment.

The two largest French water companies were quick to offer their help to the new president Carlos Menem, who had turned his country into a privatisation theme park. Karina Forcinito is an economist but her practical knowledge of the effects of privatisation goes beyond anything she learned in school. Her gas, her electricity, her postal service and the water for her morning 'mate', are all from private companies, the result of a lot of persuasion from the outside. There was torrid competition for the water concession. The two French companies sought local help in an actual theme park.

They recruited the local mogul who ran this park and a string of casinos. The lobbying was intense at Buenos Aires' prestigious jockey club, but the French consortium prevailed. Theme park magnate Santiago Soldati was thrilled. They called their new company Aguas Argentinas. The World Bank loaned them nearly $1 billion and took a 5% stake in the company. They had effectively taken ownership of the system for 30 years without paying a peso up front. Menem's bold initiative to sell off his collapsing public sector was the talk of Latin America. The heads of the big development agencies

were hailing Argentina's success. The then head of the IMF, Michel Camdessus. We are delighted to see that Argentina is now benefiting from all its efforts. The private sector was coming, saying, "We would like to invest. "We have a lot of cash, and that's why we're here." Aguas Argentinas would become a model for aggressive privatisation around the world. A controversial figure is credited with securing the contract. Jerome Monod, then a director of Suez, is a man more used to the shadows than the limelight. Before entering the water business, he served as a top advisor to French president Jacques Chirac. The French Embassy placed itself at the disposal of Monod and his consortium in the months leading up to the award of a contract, even though back home Monod was embroiled in scandal. His company was accused of bribing the Mayor of Grenoble in return for the privatisation of the city's water. Within a year of giving the French consortium his prized water contract, Menem is invited to France. He is honoured and feted, but behind the scenes, he is also called to a meeting with the man in the shadows. Jerome Monod tells him his consortium in Argentina is not making enough money. They have to renegotiate terms.

It is a pretty typical privatisation deal

according to Nobel Laureate in Economics Joseph Stiglitz. There's competition to get the concession. As they compete to get the concession, they compete excessively vigorously. So now they find out that they're losing money. What do they do? They go to their government...

..sometimes the French government. That government imposes pressure on the government in the developing country, and say, "Renegotiate that." The company, meanwhile, has the government over the barrel, because if the company withdraws, who's gonna start providing water? Back in Argentina, the Menem Government agrees to higher rates. There is protest and he calls for a review. He puts his trusted minister for water and the environment in charge of the reviews - Maria Julia Alsogaray, one part politician, one part poster girl and one part prima donna. She granted the rate increases and she seemed to handle the seismic shifts in Argentine politics with some aplomb.

And she carried the message to the UN. In recent years, Argentina has been very conspicuous for being a leader in public privatising... ..the public... the whole public sector. It was a very easy task. The rate hikes helped theme park magnate Santiago Soldati sell his shares to Suez and pocket 150 million on a 50 million investment. In Argentina, making money from water had now been blessed.

The Washington Consensus was held aloft, the world invited to pay homage.

Privatisation of water was now being discussed in cabinet meetings and council chambers across the world. It was thus inevitable that the lure of liquid gold would capture the imagination of America's high rollers. At its peak, Enron, an aggressive energy trader since 1985, was earning more than 100 billion a year. By 1998, they were looking for the next big thing in business. Water, like energy, was something everybody needed.

Chris Wasden had been a Wall Street investment banker for 10 years when a new Enron company called Azurix came calling. It was a very exciting time. When we read in the press releases that Enron was getting into the water industry, we looked around and thought, "What are we missing?" You know, if Enron's going after the water industry, it must be a new hot thing. They started close to home in Florida in California. The San Joaquin Valley in central California - paradoxically a desert and, at the same time, one of North America's most prosperous agricultural producers. The fertility is a result of irrigation in a part of America that is running out of water. High above the valley, in the Sierra Nevada Mountains, Oakhurst dates back to the California gold rush of the mid-1800s. Today it's an idyllic retirement and recreation area,

except for one thing - it's running out of water. For many residents, water is now as hard to find as gold, which explains the brisk trade at the local water store. WOMAN: I needed a smaller one because I don't think I can...

..I don't think I can carry a 5-gallon. That's the size. OK. Because this one will be 40 pounds. Yeah, it's too heavy for me. I can't lift it. Filling plastic jugs with water - a daily chore for the relatively rich as it is for the desperately poor. Farmers in the dry flat-lands below the mountains have plenty of water. California waters 9 million acres of farmland from a far-flung system of rivers and canals. Denis Prosperi is an almond- and grape-grower, and makes no apology for irrigating the desert. Well, the most fertile areas in the world of the farmer are always the deserts because you have very little rainfall - we have 9 inches to 10 inches a year - which means we use irrigation,

and with irrigation, we can create the environment we want. Thank God our forefathers had enough brains in California to build the system we have. We just haven't added to it in 20 years. Today, if somebody's gonna gain a huge amount of water,

somebody is going to lose. You're not gonna build 500,000 homes in one area and somebody don't... have an economic decline. Enron's brainchild Azurix was going to change all that by trading water on the Internet. water2water.com was an Azurix system for linking people with more water than they needed to people who needed more than they had. HELICOPTER PROPELLER WHIRRS Denis Prosperi would discover that a section of the San Joaquin Valley adjoining his farm was key to a mind-boggling marketing scheme. Central to the Azurix plan would be a massive water bank to store the water they hoped to sell. Right. Just wanna look here? you can see this brown section. That area right to the right, the percolation area. This was basically 52-square-kilometre field, Beneath that they'd store enough water for a year - to supply 1.6 million people 480 billion litres - on commodity markets to be treated by speculators just like pork bellies. as they told us, And basically, a gentleman, in Philadelphia, could be sitting in his office decide he wants to buy wake up one morning, of water in the Madera water bank a couple of thousand acres and he can speculate.

water went up, he could market it. If it's a dry year and the price of of Trade on water. It would be like the Chicago Board when you're on Wall Street, The reason is that of financial markets, you're at the heart financial trading - the money industry. trading - buying and selling - water So when you start talking about like you buy and sell shares of IBM, their imagination. this just captures According to one estimate, of California's usable water. farming soaks up 80% a farmer like Prosperi In the Enron plan, selling water than food. could make a lot more money in order to secure their future, So what's happened is these cities, because water drives growth. need water, and say, "I'll tell you what. So they would go to these farmers

for the next 25 years, "If you will sell me your water "I'll pay you X for this. is significantly more money "The amount that I'm paying you raising alfalfa and selling it." "than you would ever make to jump at their exciting offer, If they expected farmers they were wrong. a spirited political campaign The locals launched

to prevent the scheme. They didn't trust water speculators. Enron had a problem.

a serious problem. But it probably wasn't and the farmers would see the light. A good face-to-face chat

8:00 or 9:00 one evening I got a phone call about can we come up and see you?" and said, "We're here in L.A., Fresno Airport, Company executives flew into and fruitful encounter. anticipating a brief with local opposition. It wasn't the first time they'd dealt for a surprise. This time they were in to coming to communities They were accustomed and getting a banker, a civic leader, on their side um, an in...a councilman,

and ultimately getting projects. This was the first time a bushwhack like this. they ever had run into and then I proceeded to tell them Enron usually got what it wanted, that wasn't gonna happen. that this was a case that water woes in other places, The fallout, along with other would cost Enron nearly a $1 billion, the whole flimsy empire helping topple for water trading in America. and souring the future the other day I had an executive approach me that said that he had the backing in New York... from a very wealthy family a billionaire-type family. I mean, wealthy family - they were ..that had just read of the water industry globally a World Bank report on the situation what will happen by 2050, talking about with regards to water what needs to happen crisis of water. because we have this looming "You know, these people, And he says, "they're really smart investors, and think water's the place to be. "and they see this for a big water company. "Well, you've worked all over the world. "You've looked at this stuff "What do you think?" with a barge pole, OK? I said, "I wouldn't touch it make money on water." "Nobody wants to let anybody THUNDER RUMBLES Argentina was out of patience. By the time Enron was out of water, the dead aristocracy of a country In the centre of Buenos Aires, of Latin America. that was once the envy Generals ruled this country by the captains of industry. before it was taken over born here, would now be buried here. The Washington Consensus, likely be somewhere near this - If it was to have a shrine, it would

who was party to another experiment the tomb of a woman on the road to ruin 60 years ago, that set the country Eva Peron. with private water? And what about the experiment

and made matters worse. did make new connections Ironically, the company

many poor neighbourhoods, They brought water into to take the waste out. but didn't make the connections contaminating the watertable. The result in many areas was sewage simple market economics. It was a calamity born of of dirty water here - You can see the results children's hospital in Buenos Aires. the outpatients department at a are water-related. 20% of children's deaths in Argentina somewhere in the world, Every eight seconds, of a waterborne disease. a child dies This 10-month-old boy and severe stomach pain. has been suffering from diarrhoea an unemployed carpenter, His father, Ignacio Chavez, to get to see a doctor. has been waiting for five hours He's got a well, his own well, with a pump... and he gets water from there but not for the baby. ..for him and for his wife, He buys mineral water for him. Business failure on a child's face. that never materialised. $4.8 million of sewage connections Despite 14 years of expectations, from her neighbour. Lydia Bustos still has to get water It is not hard to see the problem. The pump she uses to a primitive sewage pit. is disconcertingly close Not surprisingly, victims of water-related illnesses. her eight children are frequently is in the hospital Her 10-year-old daughter since she was born. for the eighth time they have skin problems. WOMAN: Sometimes

all of these disorders And it's always... the same bad water. are associated with After years of broken promises, the government is now considering from the private operator, taking the water system back

Aguas Argentinas. Like the urban environment around it, Aguas Argentinas is in serious trouble. The head of the country's water regulator, Miguel Saiegh. They are in default. By the late 1990s, Argentina was drenched in recrimination. They had followed the Washington Consensus, they had privatised almost everything, they had been promised prosperity. Yet, at the end of the road, all they saw was wrath and ruin.

The pin-up politician once held lavish privatisation parties at this hotel. Now Maria Julia Alsogaray would find herself in different accommodation. The former minister for the environment was imprisoned on fraud charges. Eamon Mullen reflects on a nation's wrath. He is the federal prosecutor who proved that Alsogaray's legitimate earnings could not account for a jet-set lifestyle. And if he has his way, other politicians will soon go the way of Alsogaray. Argentina's adoption of privatisation ended up as tragic street theatre - citizens reduced to banging saucepans and calling for revenge. A currency crisis fell upon a basket-case economy,

and the clatter was heard around the world. Even in France, an intriguing notion was developing - perhaps water should be a public utility. It started here in Grenoble,

the scene of the corruption scandal in the '90s. The court found Suez had bribed the mayor

to get the city's water contract.

Another court found it had grossly overcharged its customers. Grenoble's water utility hides behind the mountain. The municipality took it back in 1999 and now jealously protects it. Raymond Avrillier is the councillor in charge. He protested it going private, and is now proud of its public performance. He says they do more maintenance and they do not have to increase rates to make a profit, and there are other advantages. And Grenoble is not the only place where privatised water has fuelled public anger. The system in the city of Castres is also up for discussion. It is managed by the Suez water company, but that's about to change, because of a citizens protest movement over water rates. Their complaint is a common one - questionable accounting that results in what they consider price-gouging. For them, there is a simple solution - to run the system themselves. Similar campaigns are spreading throughout the country,

including here in Toulouse.

The companies pay municipalities to get their water business. It has become normal practice to treat the payment as a loan, then claw it back through water rate increases. A local artist, Anne Bouzinac, is passionate about her work and about her water. She's leading a citizens campaign to get water of a different hue.

Jacques Michel is responsible

for a lot of this reappraisal of water in France. After he retired from Suez, he set himself up as a consultant to advise municipalities on their water contracts. Michel discovered the companies were grossly overcharging, and he questioned their methods. He accused the big companies of behaving like the Mafia. They sued him for defamation. To their embarrassment, the courts found nothing wrong with that description. His success, he believes, made him and his home a target. The backlash ended here at the Gare de Lyon in 1994 when French police intercepted those thugs. Herve Jaubert and an accomplice would later testify that they were hired to persuade Michel to stop meddling in the water business. Court documents reveal a startling genesis for that takedown at the railway station - a scheme that began with a man named Regis Calmels, a senior manager at Vivendi. now called Veolia, Vivendi's water subsidiary,

is run by Antoine Frerot. I was not in charge at this time. I could not tell you. is that, in a big company... But what I could tell to you

about 300,000 employees. In Veolia, we have everybody perfectly clean. In a big company, you don't have what we are, uh... You could have, uh... 'moutons noir'. ..talking in French, the company So, uh...the organisation, has to fight against that and exclude these 'moutons noir'. According to court documents, for his role in the plot Mr Calmels was convicted at three separate trials. trying to intimidate Jacques Michel He eventually beat the charge of because a witness changed his story.

the water executive was involved There's no doubt Jacques Michel. in a scheme to investigate Marc Rivelet, But according to Calmels's lawyer, the schemers meant no harm. a normal part of business. Investigating critics is just

to pay a visit to Jacques Michel, Even before crooks tried burn his house down. somebody tried to under this door Arsonists poured gasoline and set it on fire.

the whole of civil society, MAN: We don't claim to represent that they represent... unlike some people who seem to think Privatisation began with speeches.

of mixed and often failed results, After more than a decade turned to anger. public disappointment The end began with a rifle shot. GUNSHOT April 2000, Cochabamba, Bolivia. a water system leads to rioting. A bungled attempt to privatise shot at demonstrators. A sniper behind police lines was 17. The victim, Victor Hugo Daza,

was the privatisation movement. The less conspicuous victim in Latin America These images marked a turning point on the defensive. and put the companies what are they saying...obtusely? The anti-globalisation people, "Water is a gift of God." They are saying, we are not selling water. I explain to you that is not selling water The private operator are not consuming water - because the consumers the purity, the quality, they are consuming to the kitchen and to the bathroom. the ability to come directly to pay these costs, If you contest the idea that somebody has to pay the costs the payment of these costs, or you have to share which have no water services you are condemning people or no water services today, to never have water services. on Nelspruit, South Africa, A typical day dawns three hours east of Johannesburg. worried much about water. Nobody in this prosperous white city Then Nelspruit expanded in the surrounding black townships. to include 240,000 poor people The system needed a lot of new money to a private consortium. so they turned it over

Martin Nizsse is the local manager Utility Company. of the Greater Nelspruit from Holland. He and his family came here He remains a strong believer in the dogma "Doing good by doing business."

NIZSSE: This country is developing in a rapid speed. It is developing opportunities for the people,

it is developing opportunities for business. There's definitely a water shortage, and that's a global problem. And I think with a water shortage, having a shortage, you have to manage it properly. And then the market mechanism is normally a way of managing the shortage to provide people a good service with it. South Africa's experiment with privatisation brought this device to the rural poor - the prepaid water card... ..introduced with devastating consequences to a landscape of standing pipes, buckets and wheelbarrows. These women just outside Durban

have to buy a card before they can get water. It is a policy called 'total cost recovery'. The result in the year 2000 was a pestilence across this region. Many can't afford to buy the card. The poorest of the poor then must gamble with their health, taking water from contaminated springs and ditches. South Africa guarantees everyone a minimum amount of water,

but here, to claim your allotment, you must have a card, which allows so much free and charges for the rest. If you have no money, then you have no card

and you have to find water where you can. And here you truck your putrid water past a metered standpipe and shuffle ever closer to disaster. In August 2000, cholera swept this countryside. The outbreak lasted until early 2002, infecting hundreds of thousands. The death toll was close to 300. It started because of contaminated water. Social policy analyst David Hemson.

People had water, but they couldn't afford to get water out of the pipe system. And, you know, the rivers were infected and they were drawing water from the rivers and the cholera spread like wildfire. Like Argentina, South Africa was led to private water by the World Bank. Pressure forced the country to experiment in selected areas. Patrick Bond, a political economist at the University of Witwatersand. Its advice on the pricing of water was instrumental. And it pushed very strongly to price for cost recovery plus a mark-up. And that would in turn allow a privatiser to realise, "Maybe we can get a profit "from serving poor people in South Africa." Getting profit from water strains ingenuity in South Africa. Even if people can't pay, the constitution guarantees them a minimum of water. Hence the latest company device - the trickler. We've got this small hole. The minimum to sustain life drips through the small hole over 24 hours for those who are unable to afford a proper water supply.

Ketha Mathebula explains.

It's not nice. I'm not saying that it's a nice sort of service to have. But it's a means of preparing people

for using less than the amount of water they use now and it's allowing them the six kilolitres of free water. Like colleagues in other water companies, Martin Nizsse is having trouble balancing the books. We started off at a five-year program, investing 190 million in five years. And in the first 18 months to two years, we were dead on-line on spending that money. But at the same time we had a program going that made the awareness with the people to pay for the services. And unfortunately, that awareness program has been, uh, not so successful as we hoped to be. This is where a lot of Martin Nizsse's problems lie -

Kanyamazane, a township absorbed after apartheid into Greater Nelspruit. In the streets of communities like Kanyamazane, the imperatives of business confront the implacable realities of poverty. Patrick Bond. You can attribute most of the non-payment to people's inability to pay. Not a lack of desire to pay, or a culture of non-payment, as is often claimed, but rather, as we've lost a million jobs and as low-income people, African black people, have lost 19% of their incomes since 1994, the government statistics show - while whites have increased their income by 15% - people are just too poor to pay. In all her years living under apartheid, Anna Xaba never paid for water. In a free South Africa, she now sits with bills filled with numbers she can't handle and ideas she can't understand. Company demands have left her dazed.

The demands are also getting more serious.

I think the real message for these people is that they shouldn't let it come so far

that they go so far in arrears. They have to learn that they have to save water to make sure that there is water available for everyone and that the water they use, they can afford that. (All sing) In Soweto, a demonstration about water. If privatisation can work anywhere, it should have been successful in South Africa.

The government has tried to strike a balance between the need for profit and the needs of people balanced on the outer edge of survival. Because this thing is instructing that you just give us the 50 metres. Go back to your 50 metres. I don't know the negotiations between you and the people. I don't know what you're going to do about it. But that 50 metres, please. Just respect the letter from the court. How many metres I am now from your house? So how can you come around my place? You tell me I must stand 50 metres or 100 metres away from what you are doing. Here is the problem - the Suez-managed water utility is laying pipes for new water connections and prepaid water meters. If they don't stop, we are going to fight. If you leave problems to markets, markets will not address the needs of the poorest of the poor. UN economic adviser Jeffrey Sachs points to what should have been obvious from the start of this global experiment with water. There's a misunderstanding about economics that even very nice and very well intentioned people say - that it's a 'market failure' when impoverished people die and their needs are not met. That's actually not a market failure - markets are doing what they do, which is respond to people with income, not to people without income. Soweto is where the anti-apartheid movement began. The community here, struggling with poverty, needs few lessons in economics. (Speaks local language) They're being asked to pay for water they can't afford, even before they use it. The only thing to be discussed is what is the best response.

There's this whole debate of whether we should go back and close the trenches, remove the pipes. Some people are saying, "No, it's a waste of time and energy. "It's better if they go in "and burn the containers which belong to Johannesburg Water." (Speaks local language) In the end, they decided to dig up the pipes laid that morning.

A fleeting moment of power in the face of vast global forces. A small victory. But history has shown repeatedly that great changes begin with the small triumphs of powerless people. Supertext Captions by the Australian Caption Centre Captions copyright SBS 2006

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