San Francisco Chronicle
Bechtel, Bolivia resolve dispute
Company drops demand over water contract canceling
Paul Harris, Chronicle Foreign Service
Thursday, January 19, 2006
Santiago, Chile — San Francisco-based Bechtel Corp. has dropped a $25 million dispute against the Bolivian government for canceling a water contract, after major street demonstrations forced a Bechtel-owned subsidiary to withdraw from Bolivia’s third-largest city.
The construction and engineering conglomerate and three international partners had asked for $25 million in compensation after Bolivia canceled a 40-year water deal in 2000 with Cochabamba, 239 miles southeast of the capital, La Paz.
The Bolivian government took over the water concession after thousands of residents protested water rates that increased reportedly by as much as 200 percent. In ensuing clashes with the army, a 17-year-old protester was shot to death and hundreds were injured.
Bechtel claimed rates rose by only 10 percent for the poorest consumers and that Bolivia had violated a bilateral investment treaty with the Netherlands, where the Cochabamba water company, called Aguas del Tunari, is incorporated. It had been waiting for a ruling from the World Bank’s International Center for the Settlement of Investment Disputes, a trade court that operates behind closed doors.
But today, an agreement is expected to be signed in the Bolivian city of Santa Cruz, ending the five-year dispute. Under the terms of the agreement, according to a joint statement issued by the Bolivian government and the shareholders of Aguas del Tunari, neither side will be liable for monetary compensation, and a statement will be included that reads that "the concession was terminated only because of the civil unrest and the state of emergency in Cochabamba and not because of any act done or not done by the international shareholders."
"We had offered some time ago not to continue arbitration if we received a clear, unambiguous statement that Aguas del Tunari acted entirely without fault, during time of concession and released of any liabilities," said Jonathan Marshall, media relations manager for Bechtel. "Given how poor Bolivia is, Bechtel’s intent was not to squeeze money out of the country. We simply couldn’t accept blame for what happened."
But Jim Shultz, executive director of Democracy Center, an advocacy group in Cochabamba, said he thought Bechtel dropped its legal action because of continuing public pressure and concerns about presenting a negative image of Goliath versus David.
Bechtel, the largest private corporation in the Bay Area, had revenue of $17.4 billion in 2004. In contrast, Bolivia — South America’s most impoverished nation — had a national budget of only $2.9 billion in 2004.
Shultz says 300 organizations from more than 43 countries signed a petition with the World Bank, demanding that the Bechtel-Bolivia case be opened to public scrutiny. Others waged a campaign against Bechtel that included demonstrations held outside the company’s corporate headquarters in San Francisco and in European cities of Bechtel’s three partners. In 2002, San Francisco police and fire officials used electric saws to separate and remove about a dozen protesters who chained themselves together in Bechtel’s lobby. After they were arrested, the Board of Supervisors approved a resolution asking Bechtel to drop its claim against Bolivia.
Pressure also came from elsewhere.
In Spain, both King Juan Carlos and Prime Minister Jose Luis Rodriguez Zapatero asked one of Bechtel’s partners, Abengoa SA, to withdraw from the dispute, said Eduardo Rojas, Bolivia’s deputy minister of public works. Under the agreement, the Bolivian government will purchase 80 percent of shares held by the two holding companies — International Water and Abensur — that own Aguas del Tunari, according to Rojas. The other 20 percent will remain in the hands of private investors. Bolivia is also liable for legal fees of $1.6 million.
"We are very happy with this result. There have been very hard negotiations, and we think this is the best solution that we could have hoped for," said Rojas. "No one can believe we have done this."