PPP project provides for Cartegena's poor
Water and sanitation has been a contentious subject in the Colombian city of Cartegena since the 19th century, as Colombian author Gabriel Garcia Marquez has documented. Paul Constance, managing editor at the Inter-American Development Bank reveals how a successful public-private partnership (PPP) has brought water and sanitation services to some of Colombia's poorest communities.
Until recently, 'burroducto' was the only source of potable water for tens of thousands of people who live on steep hills overlooking the historic Colombian city of Cartagena. Informal vendors would use taps in the lower part of the city to fill large cans strapped to the backs of burros (donkeys). After guiding the animals up dirt tracks to the shantytowns, the vendors would sell the water for many times what it cost in the rich beachfront neighborhoods connected to the municipal water service.
"My family used to spend around 3000 pesos a day (approximately US$40 per month) buying the burroducto water," recalls Delfina Díaz Pereyra. Díaz became a self-described water activist in 1995. "I got tired of waiting for the municipality to install the service," she says, "so I started showing up at the mayor's office to demand explanations."
City officials told Díaz that her neighborhood could not be served because it was too steep and was considered high-risk. Eventually Díaz heard that the city had signed a contract with Aguas de Barcelona, a private Spanish firm, to form a new company with the goal of improving service.
Like other Cartageneros, she was skeptical about the arrangement, "They told me they would not be able to bring service for around six more years because of all the other work they had to do first," recalls Díaz. "But they promised to start sending up water trucks immediately."
The water trucks provided water reliably at a fraction of the price charged by the burroducto, and six years later, the company kept its word and installed in-home water connections throughout Loma Fresca. Today, Díaz spends around US$8 per month for potable water that flows 24 hours a day.
"You can say what you want about the Spaniards," says Díaz, "but they solved our problem."
Díaz is one of nearly a million people who have recently been connected to water and sewer networks in cities along Colombia's Atlantic coast, an area once notorious for its sanitation problems. Cartagena, the area's second largest city, has invested US$236 million in water and sanitation over the last decade.
According to ACUACAR, the company that supplies water and sewerage to Cartagena, 98% of the city's residents now have in-home water connections and nearly 90% have access to sewer lines (up from 73% and 60%, respectively, in 1995. Also, within three years, ACUACAR will have completed treatment facilities capable of processing 80% of the city's wastewater.
These numbers would be impressive in any setting, but they are especially notable in Cartagena, where around 85% of the population is classified as poor. Since the upper classes already had decent water service, virtually all of ACUACAR's activities have been focused on low-income areas.
In contrast to some other parts of Latin America, where private investment in the water sector has provoked strong public opposition, in Cartagena the water company enjoys broad public support. Why did Cartagena succeed where so many other cities have failed?
The answer can be traced to an innovative Colombian government strategy that emphasizes local autonomy, clear objectives, financial self-sufficiency and flexible use of both public and private management models.
Cartagena's sanitation problems were once so notorious that they earned a distinguished place in literature. In his novel Love in the Time of Cholera, Gabriel García Márquez vividly describes the epidemic that killed nearly one-fifth of the city's population in the mid-19th century. Primitive sanitation continued to taint Cartagena's reputation well into the 20th century, despite substantial investments in sewer and water networks by the municipal water service.
Chronic mismanagement, lack of maintenance, rapid population growth and political interference all conspired against improvement, and by the early 1990s the water and sanitation systems were near collapse.
"People were fed up," recalled Carlos Mouthon, a journalist and radio host with RCN Radio Cartagena who has reported on the city water problems since the late 1980s. "I used to have to get up at midnight to fill up a water tank in my house, because that was the only time when there was any pressure."
Mouthon continued, "At the universities, students organized marches to protest about the lack of water, but the municipal water company was full of unqualified people appointed by the political establishment. The priority was on patronage, not service."
Meanwhile, Colombia's congress was enacting a series of legal and constitutional changes that transferred responsibility for water and sanitation from central to local governments. Starting in the late 1980s, these laws let municipalities decide how these services should be organized (including whether to allow private investment), so long as they show progress toward meeting coverage targets and recovering maintenance and investment costs.
They also created a regulatory framework with clear rules concerning tariffs, investment, subsidies and related issues. Finally, legislators decreed that a fixed percentage of the federal budget (an amount close to US$300 million in 2005) would be transferred each year to Colombia's municipal governments exclusively for financing water and sanitation projects.
A few municipalities, including Cartagena, decided to create 'mixed capital' companies to run their water and sanitation services. The goal was for the municipal government to retain control of the service's assets and to provide investment capital, while contracting an experienced private operator to improve the management of the service.
The concept was so novel that in 1994, when Cartagena started looking for partners, only Aguas de Barcelona expressed interest. Eventually the city brokered a deal whereby the municipal government owns 50% of ACUACAR, Aguas de Barcelona owns 46%, and local private investors own the balance.
Under the management contract, Aguas de Barcelona is paid 3.44% of revenues (around US$1 million per year) to operate the service, and it has complete control over personnel and contracting decisions.
When the mayor of Cartagena announced the arrangement in 1995, public reaction was initially negative.
"For a few weeks it was pretty bad," recalls John Montoya, ACUACAR's general manager since 2002. "Some people even took to shouting 'First they took our gold, now they're taking our water!'" - referring to Spain's colonial legacy.
Eventually the protests gave way to a drumbeat of demand for service improvements. ACUACAR began making emergency repairs to the most critical parts of the infrastructure.
Within months, the biochemical quality of the water had been brought up to international standards, and pressure began to increase in several parts of the city. That was the easy part.
Next, the company's new managers set out to survey the water pipe network, 30% of which was found to be leaking heavily and in need of replacement. A survey of the customer base revealed that only 45% of customers had functioning water meters in their homes, and a large percentage of these were not paying their water bill, according to Montoya.
"There was no policy for dealing with people who didn't pay," he recalls. "[The previous company] had only been collecting payments on around 40 to 45% of their bills."
ACUACAR officials introduced systems to automate and control every aspect of the company's operations. Then they hired bill collection contractors and began systematically installing water meters.
By far the biggest challenge lay in the marginal neighborhoods that lacked any service at all. With funds transferred to the city from the central government, and with loans from the IDB and the World Bank, ACUACAR took on the massive job of extending service to some 350,000 people who had no water service.
According to Carlos Triana, chief of ACUACAR's community services department, the company developed a comprehensive strategy that involved hiring social workers and community relations specialists who work continually in the field, conducting workshops to get input from residents, explain how the water and sewer services work, provide health education, and facilitate payment plans for people with irregular incomes. ACUACAR also decided to hire local residents to perform the unskilled labour required during the new network installation.
As word spread that service had been installed in new areas, demand from those that were still waiting grew even more intense. ACUACAR officials were under constant pressure to speed up the process, but they were careful never to create unrealistic expectations.
"We always told the truth," says Triana.
When Aguas de Barcelona recently announced plans to sell its stake in ACUACAR as part of a broad reorganization of its Latin American operations, people did not react as might be expected at a time when anti-globalization sentiments are widespread in Latin America.
"It's quite a paradox," says Carlos Mouthon, the radio host, recalling early opposition to the mixed-capital concept. "Today people don't want the Spaniards to leave! They're telling the mayor that they don't want the service to deteriorate, and that if the Spaniards leave, then the new operators have to be just as qualified."