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Jim Shultz: Bechtel Strikes Back at Bolivia

Bechtel Strikes Back at Bolivia

By Jim Shultz
November 11, 2002

Sometime in the next few weeks, behind closed doors at the World Bank headquarters in Washington, D.C., panelists in a secret trade court will decide if the people of South America's poorest country will have to pay $25 million to one of the world's most wealthy corporations.

The stakes in this case – Bechtel Corporation vs. Bolivia – are high, and not just for the poor families who may ultimately pay the bill. The principle of local control in an era of unchecked economic globalization is at risk.

The Bechtel vs. Bolivia case is round two of a fight over something basic: water. Two years ago Bechtel took over the public water system of Bolivia's third-largest city, Cochabamba, and within weeks raised rates by as much as 200 percent, far beyond what families there could afford. When the company refused to lower rates, the public revolted. Widespread protests eventually forced Bechtel to leave.

In November 2001, Bechtel filed a demand of $25 million against Bolivia, seeking to recover the money it says it invested, as well as a portion of the profits the corporation expected to make.

"We're not looking for a windfall from Bolivia. We're looking to recover our costs," explains Michael Curtin, the head of Bechtel's Bolivian water company.

But the company didn't invest anything close to $25 million in Bolivia in the few months it operated there. Furthermore, the $25 million prize Bechtel now seeks is equal to what the corporation earns in half a day. For the people of Bolivia, that sum is the annual cost for hiring 3,000 rural doctors, or 12,000 public school teachers, or hooking up 125,000 families who don't have access to the public water system.

More importantly, Bechtel vs. Bolivia could portend future global battles. Trade officials from 34 countries are currently working to draft a "Free Trade Act of the Americas" (FTAA), a new economic constitution which would rule from Alaska to Argentina. President Bush and other supporters hope to see the pact put in place by 2006. One of the FTAA's most controversial provisions is the establishment of a system of secret trade courts, in which multinational corporations can sue local, state and national governments – behind closed doors – to overturn laws or extract payment for actions that block their access to local markets.

The prototype for these secret courts is the very one where Bechtel has brought its case against Bolivia: the World Bank's International Centre for the Settlement of Investment Disputes (ICSID).

Under the FTAA, secret courts like these could force the repeal of environmental laws in California, health regulations in New Hampshire and worker protections in Venezuela – all in the name of knocking down barriers to trade. For these reasons, the Bechtel vs. Bolivia case has become an international symbol and rallying point.

Last August more than 300 citizen groups from 41 different countries – environmentalists, peasants, labor leaders, women's groups, indigenous leaders and others – joined to file an International Citizens Petition with the World Bank, demanding that the doors of its secret trade court be opened to public scrutiny and participation.

"The actions of Bechtel in Bolivia left a city of more than 600,000 people in turmoil for four months," the groups wrote. A young boy died, hundreds were injured, and public access to water was threatened. The international group protested that the case was about more than the calm transfer of assets from one economic institution to another. "It is a matter of deep importance to far more than the two parties who now have formal access to the process," they wrote.

Under World Bank rules the process is so secret that Bank officials won't say when the tribunal in the case will meet, won't reveal who testifies before it or what they say, and won't let any members of the media or public in the room. Bechtel has already lied on the public record about its Bolivian water rate increases. It isn't likely to be any more honest behind closed doors.

The World Bank's role is also suspect. Though it represents itself as a neutral judge, World Bank officials directly appointed the president of the tribunal hearing the case. And it was the Bank that forced Cochabamba's water into Bechtel's hands to begin with. Two years prior to the water deal, Bank officials directly threatened to withhold $600 million in international debt relief if Bolivia didn't privatize Cochabamba's public water system.

Secrecy serves privilege and lies. Public participation and public scrutiny are instruments of democracy and truth. In choosing closed doors, Bechtel and the World Bank have made clear which method they prefer. Now the public must demand that the rules of globalization be debated and implemented in the light of day. Bechtel vs. Bolivia is exactly where that battle should begin.


- Jim Shultz is executive director of The Democracy Center, lives in Cochabamba, Bolivia, and is the author of "The Democracy Owners' Manual" (Rutgers University Press).

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