Memorandum submitted by Quaker Peace and
QPSW works in close co-operation with its American
equivalentAmerican Friends Service Committee who have a
regional programme in Central America working with grass roots
civil society groups. In a recent fact finding visit to Managua
related to the Nicaraguan Poverty Reduction Strategy Paper process
we assessed the extent of civil society involvement in the PRSP
process, the role of the international organisations, including
the IMF, and the extent to which privatisation of utilities is
likely to contribute to poverty reduction.
The PRSP process is founded on the principle
of local ownership rather than top down policy prescriptions from
the IMF and the World Bank. We are concerned in general that:
(a) Civil Society contacts in Managua reported
to us that there is very little capacity by those groups to deal
with the PRSP process and related issues. Additionally they pointed
out that the whole process to date had been urban based with virtually
no rural engagement.
(b) There is a feeling that despite impressions
to the contrary that civil society contributions to the consultations
have made little or no impact on the final PRSP documents. This
has contributed to a growing disillusionment and disengagement
with the process.
(c) The resulting Nicaraguan PRSP documents
that have emerged from the process are disappointing in their
failure to address systemic problems like the lack of markets
and the reliance on one or two commodities. Not much attention
has been given to the need for growth in the small and medium
sized businesses in Nicaragua, without which there is no chance
of sustainable growth in the economy and resultant poverty reduction.
In particular we are very concerned that ill-conceived
privatisation plans are being imposed upon one of the poorest
countries in the western hemisphere. Privatisation of the water
system is causing tensions in Nicaragua, and, we submit, potentially
endangering access to clean water.
At the national level 54 per cent of the population
is connected to a water system, 33.5 per cent of the population
is without water services, and in rural areas over two thirds
of the population are without access to clean water. It is clear
that the State owned company ENACAL cannot afford to meet the
demand. The IMF and World Bank say that the company is inefficient,
therefore it cannot meet demand or expand services. The argument
runs that a private company would have to operate efficiently
to stay profitable.
In the last few years the IMF has been pushing
for full cost recovery from water services and privatisation in
a number of countries. This is reflected in the figures: in 2000
the IMF made water privatisation and full cost recovery a condition
in 12 of 40 stand-by debt and restructuring agreements.
In 1999 the Inter-American Development Bank
offered a loan to Nicaragua to assist with privatisation of parts
of the water system. Part of the conditions for the loan is that
the contract should be with an international company.
Under pre-privatisation arrangements the water
company is able to subsidise poorer communities through charges
in more wealthy areas, it is unlikely that after privatisation
such cross-subsidy arrangements would be allowed.
Under the modernisation programme being promoted
by the IADB connections would be made legal and reliable for 4,000
people in marginal settlements around Managua. (This would be
around 5 per cent of the total number of people in marginal settlements
near Managua). We are concerned that many families will not be
able to pay for the water service once they are on meters. Indeed,
we saw such a system in place on a marginal settlement near Managua
which was full of people who had been re-settled following hurricane
Mitch, and about 80 per cent of the people are unemployed in many
of these communities.
We encourage careful consideration on two main
1. Ensuring that the voices of the most vulnerable
and marginalised in the HIPC countries are included in PRSP consultations,
and that the economic plans are not simply another way of the
IMF and World Bank imposing plans on developing countries;
2. Giving serious consideration to the concerns
that are being raised about privatisation, especially of basic
utilities like water.
14 May 2002