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The persistent water problems of Lima, Peru:
Neoliberalism, institutional failures and
social inequalities
Antonio A.R. Ioris
School of Geosciences, University of Edinburgh, Scotland
Correspondence: Antonio A.R. Ioris (email: a.ioris@ed.ac.uk)
The contingent relation between water governance and nature neoliberalization has defined most
interventions in the water sector around the world in recent years. In the case of the Peruvian
capital Lima, the provision of water and sanitation services in the last two decades has been the
object of investments and institutional reforms strongly influenced by economic neoliberalism. This
essay examines the evolution of these neoliberalizing tendencies, noting the internal disputes,
necessary adjustments and underlying problems of water sufficiency in the metropolitan region.
The empirical results suggest that, rather than a straightforward process, the neoliberalization of
water in Lima has advanced according to political opportunities and technico-operational con-
straints. The water reforms implemented in the 1990s – when the goal of privatization met political
opposition – can be contrasted with the more recent phase in the 2000s, when more flexible
mechanisms, such as public-private partnerships, have facilitated public acceptance. Despite the
renovation of the infrastructure, the modernization of the water sector has failed to address
persistent water management problems, namely the discriminatory treatment of low income
residents, the chaotic expansion of the metropolitan area and the risk of future water shortages.
Keywords: neoliberalism, nature neoliberalization, water institutional reforms, Lima, Peru, urban
political ecology
Introduction: the context for the neoliberalization of water in Lima
In the last century, Lima, the capital of Peru, experienced one of the highest rates of
population growth among the large metropolitan areas of South America. In 2010, its
population reached nearly 10 million. Rapid urban growth was certainly not uncom-
mon to other parts of South America the continent, but the difficulties faced in Peru
were especially challenging due to a perverse combination of managerial, political and
socioeconomic factors. The water sector represents an important entry point into the
complexity and the contested nature of Lima’s urban development. Even if the growing
deficit of water in Lima is not dramatically different than the trend in other large
metropolises (Table 1), the availability of less than 100 m3/hab/year (below the inter-
national threshold of 500 m3/hab/year) is of serious concern. In 2010, water demand
reached 25.5 m3/s – significantly above the average supply of 21 m3/s – and is expected
to rise to 28 m3/s in 2015 (SEDAPAL, 2005). Only 32 per cent of the metropolitan
terrain is suitable for urban and agriculture development, which nonetheless has not
prevented the sprawl of new settlements over ever more remote areas where there is
limited access to water services. Despite recent investments in infrastructure, in the year
2007 (the last assessment available) 8.5 per cent of the population still depended on
water lorries and 3.9 per cent relied on public fountains, while 4.3 per cent extracted
water from boreholes or watercourses. Water scarcity has been magnified by the wide-
spread degradation of the local catchments due to mining activities, lack of sewage
treatment and inadequate rubbish disposal services.
bs_bs_banner
doi:10.1111/sjtg.12001
Singapore Journal of Tropical Geography 33 (2012) 335–350
© 2012 The Author
Singapore Journal of Tropical Geography © 2012 Department of Geography, National University of Singapore and
Blackwell Publishing Asia Pty Ltd
This paper discusses the direction of the official responses to water management
problems, the ongoing institutional reforms and the prospects for the future. Underpin-
ning the analysis is the influence since 1990 in Peru of neoliberal economic adjustments
on the reconfiguration of the Lima Water Supply and Sanitation Service (Servicio de
Agua Potable y Alcantarillado de Lima, SEDAPAL). For more than two decades, water
has been treated as a resource with monetary value, as well as technocratic and strategic
political significance. More than simply dealing with the deficit of public services,
interventions in the water sector have played an important role in the justification of
wider market-based policies championed by the national state. Because of the intro-
duction of new legislation, investment programmes and management approaches, the
water sector of Lima is now accessible to some of the largest international construction
companies and private service providers. Lima constitutes an intriguing example of a
city with a large contingent of low income residents with restricted access to public
water services (some 43 per cent of the residents still live in illegal or semilegal
dwellings), but where considerable sums of money circulate through water tariffs, local
water vendors and contracts with private organizations.
The expansion of neoliberal agendas in water use and conservation in Peru has
been examined by various authors (see Guevara Gil, 2009), but the more complex
articulation of the political nexus between the technical and economic dimensions of
the neoliberalization of water in Lima has received scant attention, despite such
studies in Cochabamba, Guayaquil and Buenos Aires – just to mention some expe-
riences in the region. Compared with other cities, Lima offers a more emblematic
case study, given that the assets and the operation of the public water utility have
remained in the hands of the national government. This paper sets out to unpack the
idiosyncratic evolution of the neoliberalization of water in Lima and assess the main
achievements and failures of the processes of change. The analysis is based on a field
research between March and June 2009, which included the review of policy docu-
ments and archival information (particularly at SEDAPAL, the National Superinten-
dence of Sanitation Services, or SUNASS, and the National Library), regular visits to
communities in the periphery and attending public events related to water services, as
well as interviews with local residents, regulators, policy makers and representatives
of multilateral agencies.
Table 1. Comparing water services in selected Latin American cities (1990–2000).
Population
(million)
Connected to Average water
demand
(m3/s)†
water
supply (%)†
sewage
service (%)†
Lima, Peru*7.1 70 69 25
Bogotá, Colombia 5.1 nd nd 17
Buenos Aires, Argentina 12.6 nd nd 85
La Paz, Bolivia 1.9 45 35 nd
Mexico City, Mexico 22.8 nd nd 50
Santiago, Chile 4.8 98 92 20
São Paulo, Brazil 16.8 nd nd 50–55
*SEDAPAL (2008) indicated connections to water supply at 91 per cent, sewage collection at 83
per cent and sewage treatment capacity at 15 per cent, water services availability on average 21
hours/day, and water unaccounted for (i.e. losses through leakage, theft and so on) 36 per cent.
†nd indicates no data available.
Source: Verner (2010: 30, table 2.3).
336 Antonio A.R. Ioris
The introduction of neoliberalism in Peru occurred during the turbulent transition
from the statist government of Alan García in the 1980s to a more techno-authoritarian
regime in the 1990s. The election of Alberto Fujimori (1990–2000) as president paved
the road for the complex alliance between national and international business groups
encouraged by the neoliberal canon. In 1992, the regime became semidictatorial, which
facilitated the replacement of an underdeveloped form of Keynesianism with structural
adjustments aimed to stabilize the economy and bring inflation under control (Gonzales
de Olarte, 1998). The economic stabilization programme promoted a dramatic reduction
of state costs at the expense of labour reforms and extensive privatization, involving
over 200 state companies and shares equivalent to USD 8.86 billion (cf. Pozo, 2006). The
government became increasingly associated with corruption scandals implicating not
only ministers and high office holders, but also President Fujimori himself (Durand,
2003). After a decade in power, the Fujimori administration eventually collapsed amidst
significant political uncertainty.
As happened in Chile in the early 1990s, the negotiated transition to reestablish civil
liberties and formal democracy was not followed by changes in the overall direction of
the economy. The neoliberal surge proved to be resilient and resumed after the election
of President Alejandro Toledo (2001–2006), an economist with professional connections
with the international financial system. In 2002, Toledo instituted a dedicated agency
(ProInversíon) to attract and support private investors, including their participation in
public water utilities. Toledo’s initial popularity was quickly eroded by a technocratic
style of government and clashes with the congress (Murakami, 2008), leading to the
surprising victory in the 2006 presidential election of Alan García, the president respon-
sible for the macroeconomic instability in the 1980s. After the ratification of the Free
Trade Agreement with the USA in 2007, the parliament delegated to the president the
authority to fast-track related legislation for six months. This included Decree 1081,
which replaced the previous water law under a centralized legislation with one of
limited public accountability to facilitate private participation (subsequently converted
into a new water law in March 2009, frustrating a large-scale, organized public
mobilization).
The term of García’s government effectively consolidated the populist face of neolib-
eralism in Peru, but paid less attention to the legacy of inequality and social exclusion,
which compromised the electoral prospects of his political group in the 2011 election
(won by the nationalist candidate Ollanta Humala). The most conspicuous outcome of
the Peruvian experiment of neoliberalism has been the pronounced dichotomy between
macroeconomic results (e.g. nearly a decade with positive rates of growth) and pending
social and political demands (e.g. around 20 per cent of Lima’s population earn less than
USD 90 per month and subsist in conditions of poverty or extreme poverty) (INEI,
2012). In 2008 the economy expanded by 9.8 per cent, but the proportion of malnu-
trition increased by 11 per cent (affecting then 34 per cent of the national population).
Likewise, the rise in socionatural conflicts in the country (at rates of more than 150 per
cent between 2008 and 2009) included 244 water-related disputes in 2010 alone (El
Comercio, 2010).
The remainder of the paper will demonstrate how the water sector of Lima epito-
mizes an important chapter in the expansion and malleability of neoliberalism in Peru.
The particularities of the local experience are highly pertinent to the provision of water
services and, ultimately, the prospects of nature neoliberalization in the global South.
Particularly in Latin America, neoliberalism has been the dominant economic paradigm
since the end of the 1980s (Lara & López, 2007) as both a productive and destructive
The persistent water problems of Lima 337
phenomenon, exacerbating rather than reducing the uneven geographies of develop-
ment (Perreault & Martin, 2005). Nevertheless, the impacts on local environments have
varied greatly between nations and places of different political, institutional, economic,
environmental and social conditions (Liverman & Vilas, 2006), and also included per-
sistent resistance and systematic contestation by grassroots movements (Perreault,
2008). Before considering the case of Lima, it is necessary to review some key theo-
retical issues related to the neoliberalization of nature.
Water management and the neoliberalization of nature: methodological and
conceptual claims
Water management reforms and policy making are central elements of contemporary
debates on the sustainable use of natural resources. A range of regulatory and technical
adjustments introduced in recent decades under the banner of ‘water governance’
ostensibly aim to reduce environmental impacts, improve user efficiency, secure addi-
tional supplies of water and promote a more flexible decision making (Ioris, 2008). The
trend towards away from the traditionally centralized interventions of government
agencies towards water governance coincided with the wider reconfiguration of the
national state under neoliberal pressures since the late 1970s. The expansion of the
neoliberal order has not been restricted to changes in monetary and production spheres.
Neoliberalism has been also a intensely environmental project (McCarthy & Prudham,
2004), a process of change that has fused the protection of ecosystem services (McAfee
& Shapiro, 2010) with the mounting encroachment and enclosure of nature (Heynen &
Robbins, 2005). In this project, environmental governance promotes the reregulation of
the use of natural resources through a combination of state- and market-oriented
approaches (Mansfield, 2007) in a way that redraws the public–private divide through
the dispersal of state functions upwards, downwards and outwards to nonstate actors
(Reed & Bruyneel, 2010).
The ‘neoliberalization of nature’ has been the object of wide-ranging academic
investigation, particularly among human geographers, who have tried to explain the
host of spatiotemporally differentiated processes that facilitate the accumulation of
capital through changes in environmental management. Geographers have indeed
produced some of the most perceptive assessments of the contradictory and multiscale
dimensions of neoliberalism (Jonas, 2006), working on material processes, on issues of
scale-crossing and scale-jumping, as well as on the remarkable array of places, regions
and countries affected by the neoliberalization of nature (Castree, 2008a). Even so,
nature neoliberalization is still too often described in generic terms or focused on the
specific details of localized case studies, with only limited attempts yet to make sense of
the socioenvironmental circumstances and their connection with broader politicoeco-
nomic drivers. Castree (2008a) underscores the dynamic and plural basis of the encoun-
ter between nature and neoliberalism, which is demonstrated by the myriad of
mechanisms (‘biophysical fixes’) available to insert nature in market-based relations.
Hence, case studies have the methodological weakness of restricting the comparison
of territorialized experiences and marketization strategies (Castree, 2010). Therefore,
Castree (2008b) recommends a middle way between the Scylla of monolithic under-
standings of neoliberalism and nature, and the Charybdis of empirical studies that do
not admit of wider comparisons.
Notwithstanding Castree’s condemnation of the widespread use of case studies, it is
important also to insist that the interactions between nature and neoliberalism are
338 Antonio A.R. Ioris
plural, multifaceted and not easily generalized. Neoliberalism is the quintessential face
of late capitalism, which emerged as a response to the crisis of profitability and mount-
ing impacts during the state-led, Keynesian phase of the economy, and that operates as
both a product of, and a driver toward, the reconfiguration, enclosure and control of
socionatural systems (Heynen et al., 2007). Springer (2010) further advises that neolib-
eralization should be considered as a hybrid, dynamic process that is expressed as a
hegemonic ideology, as a policy-based approach to state reform or as a particular logic
of Foucauldian governmentality. Consequently, notwithstanding obvious shortcomings,
case studies remain a powerful tool to investigate the complexity, unevenness and
messiness of the expansion of neoliberalism over socionatural systems. Sangameswaran
(2010) adds that institutional reforms have been examined from different perspectives,
including politicoeconomic approaches and the cultural constitution of the state, but
that case studies continue to play an important role in studying the neoliberalization of
nature. While Castree (2008b: 166) calls for a more concerted effort to synthesize the
plurality of nature neoliberalization experiences, he also recognizes that researchers
‘actively make choices [to mirror the world they are investigating] that require justifi-
cation and reflexivity’. In the end, allowing for their intrinsic limitations, case studies
provide insightful and needed accounts of the intricacy of disputes and interactions that
follow the imposition of the neoliberal rationality over nature and natural resources.
In that regard, the reform of water management constitutes a privileged example of
the neoliberalization of nature and the creation of new mechanisms of capital accumu-
lation under the flexibilization principles of environmental governance. The ‘neoliber-
alization of water’ includes a range of practices and institutional adjustments that
expand the reach of market rationality to activities such as water abstraction, distribu-
tion and conservation. It encompasses the displacement of conventional government
interventions by market priorities and by the growing adoption of joint ventures
between state agencies and the private sector.1Budds (2004) considers the implemen-
tation of those reforms as the ideological affirmation of the monetary value of water,
which happens through the development of water permit markets, the search for
different types of utility privatization and the adoption of market-based forms of water
regulation. Bakker (2005) describes this array of institutional reforms as a movement
from the ‘state hydraulic paradigm’ to the neoliberal ‘market environmentalism para-
digm’, which corresponds to the transition from Keynesian economic policies to a new
phase when market transactions have become the metaphor for the interactions
between nature and society. For Bakker (2005), the neoliberalization of water is the
outcome of several overlapping forces, such as commodification (market exchange of
water processes previously outside marketized spheres), commercialization (adoption of
commercial principles and methods) and privatization (changes in resource and utility
ownership). Furthermore, while the discourse of water governance has incorporated
the language of rights and public participation, it continues to be articulated within
neoliberalism’s individualist ontology, which is dedicated to economic growth above
broader social and environmental considerations (Roberts, 2008).
All these works (Budds, 2004; Bakker, 2005; Roberts, 2008) emphasize the myriad
of market-based adjustments associated with water neoliberalization, as a crucial driving
force behind the allocation, use and conservation of water resources nowadays. There
is still limited consideration in the literature of the persistence and malleability of
neoliberal reforms affecting the water sector across different government administra-
tions and under changing political contexts. A proper investigation of water neoliber-
alization needs to go beyond conceptual simplifications or dualisms (Ahlers &
The persistent water problems of Lima 339
Zwarteveen, 2009) in order to consider the complex, and often contradictory, advance
of neoliberal policies in specific circumstances and locations. It is worth mentioning that
a growing number of studies, particularly in Latin America, have provided a critical
assessment of the geographical complexity of neoliberal policies and pointed out the
persistence of unhelpful dualisms, such as nature/society, male/female and rights/
efficiency (e.g. Boelens & Zwarteveen, 2005). The results of these critical studies suggest
that special attention needs to be given to the resilience of neoliberal strategies, includ-
ing strategic compromise between market and nonmarket mechanisms of water man-
agement, notably in the more nuanced situations where formal privatization is not an
immediate option, as was the case of Lima).
The decisive element of such longitudinal analyses is the political nexus between
economic goals and technical interventions. Underpinning the conceptual framework
here is the assumption that the neoliberalization of water entails a set of new procedures
that help to invigorate the logic of capital accumulation through the private appropria-
tion of collective resources by the stronger social groups. Changes in the discourse and
symbolism of water management – such as the growing emphasis on cost recovery,
economic efficiency and the monetary value of water – all reflect the political priorities
of hegemonic groups and the wider balance of power in society. Likewise, the interna-
tional experience demonstrates that success of neoliberalizing strategies in the water
sector depends, first and foremost, on the negotiation capacity of government officials
and private companies, who often need to persuade a normally sceptical public of the
benefits of water neoliberalization (Mustafa & Reeder, 2009; Dosh et al., 2010). Through
the application of such a politically sensitive framework, the water sector of Lima
provides a vivid example of the contested basis of the adjustments associated with water
neoliberalism, as the following discussion reveals.
Aims, achievements and limits of the neoliberalization of water in Lima
Introduction and early results
The first phase of the neoliberalization of the water in Lima in the 1990s took place at
a unique historical and political juncture that combined the long-term failures of the
water services and the aggressive pro-market policies pursued by President Fujimori.
The mounting water problems in the capital were directly associated with the chaotic
and discriminatory pattern of urban growth during most of the twentieth century. Lima
experienced unparalleled rates of population expansion between the 1950s and 1980s,
including the staggering figure of 5.4 per cent per year between 1961 and 1972 (IMP,
1989). Initially, most migrants from rural areas and provincial towns moved to slum
tenements (tugurios) established in old buildings in the historical centre of Lima. Gradu-
ally, however, barriadas (squatter settlements) became the dominant form of urbaniza-
tion, where a plot of land is obtained (usually by invading the area) and dwellings are
constructed without the existence of any urban infrastructure or public services
(Barreda & Ramirez Corzo, 2004). Valueless pieces of land around the city were quickly
engulfed in the creation of barriadas such as Pachacútec in the Northern Cone of Lima
(Figures 1 and 2). The consolidation of the barriadas was a major feature of the expan-
sion of Lima (Driant, 1991), which ended up establishing an overarching pattern of
spatial segregation, between rich and poor, centre and periphery (Calderón Cockburn,
2005), with high levels of violence and insecurity (Plöger, 2012).
Despite some localized concessions from the state apparatus during the period of
rapid urban growth, the evolution of water supply and, to a much smaller extent,
340 Antonio A.R. Ioris
sanitation followed the dual-track urbanization of Lima: mainly the ‘legalized’ part of
the city was reasonably served by the public utility, while most of the population had to
resort to alternative strategies to guarantee their access to water (Matos Mar & Matos
Lagos, 1990). The structure and operation of the water industry of Lima maintained the
Figure 1. Pachacútec in the North Cone of Lima, where a significant proportion of the population rely on
water tanks (author’s photograph, April 2009).
Figure 2. Water lorry filling a water tank (alternative supply system) in Pachacútec (author’s photograph,
April 2009).
The persistent water problems of Lima 341
double standard of services while at the same time coming under pressure to respond to
broader changes in the economy and in the national state. With the return of democratic
rule in the early 1980s, SEDAPAL was designated as the key utility of the National Water
and Sanitation Corporation (SENAPA), which suffered a reputation for poor perfor-
mance and lack of investments. The meagre investments in water infrastructure,
however, were mostly directed to the consolidated neighbourhoods and new high
income areas of the Peruvian capital (Zolezzi & Calderón, 1987). At the time of the
election of Alberto Fujimori, a quarter of the metropolitan population did not have
domestic water supply and a third was without sanitation (IMP, 1989). The scale of the
problem was tragically confirmed when an outbreak of cholera in 1991 (after a century
without incidence) killed more than 150 persons in Lima (Ghersi & Ñaupari, 2005).
Fujimori had specific plans for the water sector of Lima and saw the opportunity to
attract private business the country and, crucially, to increase his fragile political legiti-
macy after winning the turbulent elections of 1990. As happened in other countries (see
Schwartz, 2009), water sector reforms that had been considered for years were precipi-
tated by an acute crisis situation and the severe water deficit in Lima provided the
excuse for the advance of neoliberalizing strategies. In the first moment of the neolib-
eralization of water in Peru, the priority of the national government was to prepare
SEDAPAL to be privatized. That was preceded by a series of institutional and regulatory
adjustments. The National Water and Sewerage Programme (PRONAP) and a new
regulatory agency (SUNASS) were both created in 1992, at the same time that SENAPA
was dissolved and services returned to purview of the local and regional administrations
– that is, with the important exception of SEDAPAL, given its political relevance, the
entire water sector was devolved to municipal or provincial providers). As part of the
same process, the government received a World Bank loan of USD 600 million to
reorganize the water services of Lima, including readjustments of customer tariffs and
systematic reductions in the workforce.
The improved balance sheets, the restored liquidity of SEDAPAL and the potential
for making money did not go unnoticed and three large international consortiums
prequalified to bid for the privatization of the water service in November 1994. Because
of the scale of its operation, the transfer to the private sector attracted great interest and
was the subject of intense media coverage. Moreover, due to organizational delays and
some political hesitation the tender was postponed until after the 1995 reelection of
Fujimori, followed by a series of further adjournments. The privatization of SEDAPAL
was officially and definitively cancelled in 1997, which frustrated the international
business community and the multilateral agencies involved in the tendering process.
Based on field interviews, it seems that two main concerns undermined the acceptability
of the privatization by the general public: first, the certainty of much higher tariffs (the
concessionary would have to make a fourfold increase to cover contractual require-
ments) and, second, the national state would still have to invest in the procurement of
new sources of water (despite privatization, the production of water would remain in
the hands of the government). The political price of these two issues of privatization was
too high for Fujimori, particularly when his popularity was declining due to economic
problems and with Lima being one of his main political strongholds.
With privatization losing its momentum, SEDAPAL embarked upon an extensive
programme of infrastructure and operational efficiency, which included a pipeline
scheme to transfer water from the Andes to the metropolitan area (Valdeavellano et al.,
1998). In 1998, the water utility was transformed into a public limited company and
then incorporated in the portfolio of FONAFE – the government finance corporation for
342 Antonio A.R. Ioris
state entrepreneurial activity. Those measures alleviated the severity of problems and,
paradoxically, reduced the appetite for privatization within the national government
(reinforced by ministerial replacements that removed the more orthodox neoliberals). It
demonstrates that the liberalizing goals are not achieved only through privatization,
higher tariffs and cost-recovery procedures (cf. Narsiah, 2010), but that investments
directly and indirectly funded by the state are also a prime component of water
neoliberalization.
At the beginning of this century, the public image of the water utility had improved,
albeit mainly among higher income residents, though there were widespread com-
plaints about tariffs, mistakes in the water bill and in the water meter (ICOM, 2001). Of
the 49 municipalities of Lima, 33 still had systematic water rationing and intermittent
services affecting around 70 per cent of the population. The water utility was culpable
for inadequate system maintenance, a high level of unaccounted for water, excess
staff, low metering rates and low water quality, and was fraught with political favou-
ritism (Corton, 2003). There persisted a pattern of higher levels of water use in the
wealthiest areas (330 l/day/inhabitant) than found in the lower income neighbour-
hoods (103 l/day/inhabitant) (SEDAPAL, 2005). Because of macroeconomic constraints
and the initial neoliberal reforms exhausted, the level of national investments in the
water sector had declined from USD 228.9 million/year in the 1990s to USD 166.6
million/year in the period immediately after Fujimori’s removal. In a 2003 poll of utility
clients, half perceived improvements in the quality of the service, whilst the rest either
did not notice any significant change or strongly complained about the utility’s perfor-
mance (SEDAPAL, 2005). Among those dissatisfied with SEDAPAL, about half rejected
the need to raise water tariffs and mentioned service restrictions and interruptions in the
supply.2
Overall, it is undeniable that the first phase of the neoliberalizing process achieved
significant managerial recovery and substantial investments in the water infrastructure
of Lima. Authoritarian governmental interventions, however, failed to produce any
lasting response to avert the looming risk of higher water shortage, particularly in the
periphery and more recent settlements. On the contrary, investments and institutional
reforms under neoliberal priorities never challenged the prevailing inequalities between
social groups and spatial locations. Although the neoliberalization of water was justified
on technical and economic grounds, the main driver of the new policies was political.
Fujimori was forced to react to a situation of acute water crisis and perceived in it the
potential for attracting private water operators to Peru. Privatization was one of the
central recommendations of multilateral agencies and financially assisted by loans and
technical assistance provided by organizations such as the World Bank. More important
than privatizing the public water utility, Fujimori needed to maintain his political
support in Lima. In the end, water proved to be a challenging sector for the neoliberal
ideologues and politicians, who nonetheless learned from the experience of the first
decade of reforms. An amended approach to water neoliberalization was put in practice
in the decade following the debacle of Fujimori.
Adjustments, political changes and the consolidation of water neoliberalism
The first period of water institutional reforms in Lima coincided with the government of
Alberto Fujimori and achieved a partial, but significant, recovery of the water utility.
Both before and after the aborted privatization of SEDAPAL, the sector received sub-
stantial investments from the national government and income from rising water tariffs.
While SEDAPAL (2005) considered the 1990s as a ‘preparatory phase’ to be followed by
The persistent water problems of Lima 343
the ‘improvement phase’, services in the year 2000 were plagued by problems and
insufficiencies, particularly in the periphery and new settlements around Lima. The
National Plan of Sanitation in 2006 outlined the lingering problems left by the initial
years of the neoliberalization of water and the difficulties confronting President Toledo.
Because of deficient coverage, bad quality services, unskilled staff and institutional
weaknesses, SEDAPAL still needed some USD 1.2 billion worth of investments to secure
a more reliable and comprehensive level of services. Yet, it was only during the final
years of Toledo’s presidency that investment improved, owing to new international
loans.
The need to address problems inherited from the previous decade was acknowledged
by Alan García, who made solving the water deficit one of the pillars of his campaign
manifesto in 2006. After the semiauthoritarian years of Fujimori and the turbulent
transition under Toledo, García seemed to best personify the subtle changes required to
move forward the neoliberalization of water in Lima. The appealing discourse of eco-
nomic development and social inclusion articulated by García, combined with a solid
parliamentarian majority, provided the political weight to reinforce the neoliberalization
of water in Peru. The willingness of the new government to embrace and move forward
the neoliberalization of water came through the ‘Water for all’ (APT) programme
launched in 2007, with a portfolio of 150 projects and a budget of USD 270 million in
investments in the water sector of Lima. ‘Water for all’ created novel opportunities for
foreign companies to participate in the water services of Lima without having to sell the
ownership of the water utility. Private companies bid for contracts relating to mega
engineering projects, including the construction of the Huachipa water treatment work
(USD 271 million) and the expansion of the system in the North Cone of Lima (USD 250
million), both financed with public funds and foreign loans. A series of public-private
partnerships worth more than USD 600 million were also included in the investment
programme, such as a new project to transfer water from the Andean mountains, a
water desalination plant and two sewage treatment plants. Sustained increases in water
tariffs were approved by the regulator SUNASS in order to cover the construction
of those infrastructure projects (10.37 per cent for the Marca II storage dam in the
mountains, the Huachipa water treatment plant, Ramal Norte and Ramal Sur – the
water mains in the northern and southern zones of the city – and 12.31 per cent for
the Taboada sewage treatment plant and a submarine sewage pipeline).
The second decade of water neoliberalism was characterized by an increasing com-
plexity and diversification of procedures. The intensification of business transactions
involving water has gone much further than large infrastructure projects, but began to
permeate most of the public policies on water services. The introduction of neoliberal
reforms has not only led to higher complexity of public water services, but also incor-
porated new agencies and stakeholder groups (Figure 3). Under new utility legislation
SEDAPAL is required to respond to regulatory agencies and various branches of the
national, regional and local governments, and organized communities, NGOS, academ-
ics and think-tanks are increasingly involved in the debate about water management in
Lima. Even so, as noted during several field interviews, relations between SEDAPAL, the
regulators, and the public remain tense, with mutual finger pointing and much frus-
tration over SEDAPAL’s formal mission to serve the needs of the metropolitan popula-
tion. If neoliberal policies improved the performance of the water services, some
residents continually subvert SEDAPAL’s attempt to monitor domestic water use, for
example, with significant increases in pilfering equipment (such as water meters) and
cases of vandalism.
344 Antonio A.R. Ioris
The current state of affairs has been also criticized by union leaders and NGO activists
for the lack transparency and the recurring evidence of corruption (Figure 4). Moreover,
most of the organized protest against the neoliberalization of water is now confined to
the National Federation of Workers in Water and Sanitation (FENTAP) and some other
critical think-tanks, which contrasts with more activist popular mobilizations in the
1980s and 1990s. Interestingly, the actual course of the water reforms has not even
Figure 3. Schematic representation of the main water stakeholder groups of Lima.
Figure 4. Political protest against neoliberal water policies in the centre of Lima (author’s photo, 1 May
2009).
The persistent water problems of Lima 345
pleased those sectors that call for a more orthodox neoliberal approach. Some regret that
SEDAPAL was not privatized, which in their view would have represented higher gains
in efficiency and economic rationality. Such opinions were expressed in interviews by
executives of the various international agencies with representation in Peru, as well as
consultants and academics involved in the formulation of recent projects and plans. The
fundamental criticism among advocates of neoliberalism is that while significant works
are being built by the private sector, the sources of investments remain in the hands of
the national government. The critique is that the expansion of the water infrastructure
in Lima, for example via the APT programme, is going to be paid mainly by the
government rather than by customers of SEDAPAL who will directly benefit from the
water works. The same critics have also pointed out that it is also not clear whether
the ‘Water for all’ programme will have adequate funds money to fulfil all its targets,
particularly in the wake of international financial instability since 2008.
The local experience shows that, as elsewhere, the national state remained the main
player and the ultimate guardian of water neoliberalization. State interventions were
required to minimize the risk for private business and to guarantee public acceptance of
private operators and construction companies. The moderator role performed by the
national state have kept water tariffs relatively low when compared with similar cities
in the continent (despite successive increases): typically, low income families spend a
little less than 5 per cent of their income on water services, which is the common
threshold adopted to assess water affordability (cf. INEI, 2007). Nonetheless, there is a
high probability that tariffs will have to increase significantly in the near future to
maintain profit margins and attract more private companies. It should also be noted that
despite its formal responsibilities, the regulatory agency SUNASS has had only second-
ary interference in the key decisions regarding investments and tariffs. When it was
formed in the early 1990s, SUNASS was expected to supervise and support the water
utilities. But the modest improvement of the water services during much of the last two
decades demonstrates that SUNASS lacks the instruments for penalizing water utilities
for their failures (Lin & Berg, 2008) and to avoid political interferences (CIDA, 2001).
The main challenge faced by SUNASS has been the implementation of an objective price
setting formula that allows the tariffs to gradually increase with the long-term marginal
cost of the service. In practice tariffs have been mostly manipulated according to the
political priorities of different administrations.
Overall, when contrasted with the first period of water neoliberalization in the
1990s, the second decade revealed a complex combination of continuity and change.
The water sector of Lima has continued to be the object of substantial public investments
that attracted international construction companies and private operators. Whilst main-
taining the public ownership of SEDAPAL, the water industry of Lima has become a
privileged arena for the circulation of capital associated with the increasing commodi-
fication of nature. Different presidential administrations took the opportunities available
to try to overcome institutional barriers and to promote pro-market strategies. In the
subsequent decade, the justification and the discourse associated with the water reforms
became gradually more sophisticated. Fujimori had to cope with an initial situation of
crisis in the water services and intended to privatize the public utility. When privatiza-
tion was not possible due to political reasons, the government somehow reintroduced
the conventional centralized investments that were used in previous decades. García, by
contrast, adopted a more nuanced approach that combined democratic promises –
epitomized by the slogan ‘water for all’ – and the creation of profitable opportunities for
private businesses. The public image of water neoliberalization became apparently more
346 Antonio A.R. Ioris
friendly, which nonetheless did not conceal the contradictions and tensions of the
public-private alliances. For around a fifth of the population, the colourful advertise-
ments of the new waterworks, constantly broadcast in the Peruvian media, have been
nothing by a cynical manipulation of the promises of equitable services and social
inclusion.
Conclusions: resilience and contradictions of the neoliberalization of water
This brief analysis addressed the main political trends of the neoliberalization of water
in Lima and the systematic adjustments needed to sustain the institutional reforms
across different political regimes, from semiauthoritarianism to the return of formal
democracy. The neoliberalization of water has consisted of a multistage, hybrid phe-
nomenon that unfolds simultaneously in technical, commercial and discursive direc-
tions as an adjunct of wider policies aimed to improve capital accumulation. Moreover,
the introduction of water neoliberalism was by no means a necessary outcome, but was
the result of specific geographical circumstances at the end of the twentieth century. The
institutional reforms followed a nonlinear, opportunistic pattern of development that
required significant modifications from one decade (1990s) to the next (2000s) in order
to allow for the expansion and consolidation of market-based initiatives. The combina-
tion of firm policy goals and constant policy revisions represent sophisticated approaches
to maintain water in the sphere of market-based strategies. In that process, the advo-
cates of the neoliberalization of water have learnt a great deal from the failures of the
initial privatizing model and have had to deal with the negative reactions of water users.
What is particularly relevant in the local experience, and also contributes to broaden the
body of academic literature on the neoliberalization of nature, is precisely this persistent
enhancement of the neoliberalization of water through subtle mechanisms of change
and continuity.
This study aimed to show the resilience and mystification of the institutional reforms
introduced in the past two decades, in spite of obvious limitations and growing contra-
dictions. It is clear that the public water services of Lima have experienced significant
renovation over the two decades, moving away from traditional government interven-
tions in favour of flexible patterns of governance. Neoliberalizing strategies incorporated
elements of public participation, environmental sustainability and even social justice
without compromising on incentives for the circulation of capital and the maximization
of private profits. Because of the ideological and economic commitments, the process
has proved to be surprisingly resilient and has spanned four presidential administrations
(including the current mandate of the leftist President Humala). Particularly during the
last García administration, the water industry of Lima became a favourite locus for
investments and business transactions in the form of public-private partnerships, but the
more explicit discourse on social inclusion and on the universalization of services –
trademarks of his government – also helped to legitimize neoliberal policies. It is
estimated that more than USD 3 billion have been invested in the water sector in the last
20 years in Lima, but to a large extent it depended on higher tariffs, foreign loans and
the exploitation of the working force. Likewise, while substantial sums of money have
been invested in infrastructure and management, neoliberal policies have so far failed to
address the causes of water management problems, namely the risk of renewed water
shortage due to environmental degradation and chaotic city expansion.
More importantly, because of the elitist basis of water policies in Lima, most of the
responses actually tend to aggravate the overall pattern of social and spatial discrimi-
The persistent water problems of Lima 347
nation. Both people and nature have become entangled in the implementation of
neoliberal reforms, which have persistently overlooked the concerns of the grassroots
communities living in periphery and marginalized areas of the Peruvian capital. As a
result, inequality, favouritism and contestation continue to characterize the manage-
ment of public water services of Lima and, ultimately, undermine operational and
technical improvements achieved in recent years. Insufficient attention has been dedi-
cated to specific solutions to the water problems of different parts of the capital and to
increasing the reliability of the water system. Capitalizing on the symbolism attached to
large-scale projects, community-based and low-cost alternatives are largely disregarded
as unfeasible and irrelevant. In addition, the relation between the water utility
SEDAPAL and the population has been marked by selective channels of communication
that ignore the demands and the political organization of the periphery. In the end, the
considerable complexity of the ongoing water reforms, together with aggressive adver-
tising campaigns, populist government propaganda and the dissimulation of the asym-
metry between gains and losses, may have affected the mobilization capacity of low
income communities and weakened the leadership of protest groups. However, with the
costs, insufficiencies and contradictions of the neoliberal initiatives becoming increas-
ingly more evident, these contain the seeds of further political contestation.
Endnotes
1 These increasingly include public-private partnerships, which comprise various possible
arrangements with different levels of commitment, profitability and risk. Lower risk options
include service contracts, management contracts and lease contracts; medium risk options
include various forms of concessions and the widely used ‘build, operate and transfer’ (BOT)
mechanism; and more complex and riskier alternatives include mixed financed companies,
utilities partially owned by the government and full divestiture (or privatization).
2 The annual rates of increase in water supply and sanitation tariffs in Lima were: 17 per cent in
1995, 10 per cent in 1996, 19 per cent in 1997, 14 per cent in 1998, 9 per cent in both 1999 and
in 2000, 2.8 per cent in 2002 and 3.0 per cent in 2004 (SEDAPAL, 2005). Between 2001 and
2008, the average tariff increased by 97.4 per cent, from USD 0.39/m3to USD 0.77/m3.
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