Will water slake a thirst for profits?
Investors weigh the ethical question of making money off an essential resource.
from the June 25, 2007 edition
Page 3 of 4
Some water experts meanwhile see a different picture. Public water utilities routinely face political pressure to keep prices so low that big users, including farms and industry, have little incentive to conserve, says Rick Rheingans, an economist at Emory University's Center for Global Safe Water in Atlanta. Inadequate pricing means that many utilities in poor nations can't make enough to restore their decaying infrastructures, he says.
What's more, the poorest citizens of developing nations often lack access to municipal water and instead pay three to 10 times as much to have water supplied, for instance, by truck-driving entrepreneurs who mark up the price and can't guarantee safe contents.
Because they aren't on the water grid, the poorest "simply don't benefit from subsidies channeled through utilities," says Gary White, executive director of WaterPartners International, a Kansas City, Mo., nonprofit that aims to increase safe water access in developing nations. "Thus, the really poor don't see their water rates go up when a utility is privatized." Indeed, the poor are likely to pay less if they gain access to the grid.
Private firms and their investors can play a role, Mr. Rheingans says, by supplying water to customers who can afford it and reinvesting profits in infrastructure. This may free up public subsidies, he says, to focus on getting the poorest citizens safe water at rates they can afford. Private-sector investment "is a very important piece of the pie, and it's one that's been remarkably untapped," Rheingans says.
As investors move in, they often look to exploit the very situations that disturb advocates who want to keep water a very inexpensive public resource. For instance, analyst Eric Cinnamond at Intrepid Capital in Jacksonville, Fla., says the firm is investing in Connecticut Water Services, a public utility, because regulators recently approved a 22 percent rate hike over two years.
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