• by IPS Correspondents (lima)
• Friday, November 18, 1994
• Inter Press Service

LIMA, Nov 18 (IPS) - Peru's state-run water company will not be sold to the highest bidderfor the first time in the country's fast-paced privatisation processbut to the firm which promises to charge the lowest rates and to expand services.

The company which wins the international bidding for SEDAPAL - which supplies potable water and administers Lima's sewer system - will receive credits and funds to expand and improve services.

The World Bank will contribute 25 million dollars of Japanese funds, and 150 million more will come from international financial aid, according to Guillermo Cox, president of the commission in charge of selling SEDAPAL.

The winning firm must put up 100 million dollars and commit to investing 600 million more to expand the company's services, which now reach only 75 percent of Lima's 6.5 million inhabitants.

The move differs radically from the policy followed up to now, by which firms went to the highest bidder and to whoever promised to generate the most jobs.

Upon entering office in July 1990, President Alberto Fujimori found a severe fiscal and economic crisis, and immediately initiated a programme of adjustments which eliminated subsidies and reduced public investment.

He pinpointed the inefficiency and marginal profitability of the enormous state economic sector as key factors leading to the fiscal deficit.

Fujimori set the goal of transferring Peru's 137 state-run companies to private hands by July 28, 1995, when his term runs out. Some 60 firms have already been sold, bringing state coffers 2.5 billion dollars.

"We cannot allow rates to be freely set by a private company that will hold the monopoly of a basic service which must be extended to low-income sectors of the population, who currently have to buy water from supply-trucks," said Cox.

Fujimori aims to avoid the criticism he received when Lima's telephone company was sold to a Spanish consortium which plans to compensate for the two billion dollars it invested by raising prices.

The public auction will be held in January, and Cox said three important consortiums are interested, made up of French, British, Japanese and Spanish companies, "all of which have experience in the administration of water and sewer systems."

© Inter Press Service (2014) — All Rights Reserved. Original source: Inter Press Service

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