To the highest bidder: private investment in water may be best way to save a sinking Mexico City as government struggles to combat nature, meet demand.

By United Nations estimates, two-thirds of humanity will face shortages of clean freshwater by 2025. Nowhere is this clearer than in Mexico City.

Once a valley of lakes with a canal system built by the Aztecs, the lakes were subsequently emptied and now the capital sits surrounded by mountains with no natural drainage. While the rainy season replenishes the city's groundwater supplies with 700 million cubic meters of rainwater annually, nearly double that figure is extracted--an alarming amount considering the valley surrounding Mexico City still relies on its aquifers to obtain 66% of its water. This rapid extraction has led to vast water shortages, and a city that is literally sinking into the ground.

The city's problems do not just lie with water shortages: with a population near 20 million, the metropolis' waste increases every year. The great drainage canal, one of two that were built to drain the city's waste, is now working at 10% capacity--as the antiquated system deteriorates. Without a complete overhaul, the system is expected to shut down altogether within the next few years.

BEGGING FOR INVESTMENT

The National Water Commission (CNA) has taken stock of the growing problem. With no conceivable way of tackling the overwhelming project by itself, the Mexican government, together with the CNA, pulled together a US$1.035 billion Valley of Mexico Sanitation Project in 1996 with the help of the Inter-American Development Bank (IDB).

The IDB is lending US$365 million to the project, a figure that is augmented by a further US$410 million in aid from the Overseas Economic Cooperation Fund of Japan. The project aims to create a multifaceted program involving the enlargement of the city's deepest drainage well, building new lakes for collecting rainwater and constructing four large treatment plants around the valley to improve processing wastewater.

The project also aims to improve water companies' efficiency to collect water charges and tackle the city's antiquated pipe network, which loses an estimated 35% of water each year, according to Leonor Pintado, the manager of the Valley of Mexico Sanitation Project. The new water highway, called the acuiferico, will allow four additional cubic meters of water per second into the wells, to reduce the sinking water table levels.

ENTER THE CORPORATIONS

In order to implement these improvements, the CNA awarded contracts to private alliances for the design, construction and operation of the wastewater treatment and drainage networks. The alliances are required by law to be 51% nationally owned. Of the four contracts awarded, two of the world's biggest water companies, the France-based multinationals Vivendi and Suez Lyonnaise des Eaux, have taken 49% stakes in two of these joint ventures, with another water giant, the U.S.-based Azurix, taking up interests in a third.

The fact that the private ventures are part owned by foreign multinationals has created some nationalistic opposition. World water demand has tripled over the last half century, leading to falling water tables globally. Many of the hardest hit are developing nations with no way to pay for ways to fight the alarming trend.

This has created growing pressure for governments to turn water and sanitation services over to the private sector, with the profit motive an incentive to ensure that all people are given access to healthy drinking water. This, at least, is the theory. However, there is an increasing voice of concern that allowing multinationals control over what has been traditionally viewed as a public good is setting a dangerous precedent.

ALL THE WATER IN FEW HANDS

Canadian activist Maude Barlow, in her best-selling book "Blue Gold," took an in-depth look at the water crisis facing a global population that threatens to exceed 9.3 billion by 2050. Suez Lyonnaise des Eaux and Vivendi Universal--both ranked among the 100 largest corporations in the world by the Global Fortune 500--own, or have controlling interests in, water companies in over 120 countries and distribute to almost 100 million people, according to Barlow.

Barlow argues, "The private sector should play a role as a consultant to governments. It can build infrastructure, but it must not have control over the management of water."

Jesus Campos Lopez, under director of Urban Hydraulic Infrastructure at the National Water Commission, said that each of Mexico City's 16 districts is in charge of attracting investment to improve its water efficiency and distribution.

With the help of foreign investment, the municipalities can take advantage of funding to overhaul their operations. While the average cost per cubic meter of water in Mexico is five pesos, according to the CNA, the water companies are only managing to collect 1.40 due to trouble collecting from clients.

Clearly any improvement on this figure will help enormously. The pessimists argue that the poor in Mexico are unable to pay for water charges, and therefore ideas of increasing water rates will likely have little or no success. However, Valley of Mexico Sanitation Project manager Pintado said that in the areas where there is little or no public water supply, families spend up to 10 times that of the rest of the population. So the people with the least money are paying the most.

Foreign investment also brings foreign technology. For instance instead of digging up whole roads to test pipework below the surface and determine where repairs are needed, cities are using foreign electronic monitoring equipment to do the job.

WATCH THE LEAK

Azurix, one of the private investors awarded a contract to improve services, has replaced sewer mains with no need to dig up pavements, using technology that has been developed in the United Kingdom. Whereas pipes used to be made of asbestos cement, an inflexible material unsuitable for a city that not only is sinking but also gets hit regularly with tremors, newly developed polycarbon materials are being used that bend with tectonic movement.

The CNA figures predict that if the Federal District manages to reduce its leakages from the current 35% to 20% within the next 30 years, there could arguably be no more water shortages.

Of course, companies in the capital will have to curb water usage. Currently, different water tariffs are placed according to domestic, industrial and commercial use. Industry uses a disproportionate amount of water (the agriculture sector accounts for 78% of water consumption nationally), but it currently uses drinking water where it could be using treated or recycled water from plants the CNA is building around the capital.

Municipalities now have the power to place fines on industry to make sure companies use treated water wherever possible, and it is the CNA's duty to enforce that. Progress is clearly being made, so multinational firms ask, "Why does it matter that it is being made with foreign help?"

Recent failures by internationally owned companies to satisfy water supply in developing countries have been cited by a growing body that questions the corporate control of water and the pricing strategies private companies place on the local supply once they have full control.

Major multinational corporations have greatly expanded their efforts to take over responsibility for a larger portion of the water service market. However as Campos at the National Water Commission pointed out, the municipalities in the Federal District are separately in charge of contracting out services to help them with their task.

These contracts are awarded on a yearly basis, and at least in the medium term, it would seem difficult for one large player to get a grip on the water supply of Mexico City.

Thomasina Miers is a freelance writer based in Mexico City.