The world is running out of fresh water, and the fight to control it has begun.

In this "Letter from Bolivia" New Yorker correspondent William Finnegan describes the intersection of global freshwater shortages and efforts to privatize utilities in third world countries. After hearing news of the Cochabamba water revolts, Finnegan traveled to Bolivia "to find out how the global water business looks from ground."

In April of 2000, in the central plaza of the beautiful old Andean city of Cochabamba, Bolivia, the body of VÌctor Hugo Daza lay on a makeshift bier. Daza, a seventeen-year-old student, had been shot in the face by the Army during protests sparked by an increase in local water rates. These protests had been growing for months, and unrest had also erupted in other parts of the country. The national government had just declared martial law. In Cochabamba, a city of eight hundred thousand, the third largest in Bolivia, a good part of the population was now in the streets, battling police and soldiers in what people had started calling la guerra del agua-the Water War. Peasants from the nearby countryside manned barricades, sealing off all roads to the city. The protesters had captured the central plaza, where thousands milled around a tiled fountain and the catafalque of VÌctor Daza. Some of their leaders had been arrested and taken to a remote prison in the Amazon; others were in hiding.

The chief demand of the water warriors, as they were called, was the removal of a private, foreign-led consortium that had taken over Cochabamba's water system. For the Bolivian government, breaking with the consortium-which was dominated by the United States-based Bechtel Corporation-was unthinkable, politically and financially. Bolivia had signed a lucrative, long-term contract. Renouncing it would be a blow to the confidence of foreign investors in a region where national governments and economies depend on such confidence for their survival. (Argentina's recent bankruptcy was caused in large part by a loss of credibility with international bankers.) The rebellion in Cochabamba was setting off loud alarms, particularly among the major corporations in the global water business. This business has been booming in recent years-Enron was a big player, before its collapse-largely because of the worldwide drive to privatize public utilities.

For opponents of privatization, who believe that access to clean water is a human right, the Cochabamba Water War became an event of surpassing interest. There are many signs that other poor communities, especially in Third World cities, may start refusing to accept deals that put a foreign corporation's hand on the neighborhood pump or the household tap. Indeed, water auctions may turn out to test the limits of the global privatization gold rush. And while the number of populists opposing water privatization seems effectively inexhaustible-the leaders of the Cochabamba rebellion included peasant farmers and an unassuming former shoemaker named ²scar Olivera-the same cannot be said of the world's water supply. There was a great deal more than local water rates riding on the outcome of this strange, passionate clash in Bolivia.

The world is running out of fresh water. There's water everywhere, of course, but less than three per cent of it is fresh, and most of that is locked up in polar ice caps and glaciers, unrecoverable for practical purposes. Lakes, rivers, marshes, aquifers, and atmospheric vapor make up less than one per cent of the earth's total water, and people are already using more than half of the accessible runoff. Water demand, on the other hand, has been growing rapidly-it tripled worldwide between 1950 and 1990-and water use in many areas already exceeds nature's ability to recharge supplies. By 2025, the demand for water around the world is expected to exceed supply by fifty-six per cent.

Some of the resource depletion is visible from outer space. The Aral Sea, in central Asia, was until recently the world's fourth-largest lake. Then Soviet planners dammed and diverted its source waters for cotton irrigation. The Aral has since lost half its area and three-fourths of its volume. Its once great fisheries have vanished; all twenty-four species native to the lake are believed to be extinct. The local climate has changed, and dust storms now plague the region.

Aquifer depletion, though less visible, is an even more serious problem. There is sixty times as much fresh water stored underground as in lakes and rivers aboveground. And yet parts of northern China, to take one example, are approaching groundwater bankruptcy. Beijing's water table has dropped more than a hundred feet in the past forty years. In the United States, the Ogallala Aquifer, which reaches from Texas to South Dakota and is indispensable to farming on the Great Plains, is being drained eight times faster than it can naturally recharge. In vast areas of India, Mexico, the Middle East, and California's Central Valley the story is the same.

Meanwhile, more than a billion people have no access to clean drinking water, and nearly three billion live without basic sanitation. Five million people die each year from waterborne diseases such as cholera, typhoid, and dysentery. This enormous, slow-motion public-health emergency is, in large measure, a result of rapid, chaotic urbanization in the nations of the Global South. Traditional water sources have been polluted, destroyed, overtaxed, or abandoned.

Annual rainfall is not always a measure of water wealth. Poland, for instance, gets plenty of rain, but its lakes, rivers, and groundwater are so polluted that it has as little usable water as Bahrain. Arid regions with the means to pay (Southern California, the Persian Gulf States) already pipe water in from wetter areas. New technologies are being hurriedly developed: huge fabric bags holding millions of gallons of fresh water are being hauled by barges across the Mediterranean, and there are businessmen in Alaska who believe that the state's earnings from fresh water will eventually dwarf its earnings from oil.

For strategic planners at some of the world's largest corporations, the global freshwater shortage coincides opportunely with privatization. According to Johan Bastin, of the European Bank for Reconstruction and Development, "Water is the last infrastructure frontier for private investors." In the past fifteen years, municipal and regional water systems have been steadily coming onto the international market. Two French corporations, Vivendi Environment and Suez, lead the industry: Vivendi runs eight thousand systems in a hundred countries; Suez has operations in a hundred and thirty countries. The biggest American player, Bechtel, whose directors include former Secretary of State George P. Shultz, has always been notable for its political connections. The United States is itself a field for direct foreign investment in water. Suez is running Atlanta's water system, and Vivendi recently bought U.S. Filter, a national water-services group, for more than six billion dollars.

But the main push is in the Global South, where, over the past twenty years, the World Bank and the International Monetary Fund have effectively taken control of the economies of scores of nations that are heavily in debt. The Bank and the I.M.F. have been requiring these countries to accept "structural adjustment," which includes opening markets to foreign firms and privatizing state enterprises, including utilities. The Bank once had a quite different approach to public works: it was an enthusiastic financier of monumental projects, and would typically lend the money to build large dams. Many of the dams were spectacular failures, delivering few, if any, benefits (except to politicians and construction firms) while displacing millions of people and leaving behind environmental destruction and public debts. The Bank is now getting out of the dam business and into water privatization. It often works closely with the conglomerates, helping them to acquire the water assets of debtor nations.

The idea behind privatization is to bring market discipline and efficiency to bear on a crucial and frequently corrupt sector. Supporters argue that only private capital-which means, in practice, multinational corporations-can afford to expand water and sanitation networks sufficiently to reach the underserved poor. Since corporations are in business to make money, they often increase water rates. But, in theory, higher water rates can also help to promote conservation. Indeed, privatization advocates say, any valuable commodity-and this includes health care and education-that is provided free eventually gets taken for granted and wasted. According to this argument, turning water into a tradable commodity may even be the only practical way to avoid worldwide shortages and environmental disasters. Public subsidies for essential services such as water may sound like humane policy, but in the real world subsidies benefit the powerful, because they have the resources to manipulate them.

In Cochabamba, which has a chronic water shortage, this unintended consequence was grotesquely clear. Most of the poorest neighborhoods were not hooked up to the network, so state subsidies to the water utility went mainly to industries and middle-class neighborhoods; the poor paid far more for water of dubious purity from trucks and handcarts. In the World Bank's view, it was a city that was crying out for water privatization.

I went to Villa San Miguel, a ramshackle settlement on an arid hillside a couple of miles south of Cochabamba, to find out how the global water business looks from the ground. ...

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Originally published in The New Yorker on April 8, 2002. Copyright © 2002 William Finnegan. For the full version of this article and more New Yorker articles please visit The New Yorker online at http://www.newyorker.com.