THEIR country has lots of fresh water. But fewer people in Peru have access to piped water and sewerage than anywhere else in South America except Bolivia. The government is turning to the private sector to narrow that gap. But privatisation of the water industry has proved politically toxic in Latin America: despite expanding coverage, private consortia have been driven out of both Bolivia and Argentina by popular protest or populist politicians. So Peru is trying a more subtle approach.
The problem is an urgent one. Only 72% of households have piped water, and 51% access to sewerage. Lima, the capital, is perpetually threatened with water rationing. That is partly because Peru's fresh water is in the wrong place. Only 100 miles (160km) or so inland from the Pacific, the Andean watershed diverts all rivers to the Amazon and the Atlantic. But after half a century of migration from the Andean highlands, 70% of Peru's 26m people, most of its industry and its booming export agriculture are all crammed into the narrow coastal desert to the west of the watershed.
The bigger problems are poorly run state-owned water companies, and a collapse in public investment. According to official estimates, more than 40% of water is not billed, because of leaks or unauthorised connections. To reach the regional average for coverage of piped water, Peru needs to invest $4.6 billion, according to the Peruvian Economy Institute, a free-market think-tank. But government investment in water and sewerage has been declining since the late 1990s, and totalled just $43m in 2004.
The government wants to offer private investors long-term contracts, known as concessions, to operate some of the country's 45 water and sewerage companies. The idea is that each contract will be a locally determined variant on a public-private partnership. Soft loans from the Inter-American Development Bank and from the German government will be used as subsidy, to prevent the steep rises in charges that proved explosive in Bolivia. The first contract, for Tumbes, a small city in the north, was awarded last July to an Argentine-led consortium. It is supposed to invest $30m to more than double coverage from its current level of 40%.
Otto Eléspuru, the government official in charge, admits that public hostility to privatisation makes the concessions a hard sell. “We're trying to show people that while privatisation is like selling grandma's jewels, a concession is merely renting them out for the ball but still owning them,” he says.
In Huancayo, in the Andes, the mayor, Fernando Barrios, is pushing a different model. The city's water company will remain publicly owned. The contractor will have to extend coverage to 40,000 families who lack piped water under a performance contract. The investment involved will be financed with a mixture of soft loans and greater efficiency.
Bigger battles lie ahead. Next on the list is Piura, a bigger city where local Catholic priests and NGOs are strongly opposed to water and other public services being run by private companies. They argue that water is a human right, not a commodity, and that the government has deliberately starved the water companies of funds. The biggest fight will be in Lima. Polls show that while limeños are dissatisfied with Sedapal, the state-owned water company, they do not want its privatisation.
Peru is due to hold a presidential election on April 9th. Opinion polls suggest that access to potable water ranks fourth in public concerns, after jobs, crime and more paved roads. What to do about Lima's water will doubtless be a decision for the next government. Careful management of water resources should be a national priority, if coverage is to rise and coastal farming to have a long-term future. The obvious solution is to combine private management with targeted subsidies for poorer consumers. Whether the politicians can sell it is another matter.