Chapter 5 Conclusions and Lessons About the Chilean Experience
Updated: Aug 24
Bauer points to the 20 years of experience with the free market approach to water in Chile over the 1981-2004 period. Notably, another 20 years has transpired since 2004, here in 2026, and, the Water Economy book addresses that period. Bauer points out the international consensus points to the need for some new and creative ways to deal with water issues, albeit going exclusively to a Market Forum is not likely the best idea. So, through a DIT lens, perhaps the lessons learned in Chile from the pendulum swinging almost exclusively over to the Water Forum might be useful, in that DIT sees the interaction of the Market&Other Forum. Bauer points to the need to view what has evolved in Chile from the frame of integrated water resources management as in it being “holistic, interdisciplinary, and sustainable over the long run (p. 119),” which would support that DIT contention. Using the DIT lens, clearly that had not been accomplished in the first 20 years in Chile, and, as pointed out in other sections of the Water Economy book, it still has not been accomplished after 45 years (1981-2026). Other Forums are still yet to be built.
Bauer points out that the matter of water being only an economic good is still controversial. In the DIT lens, the claim that it is only about the profane without regard for the sacred lacks in substance. Bauer correctly points out that any kind of integrated water resource management needs to deal with a wide variety of issues including, again the point: “--- defining and enforcing property rights, coordinating different water uses within river basins, internalizing environmental and economic externalities, resolving conflicts, and monitoring compliance (p. 130).” Bauer raises the question as to whether “a narrow and free market approach to economics is compatible with integrated water resource management (p. 130).” Through a DIT lens, the answer is clear in the negative.
Chile: Looking Back from 2004
Bauer points out that the conversation about the new Water Forum in Chile has been long on ideology and short on empirical evidence. Specific questions he raises are whether the extremely laissez faire styled water use rights, which are in the main unattenuated by the shared other-interest, have actually led to improvements, and whether better forms of the rights would work better. A DIT lens would point to more attenuation of the rights to reflect the shared other -interest in the sacred dimension of the water. Also, more research is needed on how the Water Forums in Chile actually have worked, and, using the DIT lens, could the performance be improved by better representing the shared other-interest in Other Forums.
Empirical Results of the 1981 Water Code
Bauer works to compare what happened relative to what the law's objectives had in mind. Also Bauer considers the issues critical for integrated water management relative to what the law actually accomplished.
Comparison with the Original Objectives of the 1981 Water Code
Primary concerns had been mainly related to agriculture and irrigation, and using the free market notions from neoliberalism and libertarian economics to bring about efficiency in said domain. Nonconsumptive uses were not in view in the 1981 Code. River basin management was not in view. The actual role of the DGA was never made clear.
Bauer lists some accomplishments:
Illegal security of property rights was improved
The counter reform in agrarian land tenure was consolidated
Government regulation was greatly reduced
The free trade in water rights did move some water around to other uses
The autonomy of the local agricultural water user organizations was enhanced, such that internal operations were improved
The creation of non-consumptive water use rights did lead to more hydroelectric power development and generation
Bauer has a much longer list of problems yet to be resolved:
It is not at all clear that free trading and agricultural water use rights actually improved efficiency
Continued subsidies have been required from the government to build canals and for other investments in water infrastructure
Very little market activity actually occurred except in some of the desert regions
Definition of water rights still remains vague, and technical data is lacking in most of the regions
The idea that water markets would somehow help poor and small farmers just has not been the case.
Private bargaining has failed to address conflicts within river basins, especially as between the hydroelectric sector and agriculture. Also the non-consumptive water rights have been subjected to problems related to speculation, concentrated ownership, and private monopoly power.
Overall, much remains to be resolved, and, through a DIT lens, it cannot be done only with a Market Forum which sees only the self-interest in the domain of the profane as having any relevance.
Comparison with Issues Ignored 20 Years Ago But Critical Today
Bauer gives a list, all related to lack of adequate attention to the key role of the Other Forum:
Management of river basins needs coordination of multiple water uses and conjunctive management of both surface water and groundwater
Resolution of water conflicts through either judicial or non-judicial processes
Internalization of both economic and environmental externalities
Clarification, enforcement, and monitoring of the relationships among different property rights and duties such as consumptive and non-consumptive water rights new line environmental and ecosystem protection including the maintenance of in-stream flows for environmental purposes and new line public assistance to poor farmers to improve social equity in matters of water rights and water markets
Through a DIT lens, yes, indeed.
Political Debate About Reforming the Water Code
Bauer goes through a detailed conversation of how attempts to reform the 1981 water code have just not gone very far. It seems the sort of recalcitrant, largely ideological opposition based on the fact said individuals now have private property rights in water --- more or less full ownership of the corpus of water --- has been much more difficult than any of reformers anticipated. It is to be expected, as neoliberalism and libertarian economic framing of “the Chicago Boys” reflects an ideology lacking in an empirical foundation, so, yes, challenging ideologies based in sheer belief and faith becomes a real challenge.
Bauer notes how “the government's allegedly anti market persuasion has been greatly exaggerated for political effect and reflects the highly ideological nature of political debate in Chile in which anyone who is not a free-market neoliberal can be accused of being anti market (p.128).” Again, through the DIT lens, any effort to bring people committed to an ideology that serves their individual good is going to be hard to convince moving toward a shared cohesion, solidarity, and sense of the need to jointly provide for the common good. Like Bauer says it, the “…people wanting reform will have to develop greater capacities for persuasion, dialogue, pragmatism, and long term vision (p. 129).” Perhaps that will work. People who believe in an ideology are not prone to being persuaded.
Specific arenas Bauer believes need attention include:
1. Government should drop the attempt to put fees on non-use
2. Government should put the matter of water taxes into a longer time frame like over the next 5 to 10 years
3. Government and the opposition should come to realize that the real problem with the private water use rights is the lack of consideration of the need for some public rights water: Through the DIT lens, there is a sacred side of water which needs public ownership
4. Legislation is needed to handle the conflict between the non-consumptive uses and the consumptive uses in each river basin. DIT would suggest the legislation needs to lead to apply Ostrom IAD principles to forming new Other Forums.
5. Legal agreements need to be developed to handle conflicts within river basins, on the way to designing an institution for each basin.
6. Protection of instream flows for environmental purposes needs to be developed
7. Environmental and social NGOs should be encouraged to participate
8. A sustained effort at applied research and policy analysis between the universities and the government needs to be established
International Water Policy: Lessons for Reforms
Bauer calls for a more interdisciplinary approach to water management. The hope is that the Chilean experience will put more attention to economic and institutional aspects. The Chilean experience yes suggests that private property rights could induce some investment and perhaps some more efficiency. Yet, a few positive effects have also led to a lot of negative effects especially as relating to sustaining the natural resource. The claim that the Chilean Water Forum system can be exported to other areas is flawed, because the institutional backgrounding has not been done in Chile. As Bowers says, all three legs need to be addressed, namely “efficiency and growth, social equity, and environmental sustainability … (problem is) … Chilean approach to managing water as an economic good puts all the emphasis on water as a private good and tradable commodity, it is very difficult to recognize or enforce the other aspects of water as a public good (p. 133).” Through the DIT lens, water must be managed jointly as a private&public good using a market&other forum.
Comments