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Javier Milei announces privatization plans for Agua y Saneamientos Argentinos (AySA)

  • Javier Milei announces privatization plans for Agua y Saneamientos Argentinos (AySA)
  • Javier Milei confirmed last Wednesday that he maintains the privatization plans for AySA.

  • The Kirchner government decided to nationalize the company in March 2006, creating Agua y Saneamientos Argentinos (AySA).

  • Currently, AySA is led by Malena Galmarini since 2019.

Following Javier Milei's victory last November 19 in Argentina's presidential elections, concerns about his proposal for the privatization of state-owned companies have echoed around the world. In the words of the imminent president of the Republic of Argentina, "the changes our country needs are drastic, there is no room for gradualism", a vigorous statement that leads one to believe that his privatization plans will be implemented without anaesthesia.

With the applause of the Argentine stock market and investors, Milei's plan to keep the markets "free of state intervention" will start with the public media and the oil company YPF. In his electoral campaign, the future president included Agua y Saneamientos Argentinos (AySA) in his list of privatizations, assuring in an interview that he "would have no problem" in returning the company to private hands. Last Wednesday, Javier Milei confirmed that he maintains these plans for AySA: "AySA was Aguas Argentinas, it was private and worked very well [...] Everything that the public sector does, it does badly".

The process of privatization and re-privatization of Agua y Saneamientos Argentinos (AySA)

In 1993, the former Aguas Argentinas SA (AASA) became the drinking water and sanitation provider for the Autonomous City of Buenos Aires and seventeen areas of Greater Buenos Aires. The main shareholders were the French groups Suez Environnement and Vivendi Universal SA, the Spanish-based Sociedad General de Aguas de Barcelona SA, and Anglian Water Group Limited of the United Kingdom.

State control allowed the objective of keeping fares low to benefit the popular coalition supporting the government to be achieved

During the critical financial crisis suffered by the country in the 2000s, which would transcend as the one that caused the request for financial aid to the IMF and the notorious "corralito", AASA's shareholders proposed to the Argentine government an increase in water rates, which would be charged to users. The refusal of Néstor Kirchner's government culminated in the withdrawal of the concessions, returning water management to the public domain.

Following this event, the Kirchner government kept the tariffs of the privatized companies frozen, a decision that clashed head-on with the management of the dollar debts of these companies. After a series of unsatisfactory negotiations with AASA, the government concluded this process by seeking potential replacements for the service concession.

Finally, in the absence of private alternatives that complied with the slogan of neither dollarization nor tariff increases, the Kirchner government decided to nationalize the company in March 2006, creating Agua y Saneamientos Argentinos (AySA).

Ninety percent of the shares of AySA, now under the Ministry of Planning, Public Investment and Services, passed to the direct control of the state in a non-transferable manner, while the remaining 10% remained in the hands of the workers. This state control made it possible to comply with the objective of maintaining low tariffs to benefit the popular coalition that supported the government.

Since its nationalization, the direct control of AySA by the Executive Branch has made it possible to guarantee low tariffs, achieving that "the average tariff expressed 0.55% of the average salary and 93% of users by 2015 had some form of subsidy" (Chaia De Bellis, Jonás, 2023).

Furthermore, during the legislature of Cristina Fernández de Kirchner, the census showed for the first time in 50 years a positive growth in drinking water and sanitation infrastructure, reaching a figure of more than 5 million Argentines who had access to a safe drinking water network and more than 4 million to adequate sanitation.

AySA is currently led by Malena Galmarini since 2019, during whose tenure there have also been tariff increases and a progressive withdrawal of subsidies

The government of Mauricio Macri was marked by the beginning of a growing increase in the inflation rate that had not occurred since 1991, with the rise of the CPI in Argentina at 142.7% as of today. The increase in water tariffs by 26% in May 2018, which continued to rise until accumulating 45%, occurs in this context.

Currently, AySA is led by Malena Galmarini since 2019, during whose management there have also been rate increases and a progressive withdrawal of subsidies, resulting in a burden to the user of 62% of water and sanitation costs.  On the other hand, Galmarini claims to have inherited a debt from the previous management that, in 2022, she managed to refinance until 2026 for US$500 million.

Another controversial aspect has been the allegation against the head of AySA for promoting contracts that benefit a chlorine supplier -Transclor S.A. - until 2028, accusing AySA of preparing a bidding document tailored to this company, reason for which, allegedly, it would incur in a crime of defrauding the public administration and violation of the duties of public officials. Malena Galmarini said this was an "accusation with electoral purposes", as it happened five days before the election between Massa and Javier Milei.

Regarding the intentions of the next president to privatize the state-owned company, Galmarini defended yesterday on social networks the achievements of AySA during the last four years, expressing that not all Argentine public companies "work badly", and reaffirming the effort to bring drinking water and sanitation networks to humble families.

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