Bechtel Drops Contract Claim Against Bolivia

Construction and engineering giant Bechtel Corp. has dropped its $25-million claim against the Bolivian government for canceling a water contract whose rate hikes led to deadly protests, a company spokesman said Thursday.

In exchange, the Bolivian government said the San Francisco-based company and its international partners were not responsible for the 40-year concession contract to manage water and sewer service in Bolivia’s third-largest city, Cochabamba, ending the deal less than a year after it was signed.

Almost immediately after the fee increases were imposed under the contract in January 2000, civil unrest swept through Cochabamba, an impoverished city 239 miles southeast of La Paz.

The issue became a cause celebre for activists around the world and a public relations headache for Bechtel, a privately held company that has major contracts for reconstruction work in Iraq.

Thousands of Bolivians had protested water rates that they said increased by as much as 200%. A 17-year-old protester was shot to death, and hundreds were injured in ensuing clashes with the army.

Bechtel disputes that fees rose that high and said the Bolivian government agreed to an average increase of 35% to help pay debt and to expand service.

“The rates certainly triggered the disputes,” Bechtel spokesman Jonathan Marshall said. “The rates were written into the contract and it’s not something we sprung on Bolivia.”

A government-mandated fee rollback and customer refunds in February 2000 failed to quell the violent protest, and in April that year the government canceled the contract with the consortium Aguas del Tunari.

Bechtel and its partners then filed a $25-million arbitration claim with the World Bank’s International Center for Settlement of Investment Disputes.