The Politics of Privatisation Policies at Local Level in Mexico: The Case of the Water Utilities in Aguascalientes by Jorge Leal Kirchbach A thesis submitted in fulfillment of the requirements for the degree of Doctor of Philosophy Department of Government The London School of Economics and Political Science. London 2000 UMI Number: U615444 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U615444 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 1 1 6 i+ 733227 Abstract This thesis assesses the extent and relevance of the prevailing debate over the use of privatization schemes at a local level in Mexico, after decades of highly centralised and rigid political and economic decision­ making. The aim is to examine the privatization debate by analysing events following the modifications made to Article 115 of the Mexican constitution in 1983, which marked the inception of a new set of policies regarding the provision of public utilities at the local level. The theory of privatisation, as promoted by the Mexican Government, was for the first time on the political agenda, and debate spread rapidly. However, because research into privatisation has hitherto focused largely on economic explanations, this thesis will instead attempt to analyse the politics of the privatisation programme at a local level. Basically, it looks to explain and demonstrate that economic policies are subject to political scrutiny and demands. The process of moving the control of traditionally government services from federal to state and thus to local level seems to be an ongoing trend focused upon encouraging improved governance capabilities and increased social wealth. Far from achieving this, though, it has instead generated great controversy in the political arena concerning the implementation of public policies. Increasing concern regarding the size of governments in the Mexican municipalities, and thus their ability to cope with the provision of public utilities, has prompted these authorities to pursue their objectives by means of privatisation programmes. Of such programmes, the vast majority have taken the form of concession schemes, and it is one such scheme, concerning water utilities in the city of Aguascalientes, that represents both the most controversial and, consequently, forms our case study. ii Acknowledgements I owe to my country the opportunity of having been one of the students to have had the chance to experience the culture of another country. My commitment is to bring something back to my country and to contribute it to its development, in which I have a deep and permanent interest. Essential economic resources were made available through federal funding, in which theConsejo National de Cientia y Tecnologia (CONACYT) played a fundamental role during my stay in the United Kingdom. My supervisor at the London School of Economics and Political Science, Dr. George Philip (Government Department), encouraged me in this fascinating but compromised world of research, in which all man's weaknesses are tried. For many years, he gave me his valuable time and ideas. Without his time and support it would not have materialised. As relevant is the role played by the Co-Director at the London School of Economics and Political Science, Dr. Judith Rees, who patiently read various drafts of this thesis and tested my skills to the fullest. I hope I have not disappointed either of them. I am in debt to all my family for the support and care received during these years - my grandmother, Julieta; my mother, Carlota; and my brother, Joaquin, and his family, all played a key role in helping me to conclude this project. As vital was the unconditional help received from Tito Ramos. I would also like to take this opportunity to remember my father, Joaquin, who died while I was working on this project and with whom, unfortunately, I did not have the chance to discuss what I was doing. My greatest allies and partners on this journey, however, have been my wife, Viridiana, and my daughter, Ivana, from which I received unconditional help throughout the time expended on this thesis. I am particularly grateful to Ernesto Zedillo Ponce de Leon, Luis Alberto Perez Aceves, Vicente Fox, Martin Werner, Derek Woodhouse, Alfonso Vasquez-Mellado, Adolfo Pons, David Silveti, Ignacio Vazquez Torres, Ignacio Vazquez Chavolla, Juan Ignacio Torres Landa, Jose Aben Amar Herrera, Marco Antonio Contreras, Rodolfo Garcia del Castillo, Hermann Saenger, Mark Evans, Keith Gildart, Sergio Medina, Humberto Hernandez, Rodrigo Santa Rita, Armando Sandoval, Laura Perez, Gerardo Rivera, Sergio Negrete, Eduardo Nieto, Carlos Diaz-Duran, Julio Velasco and Juan Carlos Velasco, all of whom gave me invaluable time and unconditional support in completing my research. I am specially grateful to Armando Jimenez San Vicente for all of his support and encouragement. At the LSE, and other U.K. universities, I made great friends, including: Joaquin Lozano, Javier Sanchez, Juan Osorio, Eduardo Torres, Alberto Cervantes, Jose Murat, Mario Ojeda, Marco Garza, Mike Bostock, Manuel Ruiz de Chavez, Ricardo Hernandez, Fabiola Gomez, Adriana Sanchez, Flavio Torres, Alfredo Hernandez, Miguel Angel Jimenez, and Susana Berruecos. All of these people are dear and reliable friends to whom I owe both admiration and respect. During my field work in Aguascalientes I met valuable people and made new friends, of whom I will just mention a few - Agustin Morales Pena, Victor Rodriguez, Edna Lorena Pacheco, Francisco Romo, Jaime del Conde and Francisco Parga. Many other people also gave their invaluable time in order to discuss my project. I am especially grateful to Enrique Pasillas Escobedo, Alejandro Vazquez Bobadilla, Manuel Reed Segovia, Humberto Blancarte, Martin Molina Ochoa, Fernando Gomez Esparza, Felipe Gonzalez Gonzalez, and Miguel Angel Najera. The Jimenez San-Vicente family made me feel at home and I am more than grateful for all the support and care. During my stay in London, I received unconditional help from Rev. John Salter, George Stanica, and David Spidy, without whose help this project would surely have never been completed. Isolated though the world of research might be, many people are involved, and I would thus like to apologise for the large number of people whose names I have omitted in error. I would also like to dedicate my thesis to all those sceptics who doubted its significance. London, England (Summer, 1999). Contents Page Abstract ii Acknowledgments in Contents VI List of Tables and Figures ix Acronyms and Abbreviations XII Preface XXI Chapter One Introduction. The Rise of the Technocratic Era: Promoting Privatisation Schemes in Mexico 1 1.1 Thesis Hypothesis, 1 1.2 Privatisation: A Political Tool, 5 1.3 Privatisation Policies at a Local Level in Mexico: A Promise or Threat, 18 Chapter Two Reinventing Ways to Provide Public Utilities at a Local Level Under Technocratic and Centralised Observance in Mexico: The Background to the Privatisation Programme ..................................................................................................................23 2.1 The Role of Technocratic Policies Under Central Observance at the Local Level in Mexico, 24 2.2 Local Governments and Public Utilities in Mexico: The Legal and Administrative Structure, 41 2.3 The First Responsibility of Local Governments: The Provision of Public Utilities, 50 2.4 The Role of the Private and Public Sectors in the Provision of Public Utilities in Mexico, 59 2.5 Local Governments and Privatisation Policies: The Empirical Evidence, 72 Concluding Note, 80 vi Chapter Three Politics, Policies, Elections and Water: The Context in the Municipality of Aguascalientes............................................................................................................83 3.1 Demographic and Economic Perspectives: The Background in Aguascalientes, 84 3.2 The Role of Politics and Policies in Aguascalientes, 94 3.3 Elections in Aguascalientes: The Fall of the PRI Hegemony and the Rise of the PAN Dominance, 111 3.4 The Water Structure in Mexico: The Background in Aguascalientes, 116 Concluding Note, 125 Chapter Four The Path Towards the First Concession Scheme for the Water Utilities in Mexico: The Beginnings in Aguascalientes (1989-1993)...................................128 4.1 The Steps Towards the First Concession Scheme for the Water Utilities in Mexico: The Background in Aguascalientes (1989-1992), 129 4.2 Fighting for the Paternity of the Concession Scheme: The 1992 Elections, 139 4.3 The First Stage of the Approval of the Concession for the Water Utilities: '93, the Year of a Final Resolution, 148 4.4 The Concession Scheme: A Free Road to Implementation, 158 Concluding Note, 169 Chapter Five The First Water Utilities Concession in Mexico: From Theory to Practice (1993-1995).......................................................................................................172 5.1 The Context of the Water Concession: As a Private Entity, 173 5.2 The Background