Chile, New Mexico, and water markets

In the last post, I compared the country of Bolivia with the state of New Mexico and how both "state" entities recognized customary water traditions and rights in national or state statutes, respectively. Here, I want to reflect forwards, in imagining what New Mexico might anticipate or mitigate if free markets on water are aggressively pursued. Perhaps no better case exists on water privatization than the water policies of Chile; its reforms to water in 1981 are still a New World benchmark for pursuing a private pathway to water pricing and re-allocations. This comparative piece relies on several publications by Bauer (2004, 2005), Budds (2009), Shiveley (2001), and Swyngedouw (2009).

Under the thumb of General Pinochet, the country of Chile enacted aggressive free-market policies in the 1981 Water Code (1981). The code recognized not only that water rights were "private," but that the resource itself was a commodity ready for full marketization. The code has been both praised by Chicago-school neoclassical economists, or "Milt's boys," who had a heavy hand in designing Chile's economic policies (Valdes 1995), and damned by social equity water critics, and so provides an interesting paradigm for comparison. What is clear is the distinction between Chile and New Mexico. Whereas New Mexico's system and legal system for water management is driven by the need for management and policy, with markets somewhat active, the contrary is true for Chile (following Bauer 2005). In Chile, water markets drive such a laissez-faire policy in water resource management, that all of the science and policy follows in the wake of pricing and free-market exchanges. That said, Bauer (2004) has demonstrated that while private rights were affirmed, free-market water incentives were less successful in Chile's new water regime. Still, Hayek would have loved Chile's policies.

What Bauer and Budds (2009) make clear, however, is that Chile's restrictive emphasis on "markets and science" in water management have made it nearly impossible to implement a version of Integrated Water Resource Management. Bauer rightly emphasizes that the institutional framework of the 1981 water code cannot cope with the multiple conflicts, the multiple users, and the difficulties in managing a resource that goes beyond a simple market measure. He goes so far as to call the code "obsolete" in many ways (2004). And cautionary tales abound from Chile itself, on the dire consequences of this full-scale privatization push. What Budds adds to this is a focus on the use of science in supporting that free-market water policies: hydrological assessments reproduce the unequal social conditions that were created because of the 1981 water code. Modeling "what already exists" does little to improve equity considerations when new water groundwater projects affect existing users; the model cannot identify the problematic users since it is a strictly hydrological model that does not take into consideration the social or political context of a situation (see the map for the area of La Ligua, Chile). Both Budds and Swyngedouw (2009) are interested in using the term "hydrosocial cycle" to include the socio-political dimensions excluded from these narrow scientific and economic calculations of proper water resource management. Academics love this kind of jargon, but what it means is that water management and governance has to include the social and political aspects of water, not just "pricing" and not just "science." The conjoined arguments point out that water scarcity is more a direct result of governance than drought; the latter happens, but it is exacerbated when management is not open to questions of equity and access.

In New Mexico, the 1907 water code is not nearly so aggressive in its pursuit of markets as the 1981 Chilean code. Although state statue does recognize and entitle the OSE to pursue expedited water markets, these have been slow to form in comparison to Chile's experiences. One of the more fascinating analyses on water markets and water transfers was done by David Shiveley (Geography, U Montana). In his 2001 article, Shiveley performed a twenty (20) year analysis of water transfers in New Mexico, between 1975-95, with special focus on the population portions of the Rio Grande. What he found was an active market, albeit "incremental" in its pace and quantity of transfers, moving water out of rural areas (Taos, for example) to support the increased urban and suburban needs of Albuquerque, and the Santa Fe metro area. Shiveley's analysis also points out the vulnerability of water rights within the MRGCD when pre-1907 (vested) rights are moved out of the basin. Since MRGCD priority dates are from 1925 and after, only rights that pre-date the conservation district can be moved "out" of the basin and uphill towards money (as the expression goes). The current Board of the MRGCD is, of course, different from those of the past and has an eye on these agriculture-to-anything else transfers. And while water transfers have not stopped, there are occasions when a request for transfer has been blocked.

What can we learn from this? How can we wisely manage water resources, as a socio-physical product, and meet the needs of increased population growth? Look to the Mimbres River, where OSE is attempting to model a "real time" water transfer market for agriculturalists, in a hyper-arid basin. I've already commented on the heady mix of guts and arrogance this approach takes, of course provided by a UChicago economist, and this will be interesting to watch. If only hydrological models are used (as in Budds 2009 critique) to estimate flows, irrigation formulae, and allocation, it is bound to encounter the same difficulties as it did in Chile (third party effects, or "injury" to existing users, as we would phrase it). If Chile is a free-market water management model, is it one that this state should be pursuing? This post is not meant to single out the OSE as some purveyor of private water rights; there is, in fact, a globalizing market for water rights better exemplified by private firms (like this one). And there is utility in water markets where the system could easily be put in place, specifically where the perversion of  (certain agricultural) subsidies can be appropriately challenged; you can find an interesting economist's take on this here. Simply put, this kind of comparative analysis can show parallels, differences, and openings for on-going dialog about what is best for all water users and concerned audiences.

Citations:
Bauer, C.J. 2004. Results of Chilean water markets: empirical research since 1990. Water Resources Research
_____. 2005. In the image of the market: the Chilean model of water resources management. International Journal of Water 3(2): 146-165.
Budds, J. 2009. Contested H2O: Science, policy and politics in water resources management in Chile. Geoforum 40(3): 418-430.
Shiveley, D. 2001. Water Right Reallocation in New Mexico's Rio Grande Basin, 1975-1995. Water Resources Development 17(3): 445-460.
Swyngedouw, E. 2009. The Political Economy and Political Ecology of the Hydro-Social Cycle. Journal of Contemporary Water Research and Education 142: 56-60.
Valdes, J.G. 1995. Pinochet's Economists: The Chicago School in Chile. Cambridge/New York: Cambridge University Press.
* please e-mail me for full versions of these articles if you want a copy and cannot obtain them by other means.