Environment and Planning D: Society and Space 2013, volume 31, pages 301 – 318

doi:10.1068/d9511

Water, power, and the production of neoliberalism in

Chile, 1973–2005

Jessica Budds
School of International Development, University of East Anglia, Norwich NR4 7RJ,
England; e-mail: j.budds@uea.ac.uk
Received 3 May 2010; in revised form 23 June 2012

Abstract. Chile’s free-market economic and political reforms, designed and implemented
under General Pinochet’s military regime (1973–90), have been important in discussions of
neoliberal public policy and environmental governance. However, understandings of how
and why these reforms unfolded often overlook the complex power dynamics involved.
This paper examines the role of water in consolidating the design, implementation, and
outcomes of Chile’s neoliberal programme, through the contested production, retention,
and reform of the 1981 Water Code. Drawing on the idea that water and power are
mutually constitutive, it demonstrates the significance of the transition to private tradable
water rights with minimal state regulation not only for changing social relationships
with water, but also for consolidating the neoliberal programme and the ambitions of
the military regime, government technocrats, and business groups. I make three related
arguments: first, that water was more central to the formation and effectiveness of the
neoliberal programme in Chile, and the ambitions of its core supporters than hitherto
acknowledged; second, that political interest groups, and their alliances, can play
crucial roles in neoliberalising nature; and third, that water reforms consolidate power
relationships and produce waterscapes in particular ways.

Keywords: water, neoliberalism, Chile, power, coconstitution, technocracy

1 Introduction
“ Behind politics there is a long history manipulated by the economic interests, who have
familiar names … the same network of power that governed with Augusto Pinochet
continues to rule today, attempting to influence the economic development and politics
of Chile.”
María Olivia Mönckeberg (2001, page 10) (1)
Chile was the first country to implement ‘neoliberal’ public policies, from 1975. Chile’s
‘neoliberal programme’ ( programa neoliberal) was developed under the military regime
of General Pinochet (1973–90), which sought to reverse the socialist policies and economic
stagnation of the previous regime under President Allende (1970–73). The programme
extended economic and market principles to many areas of Chile’s economy and society.
Chile’s experience has thus been important in discussions of neoliberalism in public policy
and environmental governance.
One important reform was the transition to a system of private water rights that were freely
tradable with minimal state regulation under the 1981 Water Code. The stated logic was that
the market would enable the reallocation of scarce water to higher value uses, as users would
be incentivised to sell water if they did not need it (eg, Thobani, 1995). While the neoliberal
features and the practical outcomes of the Water Code have been analysed, the role of water
in consolidating the power structures that underpinned the neoliberal programme has been
little explored. In this regard, some accounts of how and why neoliberal reforms unfolded in
(1)
All translations from Spanish are the author’s.
302 J Budds

Chile conflate important events and the roles of key actors, and overlook the power relations
that configured the new governance framework, while the literature on Chile’s neoliberal
reforms seldom refers to the role of water. In these accounts observed outcomes are explained
as consequences of the neoliberal policies, rather than as products of the political interests
that shaped the wider programme.
The aim of this paper is thus to examine the relationship between water and power that
underpinned the design, implementation, and outcomes of Chile’s neoliberal programme,
through the contested production, retention, and reform of the 1981 Water Code. It demonstrates
the significance of the transition to private tradable water rights not only for changing
society’s relationship with water, but also for consolidating the neoliberal programme and the
ambitions of its core supporters: the military regime, government technocrats, and business
conglomerates. Existing scholarship by Bauer (1997; 1998a) has documented and analysed
how actors and ideology shaped the production of the Water Code as one of Chile’s most
emblematic neoliberal reforms. While this paper necessarily draws extensively on that work,(2)
my intention is to consider the importance of water for the wider neoliberal programme.
Similarly, while a substantial body of work has analysed the outcomes of the Water Code for
water allocation, use, and management in Chile (Bauer, 1997; 1998a; 1998b; Budds, 2004;
2008; 2009; 2010; Hadjigeorgalis, 2008; Hadjigeorgalis and Lillywhite, 2004; Hearne and
Easter, 1997; Romano and Leporati, 2002), I will consider how the Water Code consolidated
the interests and motives of its supporters, which are still evident in contemporary Chilean
waterscapes.
I locate my analysis within the political ecology tradition in order to explore the ways
in which water and power shape each other, both materially and discursively, to form new
socioecological arrangements, which become apparent in the formation of waterscapes
(Budds, 2009; Budds and Hinojosa, 2012; Linton, 2010; Loftus, 2009; Swyngedouw, 2004).
I make three related arguments. First, while some scholarship describes the politics around
the creation and modification of Chile’s Water Code (Bauer, 1998a; 2004; Budds, 2004; 2009),
I argue here that water was much more central to the formation and effectiveness of the
wider neoliberal programme in Chile, and to the consolidation of elite power and corporate
alliances under both dictatorship and democracy, than hitherto acknowledged. Second,
starting from the critique that many analyses overattribute outcomes to neoliberal policies
per se, and underplay the ideologies and motives of their proponents, I suggest that previous
scholarship has largely focused on formal state politics and has paid insufficient attention to
the roles of specific interest groups, especially technocrats, and their political alliances and
strategic ambitions, within the neoliberalisation of nature. Third, I build on Swyngedouw’s
analysis of hydraulic engineering to show how water reforms can also recast and consolidate
power relationships, and produce waterscapes with distinct characteristics.
Following this introduction, in section 2, I locate my analysis and arguments within
current debates around hydrosocial relations and the neoliberalisation of nature. Section 3
examines the mutually reinforcing relationship between water and power in Chile’s neoliberal
programme, through the politics of the Water Code during three key historical periods:
its formulation within the military regime (c. 1975–81), its retention during the transition
from dictatorship to democracy (c. 1985–90), and its reform under democracy (c. 1992–
2005). In section 4, I outline the ways in which the power relations that underpinned the
neoliberalisation of water are evident in contemporary Chilean waterscapes, before drawing
conclusions in section 5.

(2)
Bauer (1998a) comprises the only comprehensive account of the creation of the Water Code in the
literature.
Water, power, and the production of neoliberalism in Chile, 1973–2005 303

2 Coconstituting water and power through neoliberalisation

My starting point to analyse the relationship between water and power in relation to Chile’s
neoliberal programme is the reconceptualisation of water from a material resource to a
socionature (Linton, 2010; Loftus, 2009; Swyngedouw, 2004). Repositioning water and
social power as mutually constitutive shifts emphasis from the effects of human actions on
water, to the ways in which water embeds and expresses social relations, thus forming a lens
through which to analyse socioecological change (Loftus, 2009; Swyngedouw, 1999; 2004;
2007). Such change becomes reflected in the formation of waterscapes, which comprise
‘instances’ of water—flows, allocation, infrastructure, institutions, and framings—that
become configured in particular ways through specific power arrangements and/or dynamics
(Budds and Hinojosa, 2012; Loftus, 2007).
By conceptualising water and power as mutually constitutive, we can identify the two-
directional nature of hydrosocial relations, as social relations shape, but are also shaped
by, water, both materially and symbolically, as shown by analyses of water’s physical and
symbolic resistance to privatisation (Bakker, 2003; Perreault, 2006). This demonstrates how
people’s encounters with water partially constitute social subjectivities and relations, such as
the engendering of protest and struggle over new technologies and practices introduced to
commercialise water in South Africa (Loftus, 2007), or the ‘modernisation’ of low-income
rural women through provision of piped water in India (O’Reilly, 2006).
Through the case of Spain, Swyngedouw (1999; 2007) demonstrates how water and power
are constantly reworked to transform ecology and society over time and space. He shows
how political power and national identity were produced and consolidated through a national
programme of hydraulic engineering before and during Franco’s regime (1939–75), which
sought to develop and unite the country by transferring water from the humid northwest to
the arid southeast. While Swyngedouw draws on Wittfogel’s (1957) and Worster’s (1985)
ideas about how water shapes social organisation, he shows how water was reworked in
line with specific power relations, both materially (eg, interbasin transfers) and discursively
(eg, identity formation), to consolidate Franco’s authoritarian rule. While this work focuses
on national development and integration, its insight, that water coproduces power and
authoritarianism, can inform analysis of the development of neoliberalism in Chile. In this
context, as I will contend, the formation and effectiveness of neoliberalism was contingent
on maintaining authoritarian rule, coordinating political allies, and securing water resources
for commercial interests. I argue that the evolution of waterscapes in Chile reflects the power
relations that underpinned the neoliberalisation of water, thus linking the socioecological
outcomes of neoliberal policies to the politics and vested interests involved, rather than
attributing them to a particular policy style.
Swyngedouw (2004) further argues that water is a ‘lubricant’ of capital accumulation,
since all economic development activities require water, thereby rendering water a highly
strategic resource that capitalists strive to control. However, under ‘neoliberal’ capitalism,
water itself becomes an accumulation strategy (eg, Harvey, 2003). Previous work has
focused on the institutional changes needed to realise this shift [eg, Harvey’s (2003) concept
of ‘accumulation by dispossession’], as well as the challenges that water poses for enclosure,
commodification and privatisation [eg, Bakker’s (2003) concept of an ‘uncooperative
commodity’]. However, the ways in which water might play a role in consolidating particular
forms of neoliberalism, which in turn underpin these processes of capital accumulation,
remain unaddressed.
The theoretical relationships between neoliberalism and environmental governance
have been addressed by a wider literature. While early analyses documented the social
304 J Budds

and environmental impacts of neoliberal policies,(3) subsequent scholarship has redefined

neoliberalism from an artefact to a process, seen as complex, dynamic, and contradictory
(Castree, 2008a; 2008b; Heynen and Robbins, 2005; Larner, 2003; McCarthy and Prudham,
2004). This enabled consideration of how processes of neoliberalisation produce spaces,
states, and subjects through particular social networks and specific practices (Larner, 2003).
While much scholarship has considered the role of key actors in processes of neo-
liberalisation, the underlying power relations have not always been sufficiently interrogated.
This is not to say that neoliberalism has not been recognised as an ideological, and ultimately
deeply political, phenomenon; in McCarthy and Prudham’s (2004, page 275) words:
“Neoliberalism is the most powerful ideological and political project in global governance.”
Some scholars have acknowledged the role of ruling class alliances in underpinning
neoliberalism (Harvey, 2005; McCarthy and Prudham, 2004); nevertheless, analyses
have focused on neoliberal state formation in line with market-oriented ideology (such as
structural adjustment policies), and the key characteristic reforms within the neoliberalisation
of nature (such as commodification and privatisation). This raises the need to document the
plurality of actors involved—especially technocrats, as I will show—and examine their
vested interests and power relationships, in order to better understand how particular forms
of neoliberalisation emerge and reconfigure socioecological arrangements. Furthermore, it is
also necessary to more closely interrogate how the natures being neoliberalised also shape
these social relations, and influence processes of neoliberalisation and their outcomes.
Chile is often highlighted as the earliest, most radical, and furthest-reaching case of the
neoliberalisation of public policy (eg, Harvey, 2005; Richards, 2003). However, some accounts
oversimplify the development of neoliberalism in that context, by conflating important events
and the roles of key actors (eg, Harvey, 2005), and positioning the reforms as experimental
measures to boost economic development and roll back the state (eg, Foxley, 1983; Rector,
2005). By interrogating the power structures and relations underlying the neoliberalisation of
water, I will show that water was not simply a resource that was privatised and marketised,
but was essential for the very viability and success of the neoliberal programme and the
ambitions of its proponents.

3 Water, politics, and Chile’s neoliberal programme

3.1 History and politics of water and the neoliberal programme (c. 1975–81)
After seizing power from Allende (1970–73), the military regime under Pinochet (1973–
90) faced two key problems: the economy was in a poor state following socialism,(4) and
the military lacked personnel with policy experience and expertise given the long period of
democracy before the coup (Huneeus, 2000). The navy was put in charge of the economy, and
appointed military and civilian advisers from the Christian Democrats, who had supported
the coup. They drew up moderate economic policies, which included reprivatising factories,
farms, and mines, and removing price controls and import tariffs (Sigmund, 1977). At this
time, the government and the National Agriculture Society (SNA) were preoccupied with
regularising land titles and modernising agriculture, and water was a secondary priority
(Bauer, 1998a). The 1967 Water Code,(5) implemented by President Frei (1964–70) alongside
agrarian reform, was still in force. It issued state concessions to water, having cancelled
private water rights under the previous 1951 Water Code (Bauer, 1997; 1998a).
(3)
These are broadly conceived as frameworks that sought to increase the role of the private sector and
citizens, and reduce the role of the state, in economic and social policy, especially through commodification,
privatisation, markets, fiscal austerity, and self-regulation (McCarthy and Prudham, 2004).
(4)
Economic problems included hyperinflation, shortages of goods, black market transactions, low
international reserves, a government deficit, and failing state companies (eg, Fontaine, 1988).
(5)
The new Water Code took effect in 1967, but was passed in 1969 (Bauer, 1998a).
Water, power, and the production of neoliberalism in Chile, 1973–2005 305

The navy needed technical and financial experts to design and implement further reforms,
and recruited these from two related conservative groups linked to the Catholic University
of Chile: the Gremialistas and the ‘Chicago Boys’. The Gremialistas, mainly lawyers, were
corporatists who belonged to an extremely conservative catholic movement founded at the
Catholic University to maintain the independence of the student union. Their philosophy
centred on the need for civil society organisations to pursue their own objectives independently
of party politics (Cristi, 2000). They later led student opposition to Allende, making them
natural civilian allies of the military following the coup (Huneeus, 2000; P Silva, 1993; 2009).
The Chicago Boys were mostly Chilean economists who had taken undergraduate degrees
at the Catholic University and postgraduate studies at the University of Chicago, where they
became influenced by Friedman’s free market economics and Hayek’s libertarian political
philosophy (Fontaine, 1988; P Silva, 1991; P Vergara, 1991).(6) They adopted these principles
in designing the proposed economic programme for the right-wing candidate Alessandri in the
1970 elections, sponsored by the Industrial Development Association (SOFOFA), although
right-wing circles and business interests showed little support for their radical ideas (Huneeus,
2000; P Silva, 1991; P Vergara, 1991). The Gremialistas and Chicago Boys were appointed to
the National Planning Office (ODEPLAN) through a chain of linkages between themselves
and SOFOFA; SOFOFA and the navy; the navy and the head of ODEPLAN, Roberto Kelly,
a retired naval officer; and between Kelly and the Catholic University (Huneeus, 2000;
P Vergara, 1991). Although the Gremialistas and the Chicago Boys are usually portrayed as
distinct groups (eg, P Silva, 1991; 2009), many of the latter were members or supporters of
the former (Huneeus, 2000).
The initial moderate economic policies resulted partly from complex negotiations between
the military, the Christian Democrat advisers and the ODEPLAN technocrats, and partly from
private sector interests (E Silva, 1996a). Representatives of Chile’s traditional industries,
which included SOFOFA and SNA, supported moderate policies and gradual change. They
had adjusted to subsidies and a protected market, and supported market liberalisation,
but with initial price protection. The country’s emerging financial and trade corporations,
however, supported radical policies and rapid change toward market liberalisation, because
its members had a high concentration in liquid assets (E Silva, 1993; 1996a; 1996b; P Vergara,
1991). As Kelly had close ties with the traditional industries, the gradual approach initially
prevailed (E Silva, 1993; P Silva, 1991).
However, the moderate policies were ineffective, and worsened after the 1973 oil shocks
(E Silva, 1993). A combination of four factors enabled the ODEPLAN technocrats to rise
to the fore. First, the Christian Democrat advisers had weakened and had clashed with the
military over human rights abuses (P Vergara, 1991).(7) Second, the military recognised
the allegiance and competence of the ODEPLAN technocrats, and their potential to formulate
more ambitious reforms, only possible within the authoritarian context (Huneeus, 2000;
Sigmund, 1977; P Vergara, 1991). Third, the Chicago Boys’ visibility was boosted following
a high-profile international economic conference in 1975 attended by Friedman. Immediately
afterwards, the leader of the Chicago Boys, de Castro, was appointed Minister of Economy,
paving the way for the group’s neoliberal proposals to be adopted (Huneeus, 2000; P Silva,
1991; P Vergara, 1991). Fourth, the financial and trade corporations had become more
powerful through access to foreign exchange, and pushed for the implementation of the
radical reforms (E Silva, 1993).

(6)
Not all ‘Chicago Boys’ were economists, nor had attended the Catholic University of Chicago
(Huneeus, 2000).
(7)
The Christian Democrats later moved into opposition.
306 J Budds

Therefore, by 1975, the ODEPLAN technocrats had become the military’s principal
advisers, and led the design of Chile’s economic and political reforms. These comprised
neoliberal economic measures, which entailed a sharp reduction of the state’s role in the
economy and society and the extension of the market into social and public policy. The
measures were designed to promote an economy run by the private sector, favouring export-
oriented development based on Chile’s rich natural resources (copper, agriculture, timber, and
fish) (E Silva, 1993). To achieve this, the technocrats introduced monetarist mechanisms to
curb inflation, strengthened private property, and embarked upon the (re)privatisation of state-
owned companies and utilities. The political measures included authoritarian measures (eg,
banning political parties), a reduced role for Congress, autonomy for key state institutions
(eg, the central bank), and greater power for the courts (Taylor, 2006; P Vergara, 1991).
During the formulation of these reforms, the issue of water became increasingly pressing.
The National Water Directorate (DGA) was still granting fixed-term water rights under
the 1967 Water Code. As the state-led water allocation and management framework was
increasingly incompatible with the neoliberal reforms, in 1979 the technocrats embarked
upon the revision of the water law in line with economic and market principles. This entailed
reinstating water rights and converting them into private property in order to transfer them
from the state to users, and separating water from land to convert it into a commodity, so that it
could be priced and traded independently. They argued that privatisation and commodification
would increase water security, efficiency, and productive value (Bauer, 1997; 1998a).
According to Bauer (1998a), these proposed measures were intensely debated between
the ODEPLAN technocrats and other civilian advisers, as well as the agriculture sector
(represented by the SNA) and the National Irrigation Commission. Initially, the civilian
advisers supported reverting to the 1951 Water Code (8) in order to reinstate, and increase
the legal security of, private water rights, but opposed redefining water as a commodity
and separating it from land. However, the economists constructed a convincing narrative
around neoclassical economic principles by arguing that instituting private property rights
that could be traded separately from land would bring three key benefits. First, they asserted
that secure property rights (which were to be afforded constitutional protection) (9) would
provide an incentive for investment in both water-reliant economic sectors and water
infrastructure, the responsibility for which would transfer from the state to the user. Second,
and most importantly, they argued that by converting water rights into private property water
management would be delegated from the state to water rights holders, thereby preventing
state intervention in water management. In practice, this would imply that the state would
not be able to define priority uses, or even to require rights to be used. Third, they insisted
that a system of private tradable water rights separate from land would promote efficient
water use by enabling the allocation of water to higher-value uses. This measure was aimed
at improving the efficient use of scarce water (especially in arid central and northern Chile)
in order to enable the growth of Chile’s export-oriented natural resources industries. It was
particularly aimed at agriculture, which was the most voluminous and least efficient water
user, and, as such, the most resistant to pricing (Bauer, 1998a).
The proposals for the new Water Code thus comprised the definition of water rights as
private property rights, which would be separate from land and freely tradable. As private
property, water rights would also be afforded constitutional protection, and regulated by civil
(private) law. In order to respect existing uses, all water rights in use since 1976 would be

(8)
The 1951 Water Code issued fixed-term water rights that could be registered as private property, and
cancelled by the state with compensation (Bauer, 1998a).
(9)
They would only be able to be expropriated with compensation at market value.
Water, power, and the production of neoliberalism in Chile, 1973–2005 307

recognised and regularised, and new rights would be allocated to land(10) redistributed under
agrarian reform. If available, new water rights could be requested from the DGA, the role
of which was to be sharply curtailed to purely administrative functions, such as issuing new
water rights and collecting hydrological data (Bauer, 1997; 1998a). The DGA would thus
have no authority to reject valid applications, a measure designed to curb discretion on the
part of state agencies. Once all available water had been allocated, future transfers of water
rights would take place through the market.
In order to attribute a price to water, and promote efficient use, the proposal for the
new Water Code included taxes on water rights. However, water-reliant sectors, especially
agriculture, strongly opposed taxation. The agriculture sector supported private water rights
for the security that they would afford to users, but opposed the introduction of payments. The
strength of the resulting opposition forced the economists to omit taxes from the proposal,
although they were satisfied that the new system would still attribute a value to water,
increase efficiency—but by limiting access rather than introducing payment—and curtail
the administrative power of the state (Bauer, 1998a). The Water Code would also allocate
water rights at no cost, thus providing an incentive for hoarding and speculation.(11) While
this could have derived from an interpretation of the Coase theorem that initial allocation is
unimportant because the market will eventually reallocate resources efficiently, it enabled
large industries to claim a large share of water resources (Budds, 2004).
The new Water Code was passed in 1981, by which time the neoliberal reforms were
at their most ascendant, amid the ‘economic miracle’ (1978–81). This can be attributed to
three factors. First, the financial and trade corporations supported the neoliberal economists,
some of whom were on their members’ boards (E Silva, 1993). This produced a mutually
beneficial relationship whereby the corporations privileged access to policy makers enabled
its members to influence policy, and the economists gained the support of the most powerful
businesses, forging a context within which the radical neoliberal policies that both groups
favoured could be implemented. Second, the Chicago Boys presented themselves as expert
and neutral policy advisers supporting a rational economic model (Huneeus, 2000; P Silva,
1991; P Vergara, 1991). This coincided with the military’s preference for the appointment
of technocrats to top advisory roles, so that policy formulation would be led by technical
and scientific expertise, rather than politics and ideology (12) (Huneeus, 2000; P Silva, 1991;
1993; P Vergara, 1991). Third, Pinochet became impressed by the Chicago Boys’ articulate
arguments and professional image, and was satisfied that the reforms coincided with the
military’s principal goal of preventing a future return to state control. He thus gave them his
support (E Silva, 1993; 1996b; P Silva, 1991).
These factors enabled the neoliberal political and economic reforms to be institutionalised
in the rewriting of the 1925 constitution in 1980, a process that was negotiated between the
military, the right-wing National Renewal Party (RN), and the technocrats. The RN favoured
a strong state role in economic development and long-term military rule, but the neoliberal
approach prevailed owing to the high profile of the Chicago Boys coupled with the initial
success of neoliberal economic policies (especially the ‘economic miracle’), which attracted
support from the middle and upper classes (P Silva, 1991). The new constitution embodied
the political and authoritarian measures, and set out the conditions necessary to foster a free
market economy. To prevent a future return to state control, it expanded and strengthened
private property rights, restricted the role of the state in the economy, and strengthened the
powers of the courts (P Silva, 1991).
(10)
For land designated as irrigated.
(11)
Humberto Peña, former Director, DGA, personal communication, Santiago, 4 August 2003.
(12)
As under Frei and Allende, when policy was led by politicians (P Silva, 1993).
308 J Budds

Huneeus (2000) argues that the political and economic reforms are usually described
as separate, with the Gremialistas drawing up the framework of a minimised state, and the
Chicago Boys designing a free market economy (eg, Bauer, 1998a). While the Gremialistas
are recognised as political actors, the Chicago Boys are typically portrayed as technocrats
without other political interests (eg, Taylor, 2006). However, as members or supporters of the
Gremialistas, the Chicago Boys had political experience and ambitions, although they always
portrayed themselves as neutral (Huneeus, 2000; P Silva, 1991; 1993). Through ODEPLAN
these ‘technocratic politicians’ (P Silva, 1991) forged a neoliberal economic model with the
longer-term objective of transforming the economy to create the new relationship between
the state and society that was envisaged by the Gremialistas and institutionalised in the
constitution (Huneeus, 2000). This formed part, moreover, of the ODEPLAN technocrats’
long-term political strategy: to constitute a political force that would form the government
when Chile eventually returned to democracy. As Huneeus (2000, page 462) argues, “this
cohesion was driven principally by politics, and to a lesser degree by economics.”
Through the neoliberal political and economic reforms, the ODEPLAN technocrats
supported the military by fostering success and stability for the regime, yet simultaneously
took advantage of the authoritarian context to develop and institutionalise a programme
that would consolidate their own political–economic power strategy, in collaboration with
the powerful corporations (Huneeus, 2000; P Silva, 1991; Williams, 2002). This has two
wider implications. First, the neoliberal reforms were not simply the product of ideology
or experimentation (eg, Foxley, 1983), but rather the outcome of a well-planned and well-
manoeuvred, as well as skilfully veiled, political strategy (Huneeus, 2000). Second, it suggests
that it was not Pinochet and the military advisers, but rather the ODEPLAN technocrats,
working in collaboration with business conglomerates, who directed the neoliberal economic
reforms (Williams, 2002).
Returning to the role of water in this process, the privatisation and marketisation of
water rights are barely mentioned in the wider literature on the history and politics of the
neoliberal programme (eg, Fontaine, 1988; Hachette and Lüders, 1993; E Silva, 1996b;
Taylor, 2006). This is an important gap, because control over water was crucial for the
development of Chile’s major natural resource industries, and the new principles enabled
users to acquire permanent water rights that were allocated at no cost, were protected by
law, constituted capital assets, and were subsequently untaxed. The economic development
of these industries was key to the success of the wider neoliberal programme, which, in
turn, was crucial for furthering the interests of its key proponents: the ambitions of the
technocratic politicians, the stability and longevity of the military regime, and the prosperity
of the business conglomerates.
3.2 Retention of the Water Code through the transition to democracy (c. 1985–90)
Following the financial crisis of 1982–83, the economic situation of Chile deteriorated.
The military interpreted the crisis as a temporary downturn and remained committed to
neoliberal policies (P Silva, 1991). The financial and trade corporations had weakened, and
the traditional industries had formed a coalition in favour of pragmatic free-market economic
policies to replace neoliberal policies. Because of the escalating protest against his rule,
Pinochet was forced to take notice of this group because he feared that they would withdraw
their support and join the opposition (E Silva, 1996b). He directed the ODEPLAN technocrats
to work closely with this group, and replaced some technocrats with its members (E Silva,
1993; 1996a). The ODEPLAN technocrats and these new business advisers designed more
pragmatic policies that facilitated economic recovery and encouraged investment in natural
resource exports (E Silva, 1996a; 1996b). The business sector thus actively participated
Water, power, and the production of neoliberalism in Chile, 1973–2005 309

in policy, and continued to support Pinochet in return for the retention of the neoliberal model
after democratisation (E Silva, 1993; 1996b).
The second and most important round of privatisation—of thirty state companies, prin-
cipally utilities—took place from 1985 until 1989 (Hachette and Lüders, 1993). Initially, the
military was cautious about risking controversy and further protest that would strengthen
the opposition (Hachette and Lüders, 1993). Nevertheless, privatisation was accelerated for
two reasons. First, it would provide a source of private investment for Chile’s pension funds
(Hachette and Lüders, 1993; Murillo, 2002; Sigmund, 1977; E Silva, 1993). Second, it
constituted one of the military’s final reforms when the end of the dictatorship was immi-
nent (Hachette and Lüders, 1993; Mönckeberg, 2001; Murillo 2002). Mönckeberg (2001)
asserts that privatisation was a key strategy to maintain the power of top military officials
and technocrats after the end of the military regime. Many technocrats who had been actively
involved in the privatisation of the largest state enterprises by the military during the 1980s
took top positions in these companies after the transition to democracy (in contrast to very few
military officials) (Mönckeberg, 2001; Murillo, 2002). Mönckeberg (2001) suggests that they
pushed for the privatisation of these companies under the final phase of the military regime
in order to secure their own future positions. This supports the case that the technocrats had
a long-term political strategy, and had formed a solid alliance with politicians and the private
sector (P Silva, 2001).
Many of the privatised companies were natural resource industries, such as mining,
chemicals, water supply, and electricity companies, which were reliant on water, and benefited
from the free and secure supply of water under the Water Code. Despite this clear relationship,
no literature that discusses the privatisation programme mentions the privatisation of water
rights or links it to privatisation (eg, Hachette and Lüders, 1993). Given that the neoliberal
reforms were part of a long-term strategy of the ‘technocratic politicians’, who collaborated
with the private sector and promoted reforms that would consolidate their own positions after
the transition to democracy, the technocrats would surely have realised the importance of
formulating a water framework that would benefit key private industries and thus, ultimately,
themselves. Companies’ water rights constituted valuable capital assets that were transferred
to companies on privatisation.(13) Again, as it was clear that the technocrats were acting
strategically, it is reasonable to suggest that they recognised, or even exploited, the importance
of private water rights for company privatisation.
The transition from the military government to democracy occurred in 1989, when free
elections were won by the centre-left Coalition of Parties for Democracy, which took office in
1990.(14) Pinochet had lost popularity among the public and industry, so there was little support
for the military to overturn the result (Angell and Pollack, 1990), but the dictatorship had not
collapsed and thus could still influence the post-authoritarian state (Taylor, 2006). Conscious
that the military’s days were numbered, Pinochet consolidated the economic and political
system by making a series of hasty reforms. These included reforming the electoral system
to overrepresent the political right and appointing conservatives as lifelong senators (Angell
and Pollack, 1990; Hachette and Lüders, 1993; Uggla, 2005). While, again, a discussion of
water seldom features in accounts of the transition to democracy, with the exception of some
discussion by Bauer (1998a), it is significant that the (privatised) industries obtained water
rights at no cost, which afforded them permanent and secure water, as the country passed
from dictatorship to democracy.

(13)
The privatisation, in the early 2000s, of some regional water utilities generated controversy over
this issue.
(14)
Led by the Christian Democrats and Socialists.
310 J Budds

The transfer of power followed negotiations between the military, the coalition, and the
RN (15) and rested upon the conditions that the new government would remain committed
to the neoliberal model and retain the 1980 constitution (Angell and Pollack, 1990; Uggla,
2005). The coalition considered the 1980 constitution to be incompatible with democratic
rule, and negotiated the removal of some of its authoritarian features with the military, but
compromised over further changes so as not to jeopardise the transition, leaving both the
institutional order and economic features intact (Uggla, 2005).(16) The coalition accepted
retaining the neoliberal model because of its success, although it aimed to place greater
emphasis on reducing inequality (Angell and Pollack, 1990; Taylor, 2006; Uggla, 2005).
During this period, water was crucial in underpinning the neoliberal programme in two
key, and related, ways. First, the free-market Water Code was crucial for securing the water-
reliant natural resource industries that in turn largely underpinned the neoliberal programme,
which constituted one of the most crucial conditions of the transition from dictatorship to
democracy. Second, the hasty privatisation of many of these industries (most of which relied
on water for their economic activity and counted private water rights among their capital
assets) before the end of the dictatorship both provided for the longer-term security of the
technocratic politicians through top executive positions and ensured that the power structures
that had characterised the dictatorship would continue to persist into democracy (Huneeus,
2000; Mönckeberg, 2001).
3.3 Reform of the Water Code under democracy (c. 1992–2005) (17)
The coalition’s vision for Chilean development was ‘growth with equity’ (Taylor, 2006). The
new government identified three factors ignored by the military’s orthodox neoliberal
approach: market externalities (eg, monopoly control), nonmarket social relations (eg, access
to information), and unequal access to the market (eg, resource poverty). It sought to correct
these market failures and promote social inclusion by strengthening state and social institutions
[eg, through labour law reform and constitutional reform, and increased social spending and
new social programmes (E Silva, 2002)].
Despite its commitment to the neoliberal programme, once in office, the coalition did
intend to make further reforms, including modifying the Water Code (Bauer, 1998a). In
1992 under the first coalition government (1990–94), the DGA submitted to Congress (18) a
bill to reform the Water Code. The bill included two key proposed changes. First, it sought
to restrict the potential to acquire water rights for speculation,(19) which was regarded as
both economically inefficient and socially unjust, by cancelling water rights not used for
five years. Second, it proposed to expand the role of the DGA to executive and regulatory
functions in relation to water resources management, including requiring a justification of
use for new rights and the introduction of ecological flows. The bill was strongly opposed
by conservative groups, which, together with a right-wing majority in Senate, forced the
government to withdraw it (Bauer, 1998b; 2004; ILADES, 1994).

(15)
The RN supported the military and the retention of the neoliberal model, but collaborated with
the coalition in order to play a role in the transition. Given the pretransition reform to overrepresent
the right, it was also in the coalition’s interest to collaborate with the RN because it would need its
support for future reforms (Angell and Pollack, 1990; Uggla 2005).
(16)
It had earlier declared the constitution illegitimate for being the product of a dictatorship, but had
to abandon this position to ensure that the military would leave power (Uggla, 2005).
(17)
This section draws extensively on Chilean newspapers from 1993 to 2005, which are too numerous
to reference individually. References are included for specific information or citations.
(18)
Comprising the Chamber of Deputies (lower house) and the Senate (upper house).
(19)
Humberto Peña, former director, DGA, personal communication, Santiago, 4 August 2003.
Water, power, and the production of neoliberalism in Chile, 1973–2005 311

In 1996 the second coalition government (1994–2000) revised the proposal and
resubmitted it to Congress (Bauer, 1998a; 2004; ILADES, 1994). This proposal again aimed
to curb speculation and strengthen environmental regulation (ILADES, 1994; Peña, 1997).
However, it replaced cancellation of water rights with a fee for nonuse (based on region and
duration), and included a statement of justification for new rights and stronger mechanisms
for water conservation.
The DGA argued that the proposed measures would address the failure of the Water Code
to reallocate water to higher-value uses, especially in agriculture (El Mercurio 1999a; Peña,
1997). Anecdotal evidence suggested that speculation and hoarding were widespread, and
were both creating scarcity and restricting market entry, especially among hydroelectric power
(HEP) producers in southern Chile and mining companies in northern Chile (El Mercurio
1999a; ILADES, 1994; Peña, 1997). The DGA also considered the Water Code to be vague
and/or deficient in relation to some aspects of water resources management, and sought to
increase its own remit (El Mercurio 1999b; Peña, 1997). The DGA argued that increased
water demand, especially for groundwater,(20) highlighted the environmental shortcomings
of the Water Code, in particular the absence of a minimum ecological flow, groundwater
regulation, integrated water management, and specific measures for arid northern Chile
(El Mercurio 1999a; ILADES, 1994; Peña, 1997). The DGA insisted that the reforms were
intended neither to weaken neoliberal principles nor to increase state control, but necessary
to facilitate efficiency and the market in water management (El Mercurio 1999a).
A protracted and polemic debate accompanied both bills. Three conservative groups
consistently opposed the reforms: right-wing politicians and congresspersons; large-scale
economic sectors, particularly agriculture, mining, and HEP; and independent ‘experts’,
mainly conservative academics and policy analysts. Arguments against the bills combined
practical concerns over the economic effects of the proposed changes with ideological
arguments in favour of maintaining neoliberal principles.
The most controversial aspects were forfeiture and the fee for nonuse, respectively,
which were considered to be de facto expropriation without compensation (Donoso, 1994).
The mining and HEP sectors were the strongest opponents, because they had the most unused
water rights, and argued that the proposed fees were too high and the periods for nonuse
too short for major investment projects (Donoso, 1994; El Mercurio 1996; ILADES, 1994).
Cancelling, or placing new restrictions on, water rights without paying compensation was
also deemed to violate the constitutional guarantee of private property (El Mercurio 1993).
Although the Constitutional Court had ruled that the 1996 bill was not unconstitutional
(El Mercurio 1999b), some opponents continued to argue that the reforms would enable the
DGA to impede access to water rights (A Vergara, 2004).
A related argument was that the proposed measures infringed private liberty because
they would prevent owners from making free decisions regarding their property (eg, Donoso,
1994; ILD, 2003; A Vergara, 2004). This argument was extended to assert that the reforms
would increase the authority of the DGA and thus signify a return to state control. Opponents
considered that this would weaken the security of private property rights by both overriding
the neutrality of the market and replacing some of its functions with bureaucracy, thereby
increasing state authority in water allocation and economic development (Donoso, 1994; El
Diario 1999; El Mercurio 1996; 1999a; 1999b; A Vergara, 2004). The conviction that both
bills would increase state control and weaken market mechanisms led critics to accuse the
government of reneging on the neoliberal model (El Mercurio 1999c; A Vergara, 2004).
Although acceptance that the Water Code needed some reforms increased with the
1996 bill, strong disagreement persisted over their scale and nature (Bauer, 1998a; 2004).
(20)
Increasingly used in 1990s once surface water became fully allocated.
312 J Budds

Some argued that speculation and hoarding were confined to certain sectors (HEP, mining),
and opposed modifying the entire legislation (eg, El Diario 2002). Some argued that the
modification would either be ineffective or would produce perverse effects (Donoso, 1994;
ILD, 2003). Others supported strengthening the existing institutional framework (eg, water
user associations) and perfecting market mechanisms (eg, auctions) rather than increasing
regulation (El Mercurio 1999c; Gómez-Lobo and Paredes, 2001; A Vergara, 2004). Improved
provision for environmental management was generally supported (Senate, 2005), yet
opponents criticised the bills for lacking adequate measures to address groundwater extraction
and implement minimum flows (Gómez-Lobo and Paredes, 2001; Peña, 1997; Senate, 2004;
A Vergara, 2004).
The media debate over the modification of the Water Code illustrates its highly politicised
nature: the arguments mobilised against the reforms were articulated in political–ideological
terms and were strongly linked to the political affiliations and/or vested interests of the
opponents.
Politicians opposing the reforms were from right-wing parties, the conservative RN, and
the far-right Independent Democratic Union (UDI), which was founded by the leader of the
Gremialistas and counted amongst its supporters and members many of the ODEPLAN
technocrats, some of whom had taken positions in privatised state industries. They consistently
supported the interests of the large industries, by opposing state intervention, rejecting nonuse
fees and prioritising the use of water for economic activities (Senate, 2005).
The large industries held the most rights and had the most to lose from the reforms (Senate,
2005). They mobilised arguments of weakened private property and market, increased state
intervention and possible unconstitutionality, and emphasised the practical arguments that
would most affect them, which they framed in terms of negative effects on national economic
development. Thus, the mining and HEP sectors were strongly opposed to the nonuse fee,
while the agriculture sector was more concerned about increased state intervention in water
management. While the mining and agriculture sectors argued vehemently against the
reforms, the HEP sector was less vociferous, as its accumulation of nonconsumptive rights
was behind the reforms, some concessions had been made and Chilean legislation would still
be more liberal than in other countries (Diario Financiero 2004).
The ‘experts’, predominantly economists and lawyers, produced more conceptual
arguments. They stressed the unconstitutional nature of the reforms as well as the violation
of the neoliberal model, which were some of the strongest and most authoritative arguments
in the debate and were adopted by politicians and economic sectors. While their input was
consistently framed in terms of ‘technical’ knowledge, most were associated with particular
political positions, politically oriented think tanks, and the private sector. The debate again
illustrates the culture and politics of technocracy, as the (conservative) media referred to these
groups as ‘experts’, ‘professionals’, and ‘specialists’, while describing government officials
and critical trade association leaders—who were similarly qualified—as merely ‘officials’ or
‘representatives’.
The three groups were also intricately linked: research institutes had political affiliations,
trade associations were politically conservative, and politicians had interests in specific
economic sectors, especially agriculture. Through active participation in the debate and the
mobilisation of coherent arguments, the groups assertively opposed the reforms. Moreover,
this opposition was not counterbalanced by proreform support. Those in favour of the
modification comprised coalition and independent politicians and congresspersons, the DGA,
some professional institutions (eg, the Institute of Engineers), and some experts. However,
these groups were not organised or united, and formed a reactive and defensive, rather than a
proactive and critical, stance that had little effect, especially in the right-wing media.
Water, power, and the production of neoliberalism in Chile, 1973–2005 313

On one level, the debate centred on the capacity of the state versus the market to achieve
optimal use of scarce water. On another level, however, the debate—described by the media
as a ‘fight’, ‘battle’, and ‘war’—became detached from water management and transgressed
into a wider disagreement about the merits of the state-centred approach embodied by Allende
and those of the military’s neoliberal programme (El Diario 2002; El Mercurio 1999c). For
instance:
“ [The reform] is more about a political vision with no technical justification, because the
idea is to change everything that was a legacy of the former government under General
Pinochet” (El Diario 2002).
The reforms were eventually passed in 2005. The principal changes included a nonuse
fee (structured by region and duration of nonuse), a statement of justification for certain
new rights, minimum flows for nonexhausted sources, and greater authority for the DGA in
regulating groundwater and sanctioning illegal extractions.
The polemic debate surrounding the reform of the Water Code reflects the power relations
embedded in Chilean politics. The bill was assertively and coherently opposed by the same
military, technocrat, and business interests that had supported it under the dictatorship. This
can partly be explained by the potential erosion of economic interests among key water
users. Yet, the nature of the debate suggests that it did not centre solely on the efficient
and productive management of water, but a desire to maintain the dictatorship’s political–
economic order by framing the market as neutral and the state as discretionary. The coalition
and its allies lost ground by failing to form a consolidated group with an equally strong
narrative favouring reform, and by maintaining a technocratic approach to public policy
(E Silva, 2002; Taylor, 2006).

4 Neoliberalising Chilean waterscapes

The 1981 Water Code shaped water in important ways, transforming relationships between
social actors and water and producing new socioecological arrangements. Its principles
oriented water management towards economic development led by the private sector, which,
in turn, consolidated the implementation of the neoliberal programme and its representation
as an effective model.
The conversion of water rights from state concessions into private property recast power
relations by transferring much of the responsibility for water management to water rights
holders. Although water is a flowing resource that requires regulation of use, coordination
between users, and integrated infrastructure, the new principles and arguments against state
‘discretion’ strengthened users’ control over water while curtailing the state’s role in resource
planning and regulation. Removing water management from the realm of the state impeded
the implementation of integrated water resources management, precluded a significant role
for civil society in water issues, restricted the defence of water rights against violations to
those able to undertake private legal action, and fostered technocratic approaches to water
management and governance (Budds, 2008; 2009).
The new principles enabled natural resource industries to accumulate water rights, thus
securing free and permanent access to water. Access to new water rights required knowledge
and resources to undertake the applications,(21) which favoured commercial entities and
disadvantaged less powerful users. In this way, one hydroelectric power company acquired
almost all the nonconsumptive rights in southern Chile, essentially preventing the entry of
competitors (Senate, 2004); mining companies promptly acquired water rights for potential
future projects in northern Chile, in some cases registering water being used by indigenous
(21)
Although new water rights were granted at no cost (except for the small costs of publishing
applications in two newspapers), many applicants paid consultants to identify available water and
lawyers to submit applications (Budds, 2004).
314 J Budds

groups (Budds, 2010), and commercial farmers were able to obtain most new groundwater
rights in central-northern valleys, to the detriment of peasants (Budds, 2004; 2008; 2009).
In the latter region, the separation of water from land enabled farmers to obtain water rights
and transport the water to cheap rain-fed and untilled land, thus bringing large tracts of new
land into export agricultural production (Budds, 2004; 2008). Treating water as a commodity
increasingly reinforced the nature and identity of Chile’s peasants from campesinos producing
crops for the domestic market to small-scale commercial farmers increasingly integrated into
export agriculture, based on the use of private land and water rights as collateral for credit.
Accumulation also occurred, albeit to a lesser extent, through water rights sales. Free
trade in water rights led to large sums being commanded, especially in semi-arid and arid
central and northern Chile. This incentivised some—especially lower-income—water users
to sell their rights (Budds, 2010; Hadjigeorgalis, 2008; Romano and Leporati, 2002), and
others to create business from trading [for instance, one private water utility in northern Chile
concentrated on buying and selling water rights rather than supplying consumers (Budds,
2010)]. Transfers of water between users—including between sectors (eg, agriculture to
industry)—thus became determined by private parties through market transactions according
to demand rather than through state allocation in accordance with public priorities. In some
cases this mechanism constituted a legal form of dispossession, especially among lower-
income groups, whereby the supposed security of private water rights facilitated their transfer
to other users (Budds, 2010).
The neoliberalisation of water thus changed the social relations of control over water
and drove neoliberal economic development. This is reflected in the expansion of mining,
export agriculture, and hydroelectric power through accumulation of water rights, as well as
the participation of these sectors in the vigorous defence of the Water Code against major
reform. This, in turn, not only transformed livelihoods, identities, and landscapes throughout
Chile, but also reinforced the linkages between economic and political power. By reworking
water, the economic effectiveness of neoliberalism strengthened the positions of its core
supporters: the military regime, which achieved long and stable authoritarian rule and secured
the retention of the neoliberal programme under democracy; the technocratic politicians, who
attained political influence through the UDI and gained top positions in privatised natural
resource industries; and business conglomerates, which secured control over free, valuable,
and permanent flows of water with little government intervention.

5 Conclusions
While the ways in which neoliberal reformers and principles shaped water policy and use in
Chile have been examined, this paper has shown that the neoliberalisation of water through
the 1981 Water Code in turn consolidated the design, implementation, and outcomes of
Chile’s neoliberal programme. I thus contend that water was more central to the formation and
effectiveness of the neoliberal programme, and in turn the ambitions of its core proponents,
than hitherto acknowledged in the literature.
Although barely mentioned in accounts of neoliberalism in Chile, water was an essential
element both in and for the reforms. Water was crucial to the development of export-oriented
natural resource sectors, which the neoliberal programme sought to foster, as well as to many
of the state-owned industries that were eventually privatised. Yet, it was the new and specific
legal and institutional framework that emerged under the military regime that would enable
these sectors and industries to gain control over free, permanent, legally protected, and
valuable water supplies, which could not be modified by subsequent governments (unless the
constitution were amended). The economic success of the neoliberal programme, in turn, was
key to securing the interests and ambitions of the military regime, the technocratic politicians,
and the business sector.
Water, power, and the production of neoliberalism in Chile, 1973–2005 315

Like other analyses of neoliberal natures, the case of water in Chile emphasises the important
roles played by political interests and power relations within processes of neoliberalisation,
and underlines the importance of looking beyond neoliberal state formation to the roles and
dynamics of interest groups. The part played by the technocrats in manoeuvring into power,
promoting neoliberal reforms, and building strategic alliances, as part of their own political
ambitions, is crucial to understanding the nature and outcomes of neoliberalism in this
context. The acceptance and effectiveness of the political and economic reforms, and the key
to their own ambitions, was contingent on the technocrats portraying themselves as neutral
experts and establishing mutually beneficial relationships with both the military and key
businesses. The neoliberal programme was thus neither dictated by the military, nor merely
experimental, but was promoted and implemented by technocratic politicians with political
ambitions that they sought to consolidate through it.
The Chilean case also demonstrates how reconfiguring water institutions and policies does
not just produce socioecological outcomes, but consolidates power relationships and alliances
for particular ends. As infrastructure and engineering strengthened authoritarian rule in
Franco’s Spain (Swyngedouw, 1999; 2007), the neoliberalisation of water in Chile recast and
consolidated power relationships, through both material and symbolic interventions, in ways
that are strongly reflected in contemporary waterscapes through the specific configuration of
flows, infrastructure, allocation, institutions, and discourses.
Acknowledgements. The research presented in this paper was funded by an ESRC/NERC PhD
studentship, and an ESRC Postdoctoral Fellowship, which are gratefully acknowledged. I would like
to thank Alex Loftus for his helpful discussion and feedback on this paper, to Anne-Marie Debbané for
additional comments, and to three anonymous referees for constructive reviews that helped to improve
this paper. All remaining shortcomings are mine.
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