Workers Must Control Economic Policy and Economic Outcomes

Canadian Workers' Pension Monies Used to Privatize Water in Brazil

São  Paulo, Brazil, June 11, 2021.

One of the matters of ever greater concern amongst Canadian workers is their lack of control over where their pension monies are invested. These very large pools of money are put into the hands of investment companies, financial institutions and financial oligarchs whose job is to seek the highest return for themselves and sometimes but not always the safest bet, irrespective of where the funds are invested. The workers exercise no control over the fact that investments are done according to neo-liberal considerations and go against everything Canadian workers on the whole stand for. The current term for it is "financialization." It refers to a process whereby financial markets, financial institutions and financial elites gain greater influence over economic policy and economic outcomes. The process transforms the functioning of economic systems at both the macro and micro levels both at home and abroad in favour of these narrow private interests no matter what harm they cause to the social and natural environment. Under the guise that business is business, very harmful, unacceptable nation-wrecking and anti-people investments are made.

Such is the case with the investment made on April 30 of this year of more than $900 million of Canadian workers' pension money to privatize water and sanitation services in Brazil. A large section of Rio de Janeiro's State Water and Sewage Company (CEDAE) was purchased at auction by a private company 85 per cent owned by the Canada Pension Plan Investment Board (CPPIB) and the Alberta Investment Management Corporation (AIMCo).

CEDAE was the most profitable water system in Brazil, bringing in $226 million a year, with part of these revenues used to subsidize services in areas where costs were higher.

AIMCo, which says it manages the investments for 32 pensions, endowments and government funds in the Province of Alberta, already possessed a significant stake in Brazil's third largest private water and sewage company, Iguá Saneamento, used to acquire part of the public utility. However it was a last minute infusion of some $270 million from CPP Investments, giving it 46.7 per cent ownership of Iguá, that was decisive in allowing the company to win the bid for CEDAE.

In preparation for the auction CEDAE was divided into blocks or concessions. The most lucrative concessions were scooped up by private interests, one of these being Iguá. The least profitable ones remained in the hands of the state, likely ending its ability to continue using the profits from some to subsidize others. It will likely also push rates up for users already in the grips of a severe economic crisis. Residents living in areas of Rio already serviced by private companies are said to pay up to 70 per cent more for water than those serviced by the public system.

Opposition by unions and others in Brazil as well as Canada to the privatization of water and sanitation systems was swift. Brazilian unions said 3,500 public sector workers stood to lose their jobs. The Brazilian National Urban Workers Union applied for and won an injunction to delay the auction. State legislators also voted out of concern for it to be delayed. Both of them were overruled by a government decree that ordered the auction to go ahead as scheduled.

The auction took place in the midst of the terrible crisis Brazil was going through thanks to President Jair Bolsonaro's reckless response to the pandemic and the grim consequences of this for Brazilians. It turns out the timing was likely deliberate. Bolsonaro's former environment minister was secretly recorded urging colleagues at a cabinet meeting to take advantage of the pandemic and of people having other preoccupations to get as many unpopular policies passed as they could, as quickly as they could.

Canadian Union of Public Employees President Mark Hancock accused CPP Investments of helping to legitimate Bolsonaro's privatization agenda, saying "It's outrageous that our public pension plan is using workers' retirement funds to profit from people's need for clean water and safe sewage treatment. These are human rights that are essential for survival. Access to water services is already fragile and unequal in Brazil. Privatization will make things worse."

The handing over of Canadian workers' retirement funds without their consent, and over their objection, to pay the rich through schemes geared to assisting private interests at home and abroad to line their pockets is unacceptable. It is all the more repugnant when it is defended in the name of high ideals to detract from the anti-social and nation-wrecking consequence of the investments.

The facts reveal that workers must control economic policy and economic outcomes. They must set the direction of the economy and end the policies which pay the rich and destroy the social and natural environment.

Protest at Canadian consulate in Rio de Janeiro, June 2021.

(Photos: CUPE, Jonas, SINTSAMA-RJ )

This article was published in

September 17, 2021 - No. 84

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