Trickle‐down debt: Infrastructure, development, and financialisation, Medellín 1960–2013

Abstract

In many Latin American cities, infrastructure was largely financed through development lending over the second half of the 20th century. Exacerbated by debt crises and currency devaluations, public utilities became holders of significant levels of negative value. This encouraged public debt financialisation in order to mitigate the effects of shifting interest rates and devaluation. For David Harvey, negative value is the hallmark of contemporary capitalism whereby one must produce, not for profit, but to retire debt. This statement can be applied to indebted utilities, in the sense that the focus of utility governance – and its relationship towards those dependent on it for services – becomes reoriented towards debt management – or governing by debt. Full‐cost recovery emerges in this context as a mechanism to pay down the infrastructure debt held by utilities, which quickly led to increasing levels of user indebtedness. Service disconnection and pre‐paid metering emerge as processes to recover this user debt by enforcing a culture of payment through service exclusion. In these ways, the responsibility for infrastructure debt ‘trickles down’ in small – but individually significant – amounts to persons and households, enrolling them in the logic of debt (re)payment. This paper examines these issues through a case study of urban infrastructure financing, debt, and tariffs in Medellín, Colombia from 1960 to 2013.

Framing water as a financial risk: Reviewing the processes shaping a narrative

“…Bresnihan (2016) examines the financialization of Irish Water and illustrates how “bio‐financialization” in this context has not only affected service delivery, but has also challenged the notion of the public‐private binary itself. Examining the structure of utility governance over several decades in Medellín, Colombia, Furlong (2020) shows that financialization of utility services in this area led to prolonged debt‐management, severely impacting the inhabitants as the indebtedness of utilities is transferred to users. Noting that most scholars focus on the effects of financialization and its impact on space and people, Williams (2021, p. 1878) suggests that more work is needed to unpack what he refers to as the preconditions of financialization: “the re‐alignment of sectors, driven largely by service providers, development professionals and state actors rather than investors, in order to encourage financialized forms of development.” Exploring the financialization of Kenya's water sector, Williams shows that it does not happen spontaneously, but requires structured efforts, creating the enabling conditions for these processes to occur.…”

“Money is Not the Problem”: The Slow Financialisation of Kenya’s Water Sector

“…Such restructuring, in turn, has important implications for the development options available to service providers. As Furlong (2020b) shows in the case of infrastructure financing in Medell ın, Columbia, it takes a great deal of effort to re-align the social relations of infrastructure services, via mechanisms like full cost recovery, to encourage utilities to take on higher levels of debt and to service that debt by effectively passing it on to rate-payers. Investigating how infrastructural sectors are restructured in this way, therefore, is essential in politicising the corollary of "how the need to generate revenue requires a city [or region] to be operated in particular ways" (O'Neill 2019:1307).…”

Financialized savings in public water governance: An illustrative case study in the arid American West

“…With regards to the financialization of the water sector, research shows that financial interests view water revenues as a favorable investment due to the stability and durability of revenue stream and the structural monopolies that water organizations retain over their supplies (Allen and Pryke, 2013). Using the case of utility governance in Medellín, Colombia, Furlong (2020) demonstrates that individual users ultimately shoulder the burden of debt amassed by the utility company with particularly damaging consequences for low-income users. March and Purcell (2014) argue that the financialization of water delivery should be understood as a phenomenon involving the full network of infrastructure and services necessary for water delivery, and not only the product itself: water.…”