Water as an option for financial speculation | Uh …

Having to pay for access to water is nothing new. It is also not surprising that this is a universal fact: it occurs in all countries of the world, although with different procedures (procurement can be controlled by public or private companies or a mixture of the two. systems). Now that I have started futures market trading raw materials Wall Street It incorporates an unfortunate variable: in addition to integrating the market which evolves within the productive economy, this basic product and necessary to survive becomes part of the financial market.

Until the previous Monday, it was the companies (and not the product) that were listed on the international markets. The Nasdaq Veles California Water Index, which is formed based on future water prices in major California river basins, has opened a new door in the commodification process of a good absolutely necessary for life: water.

Dark future

The logic initial of futures markets according to the story of the big capitals it is order the price of a good or service, so that it adapts to the needs of those who produce and those who consume, beyond external volatilities. In the case of water, its increasing scarcity, its arrival on the raw materials market will allow “a better risk management future linked to the resource “.

But in the Real life future markets have other logic.

An example with legendary products in this market can provide more clarity: When preparing for planting, a wheat farmer may want to make sure that they sell their crop at a certain price, such as flood, drought or flood insurance. the volatility of international markets; The same is true for the buyer of wheat who might want to guarantee value against a possible price jump. “In reality, only 2% of those who buy futures are buying the good; 98% resell it when the price goes up or down, because the real intention of those who participate in these futures markets is not to keep the product, but see it as an asset, as if it were a YPF action or the purchase of US dollars. They don’t care, ”explains the Spanish ecologist with training in economics linked to environmental impacts. Luis González Reyes, member of the environmentalists in action.

Financial logic is far from the story it tries to establish: it does not have to do with whether there is a lot or little water, but whether it is a good that becomes profitable or not. “The logic is that I have a property with which I speculate and I get the highest profitability. The result is that instead of stabilizing the price, it makes it even more fluctuating, ”explains González Reyes.

Winners and losers

The event being so recent, there is no certainty as to the impact of this new stage on the commodification of water, but the analysis of the evolution of the prices of other foods allows us to have some clues:

In 2008 there has been a significant increase in food prices, which can be explained by various factors such as the rise in the price of oil, the boom in demand for hydrocarbons, etc. One of them is that there was a speculative process: there was a lot of money available due to the collapse of the real estate market in which he did not know where to place himself and the market starts to invest heavily in future of different global commodities such as wheat or corn. This phenomenon has led to a rise in futures contracts and, consequently, their current price. The situation has had a negative impact on many countries that have not achieved a basic food basket.

“We can imagine a similar situation with the question of water: after many years of drought, which is now a possible scenario, a speculative process is encouraged which exacerbates the rise in prices more dizzyingly than what would have increased due to current supply and demand; and the presence of the future water market then favors an increase in its price, instead of stabilizing it, ”explains González Reyes.

“At the international level, significant investments will surely be considered and with a market logic: if today water is billed at low prices, the first thing that will start to happen is to alert the economic power and raise a question about the value of water ”, he adds Ignacio Salerno, sociologist specializing in economic development from an environmental perspective, member of Ocepp.

Losers are easier to identify. But the beneficiaries of this fact are, in the twenty-first century, names in English without faces and a lot of information about it: the companies that move the financial markets, which are the ones that have real power today like Apolo Capital , Blackrock (known in the country in times of currency debt negotiation), some of the leaders in the functioning of the financial market. They have a diverse portfolio, with investments in businesses and many products and services. “If they see a good investment in water, they will. In the financial markets, there are no companies specializing in one type of asset, but they evolve according to their advantages. they will get the most benefit from it»Explains González Reyes.

“To large producers, to agro-industry, to mines, but also to large hydroelectric power stations and of course to investment funds. These are the main beneficiaries in addition to the local elites of each of the countries who participate in these negotiations. The losers are 90% of the population which is not in this concentration of wealth ”, determines the professor of the University of Barcelona Judith Muñoz Saavedra.

A drop in the desert

Experts agree that there are certain limits that can slow down the process of water speculation. This is because unlike other products such as wheat, its marketing over long distances requires expensive and complex logistics. This factor gives some location the process, which also limits it. In addition, water is a sensitive product and environmental movements and citizens react and set limits.

Finally, what is currently approved is circumscribed to Californian watersheds, so it has no implication in other countries. If the majority trends of recent years are observed, this fact opens the door to similar processes that occur in other regions of the planet and can potentially reach the rest of the basins of the world, but today it is limited . González Reyes asserts that “this door that opens into the water futures market becomes a door in a climate emergency. Commodities must not be commodities and, if they are, at least the ability to speculate must be limited to the maximum with them”.

In this sense, Salerno believes that marketing water in Argentina in the short and medium term does not appear to be a business. There is a lot of water available in the country, and in the few areas of scarcity, there are no projects that could signify progress in this regard. Although he cautions that the argument “if it is marketed, it takes care of itself” must be rebutted; in other words, if we put a price on water, people will start to take better care of it. “We do not have to let the debate settle in these terms. Marketing water is not the way people are going to learn to handle it. . We have to raise awareness, rethink production techniques that consume less water. The commodification of water means sending a lot of people to their deaths. Food is traded and industry wastes industrial quantities: which makes us think What is going to be different? “, Phrasing.