Bolivia and Chile wrangle over water in Atacama
Septmber 22, 2009 - Reuters

* Rare water source stirs neighborly rivalries
* Atacama desert home to water-hungry copper mines
* Bolivia seeks historic compensation for use of stream

By Diego Ore
SILALA, Bolivia, Sept 22 (Reuters) - Bolivia and Chile have been at odds over access to the Pacific for more than a century. Now, a highland stream that trickles through the driest desert on earth is stirring old rivalries.

Resources are worth fighting for in the Atacama desert. The region may be too bleak, treeless and cold for even the hardiest residents of the Andean plains, but it is the heart of Chile's vast copper mining industry. And mines need water.

Water is so scarce in the area that Chile's Antofagasta PLC (ANTO.L) plans to pump sea water from the Pacific through a 90-mile (145 km) pipeline in one of its mines in the area.

It is not known exactly which mines tap the Silala river's modest flow, but Bolivia wants its richer neighbor -- the world's biggest copper producer -- to start paying.

"For more than a 100 years Chileans took our water without paying a cent, now we want Chile to pay for 100 percent of the Silala's water," Bolivian Foreign Minister David Choquehuanca said in a visit to the area earlier this month.

Chile says it has the right to use the water because the Silala is an international river, but Bolivia argues that it is a stream and that its course was artificially altered in the 19th century to fit the needs of Chilean companies.

The Silala is the sum of several Andean springs that join in a man-made brook that, at most, is five feet (1.5 meters) wide and roughly 2.3 feet deep (0.7 meters). It does not carry a lot of water, only 8.8 cubic feet of water (0.25 cubic metres) per second, according to the Bolivian government.

The neighboring countries reached a preliminary deal earlier this year over the Silala, after Chile agreed to pay half the water's market value -- some $5 million a year.

Under the deal, they agreed to launch a four-year study to determine the flow and use of the stream's water to help calculate how much Chile should pay in the future.

But Bolivia backtracked on the deal, saying it should be retroactive and the government is now demanding compensation for the past use of the water.

Bolivian President Evo Morales, an outspoken leftist, says his impoverished country's natural gas, mineral deposits and water resources should be controlled by the state.

The Silala spat is the latest flare up of tensions between Bolivia and Chile.

After winning the War of the Pacific in the 19th century Chile seized control of the Bolivian province of El Litoral, leaving Bolivia a landlocked country.

Frosty relations between the neighbors, which have not exchanged ambassadors since the 1970s, have thawed a little in recent years and they are in talks on several topics, including the Silala and Bolivia's call for access to the Pacific.

From its source in Bolivia, the Silala runs through a channel of 1.8 miles (3 km) built more than a century ago by the Antofagasta & Bolivia Railway Company, which held a concession to use the water.

The company later transferred the license to both the water company of the Chilean city of Antofagasta and the massive Chuquicamata mine, owned by state-run miner Codelco. The Bolivian government terminated the concession in 1997.

"But the waters continue flowing toward Chile. Whoever was using those waters before is using then now," Bolivia's Deputy Foreign Minister Hugo Fernandez told Reuters.

As well as several mines, Antofagasta PLC, which controls the Antofagasta & Bolivia Railway Company, runs a thriving water business that last year posted $84.5 million in revenue.

Locals say that since the Silala starts in Bolivia, the Chilean firms that use its waters should pay Bolivia.

"We can see that Chilean companies are selling the water," Daniel Berna, a peasant farmer from Quetana Chico, a village near the border, told Reuters. "They should at least share the profits."

(Writing by Eduardo Garcia, Editing by Jackie Frank)