It’s no coincidence that Oaxaca was chosen as the loan recipient. It has the third lowest level of potable water coverage of any Mexican state, behind Chiapas and Guerrero, according to a World Bank assessment. The reality is that many Oaxacans live with the uncertainty of not knowing what days they will have water service. In the best case, they receive water every two weeks for a few hours.

The Mexican water system differs from that of many countries: municipal water has frequent periods of low or no pressure, so individual households store city water in a reservoir, with a pump to bring it up to a tank on the roof called a tinaco from which it can then flow out the taps.

The governor, Alejandro Murat Hinojosa, likes to show off MAS Oaxaca as a major achievement of his term in office. “With this investment, water service in almost the entire city has improved,” he has stated enthusiastically in government promotions of the program. He says residents can stop buying water from private companies: “We’ll be done with the water trucks and Oaxacan citizens will have 18 permanent hours of water.”

However, the governor is hiding the poor reach of MAS Oaxaca, since the World Bank has only disbursed 27% of the negotiated sum for the 19 municipalities. What happened? According to the Annual Result Verification Reports on the Modernization of the Water and Sanitation Sector of the State of Oaxaca (Informes Anuales de Verificación de Resultados del Programa de Modernización del Sector de Agua y Saneamiento del Estado de Oaxaca), released by an external audit, the government delivered “incomplete or null reports” as well as “unfinished or overdue works.”

In the original plan, the World Bank loan was part of a new model of financing in which the Oaxacan government would receive the funds in installments from 2017 through 2021 after showing results. With these measures, the financing agency was seeking to “improve transparency and accountability” as well as “strengthen anti-fraud and anti-corruption systems,” according to its reports.

However, Iván and several of his neighbors don’t believe the governor and are certain that MAS Oaxaca won’t help them. They feel they are in danger from poorly constructed work, still lack adequate water service, and continue buying water from cistern trucks—better known as “pipas,” or pipes. “Where did that money end up?” Iván asked angrily. “There are leaks everywhere here.”

This street is sustained by retention walls up to 18 feet high that border the houses. When Potable Water and Sewage Services of Oaxaca (SAPAO, Servicios de Agua Potable y Alcantarillado de Oaxaca), a government water agency, discharges water from the tanks approximately half a kilometer uphill, the pressure breaks some of the pipe connections and that’s when water enters the walls of the houses.

María de los Ángeles Ruiz has experienced similar problems. She presented a complaint to SAPAO in July 2020, but no one came out to check on what was happening until August 2021. Avispa Midia was in the neighborhood at the same time and confirmed the leak. Reporters from the team sought out SAPAO to learn what measures the agency was going to take. SAPAO’s spokesman Héctor Enoc Martínez scheduled an interview, however, when he found out the topic was MAS Oaxaca, he avoided the planned call and didn’t respond.

Residents of the neighborhood have also complained frequently about poor water quality. Guadalupe Areta explained that, in addition to the lack of a constant supply, the water is turbid and sometimes comes out greasy. “How are we supposed to trust water like that?” she remarked.

One of MAS Oaxaca’s other priorities was to perform laboratory testing to determine the quality of water supplied to the area’s inhabitants. According to the World Bank results report, samples had to comply with “standards for bacteriological, chlorine, waste, iron, manganese, and color parameters in potable water.” This objective was never met.

A SAPAO employee who works in the area of the storage tank and did not want to be publicly identified said that of the three pumps that are supposed to pump water to the houses, “only one is working.” Several residents who live close to the tank came up to report that they still don’t receive city water and they have to pay for water from delivery trucks.

Carlos González, an engineer with Tanques del Bajío, says that his company completed the work stipulated in the contract. “We just installed the tank. I don’t know the whole reach of SAPAO’s project,” since different companies took on the work in several stages, he said.

Avispa Midia attempted to interview SAPAO regarding the tank’s functionality, but the request stalled in SAPAO’s offices until their spokesman, Héctor Enoc Martínez, stopped responding to phone calls. The reporting team also tried to contact Yoo Nanashi Construcciones to hear their version of the events. The company has no website. Of the three telephone numbers registered to it in the Oaxacan government’s service provider rolls, two did not answer and the third was answered by someone who said it was a wrong number.

Iván and his neighbors whose houses have flooded were not aware that the party responsible for the poor construction is Kenmar Servicios Integrales S.A. de C.V., which was awarded a 2.85 million peso ($142,500) contract.

An audit conducted by the High Auditing Office of the State of Oaxaca (OSFE, Órgano Superior de Fiscalización del Estado de Oaxaca) revealed that this company had received “excessive payments,” that is, it was granted “sums that were not implemented.” The audit also highlighted the lack of quality control in the work done in the area.

Kenmar’s contract was under OSFE’s magnifying glass along with 12 other funds allocations for the MAS Oaxaca project in Chapultepec. Of the 13 contracts audited, nine showed “spending on inputs that were not applied to the work” or sums “paid that were not implemented,” amounting to approximately 10.5 million pesos ($527,000).

As an autonomous body tasked with oversight of Oaxaca’s general public resources, the OSFE was not a part of the MAS Oaxaca program and therefore did not influence allocation of resources to this area. The World Bank looks to the results of these external audits, which were contracted by the program itself, to decide whether or not to allocate resources.

OSFE detected a failure of quality control as well as a lack of “engineering studies (geophysical, geohydrological, topographical)” and a “lack of physical evidence to support the concepts paid for.” The agency concluded it would take legal action for probable damages to public finances.

Through Transparencia (Transparency, a Mexican public information access agency), OSFE informed the public that it had opened “alleged administrative liability case file number OSFE/AESIEE/DSIEE-A/INV-12/2021, which incorporated OSFE’s Special Monitoring and Investigation of State Entities audit, derived from the financial compliance audit and regarding project number OA/CPE/011/2019,” of which MAS Oaxaca works form a part.

OSFE refused to grant Avispa Midia access to the case file, citing its classified status.

While the World Bank has only released half of the money projected for San Juan Chapultepec, the remaining 18 municipalities have fared much worse. Of the $55 million loan, the World Bank was supposed to supply them with $36 million to improve water services. However, it has only delivered $4.4 million, just 12.2% of the original budget.

Perseida Tenorio, a resident of Ixtaltepec, one of the municipalities this money was supposed to go to, says her community doesn’t know anything about MAS Oaxaca. “There’s a plaque here that says that the [municipal potable water system expansion project] was constructed with resources from the World Bank, but it doesn’t work. These white elephants are all over the Istmo de Tehuantepec (a region of Oaxaca). They get halfway built, they take a photo and that’s it. Water has become a business,” she said.

An external audit into 2019 and 2020 contracts, conducted in March and April 2021 by González de Aragón y Asociados, reported that in these 18 municipalities, only three contracts in Zimatlán de Álvarez were completed as of April 2021. The works were part of a renovation and expansion of the potable water system. In this municipality as well as Tuxtepec, there are other projects that are 40% completed, according to the auditors.

According to the report, in Telixtlahuaca, Juchitán de Zaragoza, and Huajuapam de León, projects were left incomplete and non-functioning. All together they were valued at around $2.5 million. In Pinotepa Nacional, Ixtaltepec, and El Espinal, the works are still under construction despite MAS Oaxaca officially ending in January 2021.

In Tlaxiaco, the State Water Commission (CEA, Comisión Estatal del Agua) signed a certificate of completion for the construction in November 2020. However, the auditors found that it still hadn’t been finished in April 2021.

Avispa Midia’s investigative team made an information request to the CEA asking for certificates of completion of the works that the audit considered still “in process.” At the time of publication, the CEA had not responded to the request.

The Ministry of Finance (SEFIN, Secretaría de Finanzas), responsible for the institutional coordination, planning, administration, and general supervision of MAS Oaxaca, was under obligation to inform the World Bank of complaints or allegations of fraud or corruption related to funds disbursed by the financing body. “SEFIN must share the conclusions of investigations with the WB [World Bank] and make the results public,” according to the World Bank.

Avispa Midia asked SEFIN for the reports sent to the World Bank via public information access channels. SEFIN replied that “in its role as General Coordinator of the MAS Oaxaca Program, [the Sub-ministry of Planning and Public Investment of the SEFIN] did not receive any complaints or allegations of fraud or corruption.”

This investigative team looked into the contracts and found that at least three businesses that had been awarded MAS Oaxaca contracts are involved in a network of phantom companies. These include Estructuras Arquitectónicas Tholoi, established in 2018, which was a service provider for the government of Oaxaca until June 30, 2021. It is one of the companies that the Tax Administration Service (SAT, Servicio de Administración Tributaria) highlighted in August 2021 as a “taxpayer with ostensibly nonexistent operations,” colloquially known as a “phantom company.”

Tholoi was granted an almost $2 million contract to work on the expansion of a potable water system in Juchitán de Zaragoza, which was never completed. According to the external audit, this business had received a more than $500,000 advance and was obligated to “refund the resources to the SEFIN.” Avispa Midia requested information about the return of the half million dollar payment to the CEA, but the organization said that “as of now the money has not been refunded to the State of Oaxaca.”

The government didn’t only award Tholoi the MAS Oaxaca contract; in 2020, the CEA granted the company another contract for 41.1 million pesos (around $2 million). Tholoi also received contracts from the State Housing Commission and the City of Oaxaca.

In its inquest, Avispa Midia found at least seven companies that share the same tax domicile and phone numbers as Tholoi, among them Acceso y Desarrollo a la Tecnología S.A. de C.V., which is also classified by the SAT as a “taxpayer with ostensibly nonexistent operations.”

Construcción y Diseño Gasso S. de R.L de C.V., established in 2019, is also linked to this network of fake businesses. The company received contracts to supervise projects in San Juan Chapultepec, and in the midst of the emergency generated by the pandemic, SAPAO directly granted it a contract of 27.6 million pesos, approximately $1.4 million.

Congresswoman Elena Cuevas, president of the Congress of Oaxaca’s Infrastructure, Urban Development, and Territorial Regulation Commission, denounced Construcción y Diseño Gasso as part of a network of “phantom companies, or a possible corruption network.”

The representative presented the accusation in March 2020 in hopes that Jorge Emilio Iruegas, a prosecutor who specializes in fighting corruption, would take on the case. “So far it doesn’t seem like they have taken this request into consideration, because we haven’t seen any advances,” said Cuevas.

Avispa Midia combed through the government of Oaxaca’s service provider database and found that at least 20 companies share not only Construcción y Diseño Gasso’s tax address and telephone number in Oaxaca, but also the same tax address in Cancun, Quintana Roo, where they are also listed as state contractors.

Yoo Nanashi Construcciones appears in this directory as well. In 2020, the company participated in two bid tenders as the sole competitor. The two contracts it received add up to a little over 16 million pesos ($835,000). “Construction and equipping of the transition tank for the San Juan Chapultepec storage tank” is one of the MAS Oaxaca works that appear in Yoo Nanashi’s contracts.

Avispa Midia requested an interview with Rubén Adrián Noriega, Undersecretary of Planning and Public Investment, which several of his employees dodged. In the end, reporters emailed him a series of questions. At the time of publication, there had been no response.

Noriega also served as head of the Transparency Unit in his area of Oaxaca, which refused to hand over requested documents. Instead, Avispa Midia was offered a 45 minute appointment to look over more than 5,000 pages of documents, without permission to take photos or make photocopies.

Reporters also requested an interview with the World Bank, which first refused to respond under the argument that there was no one familiar with the case. The team then sent questions to the World Bank’s Mexico offices. At the close of the investigation 40 days later, the questions had not been answered.

The resources allocated to improving the quality of water service followed murky paths and the problem of water access continues to worsen. The government of Oaxaca continues spending public funds to cover water service through private water trucks, said SAPAO through an information access request.

This scenario has exacerbated “water trafficking,” according to biologist Juan José Consejo from the Nature and Society Institute of Oaxaca (INSO, Instituto de la Naturaleza y la Sociedad de Oaxaca, A.C.). “Water theft is happening all over and it’s sold through water trucks by people who have neither permission nor the basic sanitary conditions. This is able to happen because there’s no oversight,” said Consejo. “The lucrative water market is on the rise; even several politicians have joined in.”

The Union of Water and Materials Trucks of the State of Oaxaca has also denounced the situation. It stated that, during drought periods, “the number of fake water trucks increases everywhere; it’s even more than those that have permission to offer this service.”

In addition to the persistent water supply problem, Oaxacans remain saddled with the World Bank debt. Of the $15.05 million disbursed, the government of Oaxaca has paid back $3.53 million so far, of which around $1 million corresponds to interest and fees, according to World Bank financial statements. The debt payment is planned in 150 monthly installments that began in January 2019 and will end in June 2031.

The residents of San Juan Chapultepec complain angrily. “It’s not possible for this to keep happening in Oaxaca,” said Iván. “Every administration steals resources from the people and nothing happens. But here, with us, we’re going to organize and mobilize until we have dignified conditions of life.” The grievance is simple: “It’s unjust for them to keep stealing from under our noses.”