By Yessenia Soto, Rainforest Alliance
Nearly one-fifth of the world’s population lives in areas of physical water scarcity, while another 1.6 billion people live in countries of economic water scarcity, or those where the infrastructure is inadequate to supply the population with clean and safe water. By 2025, the United Nations estimates that two-thirds of the world’s population could experience high water-stress conditions.
One of the world’s most naturally water-rich regions, Latin America has more than 30% of the planet’s freshwater resources–but it also faces serious water challenges. Agricultural expansion, population growth, and rapid urbanization have deteriorated water sources, putting pressure on water supplies and leading to unequal access among different populations. Moreover, climate change threatens to melt glaciers in the Andes, one of the region’s main sources of freshwater.
“Water scarcity is already recognized as a real threat in Latin America,” says Fernando Veiga, general manager of the Latin American Water Funds Partnership. “This has aroused the interest of governments, businesses, organizations, and civil society in ensuring the region’s water security.”
Veiga works with The Nature Conservancy’s Water Funds initiative, an innovative, long-term watershed conservation model that uses investment funds provided and managed by local public and private actors. Water users pay into the water fund in exchange for freshwater, and the money is invested in conservation projects in critical upstream ecosystems, helping to improve living conditions for local communities while ensuring the quality and quantity of water for cities and industries downstream.
The water fund concept was born in 1997, but it wasn’t until 2000 that the first fund, Fondo para la Protección del Agua (FONAG) was created in Ecuador. Through FONAG, TNC partnered with the Empresa Pública Metropolitana de Agua Potable y Saneamiento (EPMAPS) other institutions, and local communities to conserve the watersheds that supply water to the capital city of Quito.
FONAG started with an investment of US$21,000 that came primarily from EPMAPS. The money was allocated to restoration and reforestation in the watershed, environmental education activities, communications and information management, and the regulation and monitoring of protected areas.
Over the past 14 years, FONAG has reforested 7,400 acres (3,000 hectares) around the watershed, restored 2,400 acres (1,000 hectares), and conducted control and monitoring activities in 84,000 acres (34,000 hectares). About 4,000 families receive indirect payments in the basin area, and approximately 2.38 million people in and near Quito have benefited from a safe water supply.
FONAG’s endowment has grown to about US$12 million. Although EPMAPS is still its primary source of income, it now has financing from more entities such as the Quito Electric Company, the Andean Brewery, the Tesalia Springs water bottling company, and the Consorcio de Capacitación para el Manejo de los Recursos Naturales Renovables, a nonprofit Ecuadorian consortium made up of public and private entities.
“FONAG demonstrated that water is a good currency, and that conserving water is a beneficial investment for everyone,” said FONAG technical secretary Malki Sáenz, who noted that, along with financial sustainability, the fund enjoys political support since EPMAPS funds are protected by a city ordinance.
Within a few years of FONAG’s inception, the water fund model started being replicated in other Latin American cities. At present, there are 17 water funds across Colombia, Ecuador, Peru, Brazil, Mexico, and the Dominican Republic. This tool has also been replicated in the United States in the water-scarce states of Nevada, New Mexico, and Texas, and in Nairobi, Kenya.
Together, the 17 funds in Latin America have supported conservation activities across nearly 545,000 acres (220,000 hectares) of watershed, with nearly 3.7 million acres (1.5 million hectares) in the funds’ areas of influence–where 34 million people indirectly benefit by receiving water from conserved basins.
For communities living in the watersheds, water funds have also become tools for governance and development. “We have achieved strong engagement with the communities because they have seen a real improvement in their water supplies and green development alternatives have stemmed from the funds’ activities,” said Alejandro Calvache, TNC’s Water Funds coordinator for Colombia, Costa Rica, Panama, and Venezuela.
As communities have permanent representation on the boards of the funds, they are involved in making decisions about the conservation actions in their watersheds, and they have benefited from paid work in reforestation, monitoring, and surveillance activities.
Like FONAG, the other funds have also obtained major commitments from the public and private sectors. A big part of of investments come from beer, soft drinks, juice, and food companies; sugar mills; and aqueduct companies like EPMAPS.
Before implementation, TNC partners with academic centers to study the watersheds, measure the funds’ potential economic and environmental contributions, and estimate the savings that could be generated for communities and businesses. Additionally, they do regular monitoring to ensure and demonstrate with data whether or not the water fund is successful. To Veiga, this scientific component has been key in obtaining the support of companies and decision-makers.
In 2011, The Nature Conservancy, Fundación FEMSA, the Inter-American Development Bank (IDB), and the Global Environment Facility (GEF) partnered to establish the Latin American Water Funds Partnershipand offer technical and financial assistance for the creation and strengthening of water funds.
The partnership expects to leverage US$27 million to build and strengthen at least 32 water funds in Latin America and the Caribbean through 2016. It also seeks to positively impact 7.4 million acres (3 million hectares) of natural ecosystems and benefit about 50 million people who receive water from the affected watersheds.
“We are proud to have united such a large group of strategic actors from Mexico to Brazil, all working together to promote water conservation by investing in green infrastructure,” Veiga said.
TNC is also working with various stakeholders in Bolivia, Chile, Costa Rica, Guatemala, Honduras, and Panama–countries that aim to soon establish their own water funds to address looming water shortages.