Even though it has incalculable water resources, the water culture in Latin America leads to inefficient water use in almost all contexts of use. The region has one third of the world's freshwater resources, with 22,929 m3 per person per year, almost 300% the global average. However, it is also true that water resources are unevenly distributed across the region; in some areas water is abundant and yet other areas are very arid; also, 80% of the rain falls during a few months of the year. In addition, climate change is leading to increased floods and droughts, jeopardising the domestic water supply.
On the other hand, it is estimated that the lack of quality infrastructure in Latin America causes losses of up to 40% of the drinking water before it reaches the user. As a result, more water is withdrawn from local basins to meet water needs, generating a completely inefficient vicious circle.
According to the Development Bank of Latin America (CAF), the estimated investment needs to meet the water infrastructure demand in Latin America amount to 0.3% of the GDP until 2030; to date, those levels of investment have not materialised. But if we take into account that the cost of poor water quality represents between 1 and 2% of the GDP, the cost-benefit ratio of such investment effort is very favourable.
Waste water treatment
In Latin America, the waste water treatment market is expected to offer the most opportunities in the coming years. The efforts to increase the coverage of waste water treatment are driven by population growth and the requirements of environmental regulations. The most interesting opportunities in the region are as follows:
- Currently, only 50% of municipalities have waste water treatment plants. New waste water treatment plants are expected in the main cities in the country, including Bucaramanga, Cali, Neiva, Pereira, Manizales, Tunja and Bogotá.
- In the coming years we will see more concession contracts in Brazil, as the country tries to expand the coverage of sewerage and treatment systems. The ambitious goal of achieving universal access to sanitation will require greater private sector participation.
- The growth of the mining market depends on the prices of copper, which are beginning to recover. Desalination projects that were suspended during the commodity crisis were coming back to life in 2018. In addition, the long-lasting drought in Chile is leading to desalination opportunities for public utility companies.
- The priority for the waste water treatment sector has shifted to improving the plants which currently are not operating (40% of the sewage treatment plants), something that will require the participation of the private sector. Currently, the authorities are structuring new programmes to incorporate the experience of the private sector in order to improve the performance and the technological and financial capacity of public utility companies.
The truth is that water scarcity and its uneven distribution in Latin America is limiting the development of agriculture, industry, mining, hydropower generation, and even causing conflicts among sectors due to competition for the resource.
In Latin America, the waste water treatment market is expected to offer the most opportunities in the coming years
The mining market has become incredibly challenging in the past few years due to the substantial price drop of basic raw materials. The slowdown of the Chinese economy, weak growth in Europe, and the strengthening of the US dollar have combined to create a difficult situation for mines across the world. Capital expenditure has decreased considerably; nevertheless, the levels of production of commodities are stable and in many cases are increasing. These facts have two important repercussions for the water sector: The water demand is growing and the market is flourishing.
Concerning the first point, the volume of water that needs to be treated is growing as mines maintain the levels of production of raw materials while they exploit mineral deposits that are increasingly poor. This means that there is still a strong need to treat process water and waste water, although the expenditure tends to be lower due to the scarcity of new projects, even though existing projects continue to operate at full capacity.
The low level of investment has led to interesting dynamics in the market. It is leading to an outsourcing market increasingly more attractive for water, encouraging BOO (build-own-operate)/BOT (build-operate-transfer) water projects in mining, even in countries that traditionally do not subcontract projects. This trend will continue in the future, when mines will have to deal with a drop in the prices of basic raw materials, and a growing lack of internal knowledge about water.
Services-based offers are also gaining momentum, as many mines need to optimise their water circuits and better maintenance to make the most out of their existing assets.
The bulk of the water treatment expenditure in the mining sector will go to waste water treatment systems, due to stricter discharge regulations and the presence of heavy metals or cyanide in waters that need treatment. Seawater desalination will continue to play an important role in Chile and Peru, where water scarcity is significant and mines have to cope with diminishing rights over freshwater resources.
Latin America has 20% of the world's hydropower capacity, even though only one fourth of it has been harnessed
Hydropower is the power derived from the energy of moving water. Latin America has 20% of the world's hydropower capacity, even though only one fourth of it has been harnessed.
The Sustainable Hydropower Programme of the CAF (Development Bank of Latin America) has identified the most suitable regions to carry out future projects, and is already working in Bolivia, Peru, the state of São Paulo in Brazil, the Bermejo river basin in Argentina and the binational basin between Dominican Republic and Haiti.
But the development of hydropower projects encounters significant challenges, such as: improving water resource management, building infrastructure, and water allocation to all production sectors, in order to promote sustainable economic growth. The problem is this becomes more difficult in countries with a shortage of water resources, limiting the use of water to produce energy, that may conflict with water uses to meet other needs such as drinking water, flood control, irrigation or minimum ecological flows downstream.
The food demand is estimated to increase by 60% in 2050 due to population growth. However, only two regions on Earth can expand their arable land area: sub-Saharan Africa and Latin America. The latter only produces 11% of the food in the world, but has huge growth potential because land and water are abundant.
Then again, with regards to water, the lack of governance, lack of infrastructure and inefficient water use are limiting that expansion. Also, soil and water pollution, as well as extreme weather events are an added hindrance.
In Latin America there is a shortage of infrastructure, of human, institutional and financial capital, as well as a shortage of governability.
Clearly the region needs to improve use efficiency to avoid squandering, increase investments in water infrastructure and efficient irrigation systems, restore degraded lands and expand waste water treatment, with the help of the public and the private sectors. This way, it will move forward to achieve food security, increase farmers income and improve the lives of rural families.
To conclude, we can say that in Latin America there is a shortage of infrastructure, of human, institutional and financial capital, as well as a shortage of governability; this leads to scarcity, even though the region has plenty of water resources. Nonetheless, there are plenty of possibilities for private water companies to invest in new projects, in improving the existing ones, and in operation and maintenance services with qualified professionals.
Almar Water Solutions is a specialised company with ample technical capacity and experience in the development of water infrastructure, including its design, financing, operation and maintenance. From their Latin American office in Santiago de Chile, Almar Water Solutions works to develop comprehensive solutions to meet the growing water needs of the municipal and industrial sectors in the region.