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Water Finance and Governance in Latin America and the Caribbean. On the road to Dakar 2022

As part of the preparatory process for the 9th World Water Forum which will take plan in March 2022 in Dakar (Senegal), CAF, a member of the Board of Governors, organized the Conference on Water Finance and Governance in Latin America and the Caribbean: On the road to Dakar 2022. Structured in two days, Tuesday November 23 and Wednesday November 24, the Conference featured high-level panels that discussed the challenges and opportunities in both topics in the region, the initiatives undertaken by countries, financial entities and civil society actors and responsibilities regarding water finance and governance. Likewise, the top authorities in charge of water management in the countries of Latin America and the Caribbean and related international institutions shared their messages and actions on essential water issues at all levels.As part of the preparatory process for the 9th World Water Forum which will take plan in March 2022 in Dakar (Senegal), CAF, a member of the Board of Governors, organized the Conference on Water Finance and Governance in Latin America and the Caribbean: On the road to Dakar 2022

Structured in two days, Tuesday November 23 and Wednesday November 24, the Conference featured high-level panels that discussed the challenges and opportunities in both topics in the region, the initiatives undertaken by countries, financial entities and civil society actors and responsibilities regarding water finance and governance. Likewise, the top authorities in charge of water management in the countries of Latin America and the Caribbean and related international institutions shared their messages and actions on essential water issues at all levels.

Aware of the challenge of working on governance issues, the objective of this Conference is to consolidate the Latin American and Caribbean vision on water, with its challenges, success stories and concrete recommendations, to be integrated into a synthesis document, informed and consistent, in preparation for the 9th World Water Forum, as a message from a continent with more than 30% of the world's water resources, with significant achievements, but also with important challenges ahead.

Finance and Water Governance in Latin America and the Caribbean

Tuesday November 23. Block 1: Water Finance

According to CAF, despite the efforts made in the last two decades to increase access to water and sanitation, 161 million people in Latin America and the Caribbean do not have access to safe water, of which 17 million do not have even basic access to an improved water source. Meanwhile, 431 million people do not have safe access to sanitation, exposing them to health and safety problems.

Despite the efforts made, 161 million people in Latin America and the Caribbean do not have access to safe water

Sergio Díaz-Granados, CAF's Executive President, was in charge of the opening session of the Conference, highlighting that this is an ideal opportunity to focus on two crucial issues: governance and finance. He also reminded the audience that the climate crisis is a water crisis, since "water is the primary medium through which we feel the effects of climate change", causing serious economic and social consequences. Based on the above, there is a consensus that it is necessary to substantially boost the pace of investment. For this, it is essential to improve, optimize and increase both public and private financial flows: "It is necessary to advance toward a fairer and greener recovery and growth in the region", because at the current rate of investment, he warned, it will not be possible to achieve SDG 6 on Water and Sanitation.

Also speaking at the opening was Loïc Fauchon, President of the World Water Council, who congratulated the CAF for its work on the Board of the World Water Forum. Concerning the theme of the Conference, Fauchon pointed out the need for viable projects, suitable for investment, as well as experience to properly implement these projects: "In the current context, one thing is very clear: public financing alone will not be able to solve the current challenges". Within this context is COVID-19, which made it possible to see the responses that leaders are able to implement because, in the words of the President of the World Water Council, "water is politics". He noted, "water improves economies, health, education and contributes to food security."

Afterwards, Julián Suárez Migliozzi, CAF's Vice President for Sustainable Development, whom SWM interviewed prior to this conference, gave a keynote presentation on finance and governance in water and sanitation, providing context for the discussions that took place afterwards. Julián Suárez defined the Latin American and Caribbean region as "a continent of paradoxes", since "it is home to almost a third of the world's water resources, but has a high level of water stress in urban and productive areas". In fact, only 31% of the inhabitants of Latin America and the Caribbean have access to safely managed sanitation; he also pointed out that the order of magnitude of investment needed exclusively for WASH is 0.6% of the region's GDP: "At the current rate of investment, CAF estimates that several of the SDG 6 targets would be met between 2045 and 2050".

Julián Suárez, Vice President of Sustainable Development of CAF.

In the context of the current global water crisis, CAF's Vice President for Sustainable Development emphasized the relationship between SDG 6 'Clean Water and Sanitation' and SDG 2 'Zero Hunger', calling to "solve the water crisis in order to eradicate poverty and hunger" since, according to the FAO, 70% of the global water footprint is related to what we eat.

CAF will become in the next five years the green bank of Latin America and the Caribbean, putting water at the centre of sustainable development

In this regard, he pointed out that "it is key to understand which technological innovations can contribute to close the gaps, both in access and quality, favouring efficiency in water cycle management ", in a context in which it must be taken into account that the pandemic has severely hit Latin America and the Caribbean concerning economic and social aspects, so that "multilateral development banks have a role in blended finance". In view of this, Julian Suarez said that CAF will become in the next five years the green bank of Latin America and the Caribbean, putting water at the centre of sustainable development, "this is how we understand it from CAF," he said.

Legislative and regulatory vision

A first panel moderated by Jorge Concha, Director of Technical Analysis and Evaluation of CAF's Vice Presidency of Sustainable Development, focused on the legislative and regulatory vision, addressing the main actions required in the region to achieve the necessary consensus in order to boost the increase in financing that requires coordination and cooperation of both water and finance institutions.

In the case of Chile, Juan Pablo Letelier, president of the Andean Parliament, commented that the country decided to incorporate private capital due to the urgency of the lack of coverage, in order to speed up action and that, although they chose a model, it is not the only one available: "It is very important to have serious public institutions, a firm regulatory body and a very clear tariff policy to ensure investments", he said.

In this sense, he pointed out that it is not enough to say that water and sanitation are a human right, but that "social or subsidy policies must be established to guarantee basic access" and that policies must be in place to finance it. Likewise, the Andean Parliament has been working for years on the integrated management of water resources that follows a water security strategy, however, he regretted the lack of debate on financing: "We need to assume that we must even go as far as to inconvenience some, if necessary, to achieve our goals of proper water management to provide access", so that the debate opens up and includes the importance of public-private partnerships: "CAF can certainly be one of the main pillars to help countries that have financing problems".

Soledad García Muñoz, Special Rapporteur on Economic, Social, Cultural and Environmental Rights of the Inter-American Commission on Human Rights (IACHR),

Soledad García Muñoz, Special Rapporteur on Economic, Social, Cultural and Environmental Rights of the Inter-American Commission on Human Rights (IACHR), commented that the climate resilience approach must go hand in hand with a comprehensive rights approach that considers water as a right and a public good: "The climate emergency and the sanitation crisis are crises of human rights and the right to water". In this regard, Soledad García pointed out that she has fiscal and economic policies as a priority in her mandate, calling on States to redouble their efforts to guarantee water and sanitation: "We are working on a series of principles on fiscal policy and human rights".

In relation to this, Soledad referred to the Commission's petition and case system, under which cases and petitions can reach the Inter-American Court of Human Rights: "The Commission has protected residents and consumers of water that depend on several rivers in various countries in the region, indigenous communities affected by oil spills".

"The fluctuations in the policies of the countries of the region have made it difficult to achieve water and sanitation objectives"

The panel also included Oscar Pintos, President of the Association of Drinking Water and Sanitation Regulators of the Americas (ADERASA), who stressed that the SDG 6 target is very ambitious and financing is a key component. During his speech, he pointed to water governance issues in the region, since Latin America is characterized by "having institutions that are not fully developed", which is "a weakness" considering that governance should be the key that opens the door for financing to enable infrastructure projects and operational improvements in the sector. In this regard, he referred to several essential points when it comes to attracting more financing, pointing out that "the fluctuations in the policies of the countries of the region have made it difficult to achieve water and sanitation objectives".

The vision of providers of finance and services

In a second panel moderated by Gustavo Saltiel, Lead Water and Sanitation Specialist at The World Bank, we heard about the vision of providers of finance and providers of services. "In many countries in the region, water and sanitation service providers operate in environments that are not conducive to providing adequate and sustainable quality services from an operational, financial, social and environmental point of view," he said. In this regard, he pointed out that the region is not in a position to ensure it will achieve SDG 6, which requires a major change.

Carlos Puente, Director of Water, Energy and Environment at BANOBRAS, spoke about the work of Mexico's National Bank for Public Works and Services and, specifically, the Program for the Modernization of Water Management Entities (PROMAGUA) focused on channelling support from the National Infrastructure Fund to address gaps in the coverage and quality of drinking water, sewerage and sanitation services: "In general, PROMAGUA has been successful in promoting drinking water projects, large aqueduct and desalination projects, and wastewater treatment plant projects."

Regarding the role of international organizations, Carlos Puente commented that public development banks have an important role to play in the dialogue and dissemination of knowledge to take advantage of best practices and take into account the mistakes made across the world: "We must avoid deficiencies in the preparation of projects, be more efficient in the study of the problems we are trying to solve".

In addition, Gonzalo Meschengieser, manager of International Relations at Agua y Saneamientos Argentinos (AYSA), explained the company's financial challenges, as well as its plan to face them, which takes the form of the Master Plan for Expansion, Maintenance and Improvements, which sets the ambitious goal of universal coverage by 2030: "We have to incorporate three million people to the drinking water production system, and five million to the sewage and sanitation system", he explained.

In this regard, AYSA is also focusing on leak and loss detection, with state-of-the-art technologies, pointing out the need to obtain sources of financing for what they call "fine network", so that their users can connect to the mains. He also highlighted that institutions must explain to the world that there are significant opportunities for investment in the water sector in the Latin American region.

This second panel also included Luis Velasco, president of the Latin American Confederation of Community Water and Sanitation Organizations (CLOCSAS), who commented that CLOCSAS promotes and strengthens organizations working together and the advocacy capacity of community organizations in Latin America and the Caribbean through innovative, transparent, supportive and committed processes, as a strategy to achieve sustainable access to water and sanitation for the population: "Community water management is the most suitable actor to guarantee the universalization of access to water and sanitation, since it is in the rural area where the gap is greatest, and where other actors would find too many difficulties."

Regarding the strategies to increase sustainability and financing in rural communities, Luis Velasco commented that the public policies that should be promoted to achieve full coverage of water and sanitation services at the rural level should be based on specific regulatory frameworks suitable for the conditions of rural areas, highlighting the role of associativity: "Joining forces is a fundamental strategy to increase the sustainability and financing of community organizations for water and sanitation services".

Financing irrigation to eradicate hunger and contribute to food security 

The last panel of the first day of the Conference, moderated by Laura Melo, representing director of the World Food Program in Guatemala, addressed a highly relevant issue: financing irrigation to eradicate hunger and contribute to food security. Food security is an issue of great concern in Latin America and the Caribbean, especially considering the impact of climate change: "When we talk about promoting food security, it is inevitable to talk about water", said the moderator and recalled that "we cannot end hunger if the most vulnerable rural communities do not have access to water for food production".

Food security is an issue of great concern in Latin America and the Caribbean, especially considering the impact of climate change

First, Jacinto del Lino Pacheco Mosquera, Vice-secretary of Technified Parcel Irrigation of the Ministry of Agriculture and Livestock of Ecuador, spoke about the serious situation that the country is going through in relation to this issue, pointing out that it is necessary to make many efforts to bridge the gap between the cultivated and irrigated surface area.

This third panel discussed aspects of the relationship between water and food security through agricultural irrigation, the interconnection between SDG 6 and SDG 2, understanding that irrigation is essential for the provision of food, the eradication of hunger and the contribution to food security. There is still room to improve its efficiency, which is extremely necessary given the effects of climate change and the growing scarcity of water.

In this regard, Martín Mattos, General Director of Natural Resources of the Ministry of Livestock, Agriculture and Fisheries of Uruguay, pointed out that the country considers irrigation as an opportunity to make its productive system sustainable, with the greatest growth in cereal irrigation: "A lot of dams have been built to create water reservoirs and a very important institutional framework has been developed". In addition, as regards improving water use efficiency, Uruguay considers it "fundamental", always bearing in mind that water is "a very valuable element, but also a very fragile one".

Finally, Luis Pita, project director at Proinversion in Peru, commented that the progress in irrigation public-private partnerships (PPPs) in Peru, which aim to incorporate 140,000 new hectares on the coast, was possible thanks to the legal framework that regulates private investment, as well as the introduction of special legislation that allows establishing water tariffs in line with investments and coverage of investment and maintenance costs: "The main success factor for greater private investment in the region will be to ensure the predictability of the social and macroeconomic situation of countries", he said. Likewise, and in reference to the conditions in each country, he commented that a determining factor is to have a legal and institutional framework in line with the sectoral investment promotion mechanisms to be implemented.

EN - Finance and Water Governance in Latin America and the Caribbean -Block 2

Wednesday November 24. Block 2: Water Water governance in times of COVID-19 and climate change

The financing discussed on Tuesday 23rd requires conditions that encourage it. In this regard, water governance, which establishes the dynamic and sometimes sensitive balance between the growing demands for water use and the response capacity of decision-makers, requires adequate institutions for basin systems, including corporate governance in decision-making, regulation and service provision bodies, as well as effective and legitimate management tools.

Governance in water resources management

Edgar Salas, CAF's Director of Sustainability, Inclusiveness and Climate Change, was in charge of moderating the first panel of the day, focused on governance in water resources management. Before beginning, Salas pointed out that governance for integrated water resources management is a dynamic concept that "involves the processes and mechanisms of interaction between governmental and non-governmental actors”. He also pointed out that "water policies must be adapted to different water resource systems and the conditions in each place" and that, therefore, "governance responses must be adapted to changing circumstances".

Governance for integrated water resources management is a dynamic concept that "involves the processes and mechanisms of interaction between governmental and non-governmental actors

In terms of lessons learned on the use of water resources considering the effects of climate change, Alexandra Moreira, secretary general of the Amazon Cooperation Treaty Organization (ACTO), shared that ACTO countries have been working to face the current challenges through the Strategic Actions Program: "The current problems of the water sector deserve institutional arrangements, consensus and negotiation between countries", as these do not understand borders.

In this regard, Moreira presented some of the work developed by ACTO, highlighting the creation of an Atlas of hydro-climatic vulnerability in the region, which is a planning tool for response measures related to water resources management, and risk and disaster management. Regarding the factors to achieve integrated water management, Alexandra Moreira stressed that "it is essential to have inclusive and trustworthy institutional structures in countries for a multi-stakeholder cooperation dialogue" and that is why from ACTO they facilitate political dialogue: "We promote the exchange of knowledge, generate technical and financial cooperation, including adaptation to climate change, among the eight member countries".

Alexandra Moreira

The vision of providers of finance and services

Berta Alicia Olmedo, Executive Secretary of SICA's Regional Committee on Water Resources, presented the main experiences of the countries in Central America and the Caribbean towards improving and consolidating water governance, whose work focuses on generating information that can be useful for decision makers in the Central American region.

She highlighted the Central American Climate Forum created in 2020 and formed by six countries, which allows generating information on what will happen in the coming months in terms of climate variables, as well as the Forums for the Application of Seasonal Forecasts to Food and Nutritional Security, or the Central American Hydrological Forum, a forum of hydrologists from different countries that meet to discuss the results of the Climate Forum and generate models "that allow having hydrological forecasts in priority basins in the Central American region". In addition, in terms of financing, she stressed that if we want to have informed decisions and policies, we must keep in mind that we must have adequate and updated water data and, for this, it is necessary to have monitoring networks "sufficiently dense so that quantitative water information allows us to make better decisions".

Juan Carlos Alurralde, Secretary General of the Intergovernmental Coordinating Committee of the La Plata Basin, formed by various institutions from the five member countries (Argentina, Bolivia, Brazil, Paraguay and Uruguay) spoke about the main water resources management experiences to manage, restore and protect the basins.

Alurralde explained that during the 2010-2016 period, a transboundary assessment was consolidated and a key document was produced to formulate policies and priority actions agreed upon by the five countries to solve the main problems identified, mainly of a transboundary nature. In addition, he explained that from 2019 to 2022 a Strategic Decisions Program is being implemented, to set up enhancement and strengthening actions, and a support system for decision making. Finally, and in terms of governance challenges, cooperation is essential: "In order to achieve feasible governance, it is necessary to first establish a benign international environment conducive to cooperation".

Governance in the provision of drinking water and sanitation services

Next, Sergio I. Campos G, Head of the Water and Sanitation Division, Inter-American Development Bank (IDB), moderated an interesting discussion on governance focused on the provision of drinking water and sanitation services, where he highlighted that more than 200 million people have a discontinuous drinking water service in the region, and more than two thirds of the population in Latin America do not have adequate sanitation as per the SDGs.

More than 200 million people have a discontinuous drinking water service in the region

Iván Lucich Larrauri, president of the regulatory body SUNASS in Peru, addressed the main challenges in terms of governance of regulatory entities: "The main challenge in terms of governance is the organizational structure and culture of the water companies themselves," he said, and the first thing they must do is get to know the area where their water sources are, as well as the actors and different water users. Regarding the measures implemented, he commented that SUNNAS is implementing as part of drinking water tariffs an amount to give back to rural communities for the provision of ecosystem services such as water regulation and sediment control: "It is important to give greater value and credibility to water ecosystem services by the users of sanitation systems". Likewise, and in order to make progress in closing the existing gaps, Lucich commented that the Peruvian government is fully involved in monitoring water and sanitation programs and investment plans, and stressed that "a key element is the participation of a regulatory entity to arbitrate compliance with the agreements between the different agents, especially public government and operators, and to oversee compliance".

Hugo Rojas, general director of the National Association of Water and Sanitation Companies (ANEAS) in Mexico, pointed out that there is still a lack of effective participation of society in decision making: "Currently in Mexico there are no water projects that do not have social conflicts," he said. However, the biggest problem in the country is the financial system, as the federal budget earmarked for water operators has been reduced by more than 85% since 2016.

In this regard, he pointed out the importance of depoliticizing tariff structures and the tariffs that can be charged: "Not necessarily charging everyone more: progressive tariffs, tariffs with incentives, tariffs with cross-subsidies". Furthermore, in reference to cost recovery and subsidy targeting, Hugo Rojas pointed out that Mexico lacks a regulator: "We would very much like to have a figure like Colombia has", he said and emphasized that in many cases, it cannot be left to the municipalities to develop a tariff structure that recovers costs, since, sometimes, "it is not that they do not want to do it, it is that they do not have the technical capacity".

From Colombia, Camilo Sanchez, President of the National Association of Public Utilities and Communications Companies (ANDESCO), presented the association, a public utilities association made up of 160 companies, a very important part of which are water and sanitation companies, generating 7% of Colombia's GDP. He also made reference to the situation experienced during the pandemic and the response to it: "Our companies were prepared for this contingency", and pointed out that there was no news of any cessation of public services in Colombia: "gaps were closed in this process".

Regarding the tariff structure, Camilo Sánchez emphasized that everything necessary must be done to favor green investments, not only thinking about grey investments, and that public utilities have shown that the figure of the regulator is the best social leveler and Colombia, in this regard, is especially committed: "We have to understand that if we do not have water, there is no service".

Governance in the management of water-related disasters

The last panel of the day, and of the Conference, was moderated by Jorge Werneck, Director of the Regulatory Agency of Water, Energy and Basic Sanitation of the Federal District of Brasilia (ADASA), addressing governance from the point of view of water-related disaster management.

Claudia Herrera, executive secretary of the Coordination Center for Disaster Prevention in Central America and the Dominican Republic, emphasized that the occurrence of multiple disasters and emergencies simultaneously or over a short period of time has amplified their impact and made the response more complex. This has led to the strengthening of the governance of integrated risk management becoming a priority: "The Central American risk management policy is a fundamental pillar as a guiding framework for integrated risk management".

Pedro Palacios, Mayor of the canton of Cuenca in Ecuador, commented that the mayor's office generates tools that enable governance linked to some of the SDGs through the Governance Plan, one of the axes of which is "Environmentally friendly Cuenca". Thus, Pedro Palacios explained that, under a public policy, cross-cutting risk management, monitoring and early warning systems, in addition to communication methods thanks to new technologies, have allowed them to face risks with some peace of mind.

"In an overflow event in May of this year, the early warning system allowed us to act early, thanks to planning efforts in recent years, and we did not have any casualties." Finally, Pedro Palacios emphasized that the reservoirs allow them to have a minimum ecological flow for the summer season and for irrigation canals, as well as to have flood control, to guarantee the supply of drinking water, and electricity generation.

The panel also included the participation of Lupercio Ziroldo Antonio, Director of Engineering and Works of the Department of Water and Electric Energy of the State of São Paulo (DAEE), who pointed out that water crises have been recurring in Brazil. He also pointed out the need to "establish norms and procedures to face the problem of water crises, especially preventive actions seeking to avoid them" and that the Department of Water and Electric Energy acts to increase resilience with supplementary sanitation actions. In support of this, the Brazilian federal government has implemented measures to avoid any type of energy rationing, "especially by controlling the water level in hydroelectric dams".

On the road to the IX World Water Forum

To conclude, Franz Rojas Ortuste, coordinator of CAF's Water Agenda, conveyed the main messages of the two days of discussion, stressing that dealing with water is dealing with life itself: "When we talk about water security, we are actually talking about more than SDG 6", because water is a public good that is at the heart of sustainable development.

Water is a public good at the heart of sustainable development

This Conference confirmed that there is a bidirectional relationship between water finance and governance: "One cannot speak of governance without financing and vice versa", since any reform or modernization of public policies cannot leave financing aside. During his intervention, Franz Rojas highlighted eight take home messages from the sessions on finance that took place during the first day:

  1. Efficiency in the use of funds.

  2. Greater allocation of resources by the States (based on the Principle of Progressive Realization of Human Rights).

  3. Search for investment mechanisms with incentives.

  4. Leverage more financing (blended finance).

  5. The structural problems and fragility of the sector.

  6. Timeliness of the results of COP26 and the Climate Fund.

  7. Sustainable and affordable tariffs.

  8. The need to lower investment costs through cost-effective technologies.

 

Regarding attracting financial resources, the coordinator of CAF's Water Agenda highlighted that "it is closely related to governance", this being a balance between social demands and the demands of users and the capacity of the decision-maker: "Water has strong links with health, food and energy" so that water governance must be based on integrated management of water resources, in which the region has not yet made sufficient progress with a vision of resilience.

Christian Asinelli, CAF's Corporate Vice President of Strategic Programming, was in charge of closing the Conference on Water Finance and Governance in Latin America and the Caribbean. In his remarks, he emphasized the need to substantially increase the financial resources allocated to solve the gaps in access, quality and sustainability of water, as well as the need for a favorable environment to attract the necessary financing. He also stressed, once again, that CAF's water strategy is closely linked to climate action in line with its aspiration to become the green bank of Latin America and the Caribbean.