According to CAF – the Development Bank of Latin America, more than 160 million people in Latin America and the Caribbean do not have access to safe drinking water while 430 million, two thirds of the region’s population, lack access to adequate sanitation. CAF has called on regional governments to increase financing for the sector.
Finance is just part of the problem, explained a manager of infrastructure projects in Peru, “There is no overarching water strategy anywhere in Latin America, there is a history of poor investment, poor project management and a dysfunctional relationship with the private sector.”
“There is no overarching water strategy anywhere in Latin America, there is a history of poor investment, poor project management and a dysfunctional relationship with the private sector.”
Project manager, infrastructure, Peru
However, for an efficient use of funds it is necessary to count with the right administrative structure. This includes an adequate institutional framework for basin systems, corporate governance-led decision-making processes, strong regulatory bodies, and a clear framework for public-private collaboration. Private capital collaboration is key in the improvement and development of water infrastructure, while social policies grant basic access to those populations with limited access to safe water.
The project manager continued, “I believe PPP’s (public-private-partnerships) are essential in Latin America’s water sector because the government does not have the project management capabilities to deliver. A good PPP contract will ensure proper project planning and implementation which will result in better operational results.”
“A good PPP contract will ensure proper project planning and implementation which will result in better operational results.”
Project manager, infrastructure, Peru
There are several different examples of raising funds creatively to improve drinking water services throughout Latin America. For example, At the start of 2022, the Brazilian sanitation company, Igua Saneamento raised USD 171 million in green bonds to finance the supply, treatment and distribution of water and sewage collection in Mato Grosso and Paraná, reaching 7.1 million people. In July, the Inter-American Development Bank approved a USD 75 million loan to the Province of Buenos Aires for the construction of water systems, operational capacity improvements, and maintenance works. At an international level, the European Investment Bank and the European Commission allocated EUR 150 million in technical assistance investment grants for water and sanitation projects in the Caribbean. The funds will be allocated to finance new investments in the water supply, wastewater treatment, solid waste, and storm-management water across the region.
A high-level official at CONAGUA, Mexico’s Water Commission explained their limitations, “Let’s be clear, there is not the necessary budget at a national level to solve all the water challenges the country is facing and this is compounded by the enormous indebtedness of local agencies. Of course, we are working with local organisations to try to improve water infrastructure, for example, in some coastal states we are supporting the construction of desalination plants under PPP schemes. In Sonora, we are working on a potential association with the IP to make the water distribution system more efficient.“
The Association of Drinking Water and Sanitation Regulators of the Americas considers that water governance issues in the region mainly stem from institutions that are “not fully developed”. In addition, drops in revenues and income losses derived from the Covid-19 pandemic have aggravated the current situation. But the OECD suggests a number of measures to redirect resources to funding this infrastructure, which include higher tariffs for large consumers, increasing federal public budgets, transfers from international donors, and commercial financing.