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Latin America's water funds: downstream users invest wisely

Dramatic erosion in the Cauca Valley has impacted water supply and quality down the length of its waterways (© Pedro Moreno)
Dramatic erosion in the Cauca Valley has impacted water supply and quality down the length of its waterways
© Pedro Moreno

As clean water becomes scarcer and its true value grows ever more apparent, many groups in Latin America are seeking ways to sustainably manage watersheds for the use of all. In the past year, a new Latin American Water Funds Partnership (The Nature Conservancy, FEMSA Foundation, and the Inter-American Development Bank) has set out to consolidate, support, and expand these efforts, protecting the natural infrastructure of more than 3 million hectares of watersheds.

Since 2000, The Nature Conservancy (TNC) has sought to demonstrate to its peers - now fellow members in the Partnership - that a 'water fund' system to finance and manage watershed protection, can be self-sustaining, effective and fair. In this model, downstream water users - utility providers, private companies, even entire cities - pay into a fund which then supports a range of conservation and protection activities in the upstream watersheds they depend on. These activities are tailored to each area, and bring local communities into activities such as fencing of riverbanks, minimising pollution from ranching and farming, and reforestation.

TNC's work on water funds began in Quito, Ecuador, where it worked with Quito Water Company in creating a fund to conserve watersheds supplying the city. TNC used geographic imaging (GIS), ecological rankings, and local knowledge to help target and monitor fund activities, which were paid for by the water company's customers - the ultimate end users of water. This experience set the pattern for TNC's technical guidance, which has now supported dozens of water funds in Latin America.

Geographically aware investment

In the water fund for Colombia's Cauca Valley, the contributors are themselves agricultural users. The valley's sugar growers' and producers' associations represent some of the major water users downstream, who depend on a steady flow of water with low sediment loads. The sugar sector has been working with local communities on water protection in at least 14 watersheds in Colombia since the early 1980s.

The partners in the water funds get upstream communities directly involved in reforestation efforts (© Pedro Moreno)
The partners in the water funds get upstream communities directly involved in reforestation efforts
© Pedro Moreno

However, here and elsewhere, TNC has recognised that most funds invest on an ad hoc basis, offering incentives to anyone who will participate. "These activities and areas [in the Cauca Valley] had been randomly selected, with social aspects also taken into account," says fund specialist Alejandro Calvache. This was based on the associations' personal relationships with other users of land and water, but the activities were scattered and piecemeal.

Seeking to improve the system with new tools, TNC has experimented with more advanced targeting to determine priority areas for conservation and highest return on investment, thereby achieving the greatest impact from contributions. This began with high resolution mapping in consultation with the sugar sector, drawing on past experiences to evaluate which activities might be feasible in different areas. TNC's mappers then analysed landscape features with GIS-based software, ranking activities in each area based on their likely returns in terms of biodiversity, erosion control, and annual and dry season water supply. The final 'investment portfolio map' guides the fund's use.

Across the Cauca Valley watersheds, resources from the fund are helping to improve cattle ranching and small scale farming, which have been identified as the major threats to water supply and quality. The activities include fencing and enriching of degraded forests, protection of riverbanks, and training in silvo-pastoral systems that combine good forestry with livestock grazing.

As investment begins, more upstream residents have been brought into the conservation efforts through farmers' organisations and other local groups. Partnering with these groups allows farmers and ranchers to learn new methods, organise collective efforts in fencing and re-planting degraded forests, and plan more sustainable land use around the big picture provided by the investment maps.

"We are providing a lot of training to farmers and ranchers to apply better practices, and where possible, to relocate cattle away from the rivers," says Ana Guzman of the Partnership. "All of the watershed funds include these kinds of activities, but it's particularly effective in certain places where farmers have an association already in place and we can organize better."

With water fund support, ranchers fence off areas near a river bank in the Cauca Valley (© Pedro Moreno)
With water fund support, ranchers fence off areas near a river bank in the Cauca Valley
© Pedro Moreno

Calling all water users

This technical optimisation has been one of TNC's two main contributions to the watershed funds. The other has been drawing in different stakeholders and water users of every size. "When we start working with a fund we have to see exactly who is using water in order to involve them in the project," Guzman says. "In recent years we have been pursuing the participation of all of the big users, including the largest companies, who are now supporting some projects in Ecuador and other countries."

But many contributors to the funds are much smaller, says Guzman. "There are also the customers of the water companies, like in Quito for example, who don't know they are giving money for the watershed. They just pay the water bill every month, and the company takes out a percentage for the water funds. It's one of the things we want to work on in the coming years, to not just involve the communities upstream but downstream too, so they know the importance of what they are contributing to."

Written by: T. Paul Cox

Date published: July 2012


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