WATER RESOURCES AT THE IDB Washington, D.C. May 2004 Washington, D.C. May 2004

STRUCTURE OF PRESENTATION Overview of LAC Overview of LAC Main Challenges Main Challenges The IWRM Strategy The IWRM Strategy Financing the Strategy: The Water Partnership Financing the Strategy: The Water Partnership Pipeline of projects Pipeline of projects

OVERVIEW OF LAC

URBANIZATION IN LAC Total LAC = 517 millions 389 millions = 75% in urban areas

APPROXIMATELY 116 (50 IN URBAN AREAS) MILLION PEOPLE WITH NO ACCESS TO SANITATION SYSTEMS AND 75 WITHOUT POTABLE WATER (26 IN URBAN AREAS) APPROXIMATELY 116 (50 IN URBAN AREAS) MILLION PEOPLE WITH NO ACCESS TO SANITATION SYSTEMS AND 75 WITHOUT POTABLE WATER (26 IN URBAN AREAS) URBAN FLOODS COST MEXICO US$ 150 MILLION/YR, SEVERE IN CENTRAL AND SOUTH AMERICA (eg CHILE THIS MONTH) URBAN FLOODS COST MEXICO US$ 150 MILLION/YR, SEVERE IN CENTRAL AND SOUTH AMERICA (eg CHILE THIS MONTH)

70% OF WATER EXTRACTIONS ARE FOR AGRICULTURE 70% OF WATER EXTRACTIONS ARE FOR AGRICULTURE HYDROPOWER GENERATES 64% OF TOTAL ENERGY HYDROPOWER GENERATES 64% OF TOTAL ENERGY NAVIGATION VERY IMPORTANT (AMAZON RIVER BASIN, RIO DE LA PLATA BASIN). IN 2000, 18 MILLION TONS OF GOODS WERE TRANPORTED IN THE AMAZON BASIN NAVIGATION VERY IMPORTANT (AMAZON RIVER BASIN, RIO DE LA PLATA BASIN). IN 2000, 18 MILLION TONS OF GOODS WERE TRANPORTED IN THE AMAZON BASIN

70% Potential (millions Gwh/yr) Total utilized Percentage utilized 70% % 0.8 North America Europe 33% 1.6 6% % 3.6 South America África Asia HYDROPOWER POTENTIAL

MAIN WATER RESOURCES MANAGEMENT PROBLEMS IN LAC Ù WEAK INSTITUTIONS (UNDERFUNDED, POLITICIZED, ILL-ORGANIZED, UNDERSTAFFED) RESULTING IN DETEORIORATED INFRASTRUCTURE AND LOW EFFICIENCIES Ù WEAK REGULATORY FRAMEWORKS PREFERRED OVER INCENTIVE-BASED APPROACHES Ù LACK OF OR OUTDATED LEGAL FRAMEWORKS AND NO ENFORCEMENT Ù HIGH RATES OF URBANIZATION LEADING TO POOR WATER QUALITY Ù WATER RESOURCES MANAGEMENT ACTIVITIES ARE DIFFUSED AND FRAGMENTED Ù WATER HIGHLY CONCENTRATED IN A FEW AREAS

Social Challenges Economic Challenges Financial Challenges Environmental Challenges Institutional Challenges MAIN CHALLENGES IN LAC Increase coverage rates Improve health conditions natural hazard risk mitigation Economic valuation of water resources Water allocation among competing uses integrated approaches to water management Raise funds for operation and maintenance Financing infrastructure Financing institutional development Reduce and control pollution Integrated approaches to water management Ecosystem approach to water management Water law reforms Institutional innovation including regulation Stakeholder participation

IADBs STRATEGY ON INTEGRATED WATER RESOURCES MANAGEMENT

THE GOALS SUPPORT THE IMPLEMENTATION IN LAC OF: SUPPORT THE IMPLEMENTATION IN LAC OF: PRINCIPLES OF DUBLIN PRINCIPLES OF DUBLIN AGENDA 21 AGENDA 21 THE SAN JOSE DECLARATION THE SAN JOSE DECLARATION BOLIVIA SUMMIT ON SUSTAINABLE DEVELOPMENT BOLIVIA SUMMIT ON SUSTAINABLE DEVELOPMENT

SPECIFIC OBJECTIVES FROM DEVELOPMENT TO MANAGEMENT FROM DEVELOPMENT TO MANAGEMENT FROM SECTORAL TO INTEGRATED APPROACHES IN WATER RESOURCES LEADING TO: FROM SECTORAL TO INTEGRATED APPROACHES IN WATER RESOURCES LEADING TO: MORE EFFICIENT WAYS TO ALLOCATE AND CONSERVE WATER AND TO SOLVE CONFLICTS AMONG COMPETING USES; MORE EFFICIENT WAYS TO ALLOCATE AND CONSERVE WATER AND TO SOLVE CONFLICTS AMONG COMPETING USES; ACCOUNT FOR THE SOCIAL, ECONOMIC AND ENVIRONMENTAL VALUE OF WATER; AND ACCOUNT FOR THE SOCIAL, ECONOMIC AND ENVIRONMENTAL VALUE OF WATER; AND INCREASE PARTICIPATION OF THE PRIVATE SECTOR AND COMMUNITIES INCREASE PARTICIPATION OF THE PRIVATE SECTOR AND COMMUNITIES CHANGE IN PARADIGM:

GUIDING PRINCIPLES PROMOTING COMPREHENSIVE NATIONAL WATER RESOURCE MANAGEMENT POLICIES AND STRATEGIES PROMOTING COMPREHENSIVE NATIONAL WATER RESOURCE MANAGEMENT POLICIES AND STRATEGIES FOCUS ON INSTITUTIONAL INNOVATION AND CAPACITY BUILDING FOCUS ON INSTITUTIONAL INNOVATION AND CAPACITY BUILDING ATTENTION TO BOTH SHORT- AND LONG-TERM EFFORTS FOR BANK ACTION ATTENTION TO BOTH SHORT- AND LONG-TERM EFFORTS FOR BANK ACTION CONFORMING TO BANKS AND COUNTRIES OBJECTIVES AND TO INTERNATIONALLY ACCEPTED PRINCIPLES CONFORMING TO BANKS AND COUNTRIES OBJECTIVES AND TO INTERNATIONALLY ACCEPTED PRINCIPLES INCENTIVES FOR COUNTRY INVOLVEMENT AND FOR INTERNAL BANK COORDINATION; AND INCENTIVES FOR COUNTRY INVOLVEMENT AND FOR INTERNAL BANK COORDINATION; AND COOPERATION AND COORDINATION AMONG INTERNATIONAL FINANCIAL ORGANIZATIONS COOPERATION AND COORDINATION AMONG INTERNATIONAL FINANCIAL ORGANIZATIONS

SITUATIONS TO ENCOURAGE INTEGRATED WATER RESOURCES MANAGEMENT INTEGRATED WATER RESOURCES MANAGEMENT STAKEHOLDER EMPOWERMENT AND PARTICIPATION STAKEHOLDER EMPOWERMENT AND PARTICIPATION PRIVATE SECTOR PARTICIPATION PRIVATE SECTOR PARTICIPATION ENTITY TO COORDINATE TOP-DOWN AND BOTTOM-UP APPROACHES ENTITY TO COORDINATE TOP-DOWN AND BOTTOM-UP APPROACHES MARKET OR OTHER INCENTIVE-ORIENTED MECHANISMS TO ALLOCATE THE RESOURCE MARKET OR OTHER INCENTIVE-ORIENTED MECHANISMS TO ALLOCATE THE RESOURCE ENTITY TO COORDINATE, FACILITATE, AND REGULATE THE PROCESS OF WATER ALLOCATION PLACED OUTSIDE AND ABOVE OF ANY SPECIFIC WATER-USE-SUB-SECTOR ENTITY TO COORDINATE, FACILITATE, AND REGULATE THE PROCESS OF WATER ALLOCATION PLACED OUTSIDE AND ABOVE OF ANY SPECIFIC WATER-USE-SUB-SECTOR

STRATEGIC INSTRUMENTS COST RECOVERY COST RECOVERY PRIVATE SECTOR PARTICIPATION PRIVATE SECTOR PARTICIPATION CAPACITY BUILDING CAPACITY BUILDING STAKEHOLDER PARTICIPATION STAKEHOLDER PARTICIPATION DECENTRALIZATION DECENTRALIZATION TRADABLE WATER RIGHTS TRADABLE WATER RIGHTS RIVER BASIN COUNCILS RIVER BASIN COUNCILS

LEVELS OF ACTION FOR THE BANK CONSTITUTIONAL LEVEL: Establishing laws and policies- a national strategy for integrated water resources management ORGANIZATIONAL LEVEL: River basin management- allocating water flows, assimilative capacity, ecosystem maintenance, capability, potential energy OPERATIONAL LEVEL: Water uses and users-using water resources, subject to operational rules, to meet demands and needs

FINANCING THE STRATEGY

BANK INSTRUMENTS IDB MIF IIC PRI COUNTRY DIALOGUE COUNTRY AND REGIONAL TECHNICAL ASSISTANCE GRANTS TRUST FUNDS SECTOR AND HYBRID LOANS PROJECT SPECIFIC LOANS SMALL PROJECT LOANS COFINANCING COUNTRY AND REGIONAL TECHNICAL ASSISTANCE GRANTS FOR MICROENTERPRISE AND SMALL ENTERPRISE EQUITY FUNDS/INVESTMENTS SMALL BUSINESS VENTURE CAPITAL FUNDS PRIVATE SECTOR LOANS GUARANTEES SUBORDINATED LOANS PRIVATE SECTOR LOANS TO SMALL AND MEDIUM ENTERPRISE EQUITY FUNDS/INVESTMENTS COFINANCING

The IDB-Netherlands - Water Partnership Program INWAP

INWAP´S OBJECTIVE: n The general objective of INWAP is to support the implementation of internationally recognized principles of integrated water resources management (IWRM) in Latin America and the Caribbean. n This objective will be achieved through joint efforts: internally to improve and strengthen the Banks operational capacity in the area of IWRM, and externally to improve such capacity in the Banks borrowing member countries.

INWAP 2004 Work Plan centers around two sets of strategic priorities: n The ones stated on the Bank´s Institutional Strategy n The ones stated on the Bank´s Integrated Water Resources Management Strategy

Priorities stated under the Bank´s Institutional Strategy: The Bank´s two overarching objective are: a) sustainable economic growth, and b) poverty reduction and the promotion of social equity, implemented through four priority actions areas: social development, modernization of the state, competitiveness, and regional integration. Environment is a cross-cutting theme. The Bank´s two overarching objective are: a) sustainable economic growth, and b) poverty reduction and the promotion of social equity, implemented through four priority actions areas: social development, modernization of the state, competitiveness, and regional integration. Environment is a cross-cutting theme.

Priorities stated under the the Bank´s Integrated Water Resources Management Strategy : n The goal of the strategy is:…¨to support water resources conservation through a process of change regarding water resources issues; namely, a shift from development to management and from a sectoral to an integrated approach¨. n The strategy aims to mainstream critical aspects of IWRM related to each countrys water sector in general in the Banks water-related operations.

Strategic Lines of Action for the 2004 Work Plan: Based on the main objectives of the Bank and the principles of the IWRM Strategy, new eligible activities will place emphasis on: Based on the main objectives of the Bank and the principles of the IWRM Strategy, new eligible activities will place emphasis on: n Poverty Reduction and the Promotion of Social Equity n Water Governance

Areas of concentration are: a) support compliance with the Millennium Development Goals (MDGs) in potable water and sanitation and b) provide the methodological tools to assess the impact of water- related activities on the poor. Poverty Reduction and the Promotion of Social Equity Water Governance Areas of concentration are: a) support the formulation of IWRM strategies and plans as set in the Implementation Plan of the World Sustainable Summit and b) strengthen the institutional, legal, and policy frameworks of the Bank's borrowing member countries. Areas of concentration are: a) support the formulation of IWRM strategies and plans as set in the Implementation Plan of the World Sustainable Summit and b) strengthen the institutional, legal, and policy frameworks of the Bank's borrowing member countries.

Strategic Lines of Action for the 2004 Work Plan: Based on the main objectives of the Bank and the principles of the IWRM Strategy, new eligible activities will place emphasis on: Based on the main objectives of the Bank and the principles of the IWRM Strategy, new eligible activities will place emphasis on: n Poverty Reduction and the Promotion of Social Equity n Water Governance

INWAP´s Strategic Activities for 2004

Pipeline of IDB Loans

For there are approx. USD 2.9 billion in the pipeline For there are approx. USD 2.9 billion in the pipeline n USD 1 billion in hydropower (Tocoma in VE, Porce III in CO, two small PRI projects in BR and PN) n USD 250 million in irrigation (BR, ME and JA) n USD 1.5 billion in potable water and sanitation (large loans in ME and BR and smaller loans in variety of countries) n USD 40 million in watershed management (CR, PN and VE)