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Water Economics: Managing Supply vs. Demand

By: Alejandro BaladrĂ³n Julian

Water supplies have experienced unprecedented pressures as growing populations and economies have increased demand and degraded supplies. As a result, water scarcity has become one of the greatest risks facing the world today and a critical indicator of sustainable growth. Droughts are a recurrent problem worldwide, especially in developing countries such as those located in Latin American and the Caribbean region (LAC).

Water resource needs of Latin American countries

Water scarcity is common across many LAC countries and is expected to increase due to climate change. In addition, access to safe drinking water is still limited to more affluent areas in these regions. As urban areas have expanded so have new water and sanitation infrastructure investments. However rural areas have not experienced the same expansion in infrastructure investments, many of which have limited access to safe drinking water. Improving waste water sanitation systems is current challenge in this region. Approximately 80% of waste water in Latin America is not treated leading to the pollution of rivers and coastal areas.

Map shows.. Image courtesy of

Only 20% of waste water in Latin America is treated.
Image courtesy of the IDB.

Solving water related issues in the poorest and most vulnerable areas in Latin America and the Caribbean region needs important investments in research, water use planning, and construction of hydraulic infrastructures. Organizations such as the Inter-American Development Bank play a key role in providing financing and technical assistance to develop projects and strategies in different sectors, including water resource management.

The Inter-American Development Bank and its role in water resource management

Established in 1959, the Inter-American Development Bank (IDB) supports efforts by LAC countries to reduce poverty and inequality by solving problems, including water resource management problems such as water scarcity, waste water pollution, and flood risk. IDB initiatives aim to address emerging challenges sustainable water resource management to meet present and future water demands, while ensuring the long-term sustainability of the quantity and quality of the water.

Lessons from the past indicate that water projects are more likely to improve water resource management when countries possess the adequate water policies, regulatory frameworks, and efficient enforcement agencies. For this reason, it is critical to evaluate the effectiveness of existing top-level organizations, water legislation and policies, and understand relevant governmental features of each country before creating and implementing water programs.

Managing water resources: a shift from individual projects to an integrated approach

In the past, the IDB focus was project-based, sanitation, hydropower, irrigation and drainage, among others, however, what constitutes good water resources management changes over time. Increasing knowledge of hydrologic systems and how they impact on human life highlight the critical need to implement multipurpose water-related projects, which focus on watersheds as the natural evaluation, planning and management unit, rather than just independent projects focusing on a small part of the water cycle.

Multipurpose projects consider natural and anthropogenic processes affecting the availability of water, the water consumption and the quality of receiving waters in any specific watershed. In addition to consider all the hydrological processes occurring inside watersheds, multipurpose projects analyze strengths and weaknesses of hydrologic systems and constitute a case by case evaluation tool providing solutions tailored to the specific needs of each watershed. Multipurpose projects are especially useful to address long-term water management challenges such as how to provide appropriate water sanitation given population growth, guarantee water supply, or the best approach to make watersheds more resilient to climate change and related processes such as flooding and erosion.

Recent water programs in the IDB

Image courtesy of

Image courtesy of the World Bank

The Water and Sanitation Initiative is one of the most recent initiatives aimed to eliminate the coverage gap in water and sanitation services in LACs by emphasizing four programs, 100 Cities Program, Water for 3,000 Rural Communities, Water Defenders and Efficient and Transparent Utilities. Water for 3,000 Rural Communities supports rural communities willing to take responsibility to run their local water and sanitation systems. The program is currently close to reaching its goal of supporting a minimum of 3000 rural communities. Additionally, Water Defenders, designed to provide technical assistance and financing to protect water sources and treat waste water of 20 priority micro-watersheds, has currently surpassed it’s goal and reached 31 micro-watersheds.

Learned lessons related to water management in Latin America and other regions of the world help the IDB and other organizations to create new, more efficient water programs. Focusing on watersheds as the natural planning unit instead of individual water projects is a critical to developing long-term management strategies.

References:

News. World Water Day: Latin America Leads in Water Management but Inequalities in Access Remain. The World Bank, 22 Mar. 2013.
Inter-American Development Bank.
IDB Annual Report: The Year in Review. 2012. Inter-American Development Bank.

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