Effective Water Governance in the Americas: A Key Issue

(*) This document has been prepared for presentation at the Third Water Forum in Kyoto, Japan, 16-23 March,2003.

Effective WaterGovernance in the

Americas:A Key Issue*

Humberto PeñaPresident of the South American TechnicalAdvisory Committee of the Global Water Partnership (SAMTAC)

Miguel SolanesSenior Regional Advisor, ECLACMember of the South American TechnicalAdvisory Committee of the Global Water Partnership

Translation from Spanish into English: Revision of English version:

EFFECTIVE WATER GOVERNANCE IN THE AMERICAS: A KEY ISSUE

Page

I. INTRODUCTION 3

1. Background 32. Theoretical Framework 33. The importance of the issue to Latin America 44. Aims of this report 5

II. WATER GOVERNANCE AND THE SOCIAL,ECONOMIC AND POLITICAL BACKGROUND 5

1. Social, economic and political challenges 52. Issues facing the State and civil society 63. Factors favouring the search for solutions 9

III. GOVERNANCE OF THE WATER SECTOR: KEY ISSUES 10

1. The nature of water resources, their allocation and the role of the state 102. The hierarchical structure and institutional framework of the water sector 113. Economic rationality and social demand 134. The role of the state and the regulation of services associated with water 135. The issue of the appropriate level of government: national, provincial or municipal 166. Public participation 177. The environmental dilemma 188. Protection of the interests of ethnic groups and customary users 199. Conflict resolution 20

IV. THE SEARCH FOR ANSWERS 21

1. The challenge posed by effective water governance: The lack of simple answers 212. The challenge posed by effective water governance: Lessons and general consensus 213. The process of building effective water governance and integrated water

resources management 23

V. ANNEXES 25

1. Description of the Dialogue process in South America 252. Summary of the Dialogue in Argentina 253. Summary of the Dialogue in Brazil 274. Summary of the Dialogue in Colombia 285. Summary of the Dialogue in Chile 306. Summary of the Dialogue in Ecuador 327. Summary of the Dialogue in Peru 338. Summary of the Dialogue in Paraguay 399. Summary of the Dialogue in Uruguay 41

The authors would like to thank Axel Dourojeanni and Andrei Jouravlev for their contributions and previous work, as well as the following per-sons, who all made valuable contributions to this report: Elisa Colon, Inés Restrepo, María Elena Corrales, Lidia Oblitas, Carlos Serrentino, PeterRogers, Alan Hall, Laura Piritz, María Elena Zúñiga, Torkil Jonch Clausen, Mohamed Ait-Kadi, Rinske Warner and Judith Rees, Jerson Kelman,Gisella Damm, and Oscar de Morais Cordeiro,. This report would not have been possible without the inputs of the many participants in the 20workshops on governance organised by the South American Technical Advisory Committee for the Global Water Partnership (SAMTAC). TheAnnexes present in more detail the activities carried out in the individual countries of the region. The report refers to water, whether surface water or groundwater, in all its forms and conditions. The term “institution” is used in the wider sense,to include regulations, organisations and other processes that determine the context in which water should be managed, allocated and protected.

INDEX

c h a rged to the Global Water Partnership (GWP).Preparatory activities for this large-scale dialogue ongovernance included electronic workshops and forumsat various levels in many countries and regions of theworld. The meeting called “The Water Forum for theAmericas in the 21stCentury”, convened bythe Mexican govern-ment, proved to be aparticularly valuablecontribution. This docu-ment is based on theoriginal document pre-sented in Mexico, withsubsequent contribu-tions and comments, especially those from the RegionalWorkshop organised by the South American GlobalWater Partnership, held on 12-13 January, 2003, inBuenos Aires, Argentina. Although this report is basedmainly on the Dialogues and debates held in SouthAmerica, in general it is applicable to the whole of LatinAmerica. In line with this, the text of this report makesno distinction between the terms “South America” and“Latin America”, and will use Latin America in the gene-ric sense throughout.

2. Theoretical Framework

The concept of governance as applied to waterrefers to the capacity of a country to coherently organi-se the sustainable development of water resources. Thisdefinition encompasses both the capacity to designsocially acceptable public policy that fosters the sustai-nable development of water resources and to implementthem effectively through the relevant institutions.

The degree of governance within a society in rela-tion to water management is determined, among otherfactors, by the following:

• The degree of implicit or explicit consensus regardingthe nature of the linkages between society and water.

• The existence of consensus regarding the bases forpublic policies that expresses these linkages.

• The availability of management systems that enableeffective policy implementation and monitoring wit-hin a framework of sustainable development.

Thus, governance implies the capacity to bothgenerate and implement appropriate policies. Thesecapacities are the result of having established consen-sus, having devised coherent management systems(regimes based on institutions, laws, cultural factors,knowledge and practices), as well as adequate adminis-

1. Background

In the Framework for Action presented at theSecond Global Water Forum (The Hague, 2000) - theaim of which was to provide water security for humandevelopment at the outset of the 21st century - it wasstated that “the water crisis is often a crisis of governan-ce”, thereby identifying the need to place efficient watergovernance among the principal priorities for action(GWP, 2000).

The Ministerial declaration made at the sameevent highlighted this point of view, and demanded:“that water should be wisely governed to ensure effi-cient governance, so that public participation and theinterests of all stakeholders be included in the manage-ment of water resources”.

At the United Nations Millennium Assembly(2000), the Heads of State stressed the importance ofwater conservation and management, both for environ-mental protection and, in particular, “to stop the unsus-tainable exploitation of water resources, by developingwater management strategies at the regional, nationaland local level, which provide both equable access andadequate supplies”.

Finally, at the Fresh Water Conference in Bonn(2001), the ministers recommended taking action regar-ding water governance. Their proposal was that “Eachcountry should have in place applicable arrangementsfor governance of water affairs at all levels and, whereappointed, accelerate water sector reforms”.

The Third Global Water Forum, planned forMarch 2003 in Japan, and its Ministerial Conference,will not only review progress in the implementation ofagreements made at previous international meetings,but will also give significant attention in its discussionsto the capacity for effective governance of water resour-ces, in order to achieve a greater commitment to attai-ning tangible results from governments and the commu-nity.

Consequently, one of the main topics of the ThirdGlobal Water Forum will be the “Dialogue on EffectiveWater Governance”, the organisation of which was


I. INTRODUCTION

Water crisis is often agovernance crisis


tration of the systems (based on social participation andacceptance), and capacity building.

As can be seen, a core element of governance isthe capacity of constructing (that is, introducing anddeveloping) institutional arrangements in harmony withthe nature of the abilities, limitations and expectationsof the system or area under consideration.

The importance of the term “governance” in theregion is currently associated, to a large extent, withboth the limitations and the possibilities of societies inimplementing the profound institutional changes thathave been characteristic of the past decade. These chan-ges have often implied the creation of a new institutio-nal structure, which has meant the design and recogni-tion of new ground rules, the creation of organisationsand the development of new forms of relationships, bothformal and informal, of public and private participants.Any process of reforming a social order is the result ofthe radical transformation and dismantling of the pre-vious social order. In fact, what may lie at the heart ofthe problems or the crisis in governance in many LatinAmerican countries is the incompatibility of previousinstitutional arrangements with the new ones. The crisiswill be more acute and extensive according to the scaleof the changes undertaken, the pre-existing skills andcapacities and their usefulness in dealing with the cha-llenges posed by the transformation, and, in particular,according to the coherence of the new institutionalarrangements vis à vis the structure and nature of thesociety and the possibilities and restrictions in place foreffectively dealing with the proposed new ground rules.1

From a pro-active perspective, the crisis can be regardedas a process in which there will always be gaps to befilled and contradictions to be resolved.2 It is also neces-sary to bear in mind that, although the situation in theregion has improved compared with the past, there isstill a long way to go, as governance is not a predefinedsolution, but a process that needs continuous refinementas a function of new challenges and problems. Evenwhen there are general guidelines, there are no setmodels, and issues are resolved as they arise; conse-quently flexibility and adjustments to time and place areof great importance.3

Governance is influenced by globalization and by eachcountry’s national situation, the lack of adjustment oflegal systems and institutions, and the existence of spe-cial legal situations, as well as by pressures from interestgroups.

1 Corrales, Maria Elena, “Gobernabilidad de los Servicios de AguaPotable y Saneamiento en América Latina”, April 2002, SAMTAC-GWP. Caracas, Venezuela, pp. 4, 6, 7.

2 Comments made by the Brazilian delegation at the SAMTAC mee-ting held in Buenos Aires, 22-24 January, 2003.

3 Comments made by the Brazilian delegation at the SAMTAC mee-ting held in Buenos Aires, 22-24 January, 2003.

3. The importance of the issue to Latin America

The very limitations of governance make it a sub-ject worthy of study.4 The growing awareness within theregion of concerns such as the unsustainable use ofwater, its scarcity, pollution, monopoly control and thelack of access to water-related services of significantsectors of the population, all illustrate the relevance ofthe issue.

The importance of water governance in LatinAmerica is clearly reflected in the series of experiences,proposals for and processes of reform of water legisla-tion and management in most of the countries in theregion, as well as in the current programs and proposalsfor reforming water-related services, particularly urbanwater and sanitation utilities. In some cases these pro-grams and proposals have been developed locally, withsignificant local input, while in other cases they havebeen proposed by external agencies.

Some countries have implemented significantreforms. For example, Brazil has adopted a new waterlegislation and a national water management policy;Chile has reformed its water law and water and sanita-tion sector; Argentina has privatised both the hydroelec-tric sector and the water and sanitation utilities in seve-ral cities; Colombia and Bolivia have also privatisedsome water and sanitation services, and Mexicorecently reformed its water legislation and also privati-sed some water-related services. In addition, a numberof countries, including Bolivia, Paraguay, Peru, Ecuador,El Salvador, Honduras, Venezuela, Guatemala, CostaRica and Chile, are currently discussing modifying orreforming their water legislation.

The specific content of these procedures has beendetermined by various perceptions of the problem, ran-ging from those that emphasise a limited number of cri-teria, which are not necessarily related to the nature ofthe question at hand (tending to emphasise private pro-perty rights, minimising the character of water as apublic good) to those that assume conditions of perfectcompetition, which in practice do not exist (as is some-times the case with some public utility regulators). Insome cases these restricted or very optimistic visions ofwater management have resulted in the monopoly con-trol of water resources and in inadequate regulatory fra-meworks.

The issues outlined above illustrate both the sig-nificance of the concept of governance per se, as well asits importance as a topic for discussion at the JapanForum. Essentially, if governance is to be understood asthe capacity to address concrete problems in the region,then it is clearly relevant to emphasise it at the World

4 Olson, M. “Auge y Decadencia de las Naciones (Rise and Fall ofNations)”, Barcelona, Ariel 1986.


Water Forum in Japan,5 given that the challenges pre-sented by water management and the accessible provi-sion of services to the population are not being met.

4. Aims of this report

This report has been prepared for presentation atthe Third World Water Forum, to be held in Japan, 16-23 March, 2003. The objectives of the report are:

• to indicate, in an overall framework, those aspects ofgovernance that are particularly relevant in the con-text of Latin American countries;

• to compile the proposals put forward in the variousnational dialogues that were held in preparation forthe Third World Water Forum.

In line with the above, the aim of this report is tostimulate an active debate and to generate questionsand suggestions from the Latin American perspective

that may provide avaluable contribu-tion to the goals ofthe Third Wo r l dWater Forum.Chapter II describesand analyses thegeneral context ofthe water governan-

ce debate in the region. Chapter III identifies and analy-ses eight topics that, from the available evidence, appe-ar to be critical for water resources governance. Finally,Chapter IV considers strategies and positive action forovercoming the identified limitations.

5 Corrales, Maria Elena, op.cit, pp. 4, 6, 7.

Globalization andcountries nationalcontext are factorsthat influencegovernance

Water management problems, both in respect tothe resource itself and to water related services, neitheroriginate nor can be solved within the confines of waterresources alone. For this reason, water resource gover-nance cannot be either analysed or understood outsideof a general frame of reference to governance and itsrelated problems in the global society. A lack of aware-ness of this reality, coupled with an ignorance, on occa-sion deliberate, of contextual differences, can result inthe proposal of greatly over-simplified, uniform, andgeneralised solutions that are1 simplistic, or ideological,and eventually counterproductive. The following sec-tion briefly outlines some of the characteristics of thesocial, economic and political processes within theregion and the challenges facing the State and civilsociety in their efforts to construct effective governance.

1. Social, economic and political challenges

Latin America is characterised as belonging to thedeveloping regions of the world. The per capita incomeranges from U$700 to U$7,000,2 and a large proportionof its population lives below the poverty line (211million inhabitants, equivalent to 43.8% in 1999),3 inpoor health (infant mortality rate of 36 per thousand livebirths),4 and housing conditions (a housing deficit of 20million units),5 and is poorly educated (illiteracy rate of11.1%).6 With regard to human development, most Latin

I I . WATER GOVERNANCEAND THE SOCIAL,ECONOMIC ANDP O L I T I C A LB A C K G R O U N D

1 A r b o r, Xavier and Giner, Salvador: “La Gobernabilidad:Ciudadanía y Democracia en la Encrucijada Mundial” SigloVeintiuno de España Editores, S.A.” 1996, Madrid, p. 2.

2 ECLAC, Division of Statistics and Economic Forecasts, NationalAccounts, Gross Domestic Product per inhabitant at constant mar-ket prices.

3 ECLAC, Social Panorama 2000-2001.

3 ECLAC, Population Division, Demographic Bulletin No 67.

5 ECLAC, Census Data, Environment and Development Series, JoanMacDonald, Daniela Simioni; “Urban Consensus”.

6 UNESCO, Statistical Yearbook, 2002 forecast.


American countries are ranked between 34 and 108 inthe Human Development Index, only Arg e n t i n a ,Uruguay, Chile and Costa Rica are classified as havinghigh levels of human development.7 Furthermore, LatinAmerica is the region with the highest level of socialinequality in the world, according to World Bank statis-tics.8

Latin America’s political history, with the exception ofcertain periods, has also frequently suffered long periodsof instability and interruptions in the processes of demo-cratic development that reflect an endemic incapacity tomeet the social needs of the population.

The last few decades have been marked by pro-found changes. The 1980s was in general a period ofmarked stagnation, “the lost decade”, characterised byinstability, a debt crisis reaching the equivalent of 378%of total exports and 66% of the regional Gross DomesticProduct, and serious macroeconomic imbalances (fiscaldeficit reaching 10% of GDP in the second half of thedecade).

In the first half of the 1990s, Latin America ente-red into a period of growth and recovery: between 1990and 1996, GDP grew at an average annual rate of3.2%,9 inflation was curbed, exports and investmentsincreased, and the level of debt decreased. The regionexperienced some degree of democratic consolidation.However, the second half of the decade has again beencharacterised by stagnation, with GDP growing at anaverage rate of 2.0% per annum10 for the period 1996 to2001. It has also been strongly affected by instabilityand the crises in international trade (in Asia, Mexico,Brazil and Argentina), compounded by political instabi-lity, and lack of confidence in the existing developmentmodel.

Since the 1980s, the role of the State and thegovernance of society have been vigorously debated inthe region. Most countries have undertaken significant

7 UNDP; Human Development Report 2001

8 Trends in Income Distribution, Social Panorama in Latin America2000-2001; ECLAC; “Income distribution in Latin America standsout internationally especially because of the disproportionateamount of the total income that the 10% of the richer householdsmanages to amass. Except for Costa Rica and Uruguay, this stratareceives over 30% of the income, and in most of them the per-centage is more than 35%”.

9 ECLAC: GDP, based on 1995 dollars

10 Ibid.

reforms designed to reduce the role of the State in entre-preneurial activities and in the provision of services,which, in some cases, have been accompanied by pri-vatisation and the liberalisation of markets and trade.The political and social instability resulting from recenteconomic crises in the region has led to strong questio-ning of the economic reforms implemented, especiallyof the ability of the State to create and regulate marketsin defence of the public interest. The outcome remainsuncertain, and some perspectives suggest that a varietyof responses will be required.

2. Issues facing the State and civil society

Studies carried out on the public perception ofgovernment institutions often show that these have analarmingly low level of credibility. Various factors haveinfluenced this, which are not always attributable to theinstitutions themselves. However, these include the fai-lure of the institutions themselves to solve the more cri-tical problems that afflict society, either due to the limi-tations of the environment in which they operate, or asa result of a lack of resources, authority, or access topolitical power. Other factors that influence credibilityare ideological prejudices and opinions about the roleof the State and its regulation of the private sector, weak-nesses of the institutions of civil society, the perceivedco-option of institutions by specific interest groups, andproblems arising from increasing globalization.

a) The inefficiency of public administration

A fundamental reason for the loss of credibility bypublic institutions is their incapacity to meet the basicneeds of the population in terms of public services. Inmany cases these deficiencies are the result of: (i) out-dated and inefficient management practices; (ii) politicalintervention - understood as the intervention of publicfigures in management, operational or economic deci-sions for short-term or opportunistic political ends; and(iii) the lack of financial and human resources, or a weakinstitutional structure (lack of clear roles and power rela-tionships, the absence of effective conflict-solvingmechanisms, among other factors).

Thus, organisations responsible for managingwater resources often do not have any accounting oradministrative capacity, a problem that frequently beco-mes worse at the local level as a result of decentralisa-tion processes implemented without an adequate analy-sis of existing capabilities. In some Latin Americancountries, this had led to institutional arrangements inthe water sector that are not in tune with the significan-ce of water allocation and the monitoring of water-rela-


ted public services. To a large extent this is the result ofprejudice in respect of the role of the State, a prejudicethat has negatively affected public institutions at the glo-bal scale (one only needs to think of the accountingpractices applied to large companies that have led totheir collapse).

b) The weak regulatory role of the state

The management of a public good, such as water,as both a resource and a service, is problematic and pre-carious when regulatory institutions do not adapt to thenature of the thing they are regulating. In this respect,the procedures for institutional change in Latin Americahave often neglected the fact that markets need laws andstructures to function properly, and that the state is themost appropriate regulator. Markets do not function pro-perly without free flows of information, competition,and control of externalities. Liberal Utopias do not leadto prosperity. Markets are human institutions and aretherefore imperfect; they are “too important to be left toideology”.11 According to Stiglitz, in this scheme theState in general was seen as incorrigibly corrupt.12 Insome cases, the result of this distorted vision has beenthat administrative structures for water management andthe regulation of water services have been deliberatelydesigned with ex profeso limitations on State power, orwith proposed policies that lead to a distortion of theirinformation bases.13

c) The weakness of civil society

In developed countries with strong corporate

11 Barry Gewen, reviewing the book by Stanford’s UniversityProfessor, John McMillan “Reinventing the Bazaar, A NaturalHistory of Markets”, New York Times, Book Review, June 16th,2002.

12 Interview with Joseph E. Stiglitz, John Lloyd, “The RussianDevolution”, The New York Times Magazine, August 15th, 1999.Mr Stiglitz is a Nobel Prize winner, President of the Committee ofEconomic Advisors under President Bill Clinton and ex chief eco-nomist at the World Bank.

13 Sappington David, 1986, “Comments to Regulatory Bureaucracy”,Information Economics and Policy 2 (4): 243-58, according to aquotation in Comment on “Regulation, Institutions andCommitment in Telecommunications” by Levy and Spiller, DavidSappington, “Proceedings of the World Bank Annual Conferenceon Development Economics”, 1993, p. 256. “it may be in the inte-rest of the recipient country to make as difficult as possible themeasurement of profits due to investments ... the less visible inves-tors can make their investments, the less the receiving country willbe inclined to usurp these profits ... Accounting systems can bespecially designed for these effects or vertical integration of theregulated company can be encouraged in order that creative pricetransferences may be used for measuring profits in the relevantindustry. These are surprising opinions considering that the impor-tance of appropriate information led to Joseph Stiglitz winning theNobel prize. He develops these ideas further in his book“Globalization and its Discontents”. Regarding Stiglitz and hisrole, see Campodónico, Humberto, “Los Economistas y el Poderdel Banco Mundial” no publisher.

structures representing various interest groups (such asindustrial associations, public and user organisations,trade unions, and environmental pressure groups), witha high degree of pluralism, with a relatively even balan-ce of power among them, with effective back-up struc-tures, and with well-structured legal and education sys-tems, consensus and self-regulation are tools that areincreasingly used with the consequent reduction of tran-saction costs. However, this system, when transferred tosocieties in which there is both an imbalance of powerand inequality of access among the various groups,leads to the group with the greater capacity of de factopolitical leverage managing to manipulate the politicalsystem for benefits that are not necessarily in the com-mon interest. In thiscontext, reference tocivil society losespart of its raison d’ê-tre, because the defacto principles onwhich it functionsare absent.

This asym-metry may lead tooutcomes such as: unjustified allocation of water rights;ignoring the water uses of indigenous groups; supportfor projects with an overall negative economic impact,but which yield benefits to one particular sector; regula-tory regimes that fail to induce efficiency in the provi-sion of water-related services, to mention only the mostnotorious examples.

This need for balance in water management hasbeen a subject of fundamental importance, becauseimbalances between environmental variables, econo-mic sustainability and the socio-political dimension,lead to a crisis in governance.14

In addition, the weak presence of civil society often canbe exploited by small but active groups, unrepresentati-ve of society as a whole, that are unable to generatecomprehensive visions of current problems, often there-fore only managing to reproduce ideas out of context,ideas which originated within very different realities.

d) Co-option and corruption

Associated with the situation discussed above, onoccasion, the public perception of the capturing of thestate apparatus by a particular group of users contribu-tes to the view that the apparatus itself is to the detri-ment of the community as a whole.

14 Corrales, Maria Elena, intervention in the Electronic Forum onEffective Water Governance, in Spanish Global Water Partnership,June 24/26, 2002, p.9.

Small groups arenot in the conditionto providecomprehensivevisions of existingproblems


Also notable is the co-option of regulatory bodies,which, combined with poor regulatory design and alack of operational capacities and resources, erodes ins-titutional credibility. For instance, in the privatisation ofwater and sanitation utilities in Buenos Aires, the lack ofinformation and transparency in regulatory decisions,together with ad hoc interventions by the State, made itdifficult to reassure consumers that their assets werebeing protected and that concessions are sustainable.15

The regulatory model has been weak and inefficient.The co-option of the regulator, and perhaps also thegovernment, has been mentioned as one of the mainreasons for problems with the governance of the con-cession.16

Furthermore, frequent mention has been made ofserious corruption problems in the region. Recentreports show that, based on a world corruption percep-tion index (CPI), on a scale from 1 to 10 (the higher thescore, the lower the level of perceived corruption), only2 countries, Chile (7.5) and Uruguay (5.1) score over 5,while Costa Rica scores 4.5.17

e) The emergence of new issues

Over the last few decades, the State has had topay particular attention to topics that previously wereoften given only marginal attention. This is the casewhere there are profound ethnic and cultural differenceswithin the countries of the region and where importan-ce has been given to environmental issues. Growingawareness of these issues at both the global and natio-nal levels has led to various modifications being intro-duced to both legal and institutional frameworks insome countries, but, although meaning improvementsin the significance given to these questions over pre-vious conditions, they have frequently failed to live upto expectations. Thus, both issues are increasingly visi-ble on the political agenda and sometimes lead toserious differences of opinion.

f) Problems associated with globalization

A subject relevant to the governance of waterresources and related services is the effect that interna-tional trade and investment agreements may have onnational capacities to manage resources and to regulateservices. Few have paid attention to the fact that theseagreements - which override other laws - may affect the

15 Alcazar, Lorena, et.al. “The Buenos Aires Concession”, The WorldBank Development Research Group, Regulation and CompetitionPolicy, April 2000, Policy Research Working Paper 2311, FrontCover.

16 Rogers Peter, “Water Governance”, Fortaleza Draft, prepared forthe Interamerican Development Bank (IDB), February 4th, 2002,p.4.

17 Transparency International (TI) Report, August 2002 based onassessments by institutions and analysts from 102 countries.

roles and functions of local governments, as nationalagreements will prevail over local authority.

As a consequence of globalization, many servicesare provided and water rights held by companies withinforeign investment protection systems or special conflictresolution regimes, which means that external jurisdic-tions can intervene in local matters. The effects of thissituation have yet to be fully analysed. Furthermore, itcan also subject activities and resources to legal regula-tions that are not within the field of expertise of localmanagers or regulators of the resources or servicesinvolved and they are often unaware of these and oftheir implications. Examples of such regimes includeforeign investment protection treaties, common throug-hout the region, or the regulations that may eventuallybe implemented via the Free Trade Association of theAmericas (ALCA), many of which would be based onNAFTA (The North American Free Trade Agreement).However, many analyses of NAFTA, undertaken outsideLatin America, have been critical of the treaty.18

In this context, States have lost authority to regu-late private companies in the public interest.19 A numberof companies engaged in public services in Argentina,including Aguas Argentinas20, are suing the Argentinegovernment in various courts (in France, CIADI-WorldBank) in order to demand tariff increases as a conse-quence of the devaluation of the Argentine peso.21 Alsoin Argentina, the International Monetary Fund and theGroup of Seven have pressured the government for anincrease in tariffs, in spite of the probable social andinflationary impacts this would have.22 Stiglitz has coi-ned the phrase “World Government without a WorldState” to refer to the current phenomenon of institutio-nal decisions being made outside the countries that areaffected by them.23

18 “Nafta’s powerful little secret” by Anthony DePalma published inThe New York Times March 11th, 2001.

19 Suggestions arising from “Private Rights, Public Problems: A Guideto NAFTA’s Controversial Chapter on Investor ’s Rights”.International Institute for Sustainable Development - Governmentsof Canada and Manitoba, Canada, 2001.

20 The private concessionaire (parent company Ondeo) operating thewater and sanitation services in a large part of Buenos Aires.

21 Clarín, Buenos Aires, 29 June, 2002.

22 Clarín, June 22, 2002. Some authors note that international eco-nomic institutions have been captured by the commercial andfinancial interests of the richest countries Stiglitz Joseph,“Globalization and its Discontents” Ed. Santillana, España 2002, p.44 (Spanish edition).

23 Stiglitz, op. cit supra, 47.


This has weake-ned the role of theState, and as yet nouniversally acceptedmechanism has beendevised for dealingwith this erosion ofp o w e r. There is,however, the growing

notion that the arbitration mechanisms so popular todayare not particularly suited to dealing with matters per-taining to the public interest.24 According to Stiglitz, theway in which some international institutions workadversely affects democracy, as they dictate policybased on very restricted terms to governments.

3. Factors favouring the search for solutions

Faced with the scenario of difficult social andeconomic conditions outlined above, of the high levelof political instability prevailing in most countries andthe problems facing the State and civil society, it must beconsidered whether it is feasible to effectively addressthe problem of water governance in the region.

In this regard, it is important to remember that,historically speaking, when societies have had to facemajor challenges in water management, they have beenable to create effective governance systems, arising fromthe need to control water both for protection and foruse, both nationally and locally. Ancient China andEgypt are notable cases. More recent examples includethe development of the American West, the creation oflocal authorities in the Netherlands and of the riverbasin institutions in Spain.

In the Americas, the need for water management- particularly in arid areas under irrigation - has alreadyled to the creation of management bodies and the con-solidation of user organisations, which have assumedsome of the services associated with effective watergovernance. The cases of user cooperatives in countrieslike Ecuador and Argentina are also well known.

Their existence seems to indicate that the watersector has the potential, derived from its own need formanagement and the vital nature of its services, of gene-rating its own system of governance, even within con-

As a consequenceof globalization,many companiesprovide servicesand hold rights

24 Speech by Daniel Magraw, Centre for International EnvironmentalLaw, Johannesburg, September 3, 2002 and New York Times,op.cit. 24/

texts of severe general governance problems.

It is also important to consider the followingpoints:

• The last decade has seen a growing awareness inpublic opinion in the region, as reflected in the manydeclarations made both nationally and internationally,regarding the importance of water for future humandevelopment. This awareness has been influencedboth by the dissemination into the public domain ofthe conclusions reached at the various internationalconferences and other events, as well as the growingnumber of conflicts over water resources of which thepublic is aware. Such a situation did not exist 10 yearsago, as can be seen by comparing the results of thefirst Earth Summit held in Rio de Janeiro in 1992 withthose of the second held in Johannesburg in 2002.

• A second element contributing positively to the effortsaimed at improving water governance is the growingconviction of the need for a reform of the State, resul-ting from greater demands from citizens as beneficia-ries of state actions and users of public services.

• Finally, it must be mentioned that water management,because of its undeniably social character and closelink to the fulfilment of basic needs, is also an appro-priate means for strengthening social structures fromthe bottom up and often, in the medium or long term,can be a catalyst for cooperation, transcending ideo-logical conflicts that make problem-solving difficult inother areas of society.


1. The nature of water resources, their allocationand the role of the state

In Latin America, the issue of the nature of waterrights, the factors that affect them, and the creation ofwater markets has led to significant controversy, whichin turn has affected the governance of the water sector.The most significant issues are presented in more detailbelow:

a) The nature of water and property rights: water rights

Water is no ordinary good. Water resourc e sembody particular characteristics related to their multi-ple environmental, economic, and social functions.These include, among others, characteristics of a publicgood together with productive functions, in which it iscommon to find significant externalities at the riverbasin level: incomplete information and uncertainty;social and environmental inequities and injustices; aswell as imperfect markets and vulnerability to monopolycontrol.1

These characteristics have produced systems ofwater rights that strive to achieve a balance between thedifferent demands and requirements arising from themany environmental values, and the unique physical,chemical and biological attributes of water resources.For this reason, every country in the world delegates atleast some functions of water management to the State.Water is in the public domain, the State researches andsurveys water resources and takes an active role in waterallocation and the monitoring of its use.

III. GOVERNANCE OFTHE WATER SECTOR:KEY ISSUES

1 See; Bonnie Colby-Saliba and David Bush, “Water Markets inTheory and Practice: Market Transfers, Water Values and PublicPolicy”, Studies in Water Policy and Management (No 12,Westview Press, Boulder, 1987).

While in most countries water is in the publicdomain, water use rights granted to private individualsor corporations are protected under constitutionallyguarantee as property rights, since a system of stablewater rights is an incentive to investment in the deve-lopment and conservation of water resourc e s .Furthermore, the stability and security of water rightsand the uses arising from them acknowledge the pre-sence of existing economic activities and prevent socialconflict.2 The actual form that this balancing act betwe-en the public domain and the necessary security ofwater rights takes may become an element that affectsthe effective governance of the sector.

b) Conditions in the granting of water rights

The importance of water rights as private property is lin-ked to the availability of the resource: the scarcer theresource, the greater its value. Therefore the majority ofwater laws contain provisions that require water rightsto be used effectively in their creation, generation,maintenance or preservation.

The rationale behind this principle has been definedwith precision and clarity by the authorities, judges andlegislation of the United States of America. A typicaldeclaration of the regulations relating to beneficial useis: “beneficial use is the basis, the measure and the limi-tation of all water rights in this state ... consistent withthe public interest in optimum water use”.3 A commonconcept was that water rights should only be givenaccording to the amount of water needed, as the mainconcern was the possibility of “awarding an absolutemonopoly to just one individual”.4

The way in which these conditions are incorpora-ted has far-reaching consequences for the effectivegovernance of water resources. In fact, there are nume-rous examples in the economic literature5 of monopoli-sation through the creation of entry barriers resultingfrom the control of essential production inputs and natu-ral resources. The existence of water markets does notimprove the situation, as, in fact, “crucial inputs of thistype are not usually traded in competitive markets”.6

2 Syllabus and Opinions (United States Supreme Court 1984, No80); “La Pampa vs. Mendoza” (Argentinean Supreme Court 1987,L-195-XVIII); Francoise Conac “Land and Water Rights Issues inIrrigated Schemes in Sub-Saharan Africa: Conflicts to be Avoided”,DVWK Bulletin (No. 16, Paul Parcy Verlag, Hamburg, Berlin,1989); Beck (Vol. 1, 1991) 366.

3 Beck, Robert E. Ed. Water and Water Rights. Vols. 1-3.Charlottesville: The Michie Company, 1991. (Vol. 2, 1991) 106.

4 Ibid., 107-108.

5 Lawrence Anthony, Sullivan, Antitrust (St. Paul, West PublishingCo., 1977) 25, 31, 77.

6 Mark Armstrong et al, Regulatory Reform: Economic Analysis andBritish Experience (Boston, MIT Press, 1994) 117; and Oman ‘90.


Furthermore, for large-scale institutional waterusers, the incentives for selling water rights, where thereis no penalty of expiry due to non-use, are minimalcompared with the strategic advantage of controlling akey production input in the context of free market powerpolicies in corporate practice.

The Chilean experience of the emission of uncon-ditioned water rights appears to support the underlyingrationale of effective and beneficial use requirements, asit has produced negative effects on both water marketsand efficient water allocation.7 It is interesting to notethat, since August 1998, legal and administrative autho-rities at different levels have made various decisions onthese characteristics of the Chilean water rights system.In these decisions, the Constitutional Court has ack-nowledged the State’s right to regulate the conditionsthat apply to the granting of water rights (Rol 60/1997),and the Anti-Monopoly Commission has recommendedthat no further water rights be allocated within thehydroelectric sector until the water law has been modi-fied to include provisions that guarantee effective wateruse (CPC 992/636; CR 480/97).

c) Water markets

If water allocation is important, even more funda-mental is re-allocation as resources become scarcer inrelation to demand. As the source becomes depleted,the original allocation can only be modified by transfe-rring rights to other users or uses. In order to satisfyincreasing demands, countries have to decide whetherto use administrative mechanisms or water markets toachieve water re-allocation.

The choice between these alternatives has beenthe cause of numerous debates in the region. While ack-nowledging the importance of appropriate water mana-gement, the debate reflects, on the one hand, the poorperformance of a conventional response (administrativere-allocation) and, on the other, the difficulty of imple-menting a different alternative (water markets), which,on occasion, produces a profound contradiction to tra-ditional practices and ideas.

7 See Carl Bauer, Against the Current: Privatization, Markets, and theState in Water Rights, Chile, 1979-1993 (Berkeley, 1995) p.2:“Private bargaining and exchange cannot coordinate overlappingresources without continued State intervention, through the courts,if not through other political organs”; p. 57: “These features [of thelaw] stimulate speculation...they have been favoured [by suppor-ters of the law] saying that speculation improves market operationsand price signals...they deny criticisms that speculation might dis-tort prices through unequal bargaining power or monopoly control...”; p.171: “The government virtually guaranteed the under-valua-tion of water rights [resulting in relatively few transactions] whenit privatized them without imposing any taxes, fees, or other obli-gations to the public interest”.

It is beyond the scope of this report to enter into adetailed discussion of this issue; nevertheless, it isimportant to comment briefly on how water markets arecreated:

• It is necessary to have an institutional and legal systemthat is compatible with a market economy (guarante-ed rights, infrastructure, transferability of rights, regis-ters of rights, etc.) as well as with the nature of thewater resource. The economic and cultural contextmust also be appropriate for the development of amarket economy.

• The sustainable and efficient functioning of watermarkets depends on the institutional framework esta-blished by the State. Important lessons can be learnedfrom the regulations applied in the western UnitedStates, where markets arose spontaneously at first andthen were adjusted on the basis of experience. A mar-ket without regulations to guarantee sustainable watersupply, protection against impacts on third parties andthe environment, and to prevent monopoly control, isa mechanism that leads to uncontested appropriationrather than an instrument of government.

• Experience has shown that the following rules areimportant for the adequate functioning of a watermarket: a) water must be put to beneficial use andcontinue to be used beneficially after re-allocation; b)re-allocation should not affect other users and must bein the public interest; c) in many jurisdictions, thetransfer of water from one river basin to another, or tooutside the source area, can only occur with due con-sideration of local interests.8

It is important to point out that there are countriesin which the water management system is consideredinsufficiently mature for the implementation of watermarkets. In these cases, emphasis has been placed ins-tead on the implementation and improvement of appro-priate systems for the allocation of rights.9

2. The hierarchical relationship and the institutio-nal structure

The institutional structure for water resourc epolicy-making, its allocation, management and monito-ring, plays an important role in the implementation of

8 Ibid.

9 According to comments by the Brazilian delegation in Samtac,Buenos Aires Meeting, January 22-24, 2003.


sustainable water resource development and, in general,in the effective governance of the sector. The strategiesadopted by Latin American countries differ widely, as dothe results achieved.

If these functions are conferred upon institutionswith functional responsibilities for specific uses or spe-cific economic activities, water planning and manage-ment is unlikely to be objective. In such cases, eachinterest group will tend towards supporting water pro-jects or allocations according to their functional inte-rests without considering the source of supply, the secu-rity of the investment or the economic basis of the pro-ject. On the other hand, the technical specifications and

the environmen-tal and socialfunctions ofwater make itinappropriate toplace waterm a n a g e m e n twithin the remitof purely econo-mic ministries oreven environ-

mental ministries or institutions, as in either case there isthe risk of overlooking relevant considerations.

In order to avoid such problems, many jurisdic-tions assign responsibilities for policy formulation, waterallocation, and program and project evaluation to aministry or agency that does not have responsibilities forthe use of the resource. In Latin America, when wateradministration has been separated from sector minis-tries, this has often been a matter of dispute within thegovernment itself. The most frequent solution to thisissue has been linking water management to environ-ment and ministries of natural resources or publicworks.

The most interesting experiences in the regionover the last few decades have been in Mexico, wherewater resources are managed by the National WaterCommission (Comisión Nacional de Aguas); and inBrazil, which recently set up the National Water Agency(Agência Nacional de Aguas) with the principal objecti -ve of overcoming traditional conflicts and limitationsimposed by a system in which, until now, water hadbeen under the charge of functional ministries. Otherexamples of non-user organizations, or at least of thosethat are not linked to specific water sectors, are theMinistries of Natural Resources in Colombia andVenezuela, and the Water Directorate (DirecciónGeneral de Aguas) in Chile.

In a recent World Bank publication the need toseparate water’s policy-making, planning, and regula-tion functions from operational functions at every levelof government is also underlined. Thus, the Bank agreeswith the US National Water Board which, back in 1972,

The most interestingexperiences in theregion in the lastdecades have beenthose of Mexico, Brazil,Colombia and Chile

recommended that “policy planning and sector plan-ning ought to be separated from functional, design andconstruction planning and operation on behalf of exe-cuting agencies”.10 This functional separation is fairlyuncommon in Latin America, yet its application in prac-tice has proved successful. One case has been Chile,which since 1969 has maintained a clear differentiationbetween these different roles of the State in water mana-gement. This has enabled it to prevent distortions in theregulatory function while generating clear indications tothe different agents - in both the public and the privatesectors - regarding the relative scarcity of the waterresource.

Other important characteristics that are conside-red essential for a water authority, if it is to provide ade-quate governance to the sector, are that the authorityshould have a sufficiently high position within thegovernment hierarchy for it to be able to consolidate themultiple responsibilities related to water management,that it enjoy real administrative capacity, and that it beeffectively autonomous.

Another relevant consideration is that, given thetechnical complexity of water issues, a number of coun-tries respect the administrative criterion that issues thatrequire specific professional knowledge: “...finding offact must be determined in the first instance by the offi-cers charged with the administration of the stream.....The finding of fact thus made is final unless it appearsthat it was unreasonable or arbitrarily made.”11

However, some countries, such as Chile, havedecided to limit the administrative role of the State inwater management. It is argued that, as a result, manywater conflicts have ended up in the higher law courts,whose rulings have been quite erratic, precisely due totheir lack of the specific technical knowledge.12 At leastone document suggests that the administrative jurisdic-tion in Chile should have greater powers, akin to thosein Mendoza, Argentina.13 In California, it has been sug-gested that the increased effectiveness and neutrality ofthe supervising institutions is one of the conditions thatleads to the formation of water markets.14

1 0 Water Resources Management (The World Bank, Washington,D.C., 1993) 45; also seePB-211921 Water Resources Planning(National Water Commission, Springfield, June 1972) 46.

11 Supreme Court of Nebraska, “Water Law, Resource Use andEnvironmental Protection” as cited by Frank Trelease (We s tPublishing Corporation, Minneapolis, 1974) 97.

1 2 Carl Bauer, Water Markets and the Principles of Dublin (Berkeley,September 1996).

1 3 John Briscoe, “Water Resources Management in Chile: Lessonsfrom a World Bank Study Tour”, Working Paper (The World Bank,January 1996) 9.

1 4 Haddad, 390-91


3. Economic rationality and social demand

In countries similar to those of Latin America, it is com-mon to find tensions between the expectations of thepopulation of improving their quality of life and econo-mic limitations. This tension has repercussions on thedecision-making process and results in controversy overthe application of certain economic criteria and, onoccasion, in serious difficulties regarding effectivegovernance of the sector and the maintenance of socialorder. These tensions are clearly illustrated with respectto drinking water and sanitation services, in the deve-lopment of irrigation, and in the treatment given towater allocation under scarcity.

a) Drinking water supply and sewerage

Many countries face a critical problem in thisarea, reflected in the chronic under-funding of services,low service penetration in poor areas, and an increa-singly expensive supply. In such cases, tariffs are restric-ted by the absence of a capacity to pay, which in turnleads to inefficient management. Additionally, whenthere are subsidies, these are geared towards the supplyside, leading to cross-subsidies, with negative conse-quences for efficiency, fairness and competition. Allthese elements make up a vicious cycle that pushestowards low service quality.

Some countries, like Chile, have successfullyimplemented subsidies geared towards demand, focu-sed on the poor, yet in many countries this would be dif-ficult to implement due to the debilities of the Stateitself. Among these debilities is the lack of administrati-ve and supervisory capacity for an appropriate monito-ring of the use of such subsidies. The cases of the socialconflict in Cochabamba, Bolivia, and the failure inBuenos Aires, Argentina to consider the issue of servicefor the poor, illustrate this issue.

b) State support for irrigated agriculture

From the social and productive point of view, irri-gation allows for a substantial increase in agriculturalemployment and significantly increases its competitive-ness. In consequence, in general, the agricultural sectorlobbies for state investment in irrigation development.However, in most cases, ex-post evaluation of the resultsof investments in the sector show few gains in producti-ve efficiency and even social inequity. Furthermore, theagricultural sector faces international trade influencedby a generalized distortion due to the subsidies assignedin more developed countries.15 Under these conditions,

government-supported irrigation policies can end upbeing questioned, especially with regard to matters suchas competition for financial resources with other activi-ties that may have greater social returns, the recovery ofthe investment through payments by farmers, subsidiesfor the poor, and monitoring to ensure effective projectcompletion in accord with the original conception.

c) Water resource allocation

The allocation of water resources in areas of waters c a rcity generates tensions between social interests(domestic and agricultural use) and economic benefits(mining, industry, hydroelectricity), which often cannotbe easily resolved. In some systems, this conflict is sol-ved by declaring drinking water and sanitation to be apriority, sacrificing to a certain degree the search for anallocation system that may incorporate economic crite-ria. Moreover, defining priorities fails to provide a clearsignal of the degree of scarcity and favours inefficiencyin the privileged activity. On the other hand, public opi-nion often finds little justification for market competitionfor the use of water resources. This is particularly truewhere there are no mechanisms for protecting traditio-nal or indigenous water use, or, when they are present,these mechanisms, due to technical or legal reasons,lack credibility in the view of those involved. It ought tobe noted, however that, from a technical point of view,it can often be extremely complex to determine thesecondary effects of new extractions. Cases related togroundwater exploitation in northern Chile are typicalexamples of this problem.

4. The Role of the state and the regulation ofservices associated with water

The region has privatised a significant number ofdrinking water and sanitation services. The privatisationprocess has been in response to various financial andphilosophical motivations, and has been carried outsince the mid-eighties at a different pace, breadth, anddepth in each country. It is generally accepted that, dueto the importance of drinking water and sanitation ser-vices, their monopoly characteristics, the disparity bet-ween consumers and suppliers, and their many envi-ronmental impacts, they require regulation in terms ofprices, conditions, and quality of supply, and environ-mental impacts. It is also accepted that regulation oughtto be carried out by independent and stable regulators.

The situation after privatisation has, however,been cause for some concern: regulation frameworksdefined by predominant sector interest groups; userprotection mechanisms that have not lived up toexpectations; the limitations of theoretical economic

1 5 Corn produced in the United States is sold in the international mar-kets at 20% of the production cost. Tina Rosemberg, “The TradeFix”, New York Times, Sunday Magazine, August 18, 2002


approaches; the controlling power of holdings andmonopolies; and technical failures in some areas.Problems that are a source of general concern are: thevulnerability of regulators to institutional capture;ambiguity regarding their independence; the non-application of concepts such as reasonable incomeand returns; the monopolisation of essential infras-tructure; the unilateral control of some resources thatconstitute key supplies; and others, such as pricetransfers and the lack of information or accountingpractices that allow for the monitoring and following-up of the companies supplying service.

Also to be noted are the facts that competitivemarket notions applicable to more dynamic activitiesare being applied to the water sector, that coverage forthe low income population has not significantly impro-ved, and that the budgets envisioned have not adequa-tely taken into account considerations of scale and effi-ciency, information delivery, and a subsidy structure forthe poorest segment of the population. Problems havealso been encountered regarding contractual opportu-nism, postponement of investments, and failure to takeheed of environmental interests. Fundamentally, the pre-occupation with ensuring stable levels of companyincome has led to the award of warranties and a stabi-lity that may eventually fail to motivate company effi-ciency, going as far as disassociating company perfor-mance from that of the rest of the economy, turningthem into a regression vector. All of this occurs withinrigid contractual and legal frameworks.

The differences between the rigid approachemployed in the region, where profits are specified, andthe pragmatic, empirical approach, based on rationalityand balance, as used in the system in the United States,is notable. 16 17

One of the best examples available of this typeof approach is that employed in the decision by JudgeHolmes, using prudence and fairness, “ between

1 6 Rogers Peter, “Water Governance”, Draft prepared for theInteramerican Development Bank, February 4, 2002, p.4. “NorthAmerican experience and Anglo-Saxon pragmatism indicate thatempirical reasoning will be used when solving water governanceproblems” and “experimenting with using a timeline on rights hasled the United States to flexible approaches in matters of gover-nance”. “This approach allows for adjustments when economicand social conditions change as it does not aspire to develop allembracing institutions covering all possibilities”.

1 7 Phillips, Charles, Jr. “The Regulation of Public Utilities” PUR,1993, p.181, Arlington VA. USA, quoting Troxell, “Economics ofPublic Utilities”, 224 “the concept of reasonable returns as used bythe Supreme Court is in fact a notion relating to zones of reasona-bility. Confiscation is the lower limit. User exploitation is the upperlimit. If profits are to be reasonable, it ought to fall in betweenthese limits. Clearly, the required profits cannot be represented bya specific sum, nor defined by a certain formula. They will vary inaccordance to the economic conditions of both the company andthe economy itself.”

Scylla and Charibdis”, where he states: “If on the onehand a franchise means that the highest possible pro-fit that can be obtained free from competition is pro-tected by the constitutional guarantee to property,then the power to regulate is zero. If, on the otherhand, the power to regulate totally eliminates the pro-tection of property, then this is non-existent. This isn’teconomic theory but merely a fair interpretation of adeal. None of the extreme interpretations could havebeen consented to. A mid point between the twoought to be established”.1 8

This type of reasoning has deep structural impli-cations for the interpretation of rights and conflict sol-ving. It provides long-term stability and trust. It contri-butes towards sound social structure creating an effec-tive constitutional characteristic of social sharing bothin good and bad times. A perception by society of fairsharing is important for governance, preventing socialfrustration and social inequity. Public and privateassociations can thus share out both the costs and theb e n e f i t s .

The concept of stability referred to above goesbeyond the fulfilment of a contract or the interpreta-tion of a law. It means long term social stability evenat the expense of having to create variables in theimplementation of a contract or in the extension of aright. Bearing in mind that rationality must be preser-ved and that there would be no confiscation, it meansthat companies will not be forced to work at a loss. Incertain cases, courts in the United States have decidedthat in order to determine when there are real losses,not only does the income of a concessionaire have tobe verified, but also that of its associated companiesthat are linked to the main business1 9 (the total effectcriterion should include profits in related businesslines, even those not regulated).

U n f o r t u n a t e l y, the current situation in LatinAmerica does not seem to grant this type of reasonable,pragmatic, understanding, and flexible approach torights and contracts. To the contrary, current legislationrelating to water, public utilities, and investment protec-tion agreements emphasises unilateral and contractualsecurity, even if the context of the prevailing conditionswere to change. In this system, some argue, there is con-fiscation when someone has to accept lower thanexpected benefits even if profits are still in the blue.Thus, it is not unusual to find that public utility holdershave guaranteed returns and special exchange and inte-rest rates. This situation prevails despite distinguishedWorld Bank specialists pointing out that this type of gua-

1 8 Phillips Jr., 1993, p. 411, quoting Cedar Rapids Gas Light Co. vs.Cedar Rapids, 223 U.S. 665, 669 (1912.

1 9 Cases of Covington, 1896; Natural Gas, 1942; Andrus, 1979;Duquesne, 1989.

rantees may eliminate the benefits of privatisation asthey suppress the incentives for selecting and managingprogrammes and projects in an efficient manner. 20

These guarantees in turn become liabilities affec-ting national budgets. They also create two types of eco-nomic players: those having all manner of guarantees,whatever the fluctuations in the economy, and those,usually ordinary citizens, who do not have any. In timesof crisis, these liabilities have negative effects on the sys-tems where they operate. While the general economystumbles and economic activity falls and the populationsuffers, public utility companies demand full and up-to-date payment. In contrast, in the United States, at thetime of the depression, judges and the courts acknow-ledged the decline in the interest rate and in companyprofits throughout the country, and were inclined toaccept lower returns in public utility services. 21

This has led to issues related to public utilitiescurrently occupying a prominent position in the publicagenda debate in the region. The transformation processpresently underway is setting new organisation modali-ties (production and institutional) and the coordinationof activities that up until recently were directly contro-lled by the State through state companies.

The new ways of coordinating public utility servi-ce activities present two basic types of problems thatneed to be met in terms of regulatory schemes. Firstly,the rationale behind the decisions taken by the new andprivate operators (maximise benefit) may not necessarilycoincide with general social ends that such basic activi-ties as public utilities must necessarily answer to (requi-rements relating to coverage, quality and costs) (Phillips,1993). Therefore, certain regulatory dispositions andmechanisms must be in place to impede the emergenceof a significant gap between that rationale and thosebasic social needs.

Secondly, the majority of public utility activitiesdo not have the appropriate characteristics for competi-tive market mechanisms to operate. In these kinds ofactivities the operational range of the market must beincreased through productive reorganisation andthrough institutional and regulatory mechanisms.

The quality, not only of the markets, but also thatof the regulations, depends on the discrete context theyare inserted in and on the attitudes and habits of the spe-cific population, a fact often ignored in making recom-mendations with supposedly universal effects.22


2 0 Thobani, Mateen, “Private Infrastructure, Public Risk”, Financeand Development, March 1999.

2 1 Phillips, op. cit. p. 378, and cases cited therein.

2 2 Interview of Stiglitz, New York Times, 1999.

Although the region has received a significantamount of specially designed international consultantassistance on economic matters and ad hoc manuals onhow to deal with various problems, there has been littleinformation on operational interdisciplinary regulation,particularly on the domestic legal dynamics of regula-ting mature systems, these having been directly incor-porated from the originating countries (England, USA,France).

For instance, in order to overcome the problems asso-ciated with the drinking water sector:

• The need was put forward for “political non-interven-tion” in the services through three interrelated instru-ments: a new Legal Framework that sets the guidelinesfor an appropriate separation of roles and the creationof independent regulatory bodies; a tariff policy andstructure to guarantee the economic and financial sus-tainability of the service, and lastly, the incorporationof private operators to improve efficiency and to suffi-ciently separate service operation from the publicfunctions of guidance, regulation, and control.

• [ H o w e v e r,] despite the efforts made, the region conti-nues to present ahigh level of ser-vice exclusion.Even more worr-ying still, thespeed at whichcoverage pro-blems are beingo v e rcome hasbeen, during thelast decade, infe-rior to the speedattained in previous periods, particularly during the1960s, the period when Latin America made a quanti-tative jump, based on a marked preoccupation forimproving the health conditions of the population.2 3

Obviously, the problems associated with the regu-lation and supply of public services are present in drin-king water services as well as in electricity and irriga-tion. It can be claimed that such problems, with indivi-dual differences, but also with common characteristics,occur in all mass consumer service supply systemswhere conditions for perfect competition do not exist.

For instance, in electricity generation, the defecti-ve design of a water rights allocation system may lead toa concentration of rights in a few companies, facilitatingtheir market power and creating barriers to market entryand hindering fair competition. 24

23 Corrales, María Elena, op. cit. And pages Note 3, supra.

2 4 In Chile, the Antimonopoly Commission has recommended thatno other water right may be allocated for hydroelectric powergeneration until stipulations to guarantee effective water use areincluded in the Water Law (CPC 992/636; CR 480/97).

The region hasreceived littleinformation withregards toregulatory aspectsof countries withrelevant experience


supply services at the municipal level, and in unitarycountries with marked regional differences.

Relationships between centralisation and decen-tralisation of activities appear to show that, rather than aproblem of radical alternatives, it is more importantly aquestion of structuring balanced systems, where legaland political powers are assigned to the appropriatelevel of government and where the roles of the privateand public sectors, at the various levels, are comple-mentary. A study in Colombia, made by ECLAC for theInteramerican Development Bank, found that imple-menting decentralisation without first conducting a tho-rough activity analysis led to the loss of economies ofscale, and that assigning responsibilities to local organi-sations lacking technical training and subjecting basinauthorities to political pressures are not conducive tosound resource management.28

Some countries have tried to solve the problemsarising from different jurisdictions by nationalising waterand its administration, yet this often leads to the incon-venience of excessive centralisation.

In federal countries the practice has been todeclare certain water uses to be under national jurisdic-tion, such as international and inter-provincial naviga-tion, certain products, such perhaps as electricity, andcertain public interests, such as pollution control andsome ecological concerns. Inter-jurisdictional and basinorganisation agreements have also been tried.29 In thiscontext Brazil has stressed the importance of “BasinCommittees”, as appropriate management institutions.

Curiously, basin organisations have been emplo-yed in unitary countries for ensuring better local partici-pation. This proves that appropriate institutional arran-gements are a function of the nature of the resourcemore than of the political or organisational philosophyof a particular country.

It is noteworthy that the most successful countryin the region in the field of drinking water supply andsanitation, Chile, has adopted its own model, capitali-sing on economies of scale and scope in order to extendservices efficiently on the basis of regional companies,each of which serves an extensive area. Meanwhile,countries that have adopted models on a fragmentedpolitical base at the municipal level show serious diffi-

2 8 Solanes Miguel and David Getches, “Practicas Recomendablespara la Elaboración de Leyes y Regulaciones Relacionadas con elRecurso Hídrico (Recommended Practices for Elaborating Lawsand Regulations Related with Water Resources)”, published by theInteramerican Development Bank as their Good Practices Report,in 1998. Includes an analysis of water legislation principles ofBrazil, Chile, Colombia, Costa Rica, El Salvador, United States,Jamaica and Mexico

2 9 Water Governance: Position of Brazilian Technicians on the BasicPaper by Peña and Solanes, Buenos Aires, January 23rd, 2003.

Irrigation and drainage services, when suppliedby private companies, are subject to regulation as if theywere public utilities. There are few examples of privatecompanies supplying these services and those few thatthere are, basically in the United States (Carey Act andCarrier Ditch Companies), show they have had seriousproblems, including incapacity to finance works, ove-restimation of available water resources, engineeringerrors, and cost underestimation25. In any case, the regu-lation of these services includes the right of the user toservice continuity, to an equable allocation of water,and to the regulation of tariffs by a regulatory commis-sion. Such regulation is a logical response to the mono-polist position of the supplier.26

State regulation and control are applied even inthe case of state companies, such as Bas-Languedoc,France, where rates are approved by the NationalGovernment, which also designates a Commissionerwith veto rights.27

The unequal power between irrigation operators andusers makes it necessary for their decisions, accoun-tancy, expenses, and programmes to be subject to care-ful regulation, even if they are non-profit user organisa-tions. The case of Maule, in Chile, is illustrative of this,as abuses in water distribution by the user organisationrequired the intervention of the Water Directorate.

5. The issue of the appropriate level ofgovernment: national - provincial - municipal

Which administrative level is best suited formanaging water and its services is a particularly com-plex and conflictive matter, given that the resource is notlimited either by administrative or by institutional boun-daries and, as a service, is subject to economies of scaleand scope. Water also has a direct impact on commer-cial activities, on transport, and on services, such aselectricity generation, which are managed at a nationalscale. Problems become more complicated still in fede-ral countries, in those that have chosen to locate water

2 5 John Davidson, “Distribution and Storage Organizations”, inWater and Water Rights, Robert E. Beck, Editor in Chief, 1991Edition, The Michie Company, Charlottesville, Va., Vol. 3, p.493

2 6 Davidson, op. cit. p. 495-500

2 7 United Nations, “Abstractions and Use of Water”, 1972, p. 109.


culties, with rich and poor municipalities and non-func-tional subsidy schemes. On the other hand, the presen-ce of larger units prevents excessive operational frag-mentation that would make regulation activities ineffi-cient.30

6. Public participation

An important characteristic of some arid andsemi-arid areas is the participation of users, either infield activities or in the integration and consultation withadministrative and political institutions. Well-knownexamples in South America include Chile and Mendozaand San Juan provinces in Argentina. The Spanish inhe-ritance influencing these systems since colonial times isalso common knowledge among specialists in the insti-tutional aspects of water management. It is argued thatparticipation produces a sense of community betweenthe administration and the users, lowers central admi-nistration costs, and ensures that the interests of usersare taken into consideration.

However, case studies and interviews seem toindicate there is still a long way to go in ensuring theaccess of users and the public to the water decision-making process.

There are numerous deficiencies in participation:i) limiting social conditions; ii) limited definition of theareas in which the public and users participate; iii) pro-vision of deficient and inopportune information to thepublic; iv) lack of identification of alternative mecha-nisms and decision-making capacity when participationdoes not reach convenient decisions, both in substanceand in timing; v) capture of user organisations by groupsor sectors for their own private benefit; vi) deficient statecontrol; vii) a lack of awareness on the part of those whowould delegate all water management responsibilities tothese entities of the fact that these institutions reflect theinterests of active members; viii) failure to realise that itis not just rights holders and water users who have alegitimate interest in the resource, for example, water aspart of the environment.

From a sociological point of view, in certain areasprivileged user groups have a dominant position, have ahigher educational level, are better organised and aremore powerful in collective negotiations aimed at, forexample, keeping water rates low. These have moreinfluence than poorer peasants. In contrast, the poorer

3 0 Corrales, op.cit.

users have to follow the rules of political clientelism.31

An example illustrating why participation lagsbehind is that the interests and concerns of the localpopulation have not been a priority issue when planningwater use. Indifference towards traditional rights hasbeen identified as one of the main causes of the conflictlinked to failed development efforts in some parts of theworld. Concern has also been expressed at the disregardof social values and interests linked to water.32

Users and others interested in the resource mayparticipate in public hearings or consultations aimed atanalysing policies, programmes, projects, or legislation.Although the mechanism is mostly aimed at opening upspace for participation, its mere creation does not meanall interested parties will participate, the only means ofassuring a balance of interests and more rational deci-sion-making.33

Because of this, governments should stimulateand facilitate the participation of interested parties, pro-viding access to information, authority to act in mee-tings, and, in general, provide the possibility of expres-sing opinions and positions.34 This need was confirmedby a recent South African experience: in a public hea-ring on upcoming water legislation, where industry gavedetailed answers and several organisations and indivi-duals also answered in a positive manner. However, noobservations were forthcoming from community organi-sations, rural communities, or from village water com-mittees. Non-governmental organisations made veryfew comments.

A good example of creating participation oppor-tunities is United States environmental jurisprudence,where the area where citizens can legally appeal deci-sions has been broadened, giving greater flexibility forinitiating group or individual action, on the basis of inte-rests that are different from traditional personal econo-mic interests.

3 1 Kemper, K.E. “The Cost of Free Water: Water Resources Allocationand Use in the Curu Valley, Ceará, Northeast Brazil”, 1996,Linkoping Studies in Arts and Science, No 137, Linkoping,Sweden, p. 193-200 and Hearne FF and others, “Water Allocationsand Water Markets: an analysis of gains from trade” TechnicalPaper No 315, World Bank, Washington DC.

3 2 Barraqué B. Water Management in Europe: beyond the privatiza-tion debate, Flows and Stocks of Fixed Capital, No 7, Paris, OCDE,march, 1992; also Integrated Water Resources Management inChina: the scope for change, Nanking International Symposium,22-25 April 1997.

3 3 Barraque, 1992, p. 9; Mitchel B. (ed) Integrated Water ResourcesManagement, International Experiences and Perspectives, London,Behaven Press.

3 4 Haddad, Brent Michael “Evaluating the Market Niche. Why LongTerm rural to urban interregional markets for water have not for-med in California”, Berkeley, California, University of California,1996, p.392.


its effectiveness has been registered, InternationalCouncil for Local Environmental Initiatives, 2002,Rio+10).

The principle behind this community participa-tion initiative is the search for a balance betweenvarious development interests: private business, theenvironment, and the community. The creation of apublic and collective conscience based on sharedvalues regarding issues of interest such as the supply ofservices, environmental protection and, in particular,water resource management, then becomes an instru-ment for promoting development.

7. The environmental dilemma

As has been mentioned above, environmental issueshave acquired growing significance in the region in thelast few years and they frequently give rise to highlycontroversial situations reflecting the lack of social con-sensus.

The problems discussed are in relation to the mainte-nance of environmental use, the pollution of rivers,lakes and aquifers, and the building of large-scalehydraulic works.

a) Protection of environmental uses

The safeguarding of environmental use when facingexcessive exploitation of water resources for other endscauses conflicts in arid and semi arid areas, as the mat-ter attains important economic significance. This beco-mes even more serious when dealing with situationswhich have been consolidated over a long-term periodof use, especially when the technical difficulties and theuncertainty associated with defining levels of ecosystemprotection are added.

b) Control of Water Pollution

The region has a major deficit in water pollution controland overcoming it implies effective implementation ofinstitutional arrangements geared towards control andthe diversion of significant financial resources, whichmay have alternative, competing, destinations, such associal or productive investments. Although there is agrowing awareness of the need to correct the existingsituation, it is difficult to identify an appropriate andpublicly acceptable funding mechanism. This is very

Participation is affected when there are no judi-cial frameworks allowing for public action. The existen-ce of these frameworks is, in turn, affected by the diffe-rent possibilities of access to those who make politicaldecisions, and by the lobbying capacity of pressuregroups with different special interests. Although somecountries have established environmental norms andmechanisms for public participation with respect toenvironmental impact, the regulations covering econo-mic evaluation and the economic limitation of projectsare such that recourse by the public or third parties isscarce or non-existent.

Members of the public cannot question even themost deficient projects on economic grounds.Therefore, in most countries, public participation is res-tricted by two factors: the lack of real and obligatoryrules for assessing the economic efficiency of publicinvestment; and, in consequence, the existence of rigidregulations that only give active and substantial legiti-macy to acting in defence of traditional individual eco-nomic rights.

A project, focusing on Latin America, executed byConsumers International and funded by the OverseasDevelopment Administration of the United Kingdom,starts from the premise that consumer interests are notwell represented in the procedures that regulate waterutility services in Latin America. This is due to institu-tional barriers as well as to the lack of information andtechnical know-how among consumer organisations. Infact, comparing participatory practices in privatisedpublic utility services in Latin America with those inother countries makes depressing reading, especially therequirements to inform, and the means of intervention.In the years since the privatisation of the Buenos Airesutility, there has been only one very short public mee-ting, with severely limited information.

The relevance of adequately and opportunelyinforming the public cannot be strongly enough emp-hasised. There have been cases in the region, wherepublic opinion has manifested itself as in favour of pro-jects with negative rates of return. However, the opi-nion surveys failed to mention these negative returnsand the questions put forward were vague about sour-ces of financing, rates of return, and as to who wouldbenefit.

The focus on community organisation and partici-pation foresees new participation strategies. During thelast decade the Local Agenda 21 process has proved tobe an effective approach for solving concrete problemsfacing communities.

The community (residents, users, public and pri-vate institutions, and local businesses) is invited throughthis mechanism to generate consensus on the basis of ashared vision of a desired future for a community in agiven geographical area. (There are many examples and


evident in the case of pollution from urban sewage,when the difficulties of establishing funded water supplysystems are considered. A similar situation exists in thecase of industrial pollution, especially by small ormedium-sized industries with low levels of technologi-cal development. Other concerns reflecting the difficul-ties in building effective governance on this matter referto administrative limitations for dealing with matterssuch as control and supervision of clandestine dumps,especially into aquifers, and in controlling diffuse con-tamination.

c) Building of major hydroelectric works

Environmental impact assessment systems for newprojects have been implemented in the last few years inLatin America, under varying modalities. Major hydroe-lectric projects often prove to be highly conflictive andgenerate public interest beyond national boundaries.Also, the systems established do not always have a highenough level of credibility in public opinion, nor are thetrue interests of the community always adequatelyrepresented, and opposition to the project can easilyturn into long term legal battles with unpredictableresults. In some countries this situation has become adisincentive to private investment in such projects. Fromthe perspective of the development of natural resources,this situation is not irrelevant, when it is kept in mindthat only a fraction of regional water resources arecurrently developed, particularly for electricity genera-tion.

8. Protection of the interests of ethnic groups andcustomary users

In a number of areas in the region, serious conflictsoccur between indigenous and traditional users andeconomic activities, such as mining and irrigation.There are also cases where the extraction of groundwa-ter for supplying cities affects traditional uses andecosystems. Some countries, to a lesser or greaterextent, have created systems for protecting indigenousrights, either totally or partially. In Brazil, theConstitution of 1988 and law 6001/73 contain norms forthis purpose. In Chile, law 19253 protects the customaryrights of northern ethnic groups. In Colombia, theConstitution and law 21/1991 acknowledge rights overtraditionally occupied land and resources.

However, not all countries in the region have ela-borated careful and clear definitions of the rights andobligations of interested parties and the government, nordo they have contingency plans for the defence of eth-nic and customary users. The results are poorly definedand ambiguous situations creating legal uncertainty andinsecurity, which do not translate into an effective res-

pect for protected rights. The problem is aggravated bythe incapacity or unwillingness or lack of means ofmany groups to appeal to ordinary legislation in order toprotect or consolidate their rights. There are significantdifferences in the manner in which rights of the nativepopulation are regulated in Latin America and in theUnited States. In the latter country judicial decisionshave established a very high priority to native Indianrights that the law respects and enforces.

The weaknesses in the system for the protection ofuses affect both extractive and in-situ uses related to thenatural water regime. The latter include fishing, wate-ring holes, or even the use of water meadows. The mostfrequent situation is the destruction of traditional habi-tats for the sake of assigning rights for mining, watersupply to cities, and energy generation. The customaryuses destroyed are not considered in project evalua-tions, let alone compensated for.

Part of the problem is that legislation generallydoes not recognise non-extractive customary uses, suchas fishing activities in lakes. There are examples in theregion where irrigation developments, with the award of formal titlesto the water, have led to the destruction of customary fis-heries with negative effects on the subsistence and theeconomy of significant population groups.35

There is also a need to define an operational stra-tegy for the acknowledgement of indigenous and custo-mary rights. Customary rights and the acknowledgementof customary rights and practices are not one and thesame. It is not enough to simply recognise a structure ofcustomary rights. The specific rights that emanate fromthe structure must also be recognised, or compensated,and this requires surveying and registering activities bythe State.

The problem arising from an imprecise definition of pro-tected rights is aggravated when foreign investment pro-tection agreements are signed, where customary useshave not been acknowledged under any specific legis-lation nor protected by being acknowledged or registe-red in ordinary legislation. In these cases an investormay well argue that it is unreasonable to consider theexistence of these uses and rights, given that they haveno legally recognised expression.

3 5 The case of Laguna Vera in Paraguay, for example.


Stating that it is necessary to have a jurisdictionthat makes a decision obligatory, therefore providing anincentive for negotiation, does not mean to say that itneed be exclusive. Provided there is an enforcing juris-diction and that the part not benefited by the status quois not left totally undefended, the legislation may be fle-xible towards, even promoting, alternative conflict sol-ving mechanisms.

It is essential at all levels to have applicable con-flict solving criteria and authorities responsible for itsenforcement.

In many cases decision-making faculties are dele-gated to user organisations, administrative bodies, dis-tricts, and other constituencies. It is in the public interestto have guaranteed and effective user representation,especially of the weaker and minority sectors in anysociety. Also important is the right to defence and anappeal system, and access to avenues that ensure thatno one is left undefended and that legal action does notbecome eternal.

9. Conflict resolution

Given that water is a free-flowing resource, with awide range of uses and functions, increasingly scarce,and presenting abundant externalities at the basin level,its potential for generating conflict is unlimited. Theconflict potential of the resource is aggravated whencountries and the international community do not fore-see appropriate regulations, both in form and in subs-tance and in the awarding of arbitration capacity to aspecific body. Prolonged conflict delays and discoura-ges investments and harms conservation. As conflictscan involve anyone from private individuals to munici-palities, provinces or States, institutions, sectors andnations, the problem is extremely significant. In such asituation, the lack of an efficient and opportune conflict-solving mechanism becomes critical for the governanceof the sector.

Therefore, a poor administrative capacity for pro-blem solving is a serious practical limitation. Without athird party arbitrator, the parties in a conflict that bene-fit from the status quo have no incentive for reaching anegotiated solution, benefiting as they do from a situa-tion another objects to. This situation, clearly seen inChilean legislation, contrasts notably with water admi-nistration powers in other countries, such as in the USAor in Mendoza, Argentina, where the administration hasa decision-making capacity. This authority has not beenarbitrary, because of the quality of the administrationand because of the existence of appropriate constitutio-nal and procedural guarantees.

There is a tendency to replace the obligatory juris-diction of the State with that of arbitration tribunals.There are, however, certain doubts regarding the perfor-mance of these tribunals when dealing with matters ofpublic interest.36

3 6 There are sources (see, for example, the article “Nafta’s powerfullittle secret” by Anthony DePalma in The New York Times ofMarch 11, 2001) which mention that these tribunals have led torevocation of national laws and the bringing into question of justi-ce systems and environmental laws. Some have argued that someof their worst fears regarding faceless government have been con-firmed within the Nafta framework. Environmentalists, consumersgroups, and other organizations are very worried about the way inwhich these tribunals influence the application of the law. Thus, asargues Joan Claybrook, president of Public Citizen, “what we aretalking about here is secret government”. According to AndreasLowenfeld, an expert in international trade in the New YorkUniversity School of Law: “There is no doubt that the measuresreferred to constitute an expansion of the rights of the private com-pany in relation to the government. ... The questions is, is this agood thing?” According to Martin Wagner, director of internationalprogrammes in Earth Justice Legal Defence Fund: “The fact thatNafta treaty writers chose a non-open procedure ... is more evi-dence that they were not anticipating these panels to have beforethem matters of a wide-ranging social interest.” Critics of the sys-tem assert that each challenge of these institutions erodes publicpolicy. The lack of a traditional appeals system, transparency, andlegally obligatory precedent has meant that, at least for the threenations belonging to Nafta, many people are cautious and guardedregarding this conflict solving method.


1. The challenge posed by effective watergovernance: The lack of simple answers

As water is so closely linked to society and theenvironment, there are no simple or easy answers thatguarantee governance. The only possible suggestion isthat although governance may be expressed in differentorganisational systems and its formal content arrangeddifferently (such as laws and institutional arrangements),every society has natural conditions, power groups,power structures, and requirements that must be consi-dered specifically in the process of designing the system.Otherwise, there is a risk of ignoring factors necessary toensure viability. The following considerations merit par-ticular mention:

• The prevalent ethnic and cultural characteristics, asdeeply rooted views of the world may prove decisivein applying certain management formats. In Chile, forexample, the prerequisite of individual assignation ofwater rights has been waived for Aymará andAtacameña communities.

• The institutional history of the sector, considering thatthis history has generated practices used for genera-tions in many communities and these frequently com-prise an extremely valuable social capital for effectivewater governance.

• The economic framework, social and economicideas and practices, the capacities of the differentplayers involved and their socio-economic condi-tions. The creation of market incentives in the watersector cannot be the result of applying public poli-cies divorced from the general development trend ofthe society.

• The management capacity of the State, as this mayrestrict the practical possibilities for efficient imple-mentation of institutional arrangements.

• Climate characteristics, for example, the manner inwhich water is perceived is very different where it is ascarce resource compared to areas where it is inabundance. This kind of difference may require thateven within a single country, different regions requiredifferent regimes.

• The characteristics of different water sectors and theirservices may be different even within one country. Forexample, while governance of water as a resource hasexperienced significant progress recently in Brazil, it

IV. IN SEARCH OF ANSWERS

has become clear that the governance of water supplyand sanitation services has been limited by the lack ofan adequate management framework, ideological dif-ferences and other factors.1

It is also important to remember that globalisationaffects governance in many ways. External agents andfactors influence internal processes, more so now thanever before. These influences are numerous and exam-ples have been given throughout this document. Themost important consideration is to be aware of the phe-nomenon and to identify those external factors or con-ditions that may most seriously affect governance.

2. The challenge posed by effective watergovernance: Lessons and general consensus

Despite the comments in section 1 of this chapter,one must be aware, when the management of a resour-ce or its services consistently shows certain characteris-tics, that this is not due to a lack of innovative capacityof the sector, but probably due to the nature of theresource or service involved. This is clear from the typi-cal characteristics of the legislation governing water andits associated services.

In this respect, some considerations are tentati-vely presented that, in the light of practical experience,may be considered to be generally valid.

In water legislation:

• Water laws must clearly state that water is a good thatfalls under the public dominion of the state.

• Water laws must determine specifically that water userights, when granted under conditions of, or whichaim at, effective and beneficial use that does notcause environmental damage, are protected by priva-te property clauses in the constitution. This is a basiclegal element present in the systems that have suc-cessfully promoted private investment in the develop-ment of the water resource.

• However, and provided there is no functional curtail-ment of the economic value of the rights, the lawsmay allow for the exercise of these rights to be regu-lated as needed for ecological and social sustainabi-lity.

• Systems for water concessions and the regulationsguiding their allocation should be uniform withoutexception, to prevent manipulation by special interestgroups.

1 According to comments by the Brazilian delegation in Samtac,Buenos Aires Meeting, January 22-24, 2003


Regarding institutions for water management,consensus is being achieved at different levels:

• The authority responsible for water allocation andmanagement should be independent from sectorinfluences, with authority and resources in line withits responsibility.

• Inserting water management within environmentalagencies may result in minimising its effect as a deve-lopment factor.

• Therefore, it seems appropriate that the water resour-ce have its own stable and independent institutions,even when these are closely linked to institutions res-ponsible for the strategic vision of national develop-ment.

• Basin based institutions are valid options for watermanagement, but their functions must be determi-ned in such a way that they can be implementedand they must be focused on water resources, asdemonstrated by the successful models in Franceand Spain. They must also have adequate authorityand funding.

• User organisations are useful management structures;however, they cannot replace the State, as they haveinherent limitations and must be subject to appropria-te control.

• A conflict resolving system should exist which provi-des an appropriate balance among parties and definesthe limits of the authority of the bureaucracy, the usergroups, and the courts.

• There are decisions associated with water and itsservices that are directly linked to governance,because of the impact that they have on social sta-b i l i t y. These considerations should be appropriatelydealt with in trade and investment protection trea-t i e s .

Regulators of public water and sanitation servicesneed a minimum set of attributes to function appropria-tely:

• The system to be regulated should be manageable. Itis not realistic to assume that, for example, a thousandservice providers can be regulated. Consolidation isnecessary due to its advantages with respect to scaleand control.

• The regulator must have independence and stabilityand be subject to rules of good conduct.

• The regulator must have the necessary powers andresources.

• The regulator must have appropriate legal capacity.

One limitation that administrative systems seemto share at every level is a notorious lack of operatio-nal capacity, due to various factors, including limitedfinancial, human, and legal resources and, on occa-sions, arising from the low worth assigned to their roleas regulators. This is the consequence of a poorunderstanding of the fact that the role of the adminis-tration, when there is an appropriate definition of

• Water rights are assigned when there is enough avai-lable water flow, when third party rights and ecologi-cal requirements are not affected, and when, in accor-dance with the opinion of water administrators, therequest is aligned within the public interest regardingwater use.

• The only functional priorities affecting the allocationof rights when requested ought to be those for drin-king water and sanitation purposes, when protectionhas been established for these purposes: this does notprevent the generation of clear signals regarding thescarce nature of existing water supplies, and it doesnot lead to inefficient use arising from this privilege.Such considerations should not affect the preservationof flows for ecological reasons. In cases of concurrentuses for other purposes, water authorities must care-fully assess their merits and, if the uses are equivalent,then they must be allocated using relevant criteria,such as through a bidding process, order of applica-tion, or other relevant criteria.

• In the case of rights and uses that were in existen-ce prior to the legislative change, including tradi-tional and indigenous uses, they should be ack-nowledged in accordance with their effective andbeneficial, traditional and current use, without thisaffecting the possibility of imposing appropriateregulations.

• There is a need for a planning authority to allow forthe generation of a shared vision regarding the futureevolution of water resources at the basin level.

• It is important to develop a public information systemcovering all elements affecting resource management,giving transparency to the actions affecting assetslocated within the public domain.

• The procedure for implementing these importantconsiderations must ensure their continued effecti-v e n e s s .

There are also some fundamental principles forthe regulation of water and sanitation utility services.These include:

• Universal and non-discriminatory service.• Adequate quantity and quality of service.• Reasonable tariffs and profits. It is important to bear in

mind that privatisation does not miraculously makeunprofitable operations profitable.

• A subsidy system that avoids as far as practicablecross-subsidies in favour of the better off and that gua-rantees the poor a basic minimum supply.

• Control of changes in ownership, holdings and trian-gulations.

• The right to adequate and opportune information,both for the regulators and for users.

• Obligatory accounting, in accordance with obligatoryrules.

• Use of basic installations.• Rights to opportune and adequate inspection and par-

ticipation. • Maximum use of economics of scale and scope.


functions, extension, structure and control, is criticalin managing a resource as complex as water. Anappropriate definition of the administrative role is cru-cial to protect sustainable management, the commu-nity of users, and the general public from dominationand control by special interests.

3. The process of building effective watergovernance and integrated water resourcesmanagement

It is important to analyse the routes that may allowfor progress in constructing the appropriate governanceframeworks for the water sector. Latin American coun-tries offer innumerable examples of frustrated reforms tothe sector and of efforts which, once legally approved,have ended up dead letters, far removed from the pur-pose for which they had been approved in the first place(for example, in Chile the control of industrial pollutionwas made law 70 years before it could be made effecti-ve).

If the source of the reforms that have been attemp-ted is analysed, it can be seen that frequently changes inthe water sector are merely a reflection of changes ini-tiated in other areas of the bureaucracy, which in turnhave answered to changes in the ideological or econo-mic paradigms of society. For example, in Chile, thesocial movements that gave rise to agrarian reformimposed a change in water legislation in 1969. Later, thetransformation of society with the adoption of a neo-liberal perspective required once again a change in thewater law, as exemplified in the legislation of 1981. Inboth cases the reforms which can be considered to beconsolidated and effectively incorporated into watermanagement are those that, divorced from ideology,have appropriately answered the nature of the problemsposed by water resource management and have been intune with conceptions and practices within the society.2

Similarly, since the 1990s, Peru has made severalattempts at reform of its legislation with, in some cases,the draft reform legislation being based mainly on poli-tical, economical and financial considerations. Theseprojects proposed the creation of non-regulated watermarkets, ignoring local conditions, traditional uses, and

2 Peña H. “20 años del Código de Aguas. Visión desde laAdministración”, Fourth Water Rights Symposium. UniversidadCatólica de Chile.Santiago, 2001

the nature of the resource itself. These proposals werestopped because of criticisms made by professionaladvisors - national, regional and from the United States.

Bolivia has made numerous attempts at reformduring the last twenty years, without there being a waterlaw to date. This is due to the difficulties of trying toreconcile the legitimate grievances of traditional userswith a model for water resource management more clo-sely linked to the aims of economic development.

There are, as well, reforms within the water sectorarising from internal processes independent of thevarious existing decision-making powers in society. Thisroute is generally slow and difficult, as it means brea-king the characteristic limitations of the water sector andthe reductionism prevalent in many decision-makingspheres, making it especially difficult to engage them onwater related issues.

An interesting example of this is found in Brazil,where water resources specialists managed, after manyyears, to get their legal and organisational proposalsaccepted at the political level in such as way that theyreflected the consensus reached by the water professio-nals.

The importance of the Brazilian case lies in thefact that it is the result of a discussion fundamentallynational in nature and so having solid bases for long-term consolidation. Something similar could be said ofthe process that led to the current drinking water andsanitation regulation framework in Chile. Here too, thecatalyst was the specifically national experience of thesector in regulation, and the transformation processgenerated strong involvement of the government, thecongress and public opinion.

Also worthyof note is the case ofthe current Mexicanwater law, whichwas the response ofthe most prestigiousMexican water pro-fessionals to chan-ges in the role assig-ned to the State andto the introductionof the use of econo-mic incentives for improved management.

The information presented demonstrates that it isnot necessary to wait for a general improvement in thegovernance situation of a country in order to foster ini-tiatives in the water sector. Thus, the regional associa-tion and interaction of motivated and aware professio-nal groups may prove decisive in improving sectorgovernance problems and in giving technical viability toproposals for change. Also fundamental is the dissemi-

Countries in LatinAmerica can givenumerousexamples offrustrated watersector reforms


aching dynamic water resources management, charac-terised by abandoning reductionism.

Its urgency depends on concrete situations, itbeing lesser in basins having a low level of water resour-ce exploitation and low levels of human impact, and inall cases it assumes progressive development (“a pro-cess”).

Summing up, it implies a mayor cultural change,reflecting a progression away from the industrial society,which is characterised by specialisation (reductionism),pyramidal structure (planning), and abundant resources,placing the emphasis on infrastructure, as is reflected tosome extent in the Mar del Plata Declaration, andtowards the Post Industrial Society (based on knowled-ge), characterised by integration (holistic), participationand negotiation, the awareness of limited resources, andplacing the emphasis on management, as is reflected inthe Dublin Declaration.

It is for these reasons that effective governance ofthe water sector will be more and more closely linked toIntegrated Water Resource Management.

nation and opening up of the debate to the public, thevarious interested parties, and a wide-range of decision-makers, so as to guide the search for effective solutionsto existing problems. As long as a basic consensus is notreached or this consensus does not get through to thepolitical world, there will be little hope for solid pro-gress in the region. Hence the importance of discussionssuch as those being carried out under the auspices of theMexican Government.

This illustrates the scope of the efforts made at theinternational level for promoting integrated waterresource management.

In effect, as human society becomes ever morecomplex and the intensity of human impact on naturalresources becomes more severe, the need to integratethe different elements of water management becomesimperative. In a simpler context, these elements areassumed by society in a fragmented manner without

serious difficulty.

A careful analysisof the contradictionsarising from approa-ching water pro-blems from thesocial point of view(characterised by itsfragmentation intomultiple entities andways of acting) or

from the natural world (as seen by the intrinsic unity ofhydraulic processes) shows definite inefficiencies, lostopportunities for better solutions, and generalised con-flicts in water management. In summary: loss of gover-nance in the sector.

Water resources management often presents pro-blems requiring a holistic approach. Among these thefollowing are most significant: coordination of supplyand demand policies, policies for the quality and quan-tity of water resources, the joint use of surface andground waters, the multiple use of resources, coordina-ted management of land use, vegetation cover, andwater, management of externalities, and environmentalconservation policies, among many others.

In accordance with the above, the Global WaterPartnership (GWP) has defined Integrated Wa t e rResource Management (IWRM) as a process promotingcoordinated management and development of water,land and related resources, aiming to maximise theresultant social and economic welfare equably, yet wit-hout compromising the sustainability of vital ecosys-tems.

According to this concept, Integrated Wa t e rResource Management is not an end in itself. It is ameans, or, more precisely, a “process”, a way of appro-

The successfulprocesses of ANA inBrazil and freshwater in Chile arisefrom nationalconsensus andreflexion


1. Description of the Dialoguesorganised in South America

At the beginning of 2002 the South AmericanTechnical Advisory Committee of the Global WaterPartnership proposed the organisation, in each of thecountries of the region, of national workshops. Thesewould be based on wide-range of participants, inclu-ding politicians, bureaucrats from all levels of govern-ment, user organisations, NGOs, representatives of eth-nic groups, universities, the private sector, etc. The pur-pose of the Dialogues was to form an appreciation of thefactors conforming governance as applied to the waterresource (Integrated Water Resource Management) ineach national context within the region, and thus con-tribute to the construction of an overall view of theregion.

Because of the issue’s complex nature, the coun-tries chose different procedures, some lasting only oneday, others holding several meetings and working ses-sions. However, the common denominators of all theseprocedures were widespread participation, the contrac-ting of experts, and the preparation of background docu-ments and preliminary hypotheses. These were for thepurpose of triggering discussion, both in the variouscountries and also at a regional meeting. The delibera-tions were directed to the generation of a consensus onwhat the common characteristics of effective watergovernance in the region are.

The regional meeting on January 22, 2003, inBuenos Aires, was attended by 35 specialists from 10countries of Central and South America. It was on thisoccasion that the regional document, preceding theseannexes, was approved.

The full report of each National Dialogue can befound at the SAMTAC web site atwww.eclac.org/drni/proyectos/samtac.

The following annexes contain a summary des-cription of the main issues discussed and of the proce-dures followed (date, place, institutions attending, andnumber of participants). The members of the SouthAmerican Technical Advisory Committee, who providedthe inspiration and convoked the dialogues in eachcountry, were Víctor Pochat and Armando Bertranou inArgentina, Gisela Damm Forattini, Oscar Cordeiro Netoand Carlos Tuci in Brazil, Humberto Peña and MiguelSolanes in Chile, Inés Restrepo in Colombia, RogerMontes Domeq in Paraguay, Lidia Oblitas in Perú,Carlos María Serrentino in Uruguay, and María ElenaCorrales in Venezuela.

V. ANNEXES 2. Summary of the Dialogue held in Argentina

Water Governance in Argentina.

National One Day Workshop held October 30,2002, organised by the Argentinean Institute of Wa t e rR e s o u rces, with the support of United Nations,E C L A C .

Participants, from the public administration, non-governmental organisations and the communicationsmedia, comprised a group of approximately 40 persons.They agreed that most water related issues could be dis-cussed by using governance as the starting point

The state of Governance in Argentina

Water management is not independent of thenational situation, conditioned as it is by the workings ofthe State and society in general. The Argentinean Statetoday is weak and discredited, mainly because it doesnot fulfil its essential roles and fails to answer to theneeds of society. This opinion was expressed enthusias-tically in the meeting, but the participants were unableto agree on how to achieve active and responsible par-ticipation in government.

A rgentina hasa widely recogniseddeficiency in gover-nance, and our expe-riences are closelyrelated to this fact, soin order to find ameans that mayguide us to efficient governance we should basicallybacktrack some of the way, or at least make correctionsto the routes taken. However, in water management, weare beginning to tread, albeit only as a beginning, alongpaths that may lead us to better governance of the sec-tor.

Complementary with Governance, account mustbe taken of the sustainability of the resource so as to har-monise social, economic, and environmental considera-tions in the mid and long term, overcoming the empha-sis on the short term, typical of Argentineans.

The answer must arise out of a strengthened rolefor the State and public participation.

The role of the State and Public Participation

In a country like Argentina, with a federal structu-re where water falls under the dominion of the provin-ces, greater efforts must be made in order to align thepolicies and the regulations of the different jurisdictions,it being a function of the federal government to coordi-nate and formulate national policies.

Water relatedissues are notindependent fromnational reality


In order to ensure equity, especially when wateruse is considered in conditions of a subsistence eco-nomy, the requirement to carry out technological impro-vements ought to be adapted to the conditions of theusers. However, each user ought to improve the use ofwater in accordance with the technology that is availa-ble to him.

Argentina has almost ten years of experience indrinking water and sewage service concessions, yetthese contracts do not guarantee governance due to theweakness of the regulating agencies, the high profit mar-gins obtained by the concessionaires, the lack of clarityin service extension and its financing, the lack of legalsecurity for users, and the absence of a clear definitionof subsidies, together with renegotiating contracts, rat-her than to meet promised commitments.

The commitments undertaken by countries at theSummit on Sustainable Development for the achieve-ment of service coverage targets for drinking water andsewage cannot be correlated with the targets committedto in the concessions of these services, as they arecurrently set out. Therefore, future renegotiations ofthese contracts ought to accommodate these commit-ments.

Neither do the services that have been left in thehands of the governments (provincial or municipal) orhaving been under concession have now reverted to thestate, guarantee governance. In general, the decentrali-sation process has occurred without the responsible ins-titutions having adequately prepared for the task. It isconsidered that government suppliers of public servicesshould improve their business organisation, improvequality of maintenance, undertake network expansion,increase bill collection from households having suffi-cient payment capacity, and restructure the administra-tion on which the water supply institutions depend inorder to create independent management units.

In order to improve governance the federal andprovincial governments must:• Set clear long term policies;• Modernise regulatory systems;• Promote extra-juridical conflict-solving mechanisms;• Create a federal water council to coordinate inter-

jurisdictional and inter-institutional relations; and • The Federal Government must ensure the participa-

tion of the provinces and these ensure the participa-tion of municipalities in inter-jurisdictional organisa-tions.

Governments must also create the proper mecha-nisms for ample and effective public participation, ack-nowledging that informed decision-making processesrequire an understanding of the root of the problem, itsscope and any alternative solutions, including non-structural ones.

In order for public participation to fulfil its inten-ded role access to the formal educational system isindispensable and all educational levels, both formaland informal, should instil in their students their duty ascitizens to make public issues their own. Curriculashould include information on the question of watermanagement.

Public communications play an essential role inachieving public participation in contemporary demo-cracies, translating technical problems so that the publicas a whole is familiarised with them and understandsthem, motivating the public to take an interest in theproblems and identify with possible solutions. For this tohappen, technicians and scientists must develop closelinks with journalists and other communicators, elabo-rating a fluid and constant communications programmegoing beyond the traditional diffusion of disasters (flo-ods, droughts, mud slides, etc).

It is of fundamental importance to create alterna-tive channels of communication to the traditional ones,as these are normally private companies subject to eco-nomic pressures, which can inhibit them from supplyingobjective and accurate information in every case. Onealternative could be provided by specific discussiongroups, both virtual and real, plus the magazines andweb pages of non-governmental organisations.

Drinking water supply and sewage and water fora subsistence economy

Water must be seen not only as a resource butalso as a service.

In order to guarantee governance in the allocationof water rights it must be demonstrated that the use isbeneficial, operating under conditions of efficiency andequity, and that the termination of the right be enforced,as opposed to the perpetuity that rights currently enjoyin several provinces.


3. Summary of the Dialogue Held in Brazil

Summary of the Discussions of BrazilianEngineers on the Governance of Brazilian Wa t e rResources, February 2003.

This dialogue was carried out in stages, throughsub-regional and national meetings, with the participa-tion of 500 persons from central and local governments,academia, the private sector, NGOs, funding agencies,basin committees, and water users. The meetings wereorganised and supported by the Brazilian Institute ofWater Resources (IBRH).

a) The Concept of Governance

In Brazil, over the last few years, numerous dis-cussions have been held on the concept of Governance,at meetings where engineers specialised in water resour-ces have participated. More modern conceptual varia-tions have also been discussed, such as regime andgovernance. These are, in fact, partial discussions, sincewhat is being intensely discussed in Brazil, in nearly allmeetings, is the omnipresent issue of “Water ResourceManagement”.

The discussions on Governance took place, forexample, at the regional symposiums of the ABRH(Brazilian Association of Water Resources), in July 2002,at Campo Grande in the State of Mato Grosso do Sul,the Symposium of the Water Resources of the Centre-West, and in December 2002 at the Symposium on theWater Resources of the North-East, in Maceió, State ofAlagaos. These two events convened more than 500

participants, inclu-ding engineers andr e s e a rchers fromacademia, thepublic and privatesectors, representa-tives from NGOsand multilateralagencies, etc.

With the support of the GWP, two specific mee-tings were held. On December 13, 2002, in Brasilia, aroundtables was organised, called “Institutional Modelsfor Management”, within the framework of the meeting“Water Matters in Brazil at the threshold of the 21st cen-tury, an International Technical-Scientific Meeting”, incommemoration of the 25 years of the ABRH. OverJanuary 16-17, 2003, a specific meeting on Governanceand activities of the GWP in Brazil was held in Brasilia,in preparation for the Third World Water Forum.

b) The Governance or Management Crisis.

In Brazil, since the enactment of Law 9433 and,

Water resourcemanagement is whatis being discussedtoday in Brazil

more recently, since the creation of the ANA, “AgênciaNacional de Águas” (National Water Agency), the dis-cussion of water resource management has been makingprogress over the years. Although admitting that waterpolicy implementation in the country is slower thansome optimists had hoped, most Brazilian technicalexperts agree that today we have made progress over thesituation of a year ago, even greater progress over thesituation of five years ago and infinitely more progressover the situation of ten years ago. Water resourcemanagement policy in our country is a process and, assuch, goes much further than management or the crea-tion of mere administrative changes.

c) Water Governance and the Governance ofSanitation

It is the virtually unanimous opinion of Braziliantechnical experts that the Governance of Water, as a“natural asset”, should not be confused withGovernance of the Sanitation Sector, one of the sectorsusing this “natural asset”. The water resources sector inBrazil, after a long period of stagnation, is now fully lin-ked to the electrical sector (another important user),and, it is currently modernising its management structu-res and not its institutional framework. The same cannotbe said of the Sanitation Sector, which is facing an insti-tutional crisis due to the lack of an appropriate institu-tional model and the insolvency of traditional sector ins-titutions, among other problems.

d) Management tools for measuring quality inmanagement

One of the important themes preoccupyingBrazilian technicians centres on the quality of waterr e s o u rce management and how to compare differentmanagement systems. Management quality is currentlymeasured, although informally, by the availability of someof its main manifestations, such as, for instance, the deli-very of drinking water service and its tariffs. On the otherhand, comparing different systems can be very controver-sial, as this comparison can be based on: (i) the number ofexisting management tools; (ii) the quality of existingmanagement tools; (iii) the operational value of existingmanagement tools; (iv) the improvement in water qualityat the source; (v) the decline in conflicts over water use;(vi) the degree of user and public satisfaction with waterquality conditions, among others. Independently of theform and criteria used for evaluation, there is unanimousagreement in Brazil that water resource management sys-tems ought to be continually evaluated.

e) Regional divergences and diversities

Another subject frequently discussed in meetingsin Brazil on Water Resource Management is related to


4 Summary of the Dialogue in Colombia

Effective Water Governance in Colombia

The national two day workshop in December2002 in the City of Cali, was organised and supervisedby the Colombian Association of Sanitary andEnvironmental Engineering (ACODAL) and by UN,ECLAC, and attended by some 50 persons from differentlevels of government, the private sector, academia andNGOs.

Following the adoption of the PoliticalConstitution of 1991, Colombia became a participativerather than a representative State. This introduced to theconcept of Governance the achievement of a collectiveconsensus, on the basis of political, economic, social,and environmental variables, thus the integration of thecommunity in drinking water supply and basic sanita-tion service management.

The drinking water supply and basic sanitationsector has noticeable shortcomings due to instabilityand the absence of policies. There is also a scattering ofresponsibilities for policy definition, regulation, controland funding.

Colombia does not have a law or any integratedpolicy for planning and management of water resources.Drinking water supply companies, generally obtainingwater from small rivers, gullies and nearby springs,mostly lack river basin conservation programmes, nordo they have adequate storage, transport or treatmentsystems, or any financial basis for their funding.Conservation, regulation, and resource management isneglected. There is an urgent need for river basin mana-gement and regulation programmes and for a new lawand better water management.

Law 142 of 1992, the Domestic Public ServicesLaw, has not resulted in either sector cohesion or thedecentralization of service provision. The sector doesnot have accurate information, starting from the inven-tory of installed capacity, which differs from actualcoverage in terms of quality and reliability. This lawestablishes that the tariff regime must meet the followingcriteria: economic efficiency, neutrality, solidarity, redis-tribution, financial sufficiency, simplicity, and transpa-rency. From the first enactment of the tariff methodologyin 1995 by the Drinking Water and Basic SanitationRegulation Commission (CRA), public and private com-panies have edged closer to financial sufficiency at thecost of higher tariffs. It is urgently necessary to find abalance between the user and the service provider, inorder that the costs incorporated into the tariff becorrect.

The regulatory scheme has weaknesses in its met-hodology for calculating tariffs. Tariffs are calculatedusing accounting information, thus transferring any

regional diversity and the difficulty in building a singlemodel for the whole country. An example of this issue isthe Brazilian Water Law itself, regarded as a law suita-ble for humid climates, something quite distant from theclimate in the Northeast of the country. On the otherhand there is also national consensus regarding the factthat regional inequality and diversity should not beanalysed as a problem, but rather as a situation withdiverse alternative solutions, always respecting localparticularities.

f) Centralization and decentralization

Given the nature of the Federal State, waterresources management in Brazil must necessarily consi-der three levels of administration: Federal, State andMunicipal.

Without going into which Government levelwould be the most or the least appropriate for the diffe-rent aspects of water management, the discussion inBrazil is centred on the need for much stronger coope-ration between all levels of government and betweenthe public and the private sectors. There is agreementthat the River Basin Committees are the most appropria-te forums for promoting the necessary integration requi-red of the three levels of government.

g) Groundwater

Although, in the case of groundwater, the riverbasin may not be the most appropriate physical unit forwater and natural resource management, it is alwaysconsidered that each institutional form developed forsurface water (such as management tools) is also validfor groundwater, except in some very specific matters inboth water categories (surface and groundwater) andthat water resource management must always considerthe “hydrological cycle”.

h) Areas of agreement

Brazilian technical experts consider as waterresource management tools, not only the classic exam-ples cited in legislation, but also (i) any and all instru-ments, documents, institutions, processes, acts, systemsand networks, etc. which may have any kind of impacton the management of water resources. Furthermore, (ii)the best and most efficient water management instru-ment is still a good managing institution that is efficient,strong, well-structured, independent, and self-sufficient,and that (iii) with a good management institution and anefficient delivery system, it is possible to carry out anywater resource management. It is considered that (iv) themanagement of water resources must be a specific acti-vity, as specialised as possible, and its day-to-dayaspects must not be confused with that of environmen-tal management or with the construction of hydraulicworks. (v) Brazilian technical experts agree with theother points of consensus cited and commented on inthe document by Peña and Solanes.


administrative inefficiency to the user. There are noincentives for the concessionaires to increase coverageand quality, and, within a scheme applied to a largenumber of heterogeneous companies, this leads many ofthese to non-fulfilment and makes control and supervi-sion difficult. There is a need to review the current tariffscheme, punishing inefficiency and eliminating unne-cessary costs, but guaranteeing the maintenance of thewater resource through a payment strategy for thoseliving in “upper basin” areas to conserve water using areasonable water use rate. Initially work has to be doneon policy, drafting an appropriate policy for the drinkingwater and basic sanitation service that is consistent withthe reality of our country. There is a need to assess themodel applied for service provision to identify its strongand its weak points and to assess the current model forcontrol andß interaction between the Drinking WaterRegulation Commission (CRA) and the Domestic PublicServices Superintendency (SSPD).

The Natural Resourc e scode establishes that “theuse of water for profit, eit-her by individuals or bycorporations, whetherpublic or private, will bec h a rged a fee set by theNational Government,aimed at paying the costs

of the protection and renewal of Natural Resources”. Thisis applied to hydroelectricity generating companies, whohave provided important levels of financing that is beingdiluted in too many studies resulting in little investment.The money that by law is transferred for basic sanitationand environmental improvement projects is not beinginvested, money which ought to be seen as a payment foran environmental service aimed at defending the riverbasin and the area of influence of the project.

In the past decade, Colombia has seen large-scaleinvestments in the drinking water and sanitation sector,yet, paradoxically, it seems that every day we see thesector falling behind. Political management in the sectorhas been disastrous; funding is used for unnecessary,inappropriate and expensive works. There has been toomuch spent on studies, many of them duplicated, con-tributing in nothing to the systems. Technically we findourselves with scarce resources appropriate to thecountry and little availability financial and social resour-ces. Financially, Government efforts to obtain fundsfrom multilateral banking institutions have had unfortu-nate results, as these funds have been found to be “tied”to goods and services from the originating country, toengineering, consultants and goods and services fromthe lending country. Many of these funds arrived alreadyassigned to specified national and foreign engineeringcompanies.

Governance is supported by the legitimacy asso-ciated with public participation, but the truth is that

There is a need toreview thecurrent tariffscheme, dealingwith inefficiency

there is no open forum available in the cities for discus-sing these issues. We only find political manipulation,both by Municipal councils and by the Mayors’ offices,and great silence from professional associations and theacademic sector on subjects as sensitive as water resour-ce management. There is a need to close the gap, assessinvestments and projects and to generate a “criticalmass” towards Governance. There is a lack of studies onappropriate technology for the country regarding costs,operation and maintenance, and construction methods.The critical mass of engineers in defence of their work,formation, knowledge and experience no longer exists;the defence of engineering has to be faced at the acade-mic, trade, social and political level. It is proposed torecover the ability for constructive criticism, supportedby participative democracy, ensuring the application ofappropriate sector policies. It is proposed to argue forthe development and consolidation of an appropriatetechnology for our country, with a clearly defined set ofrules with clearly established terms of reference guaran-teeing an economicand correct use ofresources in the sec-tor.

The regulatoryframework of thesector is a patchworkof guidelines thatmust be unified, minimising the risks due to a lack of astable regulatory framework to promote sector invest-ment. The current government acknowledges the drin-king water and sanitation sector to be in need of urgentattention and is providing a framework for public policydefinition in the sector as the first mechanism for rea-ching agreements. As a second mechanism, an adminis-trative review of the sector is required, for which theColombian Association of Sanitary and EnvironmentalEngineering and the National Association of DomesticPublic Services (ANDESCO) propose the creation of aVice-Ministry of Water and Environmental Sanitation.Thirdly, interaction must be fostered with the legislaturein order to enact a Water Law that reflects in a balancedmanner, both for the user as for the supplier, under therequired environment and economic considerations, anefficient use of water resources.

The regulatoryframework of thesector must beunified


There is consensus in recognising that water is, byits nature, a hybrid resource, part public and part priva-te. This means that it will always be necessary to acceptstate intervention, but, on the other hand, that the usemade of water falls into the domain of the private sector.Consequently it is agreed that private management leadsto a better use of the resource.

ii) The existence of uncertainty in water manage-ment.

A second area of consensus was reached, agre-eing that there is a significant degree of uncer-tainty regarding its management, resulting fromeconomic, social and environmental issues.

iii) Chile has a democratic system, with a clearseparation of powers.

Our country has a democratic system with aclear separation of powers, where there is res-pect for the rule of law, with a more than accep-table level of voluntary compliance with legalregulations, and a judicial system capable of sol-ving the controversies presented to it, includingthose concerning water resources.

iv) The economic system is based on free enterpri-se and the protection of property rights.

Although the water code recognizes that water isa national asset for public use, it allows usagerights to be awarded to private parties. These areguaranteed under the constitution, as there is aproperty right embodied in them, The rights arealso freely transferable independently of landownership.

v) As part of this economic system, it is increa-singly accepted that freedom of enterprise andproperty rights can be subject to limitations toprotect the environment.

It is accepted that the freedom of enterprise andthe right to property can be limited by the needto protect the environment, therefore admittingthe possibility of regulating water resources.

vi) The State has a presence in matters related toregulation, supervision and the enforcement oflegislation.

It is accepted that the state should have a subsi-diary role in regulating water use. However, thisdoes not imply a failure to recognize the needfor a high-profile presence of state institutions inthe management of water resources, and in thesupervision and enforcement of regulations.

vii) Due to the variation in the geographic condi-

5 Summary of the Dialogue in Chile

In Chile, the dialogue was organized by ECLACand some 50 persons participated in a one-day works-hop, together with four sector working groups androundtables in regions.

a) In order to prepare the report “Water Governancein Chile”, commissioned by the DialoguesOrganizing Committee in Chile for the Third WorldWater Forum, sector roundtables were held and anational workshop organized, in preparation foradopting a common position for presentation at theThird World Water Forum.

Additionally, a meeting was held in the city ofIllapel with the members of the Choapa River Basindebating roundtable, plus a meeting with public sec-tor employees in the area of water resource mana-gement from the IV Region of Coquimbo.

b) In preparation for the discussion, a document wasdrafted listing issues with reference to water wherethere was a certain level of consensus, and thosewhere there remained some disagreement

The purpose of the meetings was to gather opi-nions on the preliminary document so that the finaldocument could include the various opinions putforward and so reflect a national position.

Various public sector officials, academics, members ofnon-governmental organizations, water users includingsmall farmers, heads of user organizations, among others,attended these meetings. Large companies did not parti-cipate, nor did any of their representative institutions.

d) As the point of departure for analysing watergovernance in Chile, it was suggested that a certainbasic consensus was needed regarding: (1) the func-tion that water resources play in society and (2) thepublic policies for managing, regulating or inducinghuman behaviour in water use and conservation.

e) A distinction was made as to who should adoptthese points of consensus between formal users andthose who are affected by these users, classed asinformal users. Formal users are understood to bethose having property rights, the rest of the popula-tion being informal users, who may be affected, to agreater or a lesser extent, by the availability of or theuse given to water, as they have legitimate interestsin the uses given to it.

f) With this in mind, consensus was reached in thefollowing areas:

i) The nature of water as a national asset of publicuse, yet from which private usage rights mayemanate.


tions of the country, the nature of water resour-ces is notoriously different in the northern, cen-tral and southern parts of the country.

The characteristics of each part of the countrymust be considered, as it is not feasible to makenational generalisations, because of the diversegeographical characteristics.

viii)Although in Latin America, in some places, thecoverage of sanitary servicesis deficient, Chile does nothave this problem.

Based on an estimate ofDecember 2000, out of atotal urban population of13,341,908 persons, 99.6%had access to drinking water,

while 93.3% were connected to a sewage sys-tem. Additionally, recently wastewater treatmentplants have or are about to come into operationthat would mean that over 50% of sewage willbe discharged after treatment.

g) Areas where there is a certain level of disagreement,or where further agreement must be reached, can bedivided into:

i) Issues related to water resource management

Although it is generally accepted, theoretically,that there ought to be integrated management ofwater resources related to the complete hydrolo-gical cycle and including the management ofground and surface waters, this is not the case inChile.

ii) Conflicts related to environment protection

Conflicts arise over: (1) the maintenance of aminimum ecological flow in rivers, affecting theavailability of water resources; and (2) the qua-lity to be maintained or achieved in surfacewatercourses and bodies.

iii) Conflicts over access to or availability of waterresources

The most important challenge posed for theconstitution of new water use rights is not inawarding surface water rights, but rather rightsover groundwater. Therefore, as we are dealingwith a national asset of public use, the originalgranting of which is free, the requesting partymust at least (a) justify the reasons for granting aright and (b) be obliged to use them during agiven period.

99% of thepopulation hasfresh waterservice

iv) Economic aspects of resource management

It would seem reasonable that the holders ofwater use rights, who do not use them effecti-vely, should pay a fee for unproductive posses-sion. However, the idea of the fee has beenquestioned, as hydrological variability does notallow for the use of all the water for which thereare usage rights.

v) Groundwater resources

One of the most important areas where consen-sus must be generated is in the management ofgroundwater resources.

vi) Structuring amechanism forconflict resolu-tion or con-sensus genera-tion

The fact thatconflicts aresolved exclusively through the courts generates asituation of winners and losers, in situationswhere the conflict could actually have been sol -ved through agreement.

It I necessary tocreate consensus onunderground waterresourcemanagement


• In pollution control, the country is very backward.There is no public awareness of the problems asso-ciated with pollution, or funding mechanisms, or anypermanent controls on receiving waters, or nationalpolicies or plans.

• The construction of large-scale hydroelectric workshas stagnated, as there is no national agreement onfinancing mechanisms or on how the private sectorcan participate.

• There are conflicts between ethnic groups and large-scale water users, especially in the oilfields.Administrative and judicial mechanisms for the ade-quate protection of the interests of indigenous peoplesremain to be developed.

• The conflict-solvingcapacity of thegovernment is verylimited. There is anabsence in thecountry of conflict-solving techniques,such as have beendeveloped in othercountries in recent decades.

Following are some comments on chapter IV thatought to be considered in Ecuador:

• In part 1, an important element that should be addedto the design of a governance system is the conside-ration of “the different administrative systems existingin the region”, such as centralized, decentralized,semi-decentralized, etc.

• In part 2, “the limits and conditions of usage rights”ought to be added as a legislative norm, to be able tomake adjustments in concessions, which may requirereview, because of special requirements (such aspublic interest, climate change, etc). Additionally, inreference to water resource planning agencies, it isnecessary to add that these ought to take into accountplans for natural resources related to water, as well asnational and provincial economic planning.

• With reference to the fundamental principles for theregulation of drinking water and sanitation services,the following should be added: “the efficiency in themanagement of the resource” and “the independenceof the companies supplying the service”.

• Because of the specific nature of services provided byeach water sub-sector, it is important to add the fun-damental principles that ought to be in place for theregulation of each one. For instance, for the irrigationsub-sector, the following could be added: acceptablelevels of water quality for irrigation, equable distribu-tion, fees in accordance with social and economicneeds, levels of user participation, proper aquifer use,etc; for the hydroelectricity sector: reservoir manage-

There is no socialawareness of theproblemsassociated tocontamination

6 Summary of the Dialogue in Ecuador

The dialogue in Ecuador was supported byCANAREN. Two local meetings and one national mee-ting were held, with the active participation of some 400persons representing the whole spectrum of key players.

In general, all the observations contained in thePeña and Solanes document are applicable to Ecuador,in particular the sections “conceptual framework”,“Relevance to Latin America” and “The Problems of theState and Civil Society”.

Particularities of the situation in Ecuador inclu-de:

• In Ecuador users are not grouped together in coopera-tives, as mentioned in the document, but rather inUser Committees, whose purpose is the coordinationof the operation and maintenance of irrigation andwater supply systems in rural areas.

• In the country there has been a very limited increasein public awareness of water problems.

• The constitution of the Republic of Ecuador defineswater as a social good within the public domain. Theissue of water markets was discussed by the countryin 1996 and was soundly rejected. However, thequestion ought to be further discussed to evaluate thepossibility of transferring usage rights within a groupof users under rules clearly defined by the State.

• With reference to the hierarchical dependence of thesector and its institutional structure, it is suggested inthe document that institutions generating policies andplans should be separate from the institutions respon-sible for operational planning, design and construc-tion. This is something that remains to be undertakenin Ecuador.

• The institution acting as Water Authority in thecountry (the National Water Resources CommissionCNRH) has no effective autonomy or independence.The CNRH Secretariat depends administratively onthe Ministry of Agriculture and Livestock, and is thussubordinate to one of the water users.

• The main problems discussed in the section on “eco-nomic rationale and social demands” are problemsthat Ecuador also faces, together with the conflictsmentioned between the state and private companies.

• The Water Law and other legal texts contemplate theparticipation of users and other interested parties;however, this does not occur in practice. Their parti-cipation is limited to the operation and maintenanceof small systems in rural areas. There is a need to esta-blish new strategies for public participation.


ment in accordance with other uses and potentialdamages, multiple use and tariffs, etc.

• With reference to the institutional arrangements forwater management, although independence is impor-tant, there should be interrelation with institutions incharge of other natural resources, such as soils, vege-tation cover, and the environment in general.

In general the proposals set out in the documentare applicable in Ecuador, given that the basic cause ofthe problems has the same source. It can be fully appre-ciated that the reason why the changes carried out in thelast decades do not necessarily reflect national situa-tions is that they were in answer to similar externalinfluences, such as the imposition of criteria by interna-tional institutions, and, to a certain extent, to the appli-cation of “gimmick” solutions by certain sector interestgroups supported by international institutions.

The criteria expressed in the document weretaken into account when analysing the situation inEcuador. The answer to improving governance in waterresource management is that simultaneous interaction ofall management instruments and initial professional lea-dership is necessary if fundamental changes are to beachieved.

The conclusion reached is that to achieve effecti-ve and efficient governance, the following elements areessential:

• Clearly defined objectives and policies.• Well-organized institutions with precise definition of

responsibilities and attributions.• Appropriate management instruments.

7 Summary of the Dialogue in Peru

The Dialogue in Peru included three localDialogues and one national workshop. The Dialoguebrought together some 200 persons from all nationalwalks of life and was coordinated and organized by theCatholic University. The national workshop was held inSeptember 2002.

1- Findings and recommendations

1.a-Areas of Agreement • Current regulatory shortcomings stemming from a

failure to reflect the particular situation in the regionhave been clearly identified during the dialogues.

• Priority should be given to modification of theWater Law and it is suggested that a general waterdirectorate be established, independent of any sec-tor (it is currently within the Ministry of Agriculture).

• Overcoming poverty and greater equity must begiven overall priority, beyond any other political oreconomic interest, in the design of any strategy forachieving efficient water governance.

• Rivalry between traditional and “modern” watermanagement systems is, according to the discussionin the dialogue, a source of regulatory and institu-tional conflict.

• Activities aimed at environmental sustainabilitycould be economically viable if environmental andsocial values were assigned to water and environ-mental services were subject to fees and charges.

• Water pollution is a fact established in all dialogues,as is the lack of regulations defining tolerable indi-ces and activities.

• There is a high level of ignorance among the publicof their rights and duties in the management andadministration of Water Resources. Real participa-tion by user and multi-sector committees must beachieved.


2- Summary of presentations

THE CURRENT SITUATION PROPOSALSSOCIAL GOVERNANCE

Public Health • There are few studies of the quality • Analysis of water quality through aand Health of water consumed both in terms of permanent monitoring system.Sanitation levels of pollution and of the • Enforcement of norms and monitoringEducation physical and chemical characteristics polluting activities.

of the water source. • Promotion of a “Water Culture” at the• There are no health education national, regional and municipal

programmes focusing on the political levels through the mass media treatment of wastewater, the use of and in educational centres and within agricultural chemicals or of drinking families.water consumption. • Carrying out Public Awareness campaigns

• There are no urban plans that take through the mass media and municipalinto account the risks associated with courses and workshops.areas vulnerable to floods and landslides. • Fostering the use of ecological agriculture

techniques without the use of agrochemicals.• Planning alternative opportunities for

settlements in vulnerable zones.Indigenous • The traditional organizational structure is not • Development of institutional and legal Rights, respected and there is a tendency to impose policies that consider the Rights ofRights of a global water management system that Indigenous Peoples and peasants in nationaltraditional disregards geographical differences. y campesinos dentro de las normatividadesorganizations • Current regulations do not respond to the regulations.and of the different situations and problems • Fostering the strengthening of community-Irrigation in the regions. based organizations and their respectiveCommittees • There is little clarity in the associations.

regulatory-legal aspects of the • Institutional strengthening of irrigationdefinition of territorial rights and in committees.the use of resources in traditional • Integration of traditional water management territories of indigenous peoples. in public institutions through public

• Regulators do not know the rules meetings.governing customary rights.

The • Inadequate management of • Training in the use of technology inEnvironment irrigation, drainage, and extractive accordance with water use and natural

use of natural resources causes soil resource capacity.degradation and loss of biodiversity. • Environment fees to finance reforestation and

• Deterioration of water quality through soil recovery programmes and trainingpollution of the upper basin increases the recuperación de suelos y talleres decosts of production and delivery of drinking workshops.water to users in the lower basin. • Elaboration of Environmental Education

• Deforestation and inadequate land programmes for inclusion in the schoolmanagement are linked to the curriculum.severity of natural disasters.

Public • Lack of dialogue and coordination between • Establishment of participatory management Participation public institutions and the population. mechanisms by promoting the strengthening

• The organization of users in of user committees.Associations or Committees is weak • Programmes within institutions for activeas they do not feel identified with public participation in the development of water issues and management and do priorities for the supply of basic services tonot know their rights and duties in the most disadvantaged. respect of public utilities. • Promotion of a new institutional structure

• Little representation by user through a reform of the State to protect and organizations in decision-making at defend indigenous peoples and their usethe municipal and administrative rights.

• levels. Excessive politicisation.


Training and • There is no sense of commitment or • Complementing the development of abilitiespublic common effort to solve problems on the for social management with the introductionawareness basis of the decisions and of training programmes in agricultural

responsibilities previously agreed to. development.• There is no community leadership-training • Informing through the mass media and

programme, as the development of social workshops on the uses and customs ofcapacities is not assigned adequate traditional societies.importance. • Developing courses in higher education

• There is no social consensus or definition on integrated water management.of priorities for training. • Encouraging public discussion and

participation in legislation through the use of the INTERNET.

• Building awareness and knowledge on pollution and environmental issues through open television.

POLITICAL AND ADMINISTRATIVE GOVERNANCERiver Basin • Excessive and complex bureaucracy in • Ecological planning of land use inManagement state institutions when dealing with any river basins.

request related to resource management. • Elaboration of a proposal for• Little public transparency in the design participatory management.

of management policies. Too many • Integration of the interests of users inpolitical interests. the upper and lower basin.

• Poor coordination between public and • Public authorities and employees mustprivate sectors, and between the users obey the laws emanating from the demandsin upper and lower river basins. of society. The regions must call for the

• Social instability and conflicts in elimination of the practice of politicalcommunity organizations between appointments by the central government.agricultural and non-agricultural users, indigenous and non-indigenous, users and the public.

• Absence of proposals with broad based multi-sector consensus. Imposition of sector interests or those of specific interest groups.

Research • There are no serious studies on the current • Establishment of an information system forsupply of and demand for water resources each river basin as a basis for the formulationor on river dynamics. of management policies.

• There are no studies of water consumption • Installation of hydro-meteorological by crop. networks.

• There are no specific studies of the factors • Development of adequate management affecting water resources in a river basin. techniques for each environmental situation.

• There is little information on natural disaster • Research and diffusion of traditionalprevention and early warning systems. techniques of natural resources

management.Multi-sector • Poor information on the water resources • Consolidation of participatory governance atagreements coupled with increasing demand due to the municipal, district, provincial and

demographic growth in both rural and departmental levels through public meetings.urban areas has caused serious conflicts • Creation of organizations for managingbetween users and utilities. integral policies (administrative and

• There is an overlap of functions among technical).government institutions. • Coordination between state and local

• There are conflicts between sectors institutions.due to the interrelationship between water quantity, quality, price and conservation.

• There are no conflict-solving arrangements.

• There is no link between emerging measures of social agreement and the political decisions taken or in progress.


Regulations • Lack of an adequate legal framework • Review of current legal frameworks.adjusted to the different situations • Promotion of regulations that consider thewithin the country. particular features of each region.

• Current legal uncertainty because of • Formulation of a consistent, integralthe consecutive delays in passing the legislation as a product of thenew Water Law. continuous agreement among interested

• Excessive politicisation in local parties.governments. Centralism.

• Lack of fairness between property and usage rights and gender.

• There is no regulation of international rivers. • Laws are ineffective in punishing

illegal polluters and withdrawals due tosuperimposition of institutional powers.

Control and • Environmental impact studies are not • Application of effective mechanisms tosurveillance carried out before actions related to the sanction users and offenders.

resource are implemented. • Permanent monitoring of activities related• Pollution parameters and degrees of to water use.

fragility have not been clearly defined • Agreed commitments between usersso as to adjust them to regulations. and competent authorities.

• Non-compliance with environmental • Forcing wastewater and solid wasteregulations. management systems to comply with

regulations.Water Authority • Conflicts among the different state • Proposing a model river basin

institutions responsible for coordination authority through public discussion.of river basin management. • Elaboration of a proposal for a Law on

• Absence of a single management River Basin Authorities.organization for each river basin. • Establishment of a basin board or council

for regulation, conflict resolution and management supervision of the resource at the river basin level.

ECONOMIC GOVERNANCEPriorities • Economic and social development • Economic governance of the river basin must

priorities determine political decisions give priority to the search for sustainableindependently of the needs and capacity agricultural and livestock developmentof the natural resources. alternatives Social and economic valuation

• Land use planning should adopt natural of water.disaster prevention as a priority. • Spatial rationalisation of settlements and

• There is a lack of funding support economic activities.for sustainable activities in tune with • Development of programmes promotingthe natural characteristics of each river basin. sustainable economic activities.

• Inadequate policies for the promotion of profitable and environmentally sustainable activities.

Drinking Water • Inadequate management of water and • More information and transparency inSupply and sanitation utilities. management through consensus building.Irrigation • Lack of transparency and participation Carrying out public studies and information

of user organizations in administrative on supply of and demand for watercouncils. resources.

• Strong politicisation in appointments • Transparency in management thoughand in management policies. permanent information: locally through

• User unawareness regarding their rights the mass media; regionally, throughand duties and lack of capacity to conferences.participate in the administrative boards • User boards must be represented in theof utilities. There are no strong user administration of utilities through organizations. technicians.

• There is no institutional structure to • Making public and enforcing urbanprovide adequate drinking water and development plans.sanitation services in rural areas.


The conclusions of the workshops are summari-sed as follows:

• To address economic sustainability in the planningof strategies for effective and participatory waterr e s o u rce and river basin management it is necessaryto tackle the issue of both agricultural and urbantariffs for reaching full service provision. It is notfeasible to continue presenting strategies subsidizedby the State, nor is it possible to go on using thewater resource as an inexhaustible good or as alatrine for human use. Economic sustainability alsorequires market studies to ensure profitable com-m e rcialisation of the production in a river basinthrough the design of economically profitable andsocially and environmentally sustainable activities.Here lies the importance of the intervention of theChambers of Commerce. There has been no identi-fication of ecotourism activity and its implicationsfor the use of the resource. Ecotourism is a “green”industry and of significant economic importance inthe region.

• Overcoming poverty and achieving equity must begiven overall priority before any other political or eco-nomic interests in the design of any strategy for achie-ving efficient water governance.

• Rivalry between traditional and “modern” watermanagement systems is, according to the discussionin the dialogues, a source of regulatory and institutio-nal conflict. The question is: In what does this con-flict consist?

• Activities aimed at environmental sustainability couldbe economically viable if environmental and socialvalues were assigned to water and environmental ser-vices were subject to fees and charges.

• Environmental health, sanitation education, and waterquality configure a basic triangle in social governan-ce strategies for water. Water pollution is a fact, esta-blished in all dialogues, as is the lack of regulationsdefining tolerable indices and activities.

Infrastructure • Incomplete offers to supply service. • Funding of studies for adequate works.• Inefficient investments as works are not • State responsibility for the completion of

designed according to contingencies proposed works.and impacts.

• Lack of drinking water supply infrastructure in rural communities.

• Insufficient budgets for constructing and maintaining works.

3- Summary of seminar discussions

• There is a high level of ignorance among the public oftheir rights and duties in the management and admi-nistration of Water Resources. It is generally proposedto strengthen and educate user organisations.

.

• Current regulatory deficiencies due to a failure ofadjustment to the particularities of each region havebeen obvious in the dialogues. In the case of riverbasin management and monitoring, however, would itnot be necessary to think of a system capable of moni-toring proscribed or polluting activities specific toeach basin?

• Regarding political governance, there is a feeling inrural communities that they have lost an organizedsystem for managing the resource by the communityand that “more modern” management systems, morecomplicated for the users, have displaced them. Theintroduction of new technologies by means of whichwater is now taken from its source and carried directlyto the cities by pipes has changed access to theresource and has made them dependent on “outsider”organizations.

4- General discussion and conclusions:

Participants

The total number of participants in the three dia-logues was 127.

Grouped by major social groups:• 39 representatives from government institutions• 35 representatives from universities and research

institutions• 9 representatives from International Cooperation

organisations • 1 representative from the communications media • 30 representatives from civil society • 2 representatives from the church


tion in the meeting.

• The various local participants expressed their interestin continuing the Dialogues and in Piura andAyacucho there are already organisations for this pur-pose. In Amazonia a water management and gover-nance council bringing together the main playersfrom all public and private areas is needed. At thenational level, the General Environmental HealthDirectorate, DIGESA, is in process of creating an envi-ronmental management group (GESTA) for water. InIquitos, there is a plan to launch a follow-up pro-gramme through the Faculty of Chemical Engineeringof the National University of the Peruvian Amazonia.

The proposed initiatives are along the followinglines:

• Creation of a water culture.• Appropriate valuation of water.• Food safety issues.• Involvement of candidates from political parties

in learning about this issue (related to regionali-sation).

Finally, the Dialogue on Effective Governance hashad quite a high impact in Peru; governance has beendebated as an important issue in several fields. Also, ari-sing from this initiative, several institutions (public insti-tutions and universities) have approached the GWP-Peru and have expressed interest in joining it. At thesame, a neutral platform has been created where inte-rested parties from different backgrounds have beenable to exchange views in a harmonious environmentand it is expected that this initiative can move forwardduring 2003.

• 8 representatives from NGOs• 5 representatives from public utilities

In general, the most remarkable aspect of the par-ticipation in the dialogues has been the ample represen-tation of civil society in the form of NGOs, User Boards,Irrigation Committees, neighbourhood committees, andCivil Defence committees. This indicates an increasingpublic interest in participating in decisions and strate-gies concerning the use of water resources and in put-ting forward their demands and interests.

At the same time, the participation of representa-tive political authorities competent in the formulation ofmanagement policies and regulations has been conside-rably reduced, which has negatively affected the futureimpact of this effort to seek participatory governance.The representation of sectors responsible for regulatory,technical, and administrative control has been impor-tant, although their lack of real practical representationwas criticised.

Suggestions for Continuing the Dialogue:

• There is a need for further analysis of the factors thatlead to efficient water management both at the natio-nal and at the local level by institutionalising thesedialogues in the future.

• There were several suggestions that the PeruvianWater Association (Global Water Partnership-Peru)should be open to everybody. The National NaturalResources Institute agreed to support the organisationof a two-day dialogue to discuss the proposals of thedifferent institutions. The national environmentalcouncil (CONAM) underlined its coordinating roleand for this reason it could be the appropriate organi-sation to plan the agenda and obtain ample participa-


8 Summary of the Dialogue in Paraguay

Main Ideas Discussed at the Workshops, the Governance Forum, and in Plenary Meetings in Paraguay

The dialogue in Paraguay had two phases, a two-day workshop involving 50 municipalities followed by anational one-day workshop. The workshops were sup-ported by ECLAC, the Paraguay Water Resourc e sAssociation and the Centre for the Study and Educationin Ecodevelopment (ALTER VIDA). There were over 160participants present at the national workshop,November 2002.

Water Resource Management: Knowledge and theexchange of information

It is of paramount importance for the country toknow the extent of its water resources and to understandtheir value, both in quantity and quality. This includes aregistry of water users and of water balances by riverbasin and micro basin. In general, it is necessary to havea geographical survey of water resources as the guidingparameter. It is also necessary that local governmentsparticipate in this geographical survey. Data and mapsare needed pertaining to critical environmental aspectsin water resource use, as well as information aboutsocial and economic conflicts arising from undueresource use, among other things.

This would require establishing a water resourcesinformation system, and contributing to the debateabout the centralisation or decentralisation of any infor-mation system.

The need to construct a reliable information sys-tem for water resources reflects a heartfelt concern putforward in the dialogue: the need for a national waterresources plan, where clear definitions are establishedof how the country means to use its resources, or thedevelopment of a water vision, as a basis for outliningthe objectives and steps to be taken for governance andsustainable use of national water resources.

In the same way, it is necessary to gather andorganise existing information, currently dispersed, onprojects, evaluations, and research carried out on waterresources at the national level. Similarly, there is a needto configure information networks (projects, statisticaldata, evaluations, and management methods) and, ingeneral, create information networks.

Emphasis was also placed on constructing regio-nal databases to provide local governments (municipali-ties and provincial governments) access to up-to-dateinformation regarding the local water resource situation.

Legal Framework

On repeated occasions calls have been made todefine regulations for the water sector. This could be inthe form of a General Water Law or Water Code to beagreed upon by all sectors. The enactment of a WaterCode should also include jurisdiction for its application(laws and courts). It is also indicated that it is necessaryto separate the legal framework from the administrativeand institutional framework.

The materialisation of the initiative put forwardaccentuated the need to clarify several conceptualpoints. The example is cited that, in accordance withcurrent national legislation and bearing in mind the con-cept of “usage and custom”, groundwater is private pro-perty, which leads to the conclusion that there exists ade facto privatisation of water resources. Thus, it is para-mount to emphasise the need to treat water as a publicgood belonging to the State of Paraguay, without discri-minating among its sources (atmospheric, surface orgroundwater).

Regarding the legal framework, it has been poin-ted out several times that the current one is insufficient.It is indicated that,with the enactmentof the law establis-hing the RegulatoryInstitution for WaterSupply andSanitation (ERSSAN),several other lawsand articles wereabolished, genera-ting important legal loopholes in the regulatory structu-re. An example of this is that, with the enactment of ERS-SAN, the only institution that carried out water qualitycontrol, the SENASA (the National EnvironmentalSanitation Service), dependent on the Ministry of PublicHealth and Welfare, has been left outside the system.

As expressed in the report of the consultant in thebackground document, in the last few years the countryhas been in a conceptual void, as there is a markedweakness in the concept of water as a natural resourcein the legal framework, added to the fact that, by cuttingback the relevance to the subject of the Ministry ofHealth (as in the case of water quality), the concept ofwater as a public health issue has also been weakened.

Finally, the need is indicated to work within amulti-disciplinary team in order to properly define allexisting vacuums, overlaps and legal deficiencies toincorporate these into the new proposed regulations.

The enactment ofa Water Codemust also includeapplicationjurisdiction


having cross-border management or involving larg e - s c a l ewater resources (River Apa, Pantanal, Bañados de Ñeem-bucú, hydroelectric basins, Chaco supply waters,Guarani aquifer, etc.)

Suggestions made by the participants in theGovernance Forum

Regarding Dsta Bases

• A survey of users• A survey of institutions and involved groups • The organisation of a data base of available pro-

jects in universities and sector institutions• A study of the size of the market (with several

alternative scenarios) in the area of drinkingwater and sanitation.

• A survey of positive experiences in water resour-ce management

• A survey of the human potential (technical andscientific) existing in the country.

Regarding the Working and Management System

• Create working teams (focal groups)• Set up sector working teams• Decentralise water governance• Set up lines of cooperation among the professio-

nals of the sector institutions to elaborate andgive priority to project profiles on water resourceresearch and assessment

• Carry out joint management by the different sec-tors (public and private) of water resources (surfa-ce and groundwater)

• Work with all participants • Work as a unified group, as water involves all

sectors (multi-disciplinary)• Reach multi-sector agreements• Construct an information network on water-rela-

ted research.• Achieve practical communication among the

various involved institutions and follow-up activities• Establish water quality monitoring stations

With Reference to Participation

• Participation of decision-making sectors • Real participation of the three powers of the state:

The Executive: National Water AuthorityLegislative: Water CodeJudicial: Laws and Courts. The “Grupo Chaco”

• Strengthen public participation (ParaguayanWater Resources Association and others)

Proposed Actions

• Develop a shared vision on water management • Elaborate Integrated Water Resource Management

principles and set out policies for action • Design procedures for effective governance

Management and Coordination Systems

Integrated Water Resource Management requiresthe implementation of a working methodology, as hasalready been developed by countries currently carryingout Integrated Water Resource Management projectsand have greater relative development in managementand social and political organisations for these purposes.

There are various projects at the national andlocal level in the area of Integrated Water ResourceManagement which are dispersed, providing the possi-bility of coordinating efforts and implementing jointactions.

It has been pointed out many times that there areprofessionals trained in developing Integrated WaterResources Management research and development inthe country (human capital).

Decentralisation

It was suggested that decentralisation be conside-red not only in administrative terms, but also in consi-deration of geography, such as a partition following cri-teria based on river basins or regions. At the same timethere is a need to define the roles and functions of insti-tutions.

In many cases, closelinks can be establishedbetween local adminis-trations and river basinsor micro river basins.

In other cases, andwhen the administrative,political or organisatio-nal situation in a regionindicates it, the conceptof an AdministrativeRiver Basin can be

incorporated. That is, a group of municipalities in aregion, sharing similar production systems, land uses,ecosystem characteristics, etc, can manage several riverbasins or micro basins in a coordinated and collectivemanner. An example would be the municipal associa-tion of the southern Alto Paraná, the current recipient ofriver basin or micro basin management projects finan-ced by the World Bank and coordinated by the Ministryof Agriculture and Livestock.

A review of the legal framework is suggested, basedon this example and emphasising the decentralisation ofwater resource management, using article 13 of the LawCreating the Environmental Secretariat, which allows thedecentralisation of Secretariat functions in favour of theprovincial governments and municipalities.

It was argued that the discussion must include the mana-gement of specific large-scale projects, such as projects

Integrated WaterResourceManagementrequires theimplementation ofa workingmethodology


• Define institutional roles at general and specificlevels of water management

• Seek consensus among sector institutions onwater resource management

• Review the legal framework and bring it up todate

• Redesign and update the regulations • Define and identify the participants at the diffe-

rent levels of water management: • Economic - Production• Scientific - Research• Technical- Regulatory• Political - Public• Evaluate the current condition of water resources

in the country • Carry out a scientific evaluation of the water

resource, its variability and changes• Develop water quality regulations for various

uses • Identify the uses and create a prototype model for

reconciliation of competitive uses • Increase and rationalise knowledge of the water

resources (quality and quantity) and their poten-tial for use.

• Promote and create awareness on water use inthe family and on the part of the public in gene-ral.

• Apply the Integrated Water Resourc eManagement model.

• Organise meetings to seek consensus among therelevant participants in the national water policyfield

• Invest in dissemination and the creation of socialand political awareness of the importance ofwater resources.

9 Summary of the Dialogue in Uruguay

Regional and National Governance Workshops in UruguayConclusions Reached on the Main Issues

General Considerations:

Highlighted as relevant,• The significant changes observed both in water uses

and water quality requirements that pose a challengeto current water resource management.

• Growing agricultural use of water, coupled with insuf-ficient knowledge regarding the environmental cost ofagricultural activities.

• The growing importance of environmental quality inwater regulation.

• Incorporation of the health sector in water regulationdue to its importance for health.

• Management of ecosystem protection within a frame-work of a policy regulating natural resource use as awhole.

• Large cities as areas of concern due to their impact aslarge-scale users of the water resource.

• Concern about felling and ultimate loss of nativeforest, particularly along the banks of watercourses,specifically as the consequence of the expansion ofagricultural activity (particularly rice).

• The impact of mining on the water table and the asso-ciated pollution.

• The need for a two-way relationship betweenIntegrated Water Resource Management (IWRM) andGovernance.

• The need for Integrated Water Resource Managementto represent a comprehensive resource managementapproach including related ecosystems.

Social Considerations.

It would be convenient to,• Develop a regional focus, based on geographic crite-

ria, to progress in integrated river basin management.The Departments (Municipalities) can take on amanagerial and participating role in the managementof river basins, but this commitment presupposes acost-benefit analysis.

• Try to achieve a direct relationship of environmentalmanagement with local development problems.Improvements in environmental quality have a positi-ve impact on the quality of agricultural and industrialproduction and also on the requirements for entry intothe more demanding international markets. However,it demands reform programmes that would implymore integrated development and regional manage-ment programmes.

• Obtain greater involvement of the departmental admi-nistrations in river basin management, as well as thenecessary public participation. This demands a betterexchange of information between the central admi-


Legal Considerations.

Special emphasis was given in all the workshopsto the following,• Water must retain its character as a public good.

Despite this, there is concern about certain partial pri-vatisations in the water sector and the importance ofinformation and communication systems for publicparticipation.

• The need to improve dissemination of informationand of the knowledge available, involving the respon-sible public institutions in this effort, to achieve anappropriately shared participation of the public andprivate sectors.

• Guarantee the quality of available information so thatit can be taken into account by those responsible forlocal (provincial governments or intendencies) andnational development).

• Governance is conditioned by a clear definition ofwhat is to be governed, and in consequence by theinformation available about it.

• That there is a lack of sufficient information regardingknowledge of the hydrologic cycle in general and ofsurface waters in particular.

Economic Aspects

• The existence of a close relationship between envi-ronmental river management and the economic per-formance of productive activities was pointed out.Reference was also made to the current tendency inthe international marketplace to use food coding pre-requisites or the ISO-14000 regulations as non-cus-toms entry barriers to agroindustrial products intointernational markets.

• In order to satisfy their clients in the markets of theEuropean Union, numerous agroindustrial producersmust undertake productive activities under conditionsthat can be certified as environmentally friendly.

nistration (the executive power) and departmentaladministrations.

• Propose appropriate negotiations regionally in orderto managing river basins as the ideal environmentalunit. This approach points in the same direction as thedecentralised management models proposed by thegovernment at the national level.

• Consolidate national solidarity in both directions, thatis, water for all uses and at the same time evaluatingand compensating for the opportunity cost represen-ted by water rights of some areas being destined toother areas for the benefit of all concerned.

Water Management Considerations.

• Ensure the necessary integrated management appro-ach to the coastal area and the Rio de la Plata basin.Emphasise the fact that water quantity and qualitymismanagement at the basin level has consequencesfor our coastal resources.

Institutional Considerations.

Emphasis has been placed on,• The structure of the State in matters relating to water

resources conditions their governance. In Uruguay,the quantity and quality of the resource is administe-red by various Ministries.

• Improved integration: (i) at the state level in order toreduce the dissociation of quantity and quality in

water resource mana-gement, (ii) obtaininga better vertical inte-gration of the State,I n t e n d a n c y, RegionalBoards and the public.Both top down as wellas bottom up. • The fact that the

existing legal frameworks are good, but controls arenot effective, so there is a need to improve monitoringmechanisms.

• The recognition that multiple institutional responsi-bilities affect the efficiency of resource use regula-t i o n .

• The fact that there are too many water- r e l a t e dagents, both at the institutional level and in thenumber of users in a river basin. Currently there areno mechanisms in place to harmonise interests ateither level.

• The fact that it would be neither prudent nor possibleto concentrate all decision-making in a single institu-tion, as it would end up, among other things, carryingout self-assessments in matters of water use and theirassociated environmental costs.

• The fact that Basin Institutions are the proper environ-ment for water user participation and for sharedmanagement for coordination and consensus buil-ding.

It would not beprudent or possibleto concentrate alldecision-making ina single institution

Effective Water Governance in the Americas: A Key Issue

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