Independent Water Entrepreneurs in Latin America: The other private sector in water services

A report by Tova Maria Solo, 25 September 2003

In the Latin America and Caribbean region (LAC), it is estimated that 76 million of the region's 510 million people do not have access to safe water. Clean water is in very short supply in towns and cities, where people depend on elaborate systems of aqueducts, pipes, treatment plants and sewers to get their water.

Although small scale providers of water supply and sanitation services have been around for several decades, it was not until the late 1990s that they began to gain international recognition as key players in the water and sanitation sector. Small scale providers of water supply and sanitation services extend access to underserved communities, mainly poor, urban households outside the reach of public utilities in many developing countries.

The new Bank report, Independent Water Entrepreneurs in Latin America- The other private sector in water services, offers a first overview of small scale independent providers in six Latin American countries: Argentina, Bolivia, Colombia, Guatemala, Paraguay and Peru. In the cities reviewed, private providers reach approximately 25% of the local populations, which reflects the key role of this stakeholder in the challenge of supplying water services to an additional 120 million urban dwellers by 2015, and reducing by half the current coverage deficits established by the Millennium Development Goals in Latin America.

Independent providers in Latin America run a wide range of product and service lines, as well as of ownership patterns and size. Small scale providers range from fixed networks (piped delivery), serving as many as 14,000 households, to mobile providers (tanker trucks), serving individual households and institutions. Many small operators also offer value-added water, such as bottled, bagged, filtered, flavored waters and ice. Although small scale providers typically operate without external funding, and with limited government oversight and support, most of them offer services of good quality at a price that may be comparable to or lower than that offered by the public utility while quickly responding to the demand of consumers.

The extent of the coverage of independent providers varies depending on the city and the country. For example, in Santa Cruz, Bolivia, cooperatives are the only water suppliers for the city's one million people, and no municipal utility, public or private, has ever been established. On the other hand, private providers in Cordoba, Argentina, account for 10 to 15 percent of water services, covering about 38,200 households. The contribution of independent providers to the local economy is also considerable. In Asuncion, Paraguay, 400 aguateros have invested over US$ 30 million to provide service to 75,000 households, and have recovered both operating and investment costs fully.

Findings

The study concluded that small enterprises can be part of the solution in the provision of water and sanitation services in Latin America, and that different government policies can promote or hinder the scale and quality of their response, as well as their potential contribution to the improvement of living conditions in Latin America.

The report recommends that:

• international donors, financiers, and developers consider the value of this other private sector before undertaking major investments in the water sector;
• national and local governments review their statutes and regulations in order to open the doors to independent providers, enable competition, and ensure that their investments are secure before the law;
• independent providers themselves also need to begin networking, develop their strength through associations and business training in order to defend their rights without setting new entry barriers or fixing prices.