Investment for Water Infrastructure Expansion,  No commodity is more essential for human life than water. Yet making water accessible and usable requires substantial infrastructure investment that too often has lagged far behind demand.

For example, the World Water Council estimates that some 1.1 billion people do not have access to safe drinking water, that another 2.6 billion lack basic sanitation and that, by 2025, some 3.5 billion people will live in places where water is scarce or becoming scarce. Such numbers primarily relate to less-developed global regions, where access to infrastructure investment capital is difficult.

Even in developed areas, however, water infrastructure expansion funding can be problematic. A contrasting look at the US and Latin America illustrates both the needs and the funding approaches that can be taken to prime the water-investment pump.

Latin America investment
Central and South America offer an interesting contrast to the US in the development of water infrastructure. The Latin American region is one of the water-richest in the world, yet water infrastructure in many countries has not kept pace with growing population needs.

Prior to 1990, many Latin American countries (for example,Argentina, Chile, Colombia, Panama and Peru) organized their water industries as national monopolies under the direct control of the central government. State-owned water companies were more often being treated as part of the political apparatus than allowed to function as efficient service providers, leading to overstaffing, artificially depressed tariffs, political targeting of new investments and politicized contract awards.

State ownership often resulted in a high-cost, low-service infrastructure with a scarcity of resources for development.Growing dissatisfaction with the performance of the national monopolies, combined with wider political pressure for decentralization across all areas of government, created the conditions for a move toward decentralized control in the 1990s.

In countries such as Argentina, Colombia and Peru, this entailed a sudden fragmentation of the industry with an increase in smaller municipal providers. Even after reducing private sector participation, many of these countries have unsatisfied basic needs, and water and sewage infrastructure still seem to be lagging behind the needs of the population.There has been significant private investment in Latin American water infrastructure. For example, Peru in 2007 sought to fund a $4 billion (USD) overhaul of its aging water systems when water regulator Sunass offered bonds with 25- to 30-year maturities in which the country’s private pension funds could invest.

To know more about this topic you can read the whole article here:

http://www.wcponline.com/pdf/1001FlowingIssues.pdf

About the author
S Jose Luis Vittor, partner of international law firm McDermott Will &
Emery LLP, has served as counsel on public and private partnerships,
infrastructure and other project development and finance transactions
in Latin America, Europe, Asia and the United States.

By Jose Luis Vittor