PROPOSAL OF A CRUDE WATER TAX FOR ECUADOR: A STRATEGY FOR LONG-TERM ECONOMIC AND ENVIRONMENTAL SUSTAINABILITY
The purpose of this essay is to collate the most significant components of a proposal for the implementation of a raw water fee1 in Ecuador, which is currently being developed by the Ministry of Water (SENAGUA for its acronym in Spanish), and is sponsored by the Biodiversity Finance Initiative (BIOFIN) of the United Nations Development Programme (UNDP).
Pablo Chafla holds a bachelor degree in economics by the Pontificia Universidad Católica del Ecuador as well as by the Universidad de Alcalá de Henares. He also holds a graduate degree in Environmental Management and Natural Resources by the Universidad de Alcala de España and a doctorate in Economic Science with a specialization in Environmental Economics and Economic Development by that same university. Pablo was an advisor, professor and research fellow of the PROMETEO programme of the Ministry of Higher Education, Science, Technology and Innovation (SENESCYT for its acronym in Spanish) of the Ecuadorian government.
The implementation of a raw water fee in the country, beyond its requisite nature as provided in the Organic Law of Water Resources, Use and Exploitation of Water (LORHUYA for its acronym in Spanish), is an economic and environmental necessity which would enable the very survival of the water system.
The task of drawing up, discussing, adjusting and socializing the proposal for a fee which the SENAGUA has been developing for over a year with various (mainly government) stakeholders evinces the difficulties of agreeing on a proposal that is undeniably complex and arouses opposition, given that its analysis goes beyond any technical elements contained therein and invariably ends up in the sphere of negotiation and political strategies, further complicating its implementation.
To reduce the pushback typical to any new proposal, given that both institutions and people generally feel more comfortable with more familiar issues, on the part of SENAGUA, utmost transparency as regards the information made public is required. This information must also be properly supported and verified by analytical and technical developments such as those presented in this essay.
To that effect, the use of the “preservation of water sources and catchment areas” as the cornerstone of the proposal for a raw water fee, will certainly contribute to minimizing the pushback from some groups of water users to the imposing of a fee, however, said preservation must be treated and understood as an investment and commitment to the future of the country. Only investing in preserving water sources and catchment areas, particularly drainage basins, which are the goal of SENAGUA’s public policy in terms of protection, will ensure that the vast majority of users are open and willing to pay this fee.
Preservation must be understood with an open and systemic (i.e. integral water cycle, basin, micro-basin, etc.), integral (economic, social and environmental systems), and long-term sustainability (future generations) approach.
In this case, in the context of the BIOFIN Project, a proposal has been put forward for the preservation of water sources and catchment areas (also known as ‘water factories’) amounting to 55 million dollars over a 5-year period. This investment has been adjusted and will in no way threaten the profitability of those who use water for production and would be subject to payment of this fee.2 While it is true that this investment will not cover all of this country’s needs in terms of preservation of water resources as the need may always increase, it should however be noted that the contribution that can be made in terms of a raw water fee to the water factories is significant.
The undeniable dependence of the country’s water industry on increasingly scarce public resources makes the implementation of a raw water fee an urgent need that will provide this industry a fundamental source of “permanent income” ensuring its sustainability, and allowing it to operate and plan its actions in the long term. The application of this fee is thus a requirement for the survival of this industry. Only these resources that contribute, for instance, to the operation and maintenance of water infrastructure such as the multipurpose irrigation projects, will guarantee a change of the production matrix and the food sovereignty that the country badly needs, or adapt to and mitigate the effects of climate change where these multipurpose infrastructures are intended, among other things, for flood control.
It should be noted that the proposal of implementation of a raw water fee strongly influenced by the preservation of water sources and catchment areas, and the maintenance of water infrastructures that guarantee the integral management of the system is, without a doubt , a pioneer initiative in our region, and should thus be sponsored and disseminated internationally.
Pablo Chafla Martínez, PhD.
Lecturer at the School of Administration and Accounting
Pontificia Universidad Católica del Ecuador
1 The term ‘raw water’ refers to any resource obtained directly from natural sources such as rivers, lakes, wetlands, underground aquifers, etc., and that does not undergo any physical or chemical treatment for its use
2 It should be noted that the fee proposal submitted by SENAGUA has been adjusted to and in line with the reality of the country as it will not generate significant impact in the financial profitability (2% impact average) of those users subject to payment of this fee.