Glass Half Full: Chile’s Water Dilemma

From mining to agriculture, forestry and fishing, Chile’s main economic activities depend on fresh water. Producing copper, fruit, wine or salmon would be impossible without it. But water, taken for granted by most Chileans, isn’t limitless. In fact, a severe drought in the central-southern part of the country has withered crops and generated conflicts over water rights. But Chile is not the only country in this situation – the scarcity of water resources, especially for food production, is one of the most pressing economic and geopolitical issues facing humanity.

Water is, of course, vital for life. Two thirds of the planet is covered in it but most of this is saltwater and, to a lesser degree, polar icecap. In fact, only about 0.003% of the earth’s water is fresh and less than half of that is available for human consumption. As the world’s population has grown in the last 50 years and the intensity of water-use has risen, the demand for water has increased.

Add to this the effects of climate change, which has exacerbated droughts in some countries and caused flooding in others, and the world appears to be facing a water emergency.

“Water is a scarce resource and it will probably get scarcer due to growing demand for human consumption and productive activities, but the question is whether this scarcity will lead to a critical situation,” says Susana Jiménez, a senior economist at Santiago think tank Libertad y Desarrollo.

A river runs through it

At a national level, Chile is privileged with an abundance of water. According to data from the World Bank, Chile has total average surface runoff, generated mainly by rainfall or melting snow in the Andes, of 53,000 cubic meters per person per year, which is well above the world average (6,000m3) and the lower limit required for sustainable development (2,000m3).

In addition, Chile’s lakes and glaciers in Patagonia are an important hydro reserve which, if harnessed, could increase the country’s water availability to 70,000m3 per person per year.

But Chile’s water resources are unevenly distributed. A narrow country over 4,000km long that is sandwiched between the Andes on one side and the Pacific Ocean on the other, Chile is subject to a variety of rainfall patterns. At one extreme is the Atacama Desert in the north, with virtually zero participation, and at the other is the Valdivia rainforest in the Los Lagos Region which is one of the wettest places on earth.

“Chile has a lot of water, especially in the south, but our problem is distribution,” says Jiménez.

Most of Chile’s fresh water is located well south of Santiago where the supply (over 10,000m3 per person per year, according to the World Bank) far exceeds the demand. From Santiago north, however it is a different story altogether with surface water availability of less than 800m3 per person.

This creates an important challenge considering that over half of Chile’s population and 69% of its GDP is concentrated in Santiago northward, according to data from the National Statistics Institute (INE).

“From Santiago north we have an important shortage of water, especially in the summer months when it is most needed for agricultural irrigation,” says Gonzalo León, acting director of Water and Industry at the non-profit institution Fundación Chile. “This has been made worse by the recent drought.”

Water, water everywhere…

Chile’s vulnerability to climate change has been exposed as the country continues to suffer from one of the worst droughts on record. Now in its third year, the drought has reduced reservoir levels and shriveled crops in Chile’s agriculture-intensive central zone.

The drought, caused by the El Niño/La Niña weather phenomena in the Pacific Ocean, has been disastrous for the agricultural sector. The water deficit has reached 80% in some parts of the country and the Ministry of Agriculture has declared over 100 communities, nearly one third of the country, in agricultural emergency.

“Many small farmers in Chile are dependent on rainfall and they are particularly vulnerable to drought,” says Benjamin Kiersch, natural resources and land tenure officer at the UN Food and Agriculture Organization.

Drought periods are cyclical in Chile but climate change means that in the long-term the north is expected to become drier and the south wetter. This could create opportunities to plant new crops in southern Chile but make life more difficult for farmers in the north.

According to a 2010 study by the UN’s Economic Commission for Latin America (ECLAC), climate change could increase the average temperature in Chile by an average 4° Celsius by 2100 with serious consequences for water supply.

“This will lead to greater stress on hydro resources which could generate conflicts,” says Jiménez. Chile shares several rivers with Peru and Bolivia, while disputes could arise with Argentina over glacial water in the south, she suggests.

There is also mounting pressure from the demand side. As Chile’s economy has grown, so has its use of water for human consumption, irrigation, power generation and industrial uses.

According to the Ministry of the Environment, Chile’s total average water use is 4,710m3 per second, of which 89% corresponds to non-consumptive uses (mainly hydroelectricity generation) and 11% to consumptive uses such as irrigation in which the water that does not return immediately to the water cycle.

Agriculture is by far the largest consumer of water in Chile, responsible for 73% of total withdrawals. Household consumption in urban and rural areas is only 6% of withdrawals while mining and other industrial uses represent 9% and 12%, respectively.

By law, water utilities in Chile must own enough water rights to ensure household demand will be met, although tariffs could rise if they are forced to buy rights from third parties to ensure supplies.

As for mining, Chile’s largest economic activity, water demand is growing but is still a relative trickle compared to agriculture. “It’s surprising, but the volume of water used by mining is only equivalent to the flow in the Canal San Carlos [an irrigation canal in Santiago],” says León.

Deepening the water market

Chile’s current Water Code, established by the military regime in 1981, created a system of private water rights awarded by the state. If they are available, anyone can apply for these rights that, crucially, are not linked to land or to use.

“The water legislation of 1981 allowed Chile to develop water-related sectors with great success, especially the modernization of agriculture and irrigation,” says Javier Zuleta, the liaison officer of the World Bank in Chile.

Unlike other countries in the region where water access is largely undefined, in some cases leading to conflicts, the rules are very clear in Chile, says Zuleta.

This has led to huge improvements in sanitation and drinking water. “I remember a time when you couldn’t swim at Reñaca [a beach resort near Santiago] because of e-coli in the water, but that has changed,” he says.

Today potable water coverage in urban areas has reached 99.8% and 95.6% of the population is served by sanitation services, which puts Chile at the level of developed countries, according to figures from the Ministry of the Environment.

As hydrological priorities change and demand rises, Chile’s system of private water rights is supposed to adjust automatically through the trading of rights between users, but in reality the system has been inflexible, says the FAO’s Kiersch.

One reason is speculation. Until recently, rights holders were not penalized for obtaining rights they had no intention of using in the short term, thereby preventing others from using them. In 2005, a system of escalating fees was introduced into the Water Code to change this.

So far its impact has been minimal. “The fees haven’t had much effect in terms of liberating water rights so that people who actually use the water can legalize their situation,” says Kiersch.

Another problem is lack of information. In some cases, over-allocation of rights and confusion with regard to ownership has led to conflicts and accusations of theft.

“The de-facto ownership of rights needs to be formalized in many cases and there is no transparency of information in the market,” says Jiménez.

Kiersch also emphasizes the need for better information and enforcement. “In order to have a system of water rights that works you need to have a system to make sure those rights are honored and properly used,” he says.

In a study published last year, the World Bank recognized that Chile’s water market has been successful in establishing a regulatory framework and encouraging investment, but it includes a list of recommendations to improve the system’s efficiency.

These include making it easier to trade water rights, improving the availability of information about water resources and creating groups of water users to improve the efficiency and transparency of the market.

Creating associations of water users at a local level, as other countries like Australia have done, to resolve disputes and deepen the market for water rights would be a positive step, says Fundación Chile’s León.

Water for a rainy day

In the spring in Chile, water comes rushing down from the Andes as the snow melts, giving users a small window before it ends up in the sea. But there are ways of storing water on land to be used in the summer when supplies are scarcer.

Reservoirs are one way to do this and the Ministry of Public Works plans to invest nearly US$1 billion to build six new reservoirs through 2014. But there are other measures to save water that do not cost so much money or take so long, says the FAO’s Kiersch.

Farmers in central-southern Chile still use irrigation techniques that are wasteful, but measures such as drip irrigation and artificial canals to channel water into underground aquifers could improve efficiency, he says.

“New drip irrigation systems are much more efficient but these technologies depend in large part on the capacity of the farmer to invest,” he says. Since many small farmers don’t own water rights, they can’t apply for credit. “It’s partly a problem of infrastructure development but also water rights.”

Efficiency measures adopted by other industries include water treatment and recirculation systems, for example in industrial cooling processes, to reduce water usage. “In areas with less supply of water, the demand for efficiency is greater,” says Andrés Concha, the president of Chile’s manufacturers’ association, Sofofa.

Concha denies that lack of water has affected investment in Chile, pointing to the mining sector as an example of this, but he acknowledges that shortages are a problem for agriculture and mining. In addition to efficiency initiatives, Concha says actions are needed by the state to boost supply and improve the management of the system.

“Chile needs to give signs that it is working to increase supply, strengthen the system of property rights and improve the functioning of the market,” he says.

Supplying the north

But improving Chile’s water market and investing in efficiency will only keep its growing thirst satisfied for so long. In the long run, Chile still faces the problem of finding alternative sources of supply for businesses and cities in the north.

Some mining firms, like BHP Billiton and Minera Escondida, have already invested in desalination plants in the Atacama Region that convert seawater into fresh water for their processes. In some parts of the north, local utilities are also developing these plants for local populations and other industries.

In September, environmental authorities approved local water utility Aguas Antofagasta’s plans to build a US$120 million desalination project which would make Antofagasta the first city in Latin America to have its drinking water needs met entirely through desalination.

But desalination has a big drawback – it is costly. “Desalination is more expensive than using fresh water, especially at current energy prices,” points out Jiménez. In fact, energy represents around 80% of the cost of desalination which means it is highly sensitive to energy prices.

Given the current social opposition to large generation projects in Chile, desalination is likely to remain a pricey option. But other projects are being studied to transport fresh water thousands of kilometers from the far south to where it is needed in the north. “There are other ways to use this water, but they require huge investment and innovation,” says Jiménez.

One such project is the 1,600km AcquaAtacama pipeline being developed by French construction giant Vinci. The pipeline aims to transport up to 35m3 per second of water from rivers in central-southern Chile to the far north. Vinci’s Chilean branch, Via Marina, aims to present its feasibility study to the government in early October.

Chile would not be the first country to build such a pipeline; Singapore, which has virtually no fresh water of its own, imports 40% of its water from Malaysia through three undersea pipelines. But pipelines require electricity for pumping and are costly to build.

Another solution is to transport water by ship. The Chilean firm Waters of Patagonia, which has rights to 8,000 liters of water a second in the Aysén Region, is planning to ship water in large plastic containers to the Atacama Region and, eventually, for export to the Middle East and other countries.

“These projects are still in early stages, there is nothing concrete yet, but they are a possible long-term solution,” says Gonzalo León.

In the shorter term, improving water access requires the involvement of all water users in the decision-making process. As the World Bank suggests, more information would help farmers and others make better decisions related to water. But this will only help up to point since water supply is ultimately dependent on the climate.

Chile cannot predict the weather or control the effects of climate change but it does have the capacity to use its water more efficiently. There is little rain forecast in the next few months that could bring relief to farmers, but if Chile is able to harness its considerable water potential in the south, the glass could be half full.