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Funding management in Latin America: An informal survey of seven countries

E. Hernández Becerra

This article examines some of the issues regarding funding of watershed management efforts in seven countries of the Latin American region - Argentina, Colombia, Costa Rica, Ecuador, Guatemala, Paraguay and Venezuela - and considers potential ways of improving access to financial resources. The information for the article was derived from responses to an informal survey questionnaire circulated to selected watershed managers in each of the seven countries (see box for survey questions). The article is intended to be indicative of basic concerns rather than an exhaustive analysis.

Edgar Hernández Becerra is Director of the Centre for Postgraduate Studies at the Faculty of Forest Science, Universidad de los Andes, Mérida, Venezuela.

Integrated watershed management is a valid way of tackling the challenge of harmonizing conservation and agricultural, livestock and forestry production in upland areas with the management of water resources, especially when these resources have high socioeconomic value for downstream users. In Latin America, however, its application is being held back by a number of factors; one of the most important is a lack of financial resources. In several countries many of the basic activities involved in watershed management - reforestation and soil conservation practices, torrent control and extension work, fire control, road building and improvement, fisheries development, crop improvement, training in soil conservation, agroforestry, environmental and archeological protection, etc. - have been virtually paralysed owing to reduced budget allocations caused by, inter alia, payments on external debt. In other countries, for example Costa Rica and Guatemala, although basic efforts have been undertaken, lack of funds his blocked supplementary activities envisaged in watershed management plans, including pasture upgrading, land registration, torrent control and the increased use of chemical products in agriculture.

In May 1990, in response to a request from Unasylva, the author (with the assistance of Mr H. Hattinger of Austria and Mr E. Ramírez of Venezuela) developed and distributed an informal survey questionnaire on the financing of watershed management efforts to watershed managers in seven Latin American countries. It is apparent from the responses to the survey that there is a strong and increasing awareness among the countries of Latin America of the importance of the sustainable conservation of upland natural resources, for both local and national benefits. However, in response to the first survey question, "Is lack of funding a problem for the watershed management institution for which you work?" the answer was a universal and unequivocal "yes". Furthermore, all of the respondents indicated that lack of funding was a constraint on watershed management throughout their countries and was causing the abandonment of efforts that had been identified as essential to the conservation of catchments of national importance.

For example, the respondent from the National Forestry Institute of Argentina explained that the watershed management activities foreseen under the national programme for infrastructure conservation, developed by the Ministry of Public Works over the period 1985-89, were now at a virtual halt. In the face of growing external debt, national government support (both political and financial) of programmes that do not provide short-term, direct economic benefits has been drastically curtailed. For example, in the case of Argentina, the change of political orientation loaf to the suspension of negotiations for support for watershed management efforts from the Inter-American Development Bank.

Levels and sources of funding

It was difficult for the respondents to quantify total resources assigned to watershed management in their countries on an anneal basis, because the various organizations involved administer their budgets independently and do not have offices providing up-to-date general information. However, estimates ranged from US$1.5 million in Ecuador to as little as $6000 in Paraguay.

Sources of watershed management funding identified by the respondents may be divided into four major groups: national institutions; international aid agencies; international banks; and the local private sector. Direct government support has traditionally played the major role in the provision of funds for organized watershed management efforts. However, as evidenced by the example of Argentina above, this is an increasingly less viable mechanism. As a consequence, several of the countries in the Region are experimenting with the application of legislation that encourages or orders the transfer of monetary resources to conservation and management.

Venezuela has forestry land and water regulations that return profits from hydroelectricity to watershed management

One of the most significant attempts in this area is the enactment of legislation that mandates the transfer of part of the profits of energy sales by national hydroelectric companies to institutions entrusted with the conservation of the watersheds that provided the energy. In Colombia, national law number 56, enacted in 1981, decrees that 2 percent of total block energy sales from generating plants with an installed capacity of over 10 Kw shall be dedicated to watershed management.

Articles 50 and 5l of Venezuela's Forestry Land and Water Regulations have a similar objective. Instead of quantifying the resources to go to conservation and management, though, they leave the amount to be agreed annually between the hydroelectric companies and the Ministry of the Environment.

Guatemala and Costa Rica are each currently designing new Water Bills that will require 1 percent of sales of water-generated services to be invested in conserving the watersheds that provided them.

Another means of ensuring national-level funding of watershed management that is being tested is the application of property taxes.

The above-mentioned Colombian law also requires a share of property taxes to be allocated to watershed management practices. For example, the Valle del Cauca Corporation (see box) imposes a tax on all urban and rural properties valued at more than 100000 Colombian pesos.

Colombia's Valle de Cauca Corporation

The experiment being tried by the Autonomous Corporation of the Valle del Cauca (CVC) in Colombia is worth examining in the search for local models for obtaining funds for watershed projects.

The watershed of Alta Cauca covers an area of some 22000 km2. Beginning in 1986, the watershed management group of the CVC adopted a new approach based on an analysis of each of the 28 management units. The aim was to identify local-level efforts based on community participation that would have the most cost-efficient impact on watershed degradation. The process was based on three basic principles: involving the community right from the planning stage; boosting those activities with the highest productive and social impact; and encouraging private-sector financial participation.

Priority micro-watersheds were identified, their situation was analysed, plans of action were drawn up and monetary values were assigned to the estimated productivity increases (upstream) and damage avoided (downstream). Investment projects, including financial appraisals, were then produced. The investment projects were submitted to the coffee producers' committees, the sugar refineries, the local elected officials and the community. The aim was to make clear the tangible benefits the potential investors would obtain, for instance reduced flood damage, better water quality and higher agricultural productivity.

In the Desbaratado river subwatershed, after being made aware of the issues, the local community and businesses accepted the plan and established a fund for watershed management. The initial capital of US$20000 was placed with the Foundation of Higher Education in a counterpart agreement that guaranteed an additional contribution of 50 US cents for each dollar donated. The fund, with a value of $30000, is being held by a commercial bank at an annual interest rate of 36 percent. Seventy percent of the income goes to financing activities under the plan and the remaining 30 percent to capitalizing the fund.

The government's role is primarily one of encouragement, of training personnel to draw up investment projects well and of exerting a decisive influence on the political sphere in which the relevant decisions are taken. If models of this kind prove successful, they will help create a climate which will further facilitate the passing of laws or decrees that set up special funds to finance regional or national integrated watershed management plans.

Local coffee producers' committees were involved in the funding of watershed management activities

International funding

International multilateral and bilateral assistance continues to be important to watershed management in Latin America. The European Economic Community is providing finance in Costa Rica; the United States Agency for International Development and the Organization of American States are assisting in Guatemala; FAO is providing financial and technical support in Mexico, Honduras, Bolivia, Argentina and Colombia; the Swiss bilateral agency is active in watershed management in Bolivia and Ecuador; and that of Japan is involved in Chile and Venezuela.

While the contribution of external funding was recognized by the respondents, it was clearly seen as a short-term solution. Activities implemented under externally funded watershed management projects may permit the stabilization of endangered watersheds, but they cannot guarantee long-term sustainable conservation. Permanent mechanisms need to be developed, to ensure that when project funding is terminated, the situation in the watershed does not deteriorate.

Additionally, it is apparent from the responses of several participants in the study that in some cases a lack of capability in the drawing up of technically and financially valid watershed management projects is creating a situation where the availability of international funds exceeds the country's ability to absorb them.

Funding of watershed projects has come, on a much smaller scale, from the international banking community. The Inter-American Development Bank is financing studies in Guatemala and Ecuador, and has been asked by Venezuela to fund project implementation in three priority watersheds. However, similar problems to those concerned with international grants apply to loans for watershed management. As early as 1983 McGaughey and Gregersen noted that "a great deal of useful technical information on the [forestry] sector circulates, but very little of it is used to develop the type of information needed by financing institutions - both public and private - to evaluate opportunities for productive investments in the sector. As a result there is an inadequate number of bankable projects in country and international lending institution pipelines."

An upland area in Costa Rica. Note the erosion above and below the house

Private sector contributions to watershed management

Although none of the respondents attempted to quantify in monetary terms the contribution of the private sector to watershed management, in many of the survey responses the value of local participation is implicit. For example, one respondent from Colombia pointed out that "much emphasis must be placed on the work of the community; man is the most important factor in plans for watershed management and conservation".

The participant from Paraguay, where virtually no organized watershed management efforts are under way, asserted the need to "stimulate the organization of local people affected by watershed degradation and their involvement in conservation activities, particularly those that help increase agricultural production". The respondent from Costa Rica recommended the promotion of small-scale projects with varied activities.

It is apparent that more attempts need to be made to recognize and quantify the contribution of the private sector, and particularly the small-scale farmer in upland areas, to watershed management. The private sector is already, and must remain, a basic pillar of support for watershed management, especially when there are clear economic and social benefits to be derived therefrom.


The information gathered in the process of preparing this article clearly indicates that notwithstanding the serious funding problems facing watershed management in Latin America, attempts are being made to develop new mechanisms enabling this difficult task to be faced with new energy in the future. What is needed is creativity, determination and persistence, as well as the means to circulate valuable information among countries.

We face the challenge of showing that management of productive watershed activities generates environmental, economic and social benefits; in other words, that outlay on reversing processes of environmental degradation and social neglect is a justifiable expenditure, an investment that will yield a secure return in the future.

We also need continued assistance from international organizations that occupy an impartial position in the international framework, to make interesting cases widely known, to encourage action in this field and to help further develop the means by which the countries in the region may adequately handle programmes or projects concerned with the development and conservation of watersheds.

Informal survey questionnaire


1. Is lack of funding a problem for the watershed management institution for which you work?

2. What institutions contribute as sources of funding to watershed management efforts? Ministries, hydroelectric industries, regional and local governments, local communities, etc.) If possible, indicate whether funding is primarily provided for studies, implementation and/or maintenance.

3. What is the approximate magnitude (in US$) of the contribution of each institution listed above, and v hat percentage does this contribution represent of the total expenditure for watershed management?

4. What types of works or activities are financed? (Reforestation, soil conservation, road construction and improvement, dams or other means of torrent control, forestry extension or environment education, fire prevention and control, etc.)

5. Are there laws or other legal implements that encourage or oblige the funding of watershed management efforts?

6. Please describe a significant experience you have had (positive or negative) with respect to the financing of watershed management efforts.

7. What mechanisms or strategies could be applied to ensure increased funding for watershed management, now and in the future (from government, private, international sources)?

8. Are there important watershed projects in your country that have been developed but not executed owing to lack of funding? 9. Do you have any additional comments, problems or suggestions?


McGaughey, S.E. & Gregersen, H., eds. 1983. Forest-based development in Latin America. Washington, D.C., Inter-American Development Bank.

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