Water Resources Management (WRM) in Chile is widely known for its 1981 Water Code—written after General Augusto Pinochet took control through a military coup d'état. Free-market mechanisms became the economic philosophy in WRM, including the development of water markets and tradable water permits. A major reform to the 1981 Water Code was signed in 2005 to address social equity and environmental protection concerns. Water resources management in Chile is shared among the private sector which provides investment for infrastructure and distribution, and agencies provide regulatory oversight, maintain records, and issue water rights. Chile is negotiating formalized agreements with both Bolivia and Argentina to manage shared resources and water storage projects. Chile is also supported in rural water supply with $150 million in loans by the World Bank and the Inter-American Development Bank.
Chile has three distinct hydrological regions: The dry northern regions, including the Atacama Desert, one of the driest places on earth The central regions are temperate and support the largest population centers of Santiago and Valparaíso The sparsely populated southern provinces receive large quantities of rain and snow.
There are a number of important rivers in Chile. The longest river in Chile, the Loa River, is located in the Atacama Desert. The largest river by volume, the Rio Baker is found in the Aysén Region, of Patagonia, and the Biobío, a source of hydropower, and the Maipo supplies Santiago with water.
Water quality is quite good in Chile and is recognized for outstanding water supply and sanitation systems. The National Commission of the Environment (CONAMA) set a goal to treat 95% of wastewater by 2010. Point source pollution from mining effluent and nonpoint source agricultural runoff is a problem as untreated water discharges into lakes, rivers, and aquifers. Chile has improved in this area since the 1980 declaration to 'live in a pollution-free environment'.
Chile has increased exports of fruits and wine requiring improvements and growth in irrigation technology and management. Future hydroelectric projects on the Baker River are in planning stages and should help Chile cope with its energy demands. Hydroelectric projects generate 40% of Chile's electricity. Copper mining is a major contributor to Chile's GDP and requires large volumes of water; thus creating contention between domestic uses for water and the needs to meet export demands of copper and fruits. Many glaciers exist in Chile and climate change is increasing the rate of melting. As melting continues, experts agree that hydropower, irrigation, and water supply for human consumption may be diminished.
Water resources management history Beginning in 1855, the State Civil Code granted licenses to private parties for exclusive use of water. Nearly one hundred years later, Chile adopted the 1951 Water Code that provided a system of water rights administration very similar to that practiced in the Western United States in that the government granted provisional water rights that became protected property rights after being used. In 1967, a new water code was enacted to replace that of 1951 and was part of agrarian law reform. The 1967 Water Code was intended to empower landowners to receive water and attempted to redistribute water as a component of the governments strategy to reform agrarian policy. The 1967 Water Code strengthened Government control of water and enabled redistribution of large estates and the expropriation of land and water rights to be reallocated and without any compensation to the previous holders. Land expropriated prior to 1974 was divided into small farms and the rights to land and water were granted to the current occupants, including approximately 48,000 small farmers. These reforms in part, and a deteriorating economic situation led to the military overthrow of Allende in 1973. The new military government of General Augusto Pinochet began adopting free-market economic policies and then signed a new constitution in 1980. The 1981 Water Code was soon to follow.
The Chilean water management model and 1981 Water Code Protected by Chile's 1980 Constitution, the 1981 Water Code established the framework by which the allocation and management of water resources are employed in Chile. Internationally known as the "Chilean Model", the Chilean experience in water resources management is characterized by its use of free-market forces and water markets to reallocate water to high-value use. Although private water rights existed in Chile prior to 1981, the previous water codes restricted the creation and operation of an efficient water market. When the Water Code was being drafted in the late 1970s and early 1980s, the government was concerned with irrigation and agriculture. The framers of the 1981 Water Code sought to achieve the efficiencies of market reallocation of water within agricultural and irrigation markets. As Hernan Buchi, ex-Finance Minister of Chile (1985–1989), stated, "the objective of the governmental action in this field was to create solid water use rights in order to facilitate the proper operation of the market as an allocation mechanism".
In his book on Chilean water law, "The Siren Song", Carl. J. Bauer provides a balanced critique of the Chilean model with both positive attributes and areas where the model has not worked so well. The problems include poor "environmental protection, river basin management, public interest, social equity, coordination of multiple uses, and resolution of water conflicts". Furthermore, Bauer writes that the legal and institutional framework has become unable to deal with problems related to the model. He goes on by saying that, "the current framework is characterized by a combination of elements that reinforce each other to maintain the status quo: strong and broadly defined private economic rights tightly restricted regulatory authority a powerful but erratic judiciary untrained in public policy issues and holding a narrow and formalistic conception of the law".
With support from World Bank and Inter-American Development Bank economists and opposition from command and control proponents, the Chilean model is widely studied and documented for its methods that are at the same time innovative and ideologically divisive. The 1981 Water Code ushered Chile into a regulatory environment based on free-market water management and away from the command and control methods that had failed prior to 1981 to effectively allocate water resources and capture economic gains. Bauer proposed that together with the 1980 constitution, the 1981 water code has been successful in achieving many of its original priorities, especially those strengthening private property rights. Original priorities of the Chilean model according to Bauer include, but are not limited to: "1) security of private property rights to encourage private investment in water use and infrastructure allowing new mining in northern Chile and the planting of high-value fruits and vegetables for export. 2) Tightly restricted government regulation of water use and water management. 3) Freedom to trade water rights to allow reallocation of water resources from low-value use to high-value use where transaction costs are low and water is scarce. 4) Autonomy of private canal users' associations from the government. This has encouraged organizations to improve their administrative and technical capacity. These associations primarily operate in the agricultural sector. 5) Creation of non-consumptive water rights to encourage hydropower developments".
Summarized below, power sharing and divided responsibility are hallmarks of the 1981 Water Code:
The executive power of the government is charged with the authority to plan, regulate, and promote the appropriate use of all water. Private stakeholders have greater power to invest in both domestic and agricultural water uses, water system maintenance, and play a role in the management of water supply and sanitation. Under the Ministry of Public Works, the Water Directorate carries out all measurement, research, and is authorized to grant water use rights. The Water Cadastre under the Water Directorate records all water rights and transactions.Article 122 of the 1981 Water Code
2005 Water Code reform The reform of the 1981 Water Code was passed in 2005 to address social equity and environmental concerns. For example, while efficiencies were gained and investment increased, the allocation of water rights without limits started to create problems such as the monopolizing of water rights for surplus, speculation, and to prevent competition into various markets. Details of the reform involved fifteen years of meetings, negotiation, disputes, and concessions. Throughout the political struggle to reform the Water code, the government's position on water markets became more favorable and they proposed reforms in response to strong political opposition from conservative political parties and private sector business interests.
Major aspects of the 2005 reform include: 1) Giving the President authority to exclude water resources from economic competition in cases where necessary to protect the public interest. 2) Obliging the General Directorate of Water Resources (DGA) to consider environmental aspects in the process of establishing new water rights, especially in terms of determining ecological water flows and protecting sustainable aquifer management. 3) Charging a license fee for unused water rights and limiting requests for water use rights to genuine needs, as a deterrent against hoarding and speculation.
Important dates during the fifteen-year water code reform process: 1992 The government introduced the first reform project 1996 The government made amendments and introduced a second project 1997 Water reform approved by Chamber of Representatives 1999 Reform was approved in Senate Committees 2000 Reform was approved (in general) by the Senate 2004 Reform was approved (in detail) in Senate Committees 2005 Final project was approved unanimously in both chambers to address social equity and environmental sustainability concerns
Source: Peña, Humberto. Ministry of Public Works : Chile
Water Markets New water rights are granted by the (DGA). When competition for solicited water rights arises, they are allocated through an auction with rights awarded to the highest bidder. An example of average annual water volumes traded between 1993 and 1998 in the Maipo and Mapocho regions recorded transfers of 821 L per/s and 161 L per/s respectively.
Water trading is not a common practice in most areas of Chile and individuals do not have expectations that they can resolve their water allocation problems through water market transfers. This is due to problematic distribution between markets, cultural norms that couple land and water rights together, the urbanization of irrigated land, and high transaction costs in many areas including expenses in titling unregistered rights, information costs, costs to modify infrastructure, and the opportunity cost of time invested in the transaction.
While not widespread throughout Chile, water markets have been well documented in the areas where they have been implemented. Studies have shown active trading for water use rights in the Limari Valley, where water is scarce with a high economic value, especially for the emerging agricultural sector. Trading between sectors has transferred water to growing urban areas in the Elqui Valley and the upper Mapocho watershed, where water companies and real estate developers are continuously buying water and accounted for 76% of water rights traded between 1993 and 1999. In contrast, water markets and trading has been more limited in the BioBio, Aconcagua and Cachapoal Valleys.