Water supply and sanitation in Chile

Chile Chile Chile ,officially the Republic of Chile , is a country in South America occupying a long, narrow coastal strip between the Andes mountains to the east and the Pacific Ocean to the west. It borders Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage in the far... : Water and Sanitation

Data
Water coverage (broad definition)	95%
Sanitation coverage (broad definition)	91%
Continuity of supply (%)	100%
Average urban water use (l/c/d)	195.5 (2006)
Average urban domestic water and sewer bill for 20m3	n/a
Share of household metering	96% (2006)
Share of collected wastewater treated	82% (2006)
Urban annual investment in WSS	US$23.1/capita (2006)
Share of self-financing by utilities	High
Share of tax-financing	n/a
Share of external financing	Low
Institutions
Decentralization to municipalities	No, central government regulation
National water and sanitation company	None
Water and sanitation regulator	Yes
Responsibility for policy setting	Ministry of Public Works
Sector law	Yes (1988, amended in 1998)
Number of urban service providers	20
Number of rural service providers	n/a

Water supply
Water supply
Water supply is the provision of water by public utilities, commercial organisations, community endeavours or by individuals, usually via a system of pumps and pipes...

and sanitation
Sanitation
Sanitation is the hygienic means of promoting health through prevention of human contact with the hazards of wastes. Hazards can be either physical, microbiological, biological or chemical agents of disease. Wastes that can cause health problems are human and animal feces, solid wastes, domestic...

in Chile
Chile
Chile ,officially the Republic of Chile , is a country in South America occupying a long, narrow coastal strip between the Andes mountains to the east and the Pacific Ocean to the west. It borders Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage in the far...

is characterized by high levels of access and good service quality. Compared to most other countries, Chile's water and sanitation sector distinguishes itself by the fact that all urban water companies are privately owned or operated. The sector also prides itself of having a modern and effective regulatory framework, including an innovative subsidy to water demand by the poor. One weakness of the sector is the relatively high water losses.

This article is part of a series of articles comparing the institutional and financial characteristics of water supply and sanitation around the world.

Access

According to the regulatory agency SISS (see below), the Chilean urban areas access to water supply stood at 99.8% and access to sanitation at 95.2% in 2006, which is one of the highest levels in Latin America.

		Urban (87% of the population)	Rural (13% of the population)	Total
Water	Broad definition	100%	58%	95%
Water	House connections	99%	38%	91%
Sanitation	Broad definition	95%	62%	91%
Sanitation	Sewerage	89%	5%	78%

One of the reasons of the high coverage rates in Chile is the early effort for extending and improving the infrastructure (see below). As a result, in 1990 97% of the urban population was already connected to water and 82% to sanitation.

Service quality

Service quality is generally good in Chile. It is regularly controlled by the SISS since it was founded in 1990. The agency examines if the services comply with the Chilean norm NCh 409, which was modified for the last time in 2005 and includes standards concerning water quality, water pressure and continuity among others.
At the beginning of the 1990s, there were problems regarding the chlorination

Chlorination

Chlorination is the process of adding the element chlorine to water as a method of water purification to make it fit for human consumption as drinking water...

systems of some water service providers. Consequently, in 1991 20% of the companies did not comply with the bacteriological norms. In 2006, this share had dropped to about 1%. In the same period, compliance with disinfection norms increased from 89% to more than 99%.

Water supply is continuous (24/7), both in urban areas and in concentrated rural areas and water pressure is adequate

The sector currently undergoes a major wastewater treatment

Wastewater Treatment

Wastewater treatment may refer to:* Sewage treatment* Industrial wastewater treatment...

investment program with the goal of treating 100% of all collected municipal wastewater in 2012. This share has increased from 8% in 1989 to 82% in 2006.

Water use

Water use has gradually decreased since 1998. 96% of the water consumption is measured, which results in precise information concerning water consumption. In 2006, the total water consumption was 958 million m³. Each customer thus used on average 19.9 m³ per month, resulting in 196 liters per capita and day. Water consumption is highest in the capital region, ranging from 44m3/month (Aguas Cordillera) to 125m3/month (Aguas de Manquehue).

History and recent developments

The Chilean water supply and sanitation sector today is characterized by one of the best coverage and quality levels of Latin America. One of the reasons was a gradual and lasting extension of infrastructure which began in the 1970s. In the 1990s, most utilities improved their economic efficiency and became self-financing companies which were partially handed over to the private sector.

Before 1977: A fragmented sector structure

Before 1977 urban water and sewer services in Chile were provided by a multitude of public entities. The largest entity was the Sanitation Department (Dirección de Obras Sanitarias, DOS) of the Ministry of Public Works, which was in charge of service provision in towns outside of the two largest cities, Santiago and Valparaíso

Valparaíso

Valparaíso is a city and commune of Chile, center of its third largest conurbation and one of the country's most important seaports and an increasing cultural center in the Southwest Pacific hemisphere. The city is the capital of the Valparaíso Province and the Valparaíso Region...

. In these two cities municipal utilities were responsible for service provision. The Ministry of Agriculture and the Ministry of Housing and Urban Development also had water and sanitation departments. To guarantee its operation, the service was directly subsidized by the national government.

1977-1988: The National Water Company SENDOS

In 1977 the national public water and sanitation company SENDOS (Servicio Nacional de Obras Sanitarias) was created which had 11 regional branches. The municipal utilities in Santiago and Valparaíso

Valparaíso

were corporatized and modernized. During that time employment in the utilities was significantly reduced.

The public utilities for Santiago and Valparaíso, EMOS (Empresa Metropolitana de Obras Sanitarias) and ESVAL (Empresa Sanitaria de Valparaiso), were strengthened through loans from the World Bank during that period. In parallel, the government of General Augusto Pinochet

Augusto Pinochet

Augusto José Ramón Pinochet Ugarte, more commonly known as Augusto Pinochet , was a Chilean army general and dictator who assumed power in a coup d'état on 11 September 1973...

privatized the electricity and telecommunications sector.

Water coverage during this period increased substantially from 78% in 1976 to 98% in 1988. Sewer coverage increased from 52% in 1976 to 82% in 1988.

1988-1998: Corporatization and Regulation

In 1988, the Chilean people denied General Augusto Pinochet

Augusto Pinochet

Augusto José Ramón Pinochet Ugarte, more commonly known as Augusto Pinochet , was a Chilean army general and dictator who assumed power in a coup d'état on 11 September 1973...

a new term in a referendum, thus passing a key step in the country's transition to democracy. Unlike the privatization and liberalization in other infrastructure sectors, reform of the water and sanitation sector was thus not imposed by the military government but initiated in a climate of democracy.

Between 1988 and 1990, a number of legal reforms and the creation of new institutions had two principal objectives:

The service providers should become self-financing through higher tariffs which represent the real costs of the services and more efficient performance
Water supply and sanitation coverage and quality should become universal

Therefore, in December 1988 the General Water and Sanitation Law (Ley General de Servicios Sanitarios) allowed the granting of 13 regional concession

Concession (contract)

A concession is a business operated under a contract or license associated with a degree of exclusivity in business within a certain geographical area. For example, sports arenas or public parks may have concession stands. Many department stores contain numerous concessions operated by other...

s to public, private or mixed shareholding companies in each of Chile’s regions. In 1990 the regulatory agency SISS (Superintendencia de Servicios Sanitarios) was created through a separate law. An innovative model of tariff regulation was borrowed from the Chilean electricity and telecommunications sector: Efficient cost levels were estimated for an imaginary model company and used as a benchmark to set tariffs for the utilities. Means-tested subsidies (i.e. subsidies that are granted only to those that demonstrably have limited means) were also introduced at the same time to cushion the effect of the tariff increase on the poor. The legal framework with some modifications is still in force today.

Initially the regional companies remained public, but the intent was to prepare them for privatization. During that period they achieved financial self-sufficiency, were granted tariff increases, improved their efficiency and increased coverage . The regional companies were also transformed into private law companies (Sociedades Anónimas). Investments increased from less than US$ 80m annually on average during the 1980s to US$ 260m in 1998. However, regional utilities still did not have sufficient resources to expand wastewater treatment.

1998 and after: Privatization

Under the government of the Christian Democrat President Eduardo Frei

Eduardo Frei Ruiz-Tagle

Eduardo Alfredo Juan Bernardo Frei Ruiz-Tagle is a Chilean politician and civil engineer who was President of Chile from 1994 to 2000. He is currently Senator for Los Ríos and was President of the Senate from 2006 to 2008. He attempted a comeback as the candidate of the ruling Concertación...

the law was amended in 1998 to promote private sector participation. The stated motive was to increase efficiency, to improve service quality and to mobilize capital to extend wastewater treatment. Subsequently all regional branches of SENDOS, as well as the water and sanitation companies of Santiago and Valparaiso, were privatized. Staffing was further reduced, new complaints management procedures were introduced and the share of collected wastewater treated increased significantly.

Contrary to the case of many other Latin American cities where the private sector was asked to provide services, the Chilean service providers were financially self-sufficient when the private sector took responsibility for them. The public companies had been prepared to gradually improve efficiency and profitability since the legal reforms of 1988-1990. This may explain the stable process of private sector participation compared to other Latin American cases. A factor that explains the continuity of sector policies during various administrations is the fact that all Presidents since Chile's return to democracy in 1990 belonged to the same Coalition of Parties for Democracy

Coalition of Parties for Democracy

The Concert of Parties for Democracy , more often known as the Concertación, is a coalition of center-left political parties in Chile, founded in 1988...

.

The privatization was carried out in stages, beginning with the five largest of the 13 regional water companies serving more than 75% of users. Because of the staging, it is possible to compare the performance of the privatized and public utilities at that time. This comparison shows that from 1998 to 2001 private companies invested substantially more than public companies and - unlike the public companies - increased their labor productivity significantly. Tariffs increased for both types of companies, but more so for the privatized ones. However, according to one study, "in Chile a social consensus emerged that has made the higher water rates acceptable given the improvements in service quality and the addition of new services such as wastewater treatment."

The participation of the private sector occurred in two different ways. From 1998 to 2001, when the biggest companies were privatized, the majority of their shares were sold to the private actors. Since 2001, the government decided to not continue to sell parts of the companies, but to transfer the operation rights of the companies to private actors for 30 years. This latter way of private sector participation which is also known as concession

Concession (contract)

, differs substantially from selling shares of the companies: (i) The period of participation is limited to 30 years and (ii) the infrastructure remains property of the Chilean state. All seven companies which were privatized in the second way merged in 2005, assuming the name ESSAN.

According to the World Bank's Private Participation in Infrastructure database, investment commitments by the private sector in Chile's water and sanitation sector reached US$ 5.7 bn in 1993-2005 through 20 projects, with US$ 4 bn of commitments made in 1999 alone through 4 projects. 7 projects were divestitures, 10 were concessions and 3 were greenfield projects in wastewater treatment plants.

The Socialist Presidents Ricardo Lagos

Ricardo Lagos

Ricardo Froilán Lagos Escobar is a lawyer, economist and social democrat politician, who served as president of Chile from 2000 to 2006. He won the 1999-2000 presidential election by a narrow margin in a runoff over Independent Democrat Union candidate Joaquín Lavín...

(2000–2006) and Michelle Bachelet

Michelle Bachelet

Verónica Michelle Bachelet Jeria is a Social Democrat politician who was President of Chile from 11 March 2006 to 11 March 2010. She was the first woman president of her country...

(since 2006) maintained the basic institutional structure of the sector established under previous governments based on private service provision, means-targeted subsidies and regulation by a public, autonomous regulator.

Policy and regulation

Responsibility for sector policy in Chile is vested primarily in the Ministry of Public Works, which grants concessions and promotes rural water supply and sanitation through its Department of Sanitation Programs. The responsibility for regulation is shared between the Superintendencia de Servicios Sanitarios SISS, the economic regulator in urban areas, and the Ministry of Health which controls drinking water quality standards in both urban and rural areas.

The SISS controls water and sanitation services in urban areas according to financial and quality norms (see above). To guarantee political independence, it is a decentralized organization with its own budget. The SISS has the right to impose fines on the service providers in case of violation of norms, which directly flow in the regulator's budget. Furthermore, it receives user complaints, assesses their validity and acts on them. The agency has databases of all 53 urban service providers.

The water and sanitation regulatory system in Chile is considered by the WHO

Who

Who may refer to:* Who , an English-language pronoun* who , a Unix command* Who?, one of the Five Ws in journalism- Art and entertainment :* Who? , a 1958 novel by Algis Budrys...

to be a model not only for Latin America, but also for Europe. One of its innovative features is the use of a hypothetical efficient model enterprise to assist in determining if tariff increases requested by service providers are justified.

Rural areas

In the Chilean rural areas, the ministry of health and the ministry of economy are responsible for supervising water cooperatives and water committees. However, in rural areas there is no independent regulator, such as the SISS in urban areas. Since 1994, the Direction for Water Works (DOH) is in charge of executing the national program of Rural Potable Water (APR). Unlike urban service providers, rural water supply and sanitation sector has not been subject of regulation like urban services. Currently, the Government of President Bachelet has submitted before the Chilean Congress a Bill to give this sector a new institutional framework. According to Law 19,549 of 1998, urban concessionaires have to provide technical and administrative assistance to water committees and cooperatives in their respective region.

Service provision

Water supply and sanitation services in Chile's urban areas is provided by 53 entities. To prevent monopolization, the providers were classified into three categories according to the percentage of the population served by them. No person or society is allowed to possess more than 49% of the companies within one category:

Category	Criterion	Number of companies	Total category share of population
Bigger companies	Serve more than 15% of total population	2	50.5%
Medium sized companies	Serve between 4 and 15% of total population	6	34.3%
Smaller companies	Serve less than 4% of total population	45	15.2%

The three largest companies are

Aguas Andinas, serving the capital Santiago, majority-owned by the Spanish company Aguas de Barcelona,
the Empresa de Servicios Sanitarios del Bio-Bío ESSBIO in the sixth region
O'Higgins Region
The VI O'Higgins Region is one of Chile's 15 first order administrative divisions. It is subdivided into three provinces. It is named in honour of Bernardo O'Higgins Riquelme, one of Chile's founding fathers....

and eighth region
Bío-Bío Region
The VIII Biobío Region , one of the fifteen first-order administrative divisions in Chile, comprises four provinces: Arauco, Biobio, Concepción, and Ñuble.The capital of the Region is Concepción...

around Concepción
Concepción, Chile
Concepción is a city in Chile, capital of Concepción Province and of the Biobío Region or Region VIII. Greater Concepción is the second-largest conurbation in the country, with 889,725 inhabitants...

, majority-owned by the Latin American Investment Fund Southern Cross, and
The Empresa Sanitaria de Valparaíso
Valparaíso
Valparaíso is a city and commune of Chile, center of its third largest conurbation and one of the country's most important seaports and an increasing cultural center in the Southwest Pacific hemisphere. The city is the capital of the Valparaíso Province and the Valparaíso Region...

ESVAL in the Valparaíso Region
Valparaíso Region
The V Valparaíso Region is one of Chile's 15 first order administrative divisions.Valparaíso Region, 2006 With the country's third highest population of 1,539,852 million in 2002 and third smallest area of , the region is Chile's second most densely populated after the Santiago Metropolitan Region...

owned by various institutional investor
Institutional investor
Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets...

s.

Together the three companies serve 63% of urban water customers in Chile.

Even though the sector is privatized, the Chilean state still holds 36% through its Production Development Corporation (CORFO)

CORFO

Production Development Corporation is a Chilean governmental organization that was founded in 1939, by President Pedro Aguirre Cerda, to promote economic growth in Chile...

. As shown in the following table which shows the situation of 2006, the majority of the sector was still owned by Chilean actors.

Organization	Percentage	Country of Origin
CORFO	35.7%	Chile
Aguas de Barcelona	17.0%	Spain
Southern Cross Group	10.7%	Argentina
Grupo Hurtado Vicuña/Fernández León	8.8%	Chile
Grupo Luksic	5.3%	Chile
Grupo Solari	5.0%	Chile
Municipality of Maipú	2.3%	Chile
Iberdrola	2.0%	Spain
Others	13.2%

Rural areas

In rural areas, local water cooperatives and water committees provide water supply services. In concentrated rural areas (i.e. rural communitites with 150 to 3,000 inhabitants with a concentration of not less than 15 houses per km of water network), there was a significant development due to the national program of Rural Potable Water (APR). However, most isolated housings in Chile still lack adequate water connections.

Efficiency

Non-revenue water

Non revenue water is water that has been produced and is “lost” before it reaches the customer. Losses can be real losses or apparent losses . High levels of NRW are detrimental to the financial viability of water utilities, as well to the quality of water itself...

("water losses") in Chilean water companies was on average 34% in 2006, an unusually high level for a sector that is so modern in so many other aspects. The level of non-revenue water is thus still higher than in Germany, France or the United Kingdom. (see e.g. water losses in Germany). Indeed, non-revenue water in Chile increased from 29% in 1999 to the current 34%. The regulator considers a level of 15% as efficient.

In 2006, on average one employee of the urban water supply and sanitation providers served 418 clients, resulting in 2.4 employees per 1000 connections, below the Latin American average of 5.

Financial aspects

Tariff level Water tariffs in Chile differ substantially between regions, reflecting differences in the cost of supplying water. Tariffs in urban areas varied between US$0.8 (Aguas Manquehue in Chicureo) per cubic meter and US$ 4.1 (Aguas Patagonia in Coyhaique

Coyhaique

Coihaique , also spelled Coyhaique in Patagonia, is the capital city of both the Coihaique Province and the Aysén Region of Chile. Founded by settlers in 1929, it is a young city. Until the twentieth century, Chile showed little interest in exploiting the remote Aisén region...

) per cubic meter in 2006. In rural areas, tariffs only cover operation and maintenance costs

Affordability On average, the water and sanitation bill accounted for 1.14% of household income according to a 1998 survey by the National Statistical Institute. They varied between 0.77% for the highest (wealthiest) quintile and 2.35% for the lowest (poorest) quintile.

Financing and Subsidies Urban water and sanitation systems do not receive direct subsidies and are financed through the capital market, and ultimately through user fees. However, Chile has an innovative system of means-tested subsidies that allows qualifying poor households to receive a subsidy administered by the municipalities to pay parts of their water and sanitation bills. Rural water systems receive a partial investment subsidy that is defined in the Ley del Subsidio al Agua Potable y Saneamiento. By law, the subsidy can cover 25-85 percent of a household's water and sewer bill up to 15 m³ per month. The client pays the rest of the bill. Beyond 15 m³, households are charged full price. The subsidy is meant to target only those households that are unable to buy water at a subsistence level and is based on willingness to pay. In 1998, about 13% of households benefited at a level of ~$10 per month. The total cost of the program in 1998 was US $36 million. Opponents argue this subsidy program can act as a regressive policy and actually hurt the poor because a false assumption is made that high consumption is positively correlated to high income. On the contrary, poor families do not have access to efficient methods of using water in cooking, cleaning, and washing.

Investment Since the sector was prepared for self-sufficiency, investment increased significantly from an annual average of about US$ 100m in the period 1965 to 1989 to an annual average of US$ 242m in the period 1990 to 1998, when the first company was privatized. According to SISS, since 1998 the annual investment ranges between US$ 151m (1999) and US$ 443m (2002). Total investment in 2006 was US$ 325m.

Interamerican Development Bank

The IDB supports the water and sanitation sector in Chile through two technical assistance grants:

World Bank

Chile Infrastructure for Territorial Development

The World Bank supports the water and sanitation sector through a US$90m project approved in 2005, of which about 30% will be used for rural water supply and sanitation. The project is being executed by the Vice-Ministry of Regional Development in the Ministry of Interior. Investments are being undertaken in Coquimbo

Coquimbo

Coquimbo is a port city, commune and capital of the Elqui Province, located on the Pan-American Highway, in the Coquimbo Region of Chile. Coquimbo lies in a valley south of La Serena, with which it forms Greater La Serena with more than 400,000 inhabitants. The commune spans an area around the...

, Maule Region

Maule Region

The VII Maule Region is one of Chile's 15 first order administrative divisions. Its capital is Talca. The region takes its name from the Maule River which, running westward from the Andes, bisects the region and spans a basin of about 20,600 km2...

, Bio-Bio Region

Bío-Bío Region

The VIII Biobío Region , one of the fifteen first-order administrative divisions in Chile, comprises four provinces: Arauco, Biobio, Concepción, and Ñuble.The capital of the Region is Concepción...

, Araucania Region

Araucanía Region

The IX Araucanía Region is one of Chile's 15 first order administrative divisions and comprises two provinces: Malleco in the north and Cautín in the south....

, and Los Lagos Region

Los Lagos Region

Los Lagos Region is one of Chile's 15 regions, which are first order administrative divisions, and comprises four provinces: Chiloé, Llanquihue, Osorno and Palena. The region contains the country's second largest island, Chiloé, and the second largest lake, Llanquihue.Its capital is Puerto Montt;...

Chile - Ministry of Public Works DPL

Approved June 14, 2007, 20% of the US$30 million loan will be spent in the general water, sanitation, and flood protection sector.

Sources

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Policy and regulation

General Water and Sanitation Law (1988) Ministry of Public Works - Ministerio de Obras Públicas (MOP) Ministry of Health - Ministerio de Salud (MINSAL) Superintendency of Water and Sanitation Services - Superintendencia de Servicios Sanitarios (SISS)

Service providers

National Association of Water and Sanitation Service Providers (ANDESS) Aguas Andinas, service provider in Santiago de Chile ESSBÍO, service provider in Bio-Bío ESVAL, service provider in Valparaíso ESSAN, service provider in several provinces

The source of this article is wikipedia, the free encyclopedia. The text of this article is licensed under the GFDL.

Access

Service quality

Water use

History and recent developments

Before 1977: A fragmented sector structure

1977-1988: The National Water Company SENDOS

1988-1998: Corporatization and Regulation

1998 and after: Privatization

Policy and regulation

Rural areas

Service provision

Rural areas

Efficiency

Financial aspects

Interamerican Development Bank

World Bank

See also

Sources

Policy and regulation

Service providers