Water privatization in Ecuador

Water privatization in Guayaquil began with the decision taken in 1995 to privatize drinking water supply and sewerage in Guayaquil, the largest city and economic capital of Ecuador, through a concession contract. In preparation for privatization, the previously separate water and sewer utilities were merged into a single utility in 1996. The new utility began a modernization process and began to improve its performance. In parallel, the international bidding for the concession was prepared by Banque Paribas as the international advisor and was supported by the Inter-American Development Bank. The latter made a loan that was signed in October 1997 conditional upon the decision to award a concession. The 30-year concession agreement between the city government and the private company Interagua was signed in 2001. The contract was "poor-friendly", requiring the private company to keep tariffs constant for the first five years and to connect new users in poor areas "at no cost". At the same time, the former municipal water and sewer utility ECAPAG became the regulatory agency for the new private utility. Interagua is a consortium led by the Spanish company Proactiva Medio Ambiente, which in turn is supported by the Spanish construction firm FCC and the French water company Veolia Environnement. In 2012 the regulator ECAPAG was transformed into the Municipal Public Drinking Water and Sanitation Company of Guayaquil in what may be a first step towards the municipalization of the concession.

The investments undertaken by the concessionaire are financed through retained earnings, the municipality and the State Bank of Ecuador. The government funds are deposited into a trust fund that the concessionnaire can only access under certain conditions. For the 2011-2016 period investments of US$ 380 million are expected to be financed by the concessionnaire (US$ 107.5 million), the municipality and the State Bank of Ecuador (US$ 150 million) as well as the national government and the proceedings of a tax called Special Improvement Contributions (Contribucion Especial de Mejoriamiento, CEM).

Before the concession, 50% of the city had only 10 hours service per day. In parts of the city water was supplied only 2 to 4 hours per day, often at low pressure. Commercial and physical losses in water distribution, technically called non-revenue water, stood at a staggering 79 percent. Only 46 percent of water bills were actually collected. And only 26 percent of all connections were metered.

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Wikipedia