This chapter assesses El Salvador's performance in integrated water resources management and the provision of water supply and sanitation services to all. It reviews the situation with regard to the quantity and quality of water, the extent to which these are under pressure, and the country’s policy responses in this area. The chapter also offers a policy framework and instruments, with a view to improving the performance and cost-effectiveness of water risk management in El Salvador.
Multi-dimensional Review of El Salvador
Strategic Priorities for Robust, Inclusive and Sustainable Development
OECD Development Pathways
6. Water management and water and sanitation for all in El Salvador
Abstract
Introduction
Although El Salvador has not estimated the social cost of water insecurity. a joint analysis by the governments of El Salvador and the United States did find the poor quality and insufficiency of the supply of drinking water, and the treatment of wastewater, to be among the main obstacles to economic growth in El Salvador (MCC, 2011[1]). The delay in getting a water connection is among the single factors that most penalises El Salvador when it comes to doing business rankings (World Bank, 2020[2]). In addition, poor water quality has a cost not only because treating water to make it drinkable is more expensive when its quality is below par, but also because of the public health costs that stem from a lack of potable water. For example, insufficient water consumption is a major risk factor for chronic kidney disease, which affects around 13% of the Salvadoran population, and is the second biggest cause of death for men in the country (MINSAL/INS, 2017[3]; Orantes-Navarro et al., 2019[4]).
Water productivity – measured by national income generated per unit of freshwater abstracted – has remained relatively stable in El Salvador since 2000. By comparison with benchmark countries, it is within the middle range (Figure 6.1), but it is very low when compared to OECD countries.1 In OECD countries, gains in water productivity have stemmed essentially from improvements in infrastructure (e.g. less leakage, investment in water-efficient technologies such as drip irrigation, re-use of treated wastewater), and from an approach to water pricing that has increasingly reflected the true cost of the resource. This has encouraged a shift towards higher-value water uses, and structural changes in the economy (towards less water-intensive industries) (OECD, 2017[5]).
Figure 6.1. Water productivity in Salvador is within the middle range of benchmark countries
GDP per unit of freshwater abstractions
Source: (FAO, n.d.[6]), Aquastat for water abstractions, http://www.fao.org/nr/water/aquastat/data/query/results.html; (IMF, 2022[7]), El Salvador (website) for GDP, https://www.imf.org/en/Countries/SLV#countrydata.
With the publication of its National Integrated Water Resources Management Plan (the Plan nacional de gestión integrada del recurso hídrico, or PNGIRH) in 2017, El Salvador made progress towards the goal of integrated water resources management (IWRM) – a major achievement. The plan took stock of the water resources that are available, and their quality. It also assessed the risks of drought and flooding in the country. In addition, it assessed the demand for water from different sectors of the economy. Based on the scenarios of the national plan on climate change (2015), it also assessed the impact of climate change on water resources. The PNGIRH set environmental objectives for the quantity and quality of water and called for a new approach to governance in order to achieve them. In particular, the plan proposed to establish a general legal framework in order to regulate and promote IWRM, and a governing body to oversee the integrated management of water resources. In so doing, it was responding to the needs for legal reform in the sector, since El Salvador did not have a general law on water.
The adoption of the General Law on Water Resources (the Ley General de Recursos Hídricos, or LGRH) constitutes a major milestone in the management of water resources in El Salvador. This law was adopted in December 2021, enacted in 2022, and has been in force since June 2022 (Asamblea Legislativa, 2022[8]). Five previous water bills were prepared between 2006 and 2018 but failed to win the necessary majority for adoption in the legislature. The LGRH aims to regulate integrated water resources management and its sustainability, to guarantee the right to water and water security in the interests of ensuring a better quality of life for all citizens of El Salvador, and to promote economic and social development through the sustainable use of resources. The law largely consolidates the legal framework in this area, which was very fragmented prior to its adoption. It also created the Salvadoran Water Authority (the Autoridad Salvadoreña del Agua, or ASA) as the governing body for water resource policy. This was a necessary step in the consolidation of a hitherto fragmented institutional framework. The implementation of the LGRH will be key for future advances in water resource management in El Salvador, for consolidating knowledge about water resources and making it available to the public, for overseeing the water allocation regime, and for the management of water-related risks and trade-offs.2
Another major challenge is to ensure universal access to safe drinking water and sanitation. This is part of the United Nations Sustainable Development Goals (SDGs), to which El Salvador is committed. According to the WASH Performance Index from the University of North Carolina, El Salvador is the best performing country in the world in efforts to close the gap in access to clean water and sanitation in its communities (Cronk et al., 2015[9]). However, in El Salvador, as in other Latin American countries, there are still significant gaps in the provision of public water supply and sanitation services, especially in rural areas. Only 8% of wastewater is treated before being released into the environment. The 2018 National Plan for Water and Sanitation (the Plan nacional de agua potable y saneamento de El Salvador, or PLANAPS) estimates the investment needs to fill these gaps in the billions of dollars.
Domestic water tariffs do not include the costs of wastewater treatment, and they only partially cover the cost of supplying drinking water and providing sanitation services. The cost of water is subsidised for over 70% of the customers of the national water provider, the Administración Nacional de Acueductos y Alcantarillados, (ANDA). The prices for irrigation water are extremely low. There are many extractions of water for different uses that are generally not subject to any charge. All service charges that are not billed to users are borne by the public budget (that of ANDA), which is not conducive to investments, or even to the rehabilitation of existing hydraulic infrastructures. In turn this limits the increase in coverage in the supply of drinking water and sanitation in urban and rural areas. The share of unaccounted-for water in the supply networks continues to increase, and now stands at nearly 60%.
There is a need to develop a water culture in El Salvador. The general public is often unaware of the need to use water efficiently, as a scarce resource that must be carefully managed. Economic incentives and governance mechanisms have an important role to play in this regard. Applying the polluter pays principle through taxes and charges can also be an important source of revenue for water policy. What is more, bringing in a system of payments for ecosystem services can reveal a willingness to pay for water among users.
Box 6.1. From Analysis to Action: A Policy Workshop on Water in El Salvador
Phase 3 of the Multi-dimensional Country Review of El Salvador (From Analysis to Action) was implemented mainly through a series of policy workshops. These were conducted following a version of the government learning methodology (Blindenbacher and Nashat, 2010[10]) adapted to the Multi‑dimensional Country Reviews (MDCR). The methodology applies a range of facilitation techniques to foster the sharing of knowledge, and a mind-set of reform in complex contexts. Due to the COVID‑19 pandemic, several of the workshops were conducted on line.
The workshop “From Analysis to Action: Towards Integrated Water Resource Management and Safe Water Supply and Sanitation for All” was held online from 27 and 28 July 2021. It brought together 36 participants from public entities. These included ANDA, the Presidency of the Republic, the council of mayors of the San Salvador metropolitan area (COAMSS), the social investment fund for local development (FISDL), the Salvadoran fund for the environment (FONAES), the Ministry of the Environment and Natural Resources (MARN), the Ministry of Agriculture and Livestock, the Ministry of Finance, the Ministry of Tourism, the Ministry of Health, the Ministry of Foreign Affairs. They also included representatives from civil society, academia, and international co-operation.
Participants carried out a prioritisation exercise among the different issues addressed in this chapter, and developed action plans for the priority areas that were jointly identified by the OECD and El Salvador’s Environment Ministry. These were: the governance and financing of water basins; risk management with regard to the scarcity of water; floods and pollution; strategic financial planning for water and sanitation services; and the pricing of water and sanitation services.
The action plan at the end of this chapter is built on the contributions of the participants. The workshop took place during the initial discussion of the draft General Law on Water Resources and was publicised to feed into the consultations on the bill.
Source: (Blindenbacher and Nashat, 2010[10]), The Black Box of Governmental Learning: The Learning Spiral - A Concept to Organize Learning in Governments, The World Bank, Washington DC, https://doi.org/10.1596/978-0-8213-8453-4.
Towards integrated water resource management in El Salvador
Prior to assessing El Salvador’s IWRM policy, as defined in the PNGIRH, the following sections review the different water risks (scarcity, pollution, flooding), and provide the legal and institutional framework for the management of water resources in El Salvador.
The risk of water shortages
El Salvador is well endowed with water resources, including 590 rivers and streams across its national territory. Flowing into the Pacific Ocean, the Lempa is one of the largest river systems in Central America and represents more than 60% of El Salvador's water resources. It is also used for hydropower generation through man-made reservoirs that regulate the flow of the river. At 13% of available water resources after deducting environmental flow requirements (which are essential for maintaining ecosystem health and resilience), water stress in El Salvador should be considered low (Figure 6.2).3 However, many rivers are not permanent, or have flows that tend to fall quickly when it stops raining. Water storage in aquifers has fallen, and it is necessary to drill increasingly deep boreholes in order to find water. The artificialisation of land has considerably reduced the capacity of soils for water infiltration and retention, and thus the natural regulation of river flow and aquifer recharge. Although El Salvador has an average rainfall of 1 800 millimetres per year, rains occur through storms that are high in intensity and short in duration. Together with changes in land use, this causes the water level of rivers to rise rapidly and leads both to flooding and to a decrease in aquifer recharge. Climate variability means that droughts exceed 30 days per year.
Figure 6.2. El Salvador has a low level of water stress
Level of water stress: Freshwater withdrawal as a proportion of available freshwater resources (%)
Note: Freshwater withdrawal by all sectors in relation to available freshwater resources, which are defined as precipitation, plus inflow from trans-boundary rivers, minus evapotranspiration (i.e. renewable freshwater), minus environmental flow requirements.
Source: (UN-WATER, 2020[11]), Indicator 6.4.2 “Level of water stress: freshwater withdrawal as a proportion of available freshwater resources”.
Pressures on water resources vary within El Salvador. Withdrawal is around 20% of renewable resources in two of the country’s ten hydrographic zones, and exceeds 60% in the Rio Grande de Sonsonate-Banderas hydrographic zone, which is in the south-west of the country (MARN, 2017[12]). Over 40% of El Salvador's renewable water resources originate outside the country, with 30% from Honduras and 10% from Guatemala. This is a high dependency ratio by comparison with benchmark countries (Figure 6.3). Such dependence on water originating from neighbouring countries underlines the importance of shared governance of trans-boundary basins.
Figure 6.3. El Salvador has a high ratio of water dependency
2017, in percentage of renewable water resources
Note: Percentage of renewable water resources originating outside the country. 2017 data.
Source: (FAO, n.d.[6]), AQUASTAT database (accessed 27 December 2020).
The efficiency of water use in agriculture and in the public water supply continues to be very low. Agriculture accounts for more than half of water demand, with public water supply making up nearly 30%, and energy, fish farming and industry making up the rest (Figure 6.4). Drip irrigation accounts for only 3% of irrigation systems, with gravity and sprinkler irrigation making up the rest (MARN, 2017[12]). Almost 60% of drinking water is unaccounted for, due to leaks in the piped network, illegal connections before it reaches homes, and to inefficient metering (see section on water supply and sanitation). This inefficiency in water use is exacerbating local conflicts over water. These clashes are between irrigation and human consumption, and between different irrigators (MARN, 2013[13]). The main source of water for irrigation is surface water from major rivers, but some crops (such as sugarcane) use a great deal of groundwater. Groundwater remains the main source for the supply of drinking water, as its quality tends to be better than surface water, which reduces treatment costs. Nevertheless, since groundwater is extracted from deeper wells, it tends to contain minerals in concentrations that are not suitable for human consumption, and this requires the installation of special water purification plants.
Figure 6.4. Agriculture accounts for the lion's share of water demand in El Salvador
Source: (MARN, 2017[12]), Plan Nacional de Gestión Integrada del Recurso Hídrico de El Salvador, con énfasis en zonas prioritarias.
Measures have been taken to limit demand for water from the energy sector. In El Salvador, reservoirs and dams were designed almost exclusively for power generation, and due to their negative, real, and perceived impacts, the construction of new structures faces strong public opposition, regardless of their size (MARN, 2013[13]). Launched in the early 2000s, the El Cimarrón hydropower project was suspended in 2010 due to its negative social and environmental implications.
There is a risk of an over-exploitation of aquifers, as is the case with the aquifer of the eastern sector of San Salvador, which, due to urban growth, is also suffering from a decrease in its recharge. Beyond San Salvador, other aquifers that are close to urban centres are under great pressure, such as those of Santa Ana, Opico-Quezaltepeque, Guluchapa, San Miguel and Zapotitan (MARN, 2013[13]). The expansion of irrigation has also taken place at the expense of slowly recharging aquifers. This has led to the drying up of springs and wetlands, which is directly linked to the over-exploitation of aquifers, and to saline intrusion into coastal aquifers (indirectly causing salinisation in agricultural soils) (MARN, 2013[13]).
The area around the San Salvador volcano provides an example. The beverage industry tends to concentrate there due to the presence of a large aquifer, and also due to its proximity to the capital. This may gradually create tensions between the different uses that take place in the area (MARN, 2013[13]). A risk-based approach could be put in place in order to prevent conflicts over the use of aquifer water (see below).
Risk of poor water quality
Rivers
Significant bacteriological contamination affects most surface water due to discharges of urban and industrial wastewater without adequate treatment and, most often, without any treatment at all (MARN, 2017[12]). MARN (2019[14]) confirms the strong bacteriological contamination of water that is intended for human consumption (faecal coliforms), which highlights the urgency of modernising El Salvador’s sanitation infrastructure (see section on water supply and sanitation). In addition to the contamination of water that is intended for human consumption, the bacterial activity of decomposing organic matter (excreta, industrial organic compounds, plant debris) decreases the quantity of oxygen dissolved in the water, sometimes to the point of threatening aquatic life (MARN, 2017[12]).
Likewise, there are high concentrations of phenols throughout most of the basins (MARN, 2017[12]). Esquivel Orellana (2007[15]) reports contamination by phenolic compounds in all hydrographic zones, with an average concentration in rivers of 1 800 microgrammes per litre (µg/l), which is well above the quality standard of 10 µg/l (or 0.01 miligrammes per litre [mg/l]). MARN (2019[14]) confirms the exceedance of the phenol standard in Salvadoran waters intended for human consumption. This compound, which is highly toxic to aquatic species, cannot be biologically degraded. The coffee industry is one of the main emitters. Pulp water from coffee processing (the water used to remove the pulp from the coffee bean) contains phenols. Since 1996, El Salvador has prescribed emission limits for synthetic phenolic compounds (0.5 mg/l)4, but the special wastewater regulation of 2000 (Decree no. 39)5 does not include coffee processing in the list of activities for which the analysis of phenols in wastewater is compulsory. As of 2000, all Salvadorian coffee treatment facilities (beneficios) started treating their wastewater. Due to the high cost of laboratory analyses, however, they did this without testing the quality of the treated wastewater (Molina Guardado and Villatoro Martinez, 2006[16]).
High concentrations of phosphates, which are often well above the limits recommended by the United States Environmental Protection Agency (EPA), contribute to eutrophication in rivers and lakes. Agricultural fertilisers are likely to be the main source (MARN, 2017[12]). Reporting from the Ministry of Environment shows that the water in a number of El Salvador’s rivers is also contaminated with heavy metals. This situation led the government to ban any new investment in the mining industry in 2017. Organochlorine, organophosphorus, carbamate and glyphosate pesticides have all been detected in some rivers at levels that fall short both of EPA standards for fish life, and the World Health Organization’s (WHO) standards for human consumption. Some of the pesticides that were found are not subject to any quality standard at all.
Overall, no sampling site had excellent water quality in 2019, and the proportion of sites with average, bad, or very bad water quality has remained very high (86%). This limits aquatic life, or makes it impossible (Table 6.1). In 2019, none of the 121 sampling sites spread over 55 rivers met the quality standards for water intended for human consumption (after treatment), compared to 17% in 2011 (MARN, 2019[14]; MARN, 2013[13]). This reflects an excess of faecal coliforms, phenols and phosphates, but also of heavy metals (in particular arsenic and boron). In 2019, only three sites complied with the quality of the water intended for irrigation (without treatment), compared from 32 in 2011. This also reflects excessively high levels of faecal coliforms and heavy metals. In 2019, only six out of 121 sites had the water quality that is required for recreational activities, due to excessive levels of faecal coliforms, oil and grease, and turbidity.
Table 6.1. Poor water quality in Salvadoran rivers continues to affect aquatic life
Note: As measured by the Water Quality Index (Índice de calidad del agua, ICA), which includes nine parameters: faecal coliforms, dissolved oxygen, biochemical oxygen demand after five days, pH, turbidity, nitrates, phosphates, total dissolved solids, and change in water temperature.
Source: (MARN, 2019[14]), Informe de la Calidad del Agua de los Ríos de El Salvador 2019.
Lakes
Preliminary results of a bathymetric survey carried out by the Ministry of Environment in nine lakes and lagoons in the country showed significant reductions in the water levels of lakes. They also showed that some lagoons were critically affected by siltation, and that others still showed the ravages of the last El Niño phenomenon.6 Lake Coatepeque, a tourist hotspot located 50 kilometres from the Metropolitan Area of San Salvador, is a good example of the vulnerability of water resources to climate change. The lake is only fed by groundwater (there are no inflow or outflow rivers), and recharge takes four to five years. Its level has dropped drastically after several consecutive years of drought and can recover only if there are good rainy seasons in the coming years. Lake Coatepeque is characterised by a very attractive turquoise colour. The colour change is possibly a consequence of algal blooms, including micro-algae that produce a change in colour, but also toxic cyanobacteria. This is due to excess nutrients from domestic and agricultural sources, with 20 000 people residing in this water basin with no wastewater treatment.
The discharge of residual water from the Metropolitan Area of San Salvador (via the Acelhuate river), the irrigation districts of Zapotitán and Atiocoyo, and the agricultural sub-basins of the northern zone, cause the siltation and eutrophication of the Cerrón Grande reservoir (which is a Ramsar site7). In turn, this results in the proliferation of invasive species such as water hyacinth. Excessive nutrient levels in the reservoir cause algal blooms during the dry season, resulting in fish mortality. The El Jocotal and Olomega lagoons (which are also Ramsar sites) are similarly affected. The availability of information on the quality of coastal waters is very limited (MARN, 2017[12]).
In lakes that are close to large human settlements and confluent rivers, such as in the area influenced by the Rio Grande de San Miguel in the El Jocotal lagoon, faecal coliform levels are critical. The presence of boron and arsenic considerably increases the cost of purifying water from Lake Ilopango in order to make it suitable for human consumption.
Aquifers
The 72 aquifers that spread out over the equivalent of 46% of El Salvador have been grouped into 21 groundwater bodies (including one or more aquifers). In ten of these groundwater bodies, water quality is still not monitored, and only physico-chemical parameters are analysed (MARN, 2017[12]). All of the sampling points contain faecal coliforms of domestic, animal, and agro-industrial origin (livestock and livestock products), sometimes in very high quantities. All groundwater intended for human consumption must, therefore, undergo a disinfection process. Some sampling points also contain heavy metals from informal mining and industrial activity, in addition to those that have a natural volcanic origin. In particular, iron and manganese are found in wastewater discharges above the maximum allowable limits (as per Salvadoran technical regulation). Some wells are contaminated with nitrates (Zapotitán irrigation district, city of San Miguel). In the coastal zone, aquifers are shallow, and very vulnerable to contamination from agriculture (nutrients and pesticides). They are also prone to saline intrusion.
Risk of flooding
An area of 2 000 square kilometres (km2) – about 10% of the whole of El Salvador – is exposed to flooding. Of this area, 80% is to be found in the part of the coastal zone that is less than ten meters above sea level, which affects nearly half a million inhabitants. These areas are affected by tropical storms. Some parts of the San Salvador Metropolitan Area are also prone to flooding, a situation that has been exacerbated by changes in land use. The impacts of changes in land use are particularly dramatic in the Metropolitan Area of San Salvador, where urbanisation has progressively waterproofed the soil, resulting in a greater volume and flow of runoff water after the rains. For example, urbanisation continues in the upper part of the Arenal Montserrat sub-basin, to the detriment of coffee plantations and evergreen forests. This generates serious flooding in the Colonia La Málaga in the city of San Salvador. A similar situation is found in the cities of Santa Ana and San Miguel.
As part of the development of the PNGIRH water management plan, El Salvador drew up a map of flood risks for the population and critical infrastructure, distinguishing between moderate, high, and very high levels of risk. It shows that 180 000 people live in areas that are at very high risk of flooding (MARN, 2017[12]). The progressive occupation of areas adjacent to riverbeds has exposed more and more people to flooding. There are communities in which the beds and banks of rivers have been invaded by precarious dwellings, and they are permanently at risk of flooding. The incorporation into the public water domain (Dominio Público Hidráulico, or DPH) of the zones of ordinary maximum flood of rivers in the General Law on Water Resources can help to solve this problem, as any use of the land therein requires a permit or a concession (works, extraction of sand and gravel). Such activities on the river banks are subject to environmental regulations to prevent the degradation of aquatic ecosystems, and to protect the river flow regime. Areas of private property adjacent to the riverbanks are also subject to limitations and easements.
The legal and institutional framework for water resource management
Legal framework
Ever since the end of World War II, El Salvador has tried to regulate the different uses of water through legislation. Seeking to develop electrification in El Salvador, the 1948 Act that created the Lempa River Hydroelectric Executive Commission (the Comisión Ejecutiva Hidroeléctrica del Río Lempa, or CEL), entrusted the CEL with the construction and operation of hydropower plants (and also of plants generating electricity from other energy sources). The law that established the General Superintendence of Electricity and Telecommunications (the Superintendencia general de electricidad y telecomunicaciones, or SIGET) in 1996 entrusted this body with granting water concessions for hydropower and registering operators in the sector. The hydropower sector, however, has special conditions: concessions must be granted by the Legislative Assembly, and they cannot be permanent.
The fragmented and inconsistent legal framework has historically been an obstacle to the advancement of IWRM. Until 2022, a patchwork of laws assigned the management of water resources to several public entities, sometimes in contradictory ways. Until 1998, the Ley sobre Gestión Integrada de los Recursos Hídricos (Law on Integrated Water Resources Management or IWRM Act) of 1981 had provided a common framework for regulating the different uses of water (drinking water, irrigation, industry, hydropower, aquaculture, recreation). The IWRM Act was tacitly repealed by the Environment Act (the Ley de medio ambiente, or LMA), which was promulgated in 1998. The LMA regulates the protection of water resources and promotes the integrated management of river basins. It stipulates that the modalities of such integrated water resource management must be specified by a special law. The implementing regulation of the LMA did not set quantitative objectives for maintaining the ecosystems of the basin, such as the ecological flows of rivers - which remain unregulated. Other laws in El Salvador have established principles relating to the management of water resources. For example, the Irrigation and Drainage Act (Ley de riego y avenimiento or LRA) of 1970 stipulated that hydraulic resources, including surface and ground water, are national assets. It attributed the role of setting priorities with regard to the use of water resources to the executive branch of government. Discharge authorisations and limits were regulated by the Regulation on Water Quality, Discharge Control and Protection Zones (Decree 50, 1987), although this has now been repealed.
Following the adoption in 2022 of an over-arching General Law on Water Resources, the aforementioned LGRH, El Salvador now has a much more consolidated legal framework. The law establishes the regime for the use of water resources and discharges of wastewater. It also establishes the main policy instruments for the management of water resources, the building blocks for administrative management and information systems, and the regime for the protection and conservation of water resources. This includes the determination of environmental flows, and the prevention and control of pollution. Finally, it establishes an institutional framework, with the creation of the Salvadoran Water Agency (the Agencia Salvadoreña del Agua, or ASA).
The LGRH brings together, and builds upon, the principles from previous pieces of legislation. Among the principles enunciated by the LGRH, it is worth highlighting:
The polluter pays principle.
The river basin as the primary unit in water resource management.
Risk management.
The LGRH establishes water as a national asset, including surface and groundwater, with the exception of rainwater that is directly collected and stored by private parties. The law establishes surface and groundwater as part of the public water domain, to which it adds river beds and banks, and land covered by peak flows (maximum ordinary floods over a 25-year period).
The LGRH also establishes a preferential order in the use of water resources if there are competing demands, thus filling a key regulatory gap. It further stipulates the priority of use for human and domestic consumption, which can only be limited by the environmental flow regime. The order of priority in uses is established as follows:
1. Water for human consumption and domestic use.
2. Use for ecosystem sustainability.
3. Agricultural use.
4. Use for electricity generation.
5. Industrial and commercial use.
6. Recreational use.
7. Other uses.
The LGRH also introduces charges for the use and discharge of water. It excludes domestic use from the payment of these fees. However, it includes drinking-water service providers, including ANDA. The law provides for charges for the use and discharge of water to be calculated by volume. The applicable parameters are subject to determination by further regulations. According to the regulation in force since December 2022, abstraction charges are to be between USD 0 and USD 0.35 per m3, with the charge for community water provision bodies and domestic water use set initially zero (Gobierno de El Salvador, 2022[17]).
Beyond the LGRH, the legal framework also includes a number of other acts that have remained in force following the adoption of the LGRH.
The aforementioned LRA of 1970, attributes the regulation of water uses for agriculture to the executive branch of government, and establishes a regime for irrigation concessions. This regime does not match the ones that were established in the LGRH, and should be considered to have been tacitly revoked by the LGRH.
The 1961 National Aqueduct and Sewers Administration Act (the Ley de la Administración Nacional de Acueductos y Alcantarillados), which aims to improve water supply and sanitation infrastructure, provides that ANDA has priority in the use or operation of any national or private water body that is deemed to be necessary for public water supply or wastewater disposal (Article 70). However, the withdrawal of water for human consumption is not formally regulated in rural areas (MARN, 2017[12]). The LGRH law filled this regulatory gap. The LGRH distinguishes between domestic use and water-supply services. Domestic water use is defined as water withdrawals by households that do not have access to distribution systems, and where the withdrawal does not have a commercial purpose. Domestic use is protected by law, as it is considered as a priority use of water. It is not subject to charges, although abstraction by means of an artesian well is subject to registration. However, water service by independent system operators, such as water boards, is in principle subject to authorisation, and to the payment of a volume-based charge. Depending on how it is regulated and applied, this provision could endanger those local water distribution systems that have weaker financial situations.
In addition to regulating the quality of drinking water, the 1988 Health Code provides that no public or private infrastructure for water intended for human consumption may be built or modified without the prior authorisation of the Ministry of Health. It also stipulates that the ministry can order anyone to correct any deficiencies in sanitation infrastructure.
With the adoption, in 2017 of a law to prohibit metal mining (the Ley de prohibición de la minería metálica), El Salvador became the first country in the world to ban metal mining. Until 2017, mining required an environmental permit covering the prevention of water pollution, in accordance with the mining law (Ley de Minería) of 1995, which stated that the Ministry of Economy could, in order to protect underground or surface water that is intended for the supply of drinking water, declare certain areas to be incompatible with mining or quarrying activities. All of the provisions of the mining law of 1995 that related to metal mining have been repealed. This includes the provisions related to exploration, extraction, exploitation and processing activities, whether open-pit or underground. The use of toxic chemicals, such as cyanide, mercury, and others, is also prohibited in any process linked to metallic mining.
El Salvador’s General Law on the Management and Promotion of Fisheries and Aquaculture, (the Ley general de ordenación y promoción de pesca y acuicultura, of 2001) entrusts the Ministry of Agriculture and Livestock with granting aquaculture concessions, through the Centre for the Development of Fisheries and Aquaculture. In accordance with the Law on Protected Natural Areas of 2005 (the Ley de áreas naturales protegidas), the granting of these concessions is subject to an environmental impact study, plus the issuance of a permit by the Ministry of Environment if the concessions are located in fragile ecosystems, such as albino lands in salt forests. The LGRH maintains the role of the Ministry of Agriculture in the management of the aquaculture sector, but grants the power to grant authorisations and permits for the use of marine waters to the Salvadoran Water Authority (the Autoridad Salvadoreña del Agua, or ASA). Secondary legislation will need to resolve potential conflicts in the attribution of responsibilities.
Institutional framework
The LGRH law also established the Salvadoran Water Authority (Autoridad Salvadoreña del Agua, or ASA), to be in charge of formulating and implementing the country’s national policy for integrated water resource management, and also of implementing the new law’s provisions. This includes granting water allocations and authorisations for the use of water resources, collecting the respective charges, auditing conditions of use and permits for discharges, and penalising non-compliance. The ASA is also in charge of settling disputes over water use and discharges.
Prior to the creation of the ASA, there was no water authority – either at the national level or at the basin level – to co-ordinate water management between sectors, and to manage risks and trade-offs in order to meet water needs. Instead, the management of water was compartmentalised by sector.
The LGRH maintains the attributions of responsibility to other entities with regard to different uses of water resources, as it is contained in other laws. It identifies public entities other than ASA as being competent to manage certain sub-sectors, subject to the allocation of water resources, and to planning, as determined by ASA. These sub-sectors include drinking water (managed by the Ministry of Health), the sanitation sector (managed by the Ministry of Environment), agricultural use (managed by the Ministry of Agriculture), and water for hydropower purposes (managed in part by the power company, CEL). Industrial and tourism uses are managed directly by the ASA.
The Ministry of Environment and Natural Resources is responsible for protecting water resources, both in quantity and quality. This implies ensuring (as per LMA, article 49):
The availability, quantity and quality of water that is intended for human consumption and other uses, through the necessary studies and guidelines, and with the participation of users.
That the inhabitants use correct practices in the use and disposal of water resources.
That the quality of water remains within the limits of environmental quality standards.
That all discharges of polluting substances are previously treated by the party that causes them.
That all wastewater re-use activities have an environmental permit.
Since 2014, and in accordance with a letter of understanding with the Ministry of Environment, the Environmental Fund of El Salvador (the Fondo Ambiental de El Salvador, or FONAES) has collected environmental compensation funds. They finance compensation actions for environmental impacts that have been deemed, by the Environmental Impact Assessment (EIA) process of projects and works carried out by the Ministry of Environment, to be unavoidable. This includes actions in all areas of the environment, including water. FONAES was created in 1994 and is also financed by international assistance. In the new legal framework, water-use charges replace environmental compensation for imperviousness. Recently enacted legislation provides for the dissolution of FONAES, and for the newly created ASA to assume its responsibilities (Asamblea Legislativa, 2022[18]).
The Ministry of Agriculture is responsible for ensuring the efficient use of water for irrigation, and it keeps a registry of irrigation permits for all irrigators. It supervises four irrigation districts covering 7 000 hectares (rice, maize, beans, etc.). It also supervises 700 officially registered irrigators (individual and collective), which irrigate 23 000 hectares (mainly pastures and sugar cane).
The Ministry of Public Works and Transport is in charge of the design and construction of river-flow regulation infrastructures for flood control. It is also responsible for managing water emergencies, such as the plugging and drainage of land where gullies have formed after heavy rains.
The Health Ministry sets and monitors compliance with quality standards for all sources of water used for human consumption. It is also responsible for monitoring septic tanks.
ANDA is responsible for the provision of water supply and sanitation services, along with municipalities, water boards and other institutions (see section on water and sanitation). The Ministry of Economy authorises the water tariffs that are applied by ANDA. These tariffs will be set by ASA. The Ministry of Finance manages budgetary transfers in order to balance the accounts of ANDA.
CEL is El Salvador’s only wholesale hydropower operator. It owns and operates 97% of the country's hydropower capacity, through four power plants (hydropower supplies 36% of the electricity produced in El Salvador).
The Ministry of Local Development supports the creation and improvement of basic infrastructure such as water in the poorest municipalities through the Social Investment Fund for Local Development (the Fondo de Inversión Social para el Desarrollo Local, or FIDSL). Created in 1990, the FIDSL was endowed with USD 77 million in public funds in 2020. About 10% of FIDSL is devoted to basic infrastructure. Most of the fund is used with the aim of providing direct financial support to the poorest people in El Salvador. The National Investment Fund for Electricity and Telephony (the Fondo de Inversión Nacional en Electricidad y Telefonía, or FINET) subsidises electricity tariffs for groundwater pumping. Founded in 1998, FINET aims to facilitate access to electricity and telephony services for people in rural areas and on low incomes. FINET is administered by FIDSL.
El Salvador’s now-superseded Integrated Water Resource Mamagement law entrusted the then Ministry of Planning and Co-ordination of Economic and Social Development with the task of developing water policies for all uses. In 1981, that ministry created a Specialised Office for Water for this purpose. This body has since been transferred to a Specialised Water Unit at ANDA. The unit provides technical assistance to the Executive Committee for the Protection of Water Resources (Comité ejecutivo de protección de los recursos hídricos, CEPRHI). This committee was created in 1987 and is composed of representatives from the ministries of agriculture, health, planning and the interior, plus ANDA. Until 1998, CEPRHI issued resolutions to prevent negative impacts on water from economic activity. For example, CEPRHI conditioned the construction and operation of a beverage factory in the municipality of Nejapa on the protection of an aquifer recharge area, on ANDA's supervision of water extraction by the plant, and on banning the discharge of wastewater into the San Antonio River. With enactment of the LMA in 1998, CEPRHI was phased out. Since then, economic development has required an environmental permit from the Ministry of Environment. Since 2010, the Inter-institutional Executive Technical Committee (Comité técnico ejecutivo interinstitucional CTEI) has facilitated institutional co-ordination in the preparation of policies and legislation relating to water resource management. The CTEI was originally placed under the authority of the Presidency's Technical and Planning Secretariat (SETEPLAN). From October 2020 to June 2021, it was then placed under the authority of a presidential commissioner for water.
Dating from 2011, El Salvador’s law on land-use planning and local development (the Ley de Ordenamiento y Desarrollo Territorial) does not take account of individual watersheds as local units of governance. However, some municipalities and communities have spontaneously come together to form structures at the micro-basin or sub-basin level in order to improve water resource management at the local level. These structures are an important first step in developing the management of river basins.
The LGRH law creates three water-basin organisations for the management of water resources for three hydrographic zones: the Lempa river basin, the Paz-Jaltepeque hydrographic zone, and the Jiquilisco-Goascorán hydrographic zone. The zonal basin organisations are described in the LGRH as administrative management bodies, although the level of differentiation in management (for example in the collection of differentiated water charges per basin) is left to be determined by the regulation of the law. The law allows for differentiated charges to be applied depending on environmental factors, but the expectation is that they will be determined centrally. Although the law defines sub-basins and micro-basins, it does not stipulate any role for bodies at that level in the management of water resources. Nor does it explicitly identify the basins that are integrated into the broader hydrographic zones for water resource management at the local level.
El Salvador’s integrated water resources management policy
In order to provide information on the progress of IWRM in El Salvador, and with the support of the Global Water Partnership (GWP), the Ministry of Agriculture carried out an evaluation of indicator 4.6.1 of the United Nations SDGs on the degree of implementation of integrated water resource management. The assessment included a workshop with over 80 participants from various institutions and civil society organisations. It attributed a score on a scale of 0 to 100 in response to 30 questions covering the four dimensions of IWRM. The results show that, according to UN-Water standards and as of 2017, El Salvador had not made much progress towards IWRM (Figure 6.5). Of particular concern is the low level of funding compared to benchmark countries.
Figure 6.5. El Salvador lags behind in pursuing the goal of integrated water resources management
Degree of implementation from 0 (very low) to 100 (very high), 2017
Note: Degree of integrated water resources management implementation (0 to 100):
-Enabling environment includes: policies, laws and plans to sustain the implementation of IWRM.
-Institutions and participation includes: the range of functions of political, social, economic and administrative institutions and of other stakeholder groups that contribute to implementation.
-Management instruments include: the resources and activities that enable decision makers and users to make informed and rational choices.
-Financing includes: budgeting and financing available and used for the development and management of water resources from various sources (beyond the supply of drinking water and sanitation).
Source: (UN-WATER, 2020[11]), The 2020 Data Drive: Joining Forces to Report on Progress towards Sustainable Development Goal (SDG) 6.
The PNGIRH water management plan of 2017, and the National Water Resource Strategy of 2013, set out El Salvador’s IWRM policy. Some measures of the PNGIRH are national in scope, while others relate to priority action zones. In the 1970s, El Salvador delimited ten hydrographic regions. These include the Lempa hydrographic region, a tri-national basin of which El Salvador has a 57% share, Honduras has 29%, and Guatemala has 14%. There are also two bi-national basins. These are the Paz hydrographic region, of which 59% is in Guatemala, and the Goascorán hydrographic region, 56% of which is in Honduras. There are also seven smaller national basins (Figure 6.6). The PNGIRH identified eight priority action zones (zonas prioritarias, or ZPs) for IWRM in these ten basins. Three of these lie within the Lempa basin. The other five form either all or part of six national basins (Figure 6.6). The key issues in these ZPs relate to conflicts over water use, the pollution of rivers by the discharge of untreated wastewater, flooding, intrusion of salt water into aquifers, soil erosion, and a lack of water for economic development (tourism, irrigation) (Table 6.2).
Figure 6.6. El Salvador is sub-divided into ten hydrographic regions
Source: (MARN, 2017[12]), Plan Nacional de Gestión Integrada del Recurso Hídrico de El Salvador, con énfasis en zonas prioritarias.
Table 6.2. El Salvador has demarcated eight priority zones for integrated water resources management
Note: * as identified in PNGIRH 2017.
Source: (MARN, 2017[12]), Plan Nacional de Gestión Integrada del Recurso Hídrico de El Salvador, con énfasis en zonas prioritarias.
The PNGIRH action plan of 2017 estimated the cost of measures to move forward with the implementation of IWRM in El Salvador at USD 2.5 billion by 2022 (Table 6.3). More than half of this cost (53%) relates to the construction of new hydropower stations, with 44% of it relating to water supply and sanitation (WSS) infrastructure (14% and 30% respectively). WSS measures are covered by the National Water and Sanitation Plan (Plan Nacional de Agua y Saneamiento, PLANAPS) (see section on drinking water and sanitation).
In 2000, as part of the United Nations Millennium Development Goals, El Salvador pledged to try to provide “improved” drinking water and sanitation services to, respectively, 87% and 88% of its population by 2015. The PNGRIH sets the objective of ensuring “safe” drinking water coverage in urban and rural areas for, respectively, 95% and 79% of the population by 2022. In 2019, El Salvador had already exceeded this target in urban areas (with coverage of 96% when distribution both by network and by standpipes is counted8). However, it is lagging behind its target for rural areas, where there is only 51% coverage, including 28% with standpipes (see section on the supply of water and sanitation and Annex 6.A). The PNGIRH action plan also provides for more sanitation infrastructure. Indeed, the strong microbiological and organic contamination detected in most of El Salvador's waterways is due, to a large extent, to the poor coverage of the sewer network, and to the insufficient or even non-existent treatment of urban and industrial wastewater before it is discharged into the natural environment. The direct discharge of untreated industrial wastewater into the environment is a major problem in El Salvador.
Table 6.3. El Salvador estimates the needs for integrated water resources management at USD 2.5 billion in the short term
1. N =national; ZP: priority zone
2. Measures already planned or in progress before the PNGIRH.
3. The Las Pavas drinking water treatment plant supplies 42% of the drinking water for the metropolitan region of San Salvador and its surroundings (1.6 million inhabitants) with water that comes from the Lempa River.
Source: (MARN, 2017[12]), Plan Nacional de Gestión Integrada del Recurso Hídrico de El Salvador, con énfasis en zonas prioritarias.
After deducting governance costs, only 2% of the financial needs estimated by the PNGIRH action plan relate to the management of water resources per se (risk of water shortage, risk of water pollution, risk of flood). Most of the financial needs concern end-of-pipe measures, such as flood-control infrastructure (not preventive measures), increasing water supply (and not reducing water demand) in agriculture, and cleaning (not prevention) of water hyacinths in water bodies. Key IWRM measures, such as the conservation of mountain soils (to improve the infiltration of rainwater and prevent landslides), the rehabilitation of rivers, and the establishment of ecological flows (to regulate water flows, prevent flooding, and preserve aquatic life), are, for the most part, only foreseen at the planning stage. Indeed, ecological flows cannot be imposed in the absence of legal provision in the LMA law. A notable exception is the decision – implemented through the LGRH – to include marginal bands along rivers in the public hydraulic domain. This is a very important and innovative step towards river restoration and is something that no OECD country has yet done.
Overall, the action plan places a strong emphasis on the construction of new multi-purpose reservoirs (hydropower combined with public water supply), despite public acceptability concerns for these large infrastructure projects. With regard to consumptive uses of water (uses that remove the water from the environment), the action plan focuses on supply-side measures, including public water supply and irrigation infrastructure, and the digging of new wells. There is very little demand management, such as metering water consumption in rural areas (ANDA does this in urban areas), setting water withdrawal limits, or introducing economic incentives such as an abstraction tax. This chapter proposes a risk-based governance approach to addressing public acceptability concerns regarding: i) large investment projects with an impact on water (based on OECD work); and ii) groundwater abstraction in the face of competing demand (based on the Australian experience).
Aside from sanitation of the domestic sector, the action plan does not pay sufficient attention to improving water quality in the face of pollution pressures from other sectors (industry, agriculture, aquaculture, and hydropower), which are regulated through environmental permits. This would involve applying the polluter pays principle. Some examples of how this could work would be to tax the discharge of untreated wastewater into the natural environment by industry, and of pesticides and excess nutrients by agriculture and aquaculture, or to levy taxes on the hydropower sector for obstacles to fish migration and for sediment transport in rivers. The section on economic instruments in this chapter shows how economic instruments can create incentives to prevent water scarcity and water pollution, while also generating income to finance IWRM (based on the French experience).
The environmental management premises of El Salvador’s IWRM action plan are steps in the right direction that should quickly be followed by concrete action. In particular, this concerns a few key steps. One of these is the implementation of ecological river flows (via direct regulation). Another is to promote the conservation of water and soil by forests at the top of the watersheds, and by agriculture further downstream (via payments for ecosystem services). Another key step is space restoration for rivers (a combination of direct regulation and public financial support). This chapter illustrates how economic instruments can help to rehabilitate rivers (based on the Swiss experience), and to conserve water and soil in watersheds (based on the experience of Peru).
In terms of governance, the action plan proposes "to analyse the current normative and institutional fabric, and the tools available to the various organisations to carry out IWRM". It further proposes “to set up a governing body that regulates, controls and supervises IWRM, and ensures compliance with water legislation and the PNGIRH whilst, at the same time, ensuring: i) that sectoral institutions ensure compliance with sectoral legislation in harmony with water legislation; and ii) the proper functioning of multi-sectoral co-ordination and consultation mechanisms for IWRM decision making and monitoring”.
However, the action plan does not address the issue of water governance by river basin. El Salvador has demarcated ten river basins (zonas hídricas) on the map. In the absence of a legal framework, however, it had not created basin agencies to implement IWRM at the scale of these basins. The basin is the natural hydrologic unit, and responding to pressures in priority zones is not the same as managing risks and trade-offs at the river-basin scale, as recommended by the OECD (OECD, 2015[19]). With the creation of the ASA, and the “water basin zonal organisations” as deconcentrated or devolved water-authority services (a system resembling that of Peru), the key issue is the financing of IWRM in each basin. One possible approach that entrusts water agencies with financing IWRM measures – and thus asserts their authority – is to apply the principle of “water pays for water”. The introduction of charges for the use of water, and for discharges of wastewater into the environment, makes it possible to direct the proceeds into the restoration of aquatic ecosystems, pollution control, and the protection of water resources, as provided for in the General Law on Water Resources.
For transboundary basins, IWRM governance should ideally be at the scale of the entire basin. For example, this can be within the framework of an international commission that brings together the relevant parties – as is the case for many international rivers (Rhine, Danube, etc.). This does not prevent governance specific to the Salvadoran sub-basin, which would be co-ordinated with the other sub-basins within the framework of the international commission. El Salvador has already taken commendable steps to strengthen water-related co-operation with its neighbours. Since 2001, for example, the Tri-national Sustainable Development Programme of the Upper Lempa River Basin (the Programa Trinacional de Desarollo Sostenible de la Cuenca Alta del Rio Lempa, or PTCARL) aims to improve the quality of life and the environment in this region, which is called Trifinio (in reference to the confluence of three borders of El Salvador, Honduras and Guatemala). The goal is to break the cycle of poverty and degradation of natural resources (with particular emphasis on the conservation of the cloud forest around the Montecristo massif). The upper basin of the Lempa River has been zoned, taking into account agricultural potential and environmental concerns. On the basis of water potential and risk, agricultural and forestry vocation, vulnerability to erosion, and over-exploitation of soils, 23 sub-basins have been prioritised. Small water-supply systems, latrines, sumps, and mini irrigation systems have been built and improved. Forest firefighters have been trained. The Association of Mayors of the Upper Lempa River Basin has been established, in order to reduce pollution in the Lempa river. The PTCARL programme is co-funded by international aid and the three countries themselves.
El Salvador also shares three transboundary aquifers in the west of the country, one with Honduras and Guatemala and the other two with Guatemala. Their use for human consumption, irrigation and industry has gradually increased, without any control over the volumes that are exploited on either side of the border (MARN, 2013[13]). As is the case for river basins, co-operation must be sought at the scale of the aquifer recharge basin. El Salvador is working on a roadmap to establish a binational entity for the management of the Ocotepeque-Citalá aquifer with a basin-oriented focus, through the Governance of Groundwater Resources in Transboundary Aquifers (GGRETA) project.
The PNGIRH action plan aims to promote a “water culture” through general measures such as the integration of the IWRM concept into education curricula (basic and secondary levels), and the creation of a public policy of citizen participation. A water culture must also develop in the field, by confronting stakeholders with water issues that are specific to the site. Developing a risk-based approach to social dialogue can help, as proposed this chapter.
The implementation of El Salvador’s General Law on Water Resources is a fundamental step in the development of IWRM in El Salvador – a process that has been underway since 2006. Prior to the promulgation of this law, it had not been possible to implement of the “water pays for water” principle, which would make it possible to establish basin-based governance of water resources. This would enable basin organisations to finance basin-level management through a system of water charges, the proceeds of which may be assigned to the basin agencies or authorities. Legislation can also allow a holistic and coherent identification and management of risk areas. This includes areas that are at risk of water scarcity, areas where drinking-water extraction points require protection, areas that are vulnerable to nitrates, areas that are at risk of flooding or drought, water bodies that are at risk of pollution, etc. Like El Salvador, most countries have passed a water law, including other countries in Central America (Costa Rica in 1942, Panama in 1966, Honduras in 2009, Nicaragua in 2010).9 Still, only France fully applies the principle by which water pays for water, which makes it a model for basin-based governance. A water code aimed at popularising the key elements of El Salvador’s new general water law, the LGRH, could usefully contribute to the development of a water culture in the country.
Towards water supply and sanitation for all
All 193 Member States of the United Nations General Assembly unanimously agreed to the 2030 Agenda for Sustainable Development in 2015. The 2030 Agenda established 17 Sustainable Development Goals for 2015–30, including SDG number six, which is to “ensure the availability and sustainable management of water and sanitation for all”.10 Thus, El Salvador is committed to achieving universal access to safe water and sanitation by 2030.
The health benefits of safe water supply and sanitation are significant. The burden of disease that is attributable to poor water, sanitation and hygiene in El Salvador is in the middle range of low- and middle-income countries in Latin America, but it is much higher than in high-income countries like Canada and the United States (Figure 6.7). Unsafe water, sanitation and hygiene cause a heavy burden of disease.
Figure 6.7. Unsafe water, sanitation and hygiene cause a heavy burden of disease
Disability-adjusted life year (DALY) rate per 100 000 population, 2016
Note: Burden of disease from mortality and morbidity as measured by the DALY indicator; selection of low- and middle-income countries in Latin America plus Canada and the United States.
Source: (WHO, 2019[20]), Safer Water, Better Health. 2019 Update.
Institutional framework
The WSS sector in El Salvador was centralised in 1961, with the creation of ANDA as an autonomous body. ANDA provides drinking water supply services to around 95.7% of the urban population, corresponding to 168 municipalities (out of 262). It serves 76 of the 85 municipalities that have sewage systems (the other nine are served by decentralised operators). In 2004, a reform process of the WSS sector began with the objective of giving municipalities the possibility of administering WSS services themselves, and introducing private operators. ANDA started outsourcing service management to municipalities through five-year renewable contracts, while retaining ownership of the infrastructure. Born in the reform of 2004, decentralised water systems remain modest in coverage, only providing water to 3.7% of the country's population (230 000 people). There are three types of decentralised water systems: mixed private-public, municipal with community participation, and non-profit entity. A barrier to their development is the lack of incentives to invest in new WSS infrastructure, with ANDA retaining ownership.
Besides ANDA and the decentralised operators, the other WSS operators are as follows:
Some 800 water boards and community associations11 supply water to around 30% of the rural population (700 000 people). User fees are generally much higher than those charged by ANDA, except in the poorest municipalities, where FINET subsidises the electricity tariff for groundwater pumping. Founded in 1998, FINET aims to facilitate access by rural sectors and low-income people to electricity and telephone services (FINET is managed by FIDSL).
95 municipalities own and operate their WSS system. These cover 0.6% of the total population (40 000 people).
Residential and industrial-zone projects have created their own WSS systems to fill gaps in ANDA’s infrastructure. This covers 1.6% of the country's population (around 100 000 people).
Investment needs
El Salvador has made progress in providing WSS services. According to UN-Water, the vast majority of the Salvadoran population (97% in 2017) uses a safely managed drinking water service. This is a high proportion compared to benchmark countries (Figure 6.8). Still, according to UN-Water, most of Salvadoran population (87% in 2017) uses a safely managed sanitation service. This is an average result compared to benchmark countries, although it is a better performance than El Salvador’s regional neighbours (Figure 6.9).
Figure 6.8. El Salvador has high public water supply coverage
Water service in % of the population, 2017
Source: (UN-WATER, 2020[11]), The 2020 Data Drive: Joining Forces to Report on Progress towards Sustainable Development Goal (SDG) 6.
Figure 6.9. El Salvador has relatively good water sanitation coverage
Sanitation service in % of the population, 2017
Source: (UN-WATER, 2020[11]), The 2020 Data Drive: Joining Forces to Report on Progress towards Sustainable Development Goal (SDG) 6.
However, national statistics differ substantially. According to ANDA’s latest statistical bulletin, in 2019, 96% of the urban population benefited from improved drinking water supply, including tap water and standpipes, but only 41% of the rural population did. Still, according to ANDA, in 2019, 89% of the urban population benefited from improved sanitation, including sewers, septic tanks and latrines, whereas only 54% of the rural population did. Data from the Ministry of Economy drawn from the 2019 Multipurpose Household Survey also show improved drinking water supply coverage of 96% in urban areas, but much lower coverage (78%) in rural areas. The Ministry of Economy’s data for improved sanitation coverage are much higher than those of ANDA (98% and 91% for urban and rural areas, respectively). The following analysis is based on ANDA data.
In 2019, more than 4% of the urban population (180 000 people) was still supplied by unimproved sources of drinking water, including tanker trucks, and almost 60% (1.45 million people) in rural areas (Annex 6.A). Households that buy water from tanker trucks pay up to 25 times more than ANDA clients for piped water (MARN, 2013[13]). ANDA and decentralised operators report drinking water leaks due to illegal connections, theft of water from fire hydrants, unbilled water, and losses in distribution networks (many dating back to the 1960s) (ANDA, 2020[21]). The rate of pipe leakage increased from 41% in 2008 to 59% in 2019 (Figure 6.10).
Figure 6.10. Leaks from the piped water supply network continue to increase
Source: ANDA annual statistical bulletins.
In most areas that are served by ANDA, drinking-water service is irregular. A national survey on family health that was carried out in 2002 showed that it ranged from 16 hours a day in some areas to less than four hours a day, and even once every four days in others (Carpio Hernández, Flores Olivares and Hernández Benitez, 2010[22]). In 2017, a non-governmental organisation (NGO), the Unidad Ecológica Salvadoreña, estimated that the water consumption of households that were connected to the public network varied between 81 and 531 litres per head per day, and that 7% of urban households (8% in rural areas) had to rely on tanker trucks (UNES, 2017[23]). By comparison, OECD countries with high domestic water consumption are between 200 and 450 litres per head per day (this is the case of Australia, Canada, Japan, Mexico and the United States) while “middle-range countries” are between 130 and 180 litres per head per day.
In 2019, unimproved sanitation affected 11% of El Salvador’s urban population (470 000 people), and 46% of the rural population (1.13 million people) (Annex 6.A). These data exclude wastewater treatment. According to ANDA, in 2020, only 8% of the country's domestic wastewater was treated before being released into the environment. By comparison, the proportion of safely treated wastewater in 2015 was 92% in Estonia, 43% in Ecuador and Morocco, and 25% in Serbia (UN-WATER, 2020[11]). All OECD countries have at least 60% of their population connected to a wastewater treatment plant with secondary or tertiary treatment. Still, primary treatment remains widespread in some OECD countries, and a few still lag behind with 20% of their population not connected to wastewater treatment (OECD, 2020[24]).
There are plans to build two wastewater treatment plants to treat 60% of San Salvador’s wastewater in the coming years (at an estimated cost of USD 360 million). However, the lack of access to private finance is a major obstacle to the development of such plants. In order to foster private investment in wastewater treatment plants, the 1961 National Aqueduct and Sewers Administration Act (Article 3) should be amended to mention explicitly that the construction and operation of wastewater treatment plants is also subject to charges for the recovery of costs (see below). Municipalities and communities have organised to build and operate wastewater treatment plants, and private companies provide wastewater treatment services in residential areas. However, these plants operate at very low efficiency levels, due to very low cost recovery (MARN, 2013[25]). El Salvador's water pricing system does not include wastewater treatment costs (see below).
Public financial support for rural WSS systems has waned. From 1962 to 1995, the Ministry of Health supported community sanitation projects through the National Basic Rural Sanitation Plan (Plan Nacional de Saneamiento Básico Rural, PLANSABAR). This allowed decentralised operators and others to fill the gap left by ANDA in rural areas, but service coverage remained insufficient because many rural households could not afford the water bill. In 1996, rural sanitation was entrusted to ANDA, but without allocating additional budgetary resources. ANDA thus tends to prioritise the development of sanitation in urban areas, and to link its engagement in rural areas to obtaining specific financial support (for example from international co-operation, or FIDSL) (MARN, 2013[25]). The Ministry of Health continues to support community sanitation projects through its network of 2 912 "health promoters" (technical assistance), and a corps of 628 sanitation inspectors. Transitional public financial support could be combined with acceptable prices for WSS services (as potentially defined by a future regulator), in order to fill the financing gap in rural areas. This would be similar to the approach in unserved urban areas. It should be part of a policy of full cost recovery in the longer term (see below).
The 2019-20 National Water Plan of ANDA aims to improve the supply of drinking water in areas that for decades have had irregular service, by constructing new groundwater wells or by improving existing wells (ANDA, 2020[26]). The National Plan for Water and Sanitation (Plan Nacional de Agua Potable y Saneamiento PLANAPS) foresees investment needs for water supply and sanitation of approximately USD 14 billion over 20 years (2019-39), including 39% for drinking water supply, and 61% for sanitation (ANDA, 2018[27]). It is not clear how the 2018 estimates tally with the investment needs that were defined a year earlier in the PNGIRH plan for water resource management. However, water resource management, and the management of WSS, are tightly linked (as they correspond to short and long water cycles). Integrated water resource management should be considered as a prerequisite for profitable management of WWS. For example, water consumers in downstream cities could contribute to the protection of ecosystems upstream, as is the case in Peru (see below).
The estimates of the PLANAPS appear to be high. Annex 6.A provides a rough estimate almost three times lower for achieving universal water and sanitation coverage for households (urban and rural) by 2050 (Table 6.4). El Salvador should develop a model to assist policymaking on water and sanitation capital spending, with data that can be adjusted as new information emerges.
Table 6.4. Investment in billions of USD are needed for universal household access to safe water supply and sanitation in El Salvador by 2050
Note: Excluding operation and maintenance (O&M) costs. See Annex 6.A for more details.
1). “Full” coverage scenario: All people living in urban areas are connected to piped water, sewerage and wastewater treatment (secondary level), plus a separate storm water collection network. “Basic” coverage scenario: Similar except that half of people living in slums have access to water through standpipes, and to sanitation through septic tanks or latrines (the other half having full coverage).
2). “Full” coverage scenario: all people living in rural areas connected to piped water, one quarter to sewers, and three quarters with access to sanitation through septic tanks or latrines. “Basic” coverage scenario: half of the rural population connected to piped water, and the other half have access to water through standpipes; access to sanitation similar to the full coverage scenario.
Source: Authors’ compilation.
Models to forecast water investments should not be biased towards the management of supply. The scope of demand-side management needs to be fully developed. The model proposed in Annex 6.A provides for the rehabilitation of existing infrastructure (to reduce leaks in pipes and increase treatment efficiency), and water metering. The recovery of treated wastewater could be added, as well as smart metering. In 2018, for example, Chile introduced a new regulation on grey water (relatively clean domestic wastewater from baths, showers, sinks, and others), for their use in activities such as irrigation, industry, or other environmental uses. Smart metering systems consist of meters, terminals and a data-gathering and management system. The meters record water flow 24 hours a day, seven days a week. Terminals gather data which is transmitted to the data-gathering system at regular intervals. This allows water supply systems to manage their network, and to diagnose areas with pressure deficits and leaks. In turn, this enables them to address issues rapidly, and to bill customers more precisely. Clients can see their usage at any time, and they receive alerts if they overconsume, which helps them to reduce their bills. Countries such as Brazil or Mexico have already started a large-scale update of WWS systems through the implementation of smart metering. Prioritising demand-side management is certainly a more cost-effective way of investing in water than building more reservoirs and dams, unless they are multi-functional (hydropower combined with water supply).
In order to get a complete picture of the water expenditure to be incurred, the scope of cost estimates should – in addition to households – cover irrigation, water storage, and industrial water. Data availability and research are heavily skewed in favour of municipal water and wastewater services, rather than the provision of industrial and agricultural water. This also reflects the greater emphasis for utilities on the provision of municipal water and wastewater services to domestic, commercial and industrial customers, rather than on in-house provision – as can be the case for industrial and agricultural water.
Financing and pricing water
Since 2009, and the World Water Forum in Istanbul, the OECD has encouraged the combination of water tariffs, budgetary transfers, and official development assistance (ODA) transfers, to help fill the water financing gap. These are known as the “three Ts”. Another way of looking at this approach is that public budget and ODA may both be used to supplement tariff revenues until an acceptable level of infrastructure is reached, and household access is improved. The idea is that sustainable income from all three sources makes it easier to obtain repayable aid in the form of loans, bonds and shares. However, this “sustainable cost recovery” approach should be seen as a transitional one, and as an intermediate step towards the ultimate goal of “full cost recovery” (Cox and Borkey, 2015[28]). Ultimately, tariffs alone should be sufficient to recover the costs of building and maintaining water supply and sanitation infrastructure.
ANDA's monthly water bill for household water supply includes a minimum charge (USD 2.29) for the first 10 cubic metres (m3) consumed (implicit rate of USD 0.229/m3), plus a block charge. The minimum charge aims to protect the finances of the company to some extent. To this effect, customers must pay 10 m3 of service each month, whether or not this amount has actually been consumed. Beyond 10 m3, different volumetric rates are attached to different consumption blocks, with the rates rising consistently as more water is consumed. This schedule is called an increasing-block tariff, or IBT) (Table 6.5). In fact, a charge rate per block that is lower than the implicit rate of the minimum charge (0.210 USD/m3) applies between 10 and 20 m3. These low rates for the first 20 m3 aim to cover water needs up to 183 litres per head per day, for an average household of 3.6 people, as per the multi-purpose household survey of 2019 (DIGESTYC, 2020[29]). This level of consumption is in the middle-upper range for cities in the OECD. Subsidised tariffs (i.e. tariffs that are lower than the cost of producing water)12, apply up to 40 m3 per month, or 365 litres per head per day, a level of consumption that is also found in the OECD countries of North America.
While the sizing of these blocks seems judicious to the extent that it is encouraging households to reduce their consumption from North American standards to levels closer to the overall the average for OECD countries, the rates that are applied are still very low compared to OECD countries as a whole (Figure 6.11). As a result, less than half of the cost of producing tap water is recovered, because the vast majority of consumption takes place in subsidised blocks (93% of households consume less than 30 m3) (Table 6.6). Budgetary transfers are insufficient to cover the deficit of ANDA, which has to resort to debt finance. ANDA benefits from a preferential tariff from CEL for its electricity consumption.
Table 6.5. El Salvador implements a progressive water tariff structure
Charges in USD
Note: 1) Minimum charge.
Source: (MINEC, 2015[30]), Acuerdo Número 1279 del Órgano Ejecutivo en el Ramo de Economía.
Figure 6.11. El Salvador’s drinking water prices are low compared to OECD cities
Note: 2017 data. Based on a monthly consumption of 8 m3, and 17 m3 during one year (i.e. 100 m3 and 200 m3 annually, respectively).
Source: (IWA, 2018[31]), International Statistics for Water Services 2018 and (MINEC, 2015[30]), Acuerdo Número 1279 del Órgano Ejecutivo en el Ramo de Economía.
Table 6.6. Only half of the cost of supplying drinking water is recovered by the water bill
Note: 2018 data.
1) Unit cost estimated by ANDA at 0.97 USD/m3.
Source: OECD Secretariat; (ANDA, 2019[32]), Boletín Estadístico 2018.
The cost recovery gap is significantly higher for sanitation services. These are billed on an increasing block tariff basis (and not by volume of water consumed, as is generally the case in OECD countries). They are billed at very low levels compared to OECD countries (USD 0.10 for water consumption up to 20 m3, USD 1.80 up to 30 m3, and USD 5 for over 500m3) (Figure 6.12). Wastewater treatment services are not priced, which explains El Salvador's delay in the construction and rehabilitation of wastewater treatment plants.
Figure 6.12. El Salvador charges very little for sewerage and sewage treatment services compared to OECD cities
Note: 2017 data. Based on a monthly consumption of 8 m3, and 17 m3 during one year (i.e. 100 m3 and 200 m3 annually, respectively).
Source: (IWA, 2018[31]), International Statistics for Water Services 2018, http://waterstatistics.iwa-network.org/ and (MINEC, 2015[30]), Acuerdo Número 1279 del Órgano Ejecutivo en el Ramo de Economía.
Progressive pricing structures of the kinds that have been described aim to reconcile conservation objectives (the more a person consumes, the more expensive their bill will be), and social objectives (covering basic needs at affordable prices). The tariff revision in 2015 reinforced the conservation signal by increasing rates as of 20 m3, and even more above 40 m3. However, poor families are not necessarily those who consume the least, and do not, therefore, benefit the most from subsidised tariffs.
The way forward
OECD countries approach the issue of affordability for low-income groups in two ways: either through the tariffs themselves, or by targeting poor households through tariff discounts or income support (OECD, 1999[33]). In both cases, cross-subsidies between water consumers (from industry to households, rich to poor) make up the shortfall of water companies from reduced tariffs. Where appropriate, social security generally provides income support. The two approaches are not mutually exclusive. A tariff can be reserved for poor consumers (those who receive social security benefits, or according to the value or type of property).
The Belgian region of Flanders implements a progressive tariff system, with cross-subsidisation and a free allowance for the poor (all people on social benefit, i.e. 7% of the population). The first 30 m3 per year (equivalent to 41 litres per head per day for a household of 2 people) are provided free of charge to each poor household (the initial allocation was 15 m3 in 1997). A social tariff (half of the normal rate) applies beyond 30 m3 (Figure 6.13. A cross-subsidy between rich and poor covers the shortfall that is caused by the 4% loss in overall water sales that results from the subsidised rates. This pricing system would be fairer if the free allowance were based on the number of people in the household, but this information is difficult to obtain. This type of approach, apparently unique in the world, is cost-effective, and is politically acceptable as long as the free allowance i) covers basic household needs, and ii) is small enough to ensure that very few households pay nothing at all for their water.
Figure 6.13. Flanders (Belgium) is a good example of combined social and progressive water pricing
Water and sanitation bill in EUR/m3
Source: (Smets, 2011[34]), La tarification progressive de l’eau potable - Les solutions en France et dans le monde.
Another option is to apply purely (linear) volumetric pricing, with rates set at such a rate as to recover the full costs of water supply and sanitation. This is the case in Austria, Denmark, Finland, France, Germany, Netherlands, Sweden and Switzerland. The social objective would then be achieved via social transfers. Fifty municipalities in France are currently experimenting with this pricing policy. For example, Eau du bassin rennais (a river basin agency) grants a “water check” of EUR 15 per year per household to beneficiaries of complementary universal health coverage, plus, in the city of Rennes, EUR 15 for sanitation expenses. Large families receive an additional water voucher of EUR 30 per year per child, as of the third child.
A third option is to create a solidarity fund financed by a tariff supplement applied to all customers, in order to pay the water bill of the poor. The city of Brussels takes EUR 0.03/m3 from water bills, but the funds only suffice to pay the water bill of 0.2% of the population.
A separate standing charge could be added to the tariff structure to recover costs that are not directly linked to the volumes of water used (such as the maintenance and reading of meters, and billing). It would also help to finance the control of illegal connections (“non-revenue water”), and the collection of unpaid bills. In turn, this would help to improve the quality and continuity of the service. The continual imbalances between the actual costs of production, on the one hand, and service charges, on the other, are an impediment not only for investment, but also for the operation and maintenance of ANDA's infrastructure. This has a cost for the Salvadoran economy, not only by straining the state budget, but also by exerting a negative impact on the health and labour productivity of the population.
El Salvador must enshrine clear and precise criteria for water pricing in the ANDA law in order to comply with the UN’s SDG 6 (ensure the availability and sustainable management of water and sanitation for all) in the most cost-effective way. A good example comes from Switzerland. The Swiss Federal Water Protection Act of 1991 provides that water tariffs must cover the costs of building, operating, and maintaining WSS infrastructure, including wastewater treatment plants, as well as the investments planned to adapt the infrastructure to regulatory requirements, and for operational optimisation. Depreciation (to preserve the value of the WSS infrastructure), and market interest rates, should be taken into account when setting tariffs, and the necessary financial reserves built up. Tariffs should include a standing charge, and a volumetric price, ideally reflecting the fixed and variable costs of the utility. The principles for calculating tariffs must be made public.
El Salvador is not starting from scratch. Article 3 of the 1961 National Aqueduct and Sewers Administration Act provides that tariffs for drinking water and sanitation services shall be sufficient to cover: i) the operation, maintenance, administration, improvements, development and expansion of infrastructures; and ii) payment of capital, interest and other charges to honour debts. The tariffs are to be set according to criteria of corporate self-financing and social public service, and to provide a safety margin. Similarly, Article 5 of the 1948 Act that created the CEL provides that tariffs for the supply of electricity and irrigation water (cánones) shall be sufficient to cover: i) the maintenance, improvement, development, and expansion of infrastructure; and ii) payment of capital, interest and other charges to honour debts. The Ministry of Economy must approve the tariffs proposed by ANDA and CEL.
The LRA law (Articles 49 to 51) does not provide for full cost recovery in supplying irrigation water but, unlike the laws that created ANDA and CEL, it provides for an abstraction fee (for direct water withdrawal). The rules stipulate that the state shall bear at least 40% of the cost of its investments in irrigation infrastructure. This includes the value of the land, and any interest on loans, whether in the irrigation districts or outside them. The remaining depreciation quota is to be shared among the irrigators on the basis of the irrigated area. Irrigation water-use charges (tarifas por servicios) in the irrigation districts are to cover operation and maintenance, and be based on the volume of water supplied, the area irrigated, or a combination of both. For irrigation districts that are transferred to irrigation associations, revenues from the charges paid by users shall accrue to an irrigation association fund. Permit holders outside the irrigation district shall pay an abstraction fee (tarifa por el permiso de riego), for the use of the water. The Legislative Assembly must approve the user charges, abstraction charges and depreciation quotas, which are proposed by the Ministry of Agriculture and the Ministry of Economy, both for and outside of the irrigation districts.
However, the abstraction fees are per hectare and not per volume withdrawn, which would be preferable. They do not reflect the risk of water shortage in the withdrawal area. The rates are far too low to encourage careful use of the resource and have not changed since 2004 (Table 6.7). In addition, the electricity tariff for pumping groundwater is subsidised in the irrigation districts, which goes against the (already weak) incentive to preserve water created by the abstraction fees. Revenues from irrigation-water withdrawal permits (paid to the Ministry of Agriculture) increased from USD 29 000 in the 2014‑15 irrigation season, to USD 38 000 in 2018-19, reflecting an increase in the irrigated area (from 21 000 to 23 000 hectares).13 Regarding user charges, MARN (2017[12]) refers to USD 5.71 per hectare for irrigation districts (“canon” paid to the Ministry of Agriculture), and from USD 57 to 70 per hectare outside of the districts (a service charge, or tarifa de servicio, paid to irrigation associations). This seems to indicate that operational and maintenance costs are not covered in irrigation districts.
Table 6.7. El Salvador levies irrigation water abstraction fees, but at very low rates
Note: The first irrigated hectare is exempt from the abstraction fee.
Source: MAG and Treasury (Agreement N° 444 of 11 June 2004), https://www.transparencia.gob.sv/institutions/mag/documents/147471/download.
An independent water regulator could be created to help develop criteria for water pricing, and then to enforce them. The establishment of water regulators is a consistent trend among OECD and non-OECD countries (OECD, 2015[35]). A certain number of Latin American countries have one (e.g. Brazil, Chile, Colombia, Peru, and Uruguay). A water regulator is generally established in order to protect the public interest as part of broader reforms to make service providers more accountable, to establish an independent price-setting process, and to bring regulatory expertise into the public sector. The scope of supervision (the number of supervised utilities) must match the human and financial means. The regulator is often financed through a levy on the water bill. For example, Peru’s SUNASS (Superintendencia Nacional de Servicios de Saneamiento) regulates, oversees and monitors the supply of WWS, including the definition of geographic areas for WWS service provision. SUNASS has several powers. These are: i) regulatory (it can issue regulations, guidelines and standards); ii) the power to set tariffs for WWS services; iii) surveillance (it can verify compliance with legal, contractual or technical obligations); and iv) sanctioning (it can impose sanctions and corrective measures in cases of non-compliance with legal or technical regulations). It can also resolve conflicts between the operators and users of water services (complaint settlement), and between companies (dispute settlement) (OECD, 2021[36]).
Making greater use of economic instruments to manage water risks
This section provides examples of international experiences that El Salvador could consider when it comes to financing IWRM, soil and water conservation in watersheds, and river rehabilitation. An example of good governance of the use of groundwater is also provided.
Financing IWRM by applying the principle of “water pays for water”
This is the case in France, where water agencies (created in 1964) collect the charges on water abstraction and sewage discharge, along with other charges (Table 6.8). The agencies redistribute the charge revenues in the form of financial aid to local communities, industry, and farmers – in accordance with each basin’s “master plan for water development and management”. The idea that water should pay for water is socially well accepted, although agency fees do increase water bills (by some 16% in 2018).14 Water consumers know what they are paying for and the benefits that they get in terms of quality of service, their health, and environmental protection. Public acceptability is higher with this approach as compared to depending on taxpayers to finance IWRM.
Table 6.8. The Seine Normandy water agency (France) collects numerous charges in 2019-24
Source: (Agence de l'eau Seine-Normandie, 2019[37]), Les redevances de l’Agence de l’eau Seine-Normandie.
Since 2015, ANDA has applied a fee of USD 0.03/m3 to the direct abstraction of water for human consumption. In rural areas, entities that have been declared to be of social interest15 are exempt. ANDA also applies a fee of USD 0.30/m3 to direct water withdrawal for other (industrial) purposes.16 According to a ruling by the Supreme Court of Justice in 2016, the justification for ANDA's abstraction fee is the control and supervision of drilling and water exploitation in private wells.17 Beyond raising revenue to finance IWRM, the taxation of withdrawals must above all aim to reduce the risk of water shortage. It is therefore imperative to first remove the dis-incentives created by electricity subsidies (to ANDA and farmers in irrigation districts) before any increase in water withdrawal tax rates.
Private water abstraction operators that use ANDA's sewerage pay an additional USD 0.15 per cubic metre of water abstracted. The pricing of ANDA’s sewerage service is thus differentiated between ANDA customers and others, to the benefit of the former, which is difficult to justify. Such a fee on sewage discharges should also apply to discharges into the natural environment (rivers, lakes, and coastal waters), whether from a wastewater treatment plant, or from another source (industry). This is in order to encourage the wastewater treatment plant, or the industry in question to treat its wastewater at the economically optimal level (depending on the level of the tax), prior to discharging it into the water body. Similarly, the fee on direct withdrawals should encourage operators, including ANDA, to reduce their water withdrawals in order to sustainably preserve the resource (to prevent situations of water scarcity). Such fees are payments made by consumers for the provision of WWS services (and they differ from taxes that constitute unrequited payment to the general government).
These two instruments (water abstraction fees and sewage discharge fees) target negative environmental externalities. Economically, they should be viewed as taxes, not charges or fees. The former are defined as “compulsory and unrequited payments to general government” while the latter are “payments made to service providers in return for the provision of services”. The abstraction/pollution tax can be passed on to users through the user charge (Figure 6.14).
Figure 6.14. Taxes can be combined with charges in water pricing
Source: Authors’ elaboration.
Most OECD countries apply an abstraction tax (or charge), and many levy a pollution tax (or charge). The rate of the tax (or charge) should not vary according to the category of users/polluters, as is often the case in OECD countries, where farmers, and industry sometimes enjoy preferential rates. In addition, the rate should not be lower for surface water than for groundwater, assuming that the latter is more vulnerable. To be cost-effective, the rate must reflect the risks of scarcity or pollution for a given body of water, whether it be an aquifer, a river or a lake. For example, the European Union’s directive on urban wastewater provides criteria for identifying water that is sensitive to eutrophication.18
Applying the water pays for water principle can make a substantial and lasting contribution to the financing of IWRM. In France, the proceeds of the charge amount to more than EUR 2 billion a year for the six water agencies (Table 6.9).
Table 6.9. French water agencies collect more than EUR 2 billion per year in 2019-24
1. Tax levied by water companies on the water bill.
2. Retail sales tax on pesticides.
3. Tax on nitrogen and phosphorus paid by large livestock farmers.
4. Tax on effluent discharges directly into water.
5. Hunting licence tax.
6. Fishing licence tax.
7. Incentives for farmers to convert to organic farming/reduce pesticide use.
Source: (MEFR, 2020[38]), Annexe au projet de loi de finances pour 2021 – Agences de l’eau.
However, there are some shortcomings in the approach that should be kept in mind. In France, most of the proceeds come from households, while the agricultural sector receives more than it contributes, resulting in cross-subsidisation (Table 6.9).19 Thus, the principle that water pays for water responds very imperfectly to the polluter-pays principle, because it inflates the water bills of households in order to address the negative effects on agriculture. In the south of France, the irrigation tax represents a tiny fraction of abstraction taxation, while irrigation is the source of most abstraction from surface water. Agricultural pollution (nitrogen, pesticides) in the catchment areas of water companies generates additional costs for the supply of public water, and these are passed on to household water bills. To correct this imbalance, the French government has considered taxing crop nitrogen (in addition to large livestock farms), and reducing support for irrigation, while continuing to tax pesticides.
In other OECD countries, proceeds from abstraction and pollution taxes go to the general budget. The OECD recommends that the earmarking of public revenues for particular purposes be kept to a minimum (OECD, 2015[39]). Earmarking limits flexibility in the use of public funds.
Financing soil and water conservation in watersheds
Changes in land use in rural areas, such as deforestation in northern El Salvador, severely affect the downstream water regime, including by reducing river flow during dry spells, and by increasing flooding and landslides during the rainy season.20 The PNGIRH plan aims to restore the infiltration capacity of hillside soils by disseminating agroforestry practices for staple cereals.21 As part of the 2013 national strategy for biodiversity, the National Ecosystem and Landscape Restoration Programme (Programa Nacional de Restauración de Ecosistemas y Paisajes, PREP), will help to achieve this objective. It has already entered its start-up phase in some pilot sites in the country (MARN, 2017[12]). El Salvador could explore other sources of funding to improve hillside soil and water conservation, particularly payments for ecosystem services (PES). El Salvador already has some experience with PES, notably in Mancomunidad La Montañona (Chalatenango) and Microcuenca La Poza (Ozatlán) (Ramos, 2010[40]).
In 2015, Peru’s Ministry of the Environment introduced an innovative PES mechanism. The water companies have created specific funds financed by the water bill, which represent around 1% of their turnover. The funds aim to compensate communities that commit to providing hydrological services, such as protecting high-mountain lake watersheds through reforestation (USD 43 million was raised nationwide through to 2019) (Figure 6.15). This fund-raising mechanism could usefully extend to other beneficiaries of the protection of mountain ecosystems, namely farmers and industry.
Figure 6.15. Peruvian cities compensate upstream rural communities for ecosystem protection
Source: Ministry of the Environment of Peru, http://www.minam.gob.pe/economia-y-financiamiento-ambiental/mecanismos-de-retribucion-por-servicios-ecosistemicos-mrse/.
Because of the desire to go fast (to maintain momentum after the adoption of the law on the PES mechanism in 2014),22 and because the water regulator understood the importance of water companies and upland communities joining forces, water companies raised funds before identifying ecosystem services. In an ideal world, it would be better to: i) first identify the water risks in the basin where the water company is located; ii) second, identify the related ecosystem services, and iii) third, set the rate and base of PES. The proportion of companies’ turnover that is devoted to PES should depend on the cost-effectiveness of the PES compared to investment spending in traditional grey infrastructure.
In addition, since 2013 the Peruvian Ministry of Agriculture and Irrigation has used part of the budget of the Sierra Azul Fund (initially known as the My Irrigation Fund) to improve cultivation practices in highland areas. The goal is to intercept and retain rainwater in soil, aquifers and surface water bodies, in order to increase irrigation water downstream – an ancient technique of “sowing and harvesting water” (siembra y cosecha de agua). This public financial support can be qualified as PES. The three levels of government in Peru can present projects whose execution will be under the responsibility of Ministry of Agriculture and Irrigation. Since its inception, the annual expenditure of the Sierra Azul Fund has ranged from USD 55 million to USD 128 million, including projects to improve the efficiency of irrigation infrastructure, and to modernise irrigation at the plot level (tecnificación del riego parcelario).
Financing river rehabilitation
As part of the development of El Salvador’s PNGIRH plan, 13 river sections were selected from 12 of the country’s rivers for the implementation of ecological flows. This work is still ongoing and began with the determination of ecological flows in priority rivers. These pilot sections were selected by taking into account their degree of conservation, the human pressures on them, and the presence of protected natural areas. The choice of the river sections where the minimum flows should be implemented first, on the basis of a cost-benefit analysis, is a step in the right direction. It provides a good basis for the choice of river sections to be rehabilitated. The geomorphology and natural hydrological regime of El Salvador's rivers have been altered by the occupation of areas adjacent to river beds, destruction of riparian forests, overexploitation of gravel and sand from river beds, and poor channelling of stretches of river (MARN, 2017[12]).
In 2011, Switzerland embarked on a long-term endeavour to rehabilitate its rivers to their natural functioning state. The Swiss policy of river rehabilitation was triggered by a popular initiative on the part of the Swiss Fishing Federation, “Living Waters”. This initiative set out to strengthen the biological functions of watercourses by creating habitats and managing riparian zones. Around 40% of Swiss rivers (and 50% of those at an altitude below 600 metres) lack the necessary space for natural functioning, and about a quarter have a high degree of fragmentation due to artificial structures. A national target has been set to rehabilitate about 25% of waters with poor morphological status in the next 80 years, i.e. some 4 000 kilometres of river length by about 2090.
Public financial support is provided through biodiversity policy and agricultural policy, while electricity consumers (via a tax on electricity bills) support the ecological improvement of hydropower plants (Table 6.10). The biodiversity policy finances rehabilitation projects, while agri-environmental payments reward farmers who manage riparian lands as “biodiversity promotion areas”. These two policies, combined with direct regulations on minimum flows, aim to provide space for water and to preserve aquatic life, while preventing flooding (by preserving floodplains).
Table 6.10. Switzerland has three funding levers for the rehabilitation of its rivers
Source: (OECD, 2017[41]), OECD Environmental Performance Reviews: Switzerland 2017.
Since 2011 and by 2030 for old installations, Swiss hydropower plants must meet three requirements: i) reduce obstacles to fish migration; ii) reduce changes in sediment transport; and iii) prevent hydro‑peaking (abrupt variations in flow rates at the dam outlet). The latter two requirements also help to mitigate the risk of flooding. In accordance with the polluter pays principle, operators of hydropower plants must cover the cost of upgrading plants to such environmental standards. In Switzerland, however, a tax on electricity bills finances the costs of environmental upgrades to existing power stations, on the principle of acquired rights guarantees. Financial support should “compensate” for any limitation in the use of hydroelectric power (compensation by virtue of the rights acquired following the granting of a concession for hydropower use). The tax base is large (each electricity consumer must pay the tax). Asking operators of hydropower plants to bear the cost of greening, and to pass it on to distributors (or consumers if they are distributors themselves), would penalise hydropower compared to other forms of energy. This principle of “electricity pays for electricity” can be justified by the political will to promote clean energy.
Risk-based governance of groundwater use
Urbanisation in aquifer recharge areas is a concern in El Salvador, where major cities are located in high-production aquifer units (MARN, 2013[13]). In each of El Salvador's 21 groundwater bodies,23 an environmental reserve of 35% of the incoming water has been established (in m3/year). Based on the water balance, its purpose is to keep the aquifers in a good quantitative state during the low-water period (MARN, 2017[12]). In order to avoid an over-exploitation of aquifers, the PNGIRH recommends that each of the groundwater bodies should take no more than 80% of the incoming water, net of environmental reserve. It is a step in the right direction. A more cost-effective approach, which would also be more site-specific, and not necessarily complex to set up, would be to estimate an abstraction limit that would be acceptable to all stakeholders based on the risks involved. It would also be a good way to avoid conflicts of use, and to develop “water culture”.
Table 6.11. Preserving the integrity of aquifers means assessing the risks of water scarcity for users
1. Highest risk rating.
Source: (Government of Western Australia, 2011[42]), Groundwater Risk-based Allocation Planning Process.
In 2011, for areas where groundwater knowledge was limited and current demand for the resource was low, the government of Western Australia developed a risk-based approach to set water allocation limits. The first step in this approach is to identify and define the groundwater resource, including the recharge of the aquifer. Second, the risks to environmental, cultural and social values that are dependent on groundwater (“in situ values”) must be assessed, as well as the opportunity cost of not withdrawing groundwater for economic development (“development risk”) (Table 6.11). The sophistication of this assessment depends on the level of risks involved (the value of planned investments, the number of people who depend on these water resources, and the presence of protected natural areas in the area). Third, the acceptable level of groundwater abstraction (and therefore of the permits that are issued) is set by weighing in situ risks against development risks (Table 6.12). Such a “risk matrix” helps to manage trade-offs between groundwater uses, while protecting the integrity of the aquifer.
Table 6.12. The sustainable use of aquifers means managing risks and trade-offs between uses
Note: Risk matrix for determining the proportion of recharge for allocation.
Source: (Government of Western Australia, 2011[42]), Groundwater Risk-based Allocation Planning Process.
Recommendations
Towards integrated water resource management
IWRM governance
The newly created Salvadoran Water Authority, the ASA, should oversee IWRM – and finance it. The ASA could be decentralised in each of the ten river basins, and governance specific to each basin could be put in place (e.g. Lempa Water Agency, Grande de San Miguel Water Agency, etc.). The basin is indeed the best scale of governance for IWRM, because it is the basic hydrological unit. Groundwater could be subject to specific governance at the level of groundwater basins. El Salvador could work towards the creation of international commissions supervising basin management for the trans-boundary rivers Lempa, Paz and Goascorán.
IWRM financing
The polluter pays principle should be applied to the financing of IWRM. This means taxing or charging for the direct withdrawal of water and for the discharge of wastewater into the environment, as provided for in El Salvador’s General Law on Water Resources. This also involves phasing out subsidies that are harmful to IWRM, such as subsidies for electricity used to pump water and subsidies for fertilisers. The tax/charge proceeds could accrue to the river-basin agencies to finance their activities according to a IWRM plan for the river basin (the principle of water pays for water). El Salvador could develop payments for water and soil conservation services provided by mountain communities, according to the principle that the beneficiary pays.
Risk-based approaches
El Salvador could define risk areas within each basin based on the current impacts on water (scarcity, pollution, floods), and in such a way as to anticipate impacts on vulnerable areas. This would be different from the existing priority zones, which could be abandoned. It may involve the identification and definition of:
Water bodies that are sensitive to contamination (stagnant water).
Sections of rivers that need to be rehabilitated (so that they find their natural course).
Parts of watersheds where priority should be given to protection of soil and water in sloping land (to regulate the water regime and prevent downstream floods and landslides).
Vulnerable aquifers (and their recharge zone).
Areas that are vulnerable to nitrates (to thwart the proliferation of algae and water hyacinths).
Demand-driven approaches
El Salvador could strengthen incentives to save irrigation water (abstraction tax/charge), and foster the spread of modern irrigation technology (e.g. agricultural policy support for drip irrigation).
Towards water supply and sanitation for all
Strategic financial planning
El Salvador could assess the funding gap between infrastructure needs and tariff revenues under a scenario of business as usual and develop scenarios to narrow the gap.
Financing WSS
El Salvador could define prospects for full cost recovery of WSS services (i.e. a timetable for a gradual increase in tariff revenues). It could create an environment conducive to the mobilisation of private financing (e.g. state guarantees, and official development assistance more focused on WSS).
Pricing WSS
El Salvador could apply a single water tariff for all, letting social policy support the incomes of the poor. Other options include reducing the subsidised tariff base for drinking water by better targeting it for the poor, improving the rate of invoice collection, involving real-estate developers in the repair of the piped network (to reduce the rate of leakage), charging by volume for the connection to sewers (instead of on a flat-rate basis), and billing for wastewater treatment.
Demand-driven approaches
El Salvador could extend meter coverage and introduce smart meters.
Although no estimates are available, the economic and social cost of water insecurity is undoubtedly very high in El Salvador. The permanent imbalances between the actual costs of water supply and sanitation, and their recovery through water bills, constitute an obstacle not only to investment in the water sector, but also to the operation and maintenance of existing infrastructure. This has a cost for the Salvadoran economy, as it hinders investment in the country, and also affects health and labour productivity. Lack of water is a factor in the prevalence of chronic kidney disease, which is the second leading cause of death among Salvadoran men. Improving water infrastructure, setting water prices that enable the necessary improvements, and establishing risk-based management of water resources, would significantly improve water productivity in El Salvador. This would make water a driver of, rather than an impediment to, economic growth.
The PNGIRH plan of 2017 calls for a new legal and governance framework to improve water resources management. The adoption and implementation of El Salvador’s General Law on Water Resources is an important step in this direction. Another key challenge for El Salvador is to ensure universal access to safe drinking water and sanitation for its population, in line with the United Nations SDGs. The 2018 PLANAPS plan for drinking water and sanitation estimated that investments to close gaps in WSS infrastructure amount to billions of US dollars.
Towards integrated water resource management
To achieve integrated and cost-effective water resource management, this chapter suggests basin-level governance combined with a risk management approach. Basic governance enables the implementation of integrated water resources management based on science (hydrological logic). A risk management approach to water (risks of scarcity, pollution, flooding) promotes cost-effectiveness by prioritising where to intervene first in the basin (risk mapping), to what extent (acceptable levels of risk), and how (which policy instruments are most cost-effective).
Water scarcity risks
El Salvador is well endowed with water resources, but inefficient use of water exacerbates conflict over water at the local level. The PNGIRH proposes to invest in water infrastructure
Groundwater is the main source of drinking water. Water in aquifers is threatened by increasing demands from cities and industry, and by lower natural recharge due to soil sealing driven by urbanisation. Above and beyond the risk of water scarcity for users, there is a risk that groundwater-dependent ecosystems could be lost. There is also a risk that the aquifers themselves could be depleted, or could suffer from saline intrusion. The PNGIRH proposes digging new wells.
The main source of irrigation water is surface water. Drip irrigation accounts for only 3% of irrigation systems, while agriculture accounts for over half of water demand. The PNGIRH proposes to expand irrigation infrastructure.
Dams and reservoirs in El Salvador were designed exclusively for energy generation. Because of their real and perceived negative impacts, the construction of new installations faces strong public opposition. In spite of the issues linked to public acceptance, the PNGIRH proposes the construction of new dams combining hydropower production with public water supply.
The PNGIRH focuses little on reducing water demand. The metering of drinking water is generalised in urban areas (which are served by ANDA), but not in rural areas. The extraction and use of water for irrigation is subject to charges, but their low level, and the characteristics of their design, do little to encourage farmers to save water. In order to incentivise the adoption of water-efficient irrigation technologies, charges to users of irrigation water should be based on the volume of water supplied, and not on the area irrigated. This is because the volume of water used depends largely on the irrigation technology used (e.g. sprinklers compared to drip irrigation). Irrigation associations have to bear all of the costs of operation and maintenance of the irrigation infrastructure that is transferred by the state. In contrast, holders of abstraction permits in irrigation districts only bear a small fraction of the operation and maintenance costs. According to El Salvador’s Irrigation and Drainage Act, the state has to cover at least 40% of investment in irrigation infrastructure, with charges to users covering the rest. As in the case of WSS in urban areas, the ultimate objective should be full cost recovery. Holders of permits outside of irrigation districts have to pay a charge for water abstraction. However, the charge is per hectare, and not on the basis of abstracted volume (as would be desirable), and does not reflect the risk of water scarcity in the area of abstraction. Moreover, the level of charges are too low to encourage careful use of the resource. Extraction charges are not applied in irrigation districts, where, in addition, the electricity tariff for groundwater pumping is subsidised.
Recommendations for managing the risk of water scarcity
To manage the risk of water scarcity, El Salvador could adopt a risk management approach by:
Identifying and mapping the water bodies (rivers, lakes, and aquifers) that are at risk of water scarcity, as well as their recharge area (sub-basin, groundwater recharge area). This first step aims at “knowing the risk”. The Ministry of Agriculture could supervise scientific risk assessments.
Establishing acceptable abstraction levels in each risk area (sub-basin, and aquifer recharge areas), in order to optimise water abstraction against competing demands, and to prevent conflicts that are associated with water use. This second step aims to “target the risk”. The CTEI could oversee: i) stakeholder concern assessments to correct misperceptions of risk, and ii) cost-benefit analyses to define acceptable levels of risk.
Identifying policy instruments in order to achieve agreed water abstraction targets in a cost-effective manner. This third and final step aims to “manage risk”. The Ministry of Agriculture could oversee ex-ante analyses of cost-effectiveness.
Policy instruments could include:
Abstraction limits for water bodies that are threatened by scarcity.
Groundwater and surface water abstraction charges, with a rate based on the risk of water scarcity, and a base that covers all sectors of the economy.
Public financial support to help equip rural households with water meters in areas where the source of drinking water comes from an area that is at risk of scarcity.
Other instruments that address several water risks simultaneously (see Governance section, below.
Risks related to inadequate water quality
Surface water
Excessive faecal coliforms, phenols, nutrients, and heavy metals (e.g. arsenic, boron), limit or preclude aquatic life in 86% of the sites sampled. Widespread bacteriological contamination (faecal coliforms) from untreated urban wastewater discharges underscores the urgent need to improve El Salvador's sanitation infrastructure.
Excess phenols threaten aquatic life and call for better control of wastewater from coffee-processing facilities (beneficios). Excess phosphates and nitrates cause eutrophication, and several types of pesticides have been detected. This requires better management of agricultural inputs. Contamination by heavy metals led the government to take the drastic decision to ban new investment in the metal‑mining industry in 2017.
Groundwater
The quality of groundwater tends to be better than that of surface water. However, all groundwater intended for human consumption has to be disinfected due to the presence both of faecal coliforms of domestic or livestock origin, and heavy metals from informal mining and industry, in all sampling points. This calls for improved sanitation. Some wells are contaminated with nitrates and pesticides, especially in shallow aquifers in the coastal zone, and this calls for better management of agricultural inputs.
Recommendations for managing the risk of water contamination
The risk of water pollution is widespread. For a much-needed improvement in surface and groundwater quality throughout the country, El Salvador could consider:
Expanding urban sanitation services throughout the country. ANDA could assess investment needs (see WSS Section below).
Incentivising industry to reduce discharges of pollutants into the environment. The Ministry of Environment could oversee both the setting of emission limits and the assessment of the vulnerability of water bodies.
Incentivising farmers to limit the excessive use of nutrients and pesticides. The Ministry of Agriculture could monitor the establishment of acceptable nutrient surpluses at the farm level. The health and environment ministries could determine the level of toxicity of pesticides to health and the environment.
Policy instruments could include:
User charges, public financial support, and foreign direct investment or Official Development Assistance (ODA) to expand sanitation infrastructure (sewerage and wastewater treatment) throughout the country (see the “3Ts” principle in the WSS Section below).
For point sources (wastewater treatment plants, industry), emission limits based on the toxicity of pollutants to health and the environment, and pollution charges at rates that are commensurate with the vulnerability of the water body receiving the discharge.
Mandatory monitoring of on-farm fertiliser balances.
Pesticide taxes with rates established according to health and environmental toxicity.
Other instruments addressing several water risks simultaneously (see Governance section, below).
Risk of flooding
Approximately 10% of the territory of El Salvador is at risk of flooding. Much of it is in coastal areas that get hit by tropical storms. The San Salvador Metropolitan Area is also prone to flooding after heavy rains. This risk has increased due to the soil sealing that has resulted from urbanisation.
El Salvador’s flood risk map shows that 180 000 people live in areas with a very high risk of flooding. The inclusion of ordinary maximum flood areas of rivers in the public hydraulic domain can prevent greater occupation of rivers banks and illegal sand and gravel extraction, thus protecting the flow regime of rivers. Privately owned areas adjacent to river banks are subject to easements.
Recommendations for managing flood risk
By mapping flood risks, El Salvador has taken the first step in the risk management approach to dealing with flood risks, which is to “know the risk”. The next steps would be:
Establish the acceptable level of flood risk for each risk area (“target risk”). Basin organisations could assess the acceptable level of flooding in risk areas, in close consultation with stakeholders, for approval by the CTEI.
Identify and implement the most cost-effective instruments to keep flood risk at an acceptable level (“manage the risk”). The Ministry of Environment could assess the economic effectiveness, cost-effectiveness, and feasibility of different policy instruments. To this end, an economic analysis unit should be created within the ministry.
Policy instruments could include:
Flood damage insurance premia according to flood risk.
Other instruments that address several water risks simultaneously (see Governance section, below).
Water governance
The very logic of hydrology speaks in favour of watershed governance. El Salvador has defined ten river basins (called "hydrographic regions"). However, the PNGIRH does not address the issue of river-basin governance. Some measures of the PNGIRH are national in scope, while others refer to priority action zones. However, these zones were delimited without distinguishing between scarcity, pollution or flood risks – each having its own geography. This does not favour a risk management approach. Such an approach would recommend prioritising action in risk areas. Basin governance and water risk governance are not mutually exclusive, but should complement each other. Some municipalities and communities have spontaneously grouped themselves into structures at the micro- or sub-basin level in order to improve water management at the local level. El Salvador could rely on these entities to develop a culture of taking a risk management-based approach to water management.
Almost all estimated financing needs for IWRM in the PNGIRH plan relate to the construction of new hydropower plants, and to water and sanitation infrastructure (the latter is also covered by PLANAPS). Only 2% of the financing needs relate to water risk management, and this segment favours control rather than prevention (for example, infrastructure for flood control, irrigation infrastructure, and the cleaning of eutrophic water bodies). Key preventive measures such as soil conservation (to improve rainwater infiltration and prevent landslides and downstream flooding), and river rehabilitation and ecological flows (to regulate river flows, prevent flooding and preserve aquatic life), are only at the planning stage. The General Law on Water Resources includes marginal strips along the rivers as part of the public hydraulic domain. This is an important and innovative step towards river rehabilitation, which has not yet been taken in any OECD country. Beyond domestic sanitation, the PNIGRH pays little attention to improving water quality in the face of pressures from other sectors (such as industry and agriculture).
Shared governance of trans-boundary water is particularly important, as more than 40% of renewable water resources come from outside the country (30% from Honduras, and 10% from Guatemala). As already noted, El Salvador has developed co-operation with its neighbours to alleviate poverty, protect ecosystems, and manage water risks in the upper Lempa river basin. Co-operation is less advanced in the case of trans-boundary aquifers in the west of the country, despite increasing pressure from users, and a lack of control over the volumes abstracted on both sides of the border.
Recommendations to improve water governance
To improve water governance in El Salvador, the country is recommended to:
Create basin agencies to implement integrated water resources management (i.e. co-ordinate water risk management) at basin level in a hydrographic logic.
Establish a funding mechanism for public financial support measures at the basin level, e.g. budget transfers from central government, or applying the water pays for water principle (i.e. allocating the proceeds of abstraction and pollution charges to the basin agencies)
Begin operations of the Salvadoran Water Authority as the governing body for water resources that will re-organise the sector, and will have strategic planning and oversight functions, as well as promoting the exchange of good practices between basin organisations.
Entrust the Ministry of Environment with the development and implementation of legislation on: i) environmental flows of rivers; ii) pollutant emission limits for point sources and classification of water bodies according to their vulnerability to pollution; iii) water abstraction charges and water pollution charges; and, in conjunction with the Ministry of Health, iv) pesticide taxes.
Mandate the Ministry of Agriculture to develop and implement legislation on agricultural nutrient monitoring at the farm level.
For trans-boundary basins and aquifers, establish an international co-operation mechanism responsible for co-ordinating water governance in sub-basins and aquifer recharge areas across the borders.
Policy instruments to simultaneously address water scarcity, water pollution, and flood risks could include:
Public financial support for the restoration of riparian ecosystems and floodplains to restore space for watercourses (combined with the obligation of respecting environmental flows and the registration of river beds in the public water domain).
Payments for ecosystem services to protect ecosystems upstream of river basins, to preserve the natural flow and water quality of downstream watercourses, and enhance aquifer recharge.
Environmental standards for dams and reservoirs to prevent hydro-peaking, and to facilitate fish migration and sediment transport.
Towards water supply and sanitation for all
The service gap in improved drinking water supply and wastewater treatment in El Salvador is much higher than in OECD countries, and causes a high burden of disease, especially in the context of COVID-19, which requires frequent hand washing. WSS tariffs do not include the costs of wastewater treatment, and only cover about half of the cost of the drinking water supply service, which is not conducive to investments in water infrastructure.
The combination of public financial support with water tariffs is proposed as a transitional step towards the ultimate goal of full cost recovery for water and sanitation services. This involves anticipating the financing gap between infrastructure needs and expected tariff revenues (strategic financial planning).
Investment needs
Almost 60% of the rural population, and 4% of the urban population, rely on unimproved sources of drinking water, including tanker trucks. This can result in a much higher water price compared with the parts of the population that have access to improved sources (be they piped water or standpipes). Even when it is available, drinking-water service can be irregular – just a few hours a day or even a few days a week in some areas. ANDA plans to dig and upgrade wells in order to improve service in these areas. Drinking-water pipes need to be modernised (many are from the 1960s). Combined with illegal connections, water theft, and unbilled water, loss rates (unaccounted-for water) in distribution networks are around 60% and continue to increase.
Almost half (46%) of the rural population, and 11% of the urban population, do not have access to improved sanitation (sewerage, septic tanks or latrines). In addition, only 8% of urban wastewater is treated before it is discharged into the environment. The few municipalities that have organised themselves to build and operate wastewater treatment plants do not recover costs, which results in very low efficiency levels. Some private companies provide wastewater treatment services in residential areas, but the lack of access to private financing is a major obstacle to the spread of wastewater treatment plants. The situation is no better in rural areas, where FIDSL devotes a few million dollars every year to sanitation, targeting the poorest populations. The remainder of public investments depends on international development assistance.
El Salvador’s PLANAPS plan for drinking water and sanitation foresees billions of US dollars in investment in providing universal access to the supply of drinking water and sanitation. Although the goal of catching up with the country’s needs in terms of water infrastructure fully justifies a supply management policy, it would be more cost-effective to prioritise demand management through better water pricing.
Recommendations for planning investment needs
To support decision making on investments for water and sanitation services in the long term (by 2050), it is recommended to:
Develop a template with data on infrastructure needs and costs that can be adjusted as new information becomes available (e.g. new legal requirements) (see Annexes).
Consider the rehabilitation of existing infrastructure.
Consider demand-side management of WSS (e.g. extension of water metering, re-use of treated wastewater).
In addition to the provision of services to households, estimate water supply needs and costs for industry and agriculture, and for water storage, in order to get a complete picture of the water expenditure to be incurred.
Water financing
According to the 1961 National Aqueduct and Sewers Administration Act, WSS tariffs must meet criteria of corporate self-financing and social public service, and allow for a margin. They must cover the costs of operation, maintenance, administration, improvement, development and expansion of infrastructure, including loan repayments. However, ANDA recovers less than half of the cost of piped water production. This forces it to resort to borrowing in order to cover the shortfall. In turn, this does not favour investment in the renewal or expansion of infrastructure. The cost recovery gap is even larger for sewerage services, which are billed at extremely low levels on the basis of an increasing block rate (and not by volume of water used, as is often the case in OECD countries). The price of wastewater treatment services is simply not regulated in El Salvador. Only drinking water supply and sewerage are regulated, which explains El Salvador's delay in constructing wastewater treatment plants.
As has been the case with post-COVID stimulus packages in advanced economies, massive public financial support could be dedicated to the modernisation of WSS infrastructure in El Salvador, as an engine of employment and growth. Combining public financial support with tariff revenues to cover the financing gap for water infrastructure could also facilitate access to reimbursable assistance and finance (loans, bonds, and equity). However, this “3 Ts” approach – the combination of water tariffs, budget transfers, and ODA transfers – should be seen as a transitional step towards the ultimate goal of full cost recovery. Ultimately, tariffs alone should be sufficient to recover the costs of building, operating and maintaining WSS infrastructure, including wastewater treatment plants. They should also make it possible to build up financial reserves for investment, as required by law.
Recommendations for financing investment needs
To foster investment in the water sector and to achieve the three goals of universal access to safe drinking water and sanitation, economic development, and environmental protection, it is recommended:
In the short term, to combine public financial support with tariff revenues in order to meet the financing gap for water infrastructure, including as part of post-COVID recovery plans, and by increasing the amount of official development assistance that is dedicated to water.
At the same time, to facilitate the use of reimbursable aid (loans, bonds, equity), and foreign direct investment.
Plan ahead for long-term tariff increases (through to 2050), with the objective of gradually recovering all costs of WSS services (operation and maintenance of infrastructure, and the constitution of financial reserves for investments).
Water pricing
While increasing block tariffs theoretically create an incentive to reduce water consumption, the tariffs that are applied in El Salvador are too low, and the blocks are too generous, to send a conservation signal to water consumers. Very low tariffs for the first 20 m3 aim to cover water needs up to 183 litres per person per day (considering an average household of 3.6 people). The first 40 m3 (365 litres per day) are billed at a subsidised rate (lower than the cost of producing water). In fact, the vast majority of billing relates to the consumption of up to 40 m3 per month. This is a very high level of consumption by OECD standards.
A progressive pricing structure (with tariffs per m3 increasing along with consumption) may send a strong conservation signal, depending on tariffs and blocks. Still, it does not necessarily meet social objectives. Poor households are not necessarily those that consume the least, and are, therefore, not necessarily those who benefit the most from subsidised tariffs. True social pricing of water services would consist of setting lower tariffs for people who receive social benefits (as is the case in part of Belgium). However, this would imply a cross-subsidy from the rich to the poor to cover the deficit of service providers. It would also reduce the water-conservation signal for the poor.
Treating the social and management objectives of WSS separately would be more cost-effective. Thus, tariffs could be set high enough to recover the costs of WSS service and investment. Meanwhile, the task of sustaining revenues would be left to social policy (thus allowing the most needy to pay their water bill).
A separate fixed charge could be added to the tariff structure to recover costs that are not directly related to the volume of water used (such as meter maintenance, or billing). This would also help to finance the control of illegal connections (unaccounted-for water), and the recovery of unpaid bills. In turn, this would help to improve the quality and continuity of service.
As in a growing number of countries, including in Latin America, an independent water regulator could be created in order to help to develop and enforce water pricing criteria that, in the long term, should aim at full cost recovery.
In application of the polluter pays principle, ANDA charges for direct water abstractions at higher rates for abstractions for industrial purposes than for those for human consumption. In rural areas, operators of WSS that have been declared to be in the social interest are exempted. As with agriculture (see above), the design of abstraction charges for WSS service providers and industry should aim primarily at managing the risk of water scarcity. Similarly, a charge should be applied to the discharge of urban and industrial wastewater into the natural environment, in order to manage the risk of pollution (see above).
Recommendations for the pricing of water and sanitation services
To achieve full cost recovery in the long run, it is recommended to:
Improve the cost-effectiveness of WSS service provision by applying the same volumetric rate for all users, leaving income support functions to social policy instruments.
Plan ahead for a gradual increase in the tariff rate, with a view to achieving full cost recovery by 2050.
Add a specific fixed charge to the tariff structure in order to recover fixed costs such as meter management, control of illegal connections, and the collection of unpaid bills.
Establish an independent water regulator to help to develop and enforce water pricing criteria, with the aim of gradually recovering all costs.
For WSS service providers and industry, redesign abstraction charges, and introduce charges for wastewater discharge to receiving bodies. The aim is to address the risks of water scarcity and water pollution (see above). For WSS service providers, charges could be passed on to their customers via the water bill.
An action plan for integrated water resource management and water supply and sanitation for all
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[23] UNES (2017), Hacia la Gestión Sustentable del Agua en El Salvador, Unidad Ecológica Salvadoreña, San Salvador, https://www.unes.org.sv/wp-content/uploads/2017/01/Propuestas-politica-nacional-hidrica.pdf.
[11] UN-WATER (2020), The 2020 Data Drive: Joining Forces to Report on Progress towards Sustainable Development Goal (SDG) 6, United Nations Water, Geneva, https://www.unwater.org/the-2020-data-drive-joining-forces-to-report-on-progress-towards-sustainable-development-goal-sdg-6/.
[20] WHO (2019), Safer Water, Better Health. 2019 Update, World Health Organization, Geneva, https://apps.who.int/iris/rest/bitstreams/1260247/retrieve.
[2] World Bank (2020), Doing Business 2020, El Salvador, World Bank, Washington D.C., https://www.doingbusiness.org/content/dam/doingBusiness/country/e/el-salvador/SLV.pdf.
Annex 6.A. Investment needs for water and sanitation in El Salvador
Annex Table 6.A.1. Investment needs for universal access to water in El Salvador by 2050
Note: Projected population in 2050 (6.9 million), according to the website of the United Nations Department of Economic and Social Affairs (UNDESA).
Assuming that 42% of the urban population lives in slums in 2019 and 2050 (following (FLACSO/MINEC/PNUD, 2010[43])), and that the rural population remains unchanged in 2050 (despite UNDESA’s forecast for it to decrease), because rural populations need sanitation services before migrating to cities.
The share of the urban and rural population connected to piped water and with access to standpipes in 2019 is according to ANDA.
Source: Authors’ compilation.
Annex Table 6.A.2. Investment needs for universal access to sanitation in El Salvador by 2050
Note: Projected population in 2050 (6.9 million) according to the website of UNDESA. Assuming that 42% of the urban population lives in slums in 2019 and 2050 (following (FLACSO/MINEC/PNUD, 2010[43])), and that the rural population remains unchanged in 2050 (despite UNDESA’s forecast for it to decrease), because rural populations need sanitation services before migrating to cities.
The share of the urban and rural population in 2019 that was connected to sewer is according to ANDA, the share of that population that has access to septic tanks and latrines is following (INS, 2014[44]).
Assuming that access to septic tanks unchanged in 2050.
Source: Authors’ compilation.
Notes
← 1. Water productivity in OECD countries ranges from USD 15/m3 (Colombia) to over USD 1 000/m3 (Luxembourg).
← 2. The secondary legislation for the implementation of the General Law on Water Resources was developed in the second half of 2022 and issued in December 2022, after the finalisation of this report. The analysis included in this chapter was conducted during 2021 in collaboration with El Salvador’s environment ministry, and shared with stakeholders for use in the discussions on the General Law on Water Resources in the Legislative Assembly. However, the OECD drafting team did not have access to the draft law during the analysis.
← 3. According to (FAO, 2018[45]) water stress starts at 25%.
← 4. Admissible values for wastewater discharged into a receiving body (standard NSO 13.49.01:09 of 1996), https://www.transparencia.gob.sv/institutions/anda/documents/115912/download.
← 6. See: https://www.marn.gob.sv/lago-de-coatepeque-ha-perdido-siete-metros-de-nivel-en-los-ultimos-40-anos/.
← 7. Ramsar sites are wetland sites designated to be of international importance under the Convention on Wetlands, an intergovernmental treaty established in 1971 in Ramsar, Iran.
← 8. A standpipe is a vertical pipe connected to the water supply that supplies water in a public space such as a village square.
← 9. Guatemala does not have a general water law, but bills are under discussion.
← 11. Known before 1986 as community development associations (Asociaciones de Desarrollo Comunal, ADESCO).
← 12. In October 2020, ANDA estimated the cost of producing water at USD 0.97/m3 (https://www.transparencia.gob.sv/institutions/anda/documents/392414/download).
← 14. https://www.clcv.org/storage/app/media/eau-anc/Enqu%C3%AAte_CLCV_Les_dessous_de_la_facture_deau_mars_2019_.pdf.
← 15. Community associations, water systems management associations, non-profit foundations, community directives, water committees and any other similar entity, legally constituted, that develop projects for community benefit.
← 16. ANDA keeps a register of direct water withdrawals for consumptive uses other than irrigation (which must be metered and registered with ANDA).
← 18. Council Directive 91/271/EEC concerning urban wastewater treatment.
← 19. For industry, tax levies and water agency disbursements are more balanced.
← 20. Landslides have claimed many lives in El Salvador. They also affect the economy due to the loss of infrastructure and productive soils.
← 21. Agroforestry is already successfully applied in southern Honduras (where it is known as the Quesungual agroforestry system).
← 23. El Salvador has grouped its many aquifers into pairs, or indeed into larger groups, according to their hydro-geochemical characteristics. These groupings are called groundwater bodies.