The Olmos River Basin hosts one of the largest infrastructure projects in Peru, the Special Olmos Irrigation Project, aiming to transfer water from the Huancabamba River to the department of Lambayeque. The proposal of creating a 20 km-long tunnel across the Andes dates back 90 years. This project turned desert land into productive and fertile soil on which agricultural activity thrives. However, different business models between the “old” and “new” parts of the Olmos Valley and bottlenecks in the implementation of integrated water management reform, require strengthening stakeholder engagement, while balancing contrasting economic and social interests.
Water Governance in Peru
OECD Studies on Water
Annex B. The Olmos River Basin
Abstract
The Olmos Irrigation Project
Introduction
The Olmos Irrigation Project (hereinafter, Proyecto Especial Olmos Tinajones, PEOT) is a set of engineering works, consisting of 3 main components: i) the transfer of the water through a 20 km Trans-Andean Tunnel and the Limón Dam, which started operating in 2012; ii) the generation of hydroelectric power; and iii) the implementation of irrigation infrastructure for agricultural purposes. The PEOT receives water from the Huancabamba, Manchara and Tabaconas Rivers, located in the Atlantic watershed, transferring it through the trans-Andean tunnel to the Pacific watershed. This project was identified during the early 20th century, mainly to increase production farming on coastal land that, due to low annual average rainfall level and despite the quality of the soils, is considered desert land (Box A B.1).
The PEOT co‑ordination body is responsible for the supervision, execution, maintenance and operation of the infrastructure of the project. Created in 2003, it is a decentralised body of the Regional Government of the Department of Lambayeque (GORE Lambayeque) and is considered a budget executing unit that has full management autonomy in technical, economic, financial and administrative aspects. The PEOT co‑ordination body depends hierarchically and functionally on the Presidency of the Regional Government and is represented by a board of directors led by a president, which is appointed by the Regional Governor of Lambayeque.
As a result of significant investment in infrastructure and more than 90 years of planning, the authorities in the department of Lambayeque have captured enough water resources from the Andes to irrigate the lands further downstream in the valley (Box A B.2). The project boosted economic development in the area, where important agro export activities take place. However, there is still a gap in terms of economic development between the “old” and “new” parts of the valley.
Box A B.1. Key data for the Olmos River Basin
The Olmos River Basin is situated in the northwest of Peru. The basin extends over an area of 1 082 km2, of which 90% is situated in the province of Lambayeque within the department of Lambayeque, and the other 10% is situated in the province of Huancabamba, in the department of Piura (Figure A B.1). The Olmos River Basin is composed of the natural catchment areas of the Olmos and Huancabamba Rivers. The basin is subject to a dry climate, with very little annual rainfall, and experiences high temperatures. Originating in the Pacific watershed, the Olmos River is 124 km long and flows from Huancabamba to the district of Olmos in the province of Lambayeque. The average flow of the river is 1.67 m3/s and its average volume is 52.67 hm3 (MINAM, 2019[1]), making it a particularly dry river, with intermittent runoff. The river is completely dry for 40% of the time of the total annual runoff and 90% of the total discharge of the river takes place between January and April (MINAM, 2019[1]), attesting to its irregularity and seasonality. Otherwise, it is similar to other rivers on the Peruvian coast, with irregular and strong discharges.
Figure A B.1. The Olmos River Basin
Note: The red dotted lines delineate the departments of Cajamarca, Lambayeque and Piura; the solid black line separates the Olmos River Basin and the Huancabamba River Basin, on which delineation the Limón Dam and Trans-Andean tunnel are located.
Source: MINAM (2019[1]), Ficha Técnica “Cuenca del Río Olmos; PEOT (2019[2]), Proyecto Especial Olmos Tinajones, https://www.regionlambayeque.gob.pe/web/?pass=MTA1Nw.
Box A B.2. Timeline of the Olmos Irrigation Project (PEOT)
The project included the construction of a 44 million m3 capacity dam and a 20 km trans-Andean tunnel, with the purpose of transferring the water from the Huancabamba River, on the Atlantic watershed, to the Pacific watershed for agricultural and power generation purposes. The works project consists mainly of two aspects: the Limón Dam collects water from the Huancabamba River and the trans-Andean tunnel transfers it to the Olmos River to irrigate the Olmos Valley. The Limón Dam is managed through a concession awarded by GORE Lambayeque to the so-called Olmos Transfer Concessionaire (Concesionaria Trasvase Olmos, CTO). The company carries out the transfer of water from the dam to the new valley through the tunnel and conveys it to users downstream as part of the irrigation component is H2Olmos.
Figure A B.2. PEOT implementation timeline
The main milestones of PEOT are the following (Figure A B.2):
In 1924, engineer Charles Sutton first proposes the Olmos Irrigation Project to the Peruvian government with the aim of boosting the Lambayeque economy.
In the 1970s, works start after two engineering companies from the Soviet Union carry out the first technical feasibility plans for the Trans-Andean tunnel. These works soon freeze, due to lack of funding.
In July 2004, the legal framework for the procurement procedure for the PEOT is set and transfer works are awarded by the Regional Government of Lambayeque (GORE Lambayeque) to the Olmos Transfer Concessionaire (Concesionaria Trasvase Olmos, CTO).
In 2004, the GORE Lambayeque, in the framework of Legislative Decrees No. 994 and 1012 and their respective regulations supporting private investment in irrigation projects, awards the works that allow for the deviation of water from the Atlantic watershed to the Pacific watershed, to the Olmos Transfer Consortium of the Odebrecht Group for a period of 20 years at a cost of USD 185 million, of which USD 77 million funded by the Andean Development Corporation (CAF).
In June 2010, another concession contract is signed between GORE Lambayeque and H2Olmos, a private company created in 2009, in order to manage the distribution of water for the irrigation component of the PEOT.
In October 2010, the economic compensation contract is signed between GORE Lambayeque and the private company SINERSA S.A. (Sindicato Energético) dedicated to the construction of electricity generation plants, their operation and administration, and the trade of energy (as part of the hydropower component).
In 2012, the public tendering process is developed by GORE Lambayeque and H2Olmos for the award of the lands of the “new Olmos valley”, as part of the irrigation component.
In November 2014, the irrigation works is inaugurated and the transfer and irrigation works is put into operation.
New concession contracts for more hydropower plants to be built in the area are being currently planned and negotiated.
Source: Regional Government of Lambayeque, (2019[2]), Proyecto Especial Olmos Tinajones, https://www.regionlambayeque.gob.pe/web/?pass=MTA1Nw.
The “old” and “new” Olmos Valley
The Olmos Project aimed since the beginning to contribute towards overcoming one of the main problems in the valley and along the Peruvian coast in general: water scarcity. The PEOT created an additional 43 000 hectares of irrigated agricultural land, 38 000 of which were awarded to the agro-industrial and agro-export sector in the “new” part of the valley further downstream, and 5 500 hectares remained in the hands of the traditional farmers of the “old” part of the valley. The “old Olmos Valley” (referencing the land that was cultivated before the works resulting from PEOT were carried out) is a traditional area of small-to-medium scale agricultural activity in the area. Improved irrigation infrastructures (drip and spray irrigation systems) allowed the development of economic activities in the new valley. The crops that are traditionally sown in the old Olmos Valley only satisfy internal demand (Figure A B.3). In the Olmos District, agriculture and livestock are the foremost sectors of activity, with over 50% of the population working in agriculture, livestock, but also hunting and forestry (Azabache and Quiroz, 2017[3]). Yet, to date, only 25 000 hectares have actually been implemented due to constraints imposed by water scarcity in the area.
The PEOT has encouraged economic development and job opportunities in the area through the productive exploitation of the previously desert land. One of the biggest agro-exporters in Peru, AGROOLMOS, has received a large plot of land from the public tendering process and grows sugarcane in the new part of the Olmos Valley, covering both the exportation quota of sugar to the United States for the country and national demand (43 000 metric tons per year) (MINAM, 2019[1]). As a result of this project, Lambayeque Department is projected as a future hub of agro-industrial development for northern Peru. To date, this project has created more than 9 000 new direct jobs and 10 000 indirect jobs in the transport, infrastructure, manufacturing, fertiliser, machinery, food distribution and uniform sectors, among others (MINAM, 2019[1]). As part of the irrigation component of the PEOT, one of the aims is to create a planned and self-sustaining city in the district of Olmos, province of Lambayeque. The creation of the New City of Olmos is the largest integral urban development project in the history of Peru, which has arisen as a result of the progress and ambition of the PEOT. An area of 734 hectares is projected to house 111 000 inhabitants (MVCS, 2017[4]).
Figure A B.3. Main crops in the old Olmos Valley, in percentage of area cultivated
Source: Azabache, L. and S. Quiroz (2017[3]), “Estrategia competitiva para el desarrollo económico del Valle Viejo de Olmos del distrito de Olmos”, http://repositorio.uss.edu.pe/handle/20.500.12802/4079.
However, the lack of appropriate water conveyance infrastructure in the old valley undermines the efforts to improve the allocation regime. This has led to growing gaps in per capita income between residents of the old valley and residents of the new valley. The distribution of the water resource in the old valley has become a breaking point in the relationship between the Water User Board (representing the interests of the farmers in the “old” valley) and the national authorities (the National Water Authority [ANA] and the PEOT), as well as with H2Olmos, the company that has been awarded the management of the transfer of water to the valley through the tunnel. This perceived unequal distribution is believed to be the cause of illegal and clandestine access to the La Juliana water intake. Moreover, as a result of the sedimentation affecting the Limón Dam, in which the water from the Huancabamba River is stored, the cost of water in Olmos is increasing (it is estimated that the treatment of sedimentation increases the cost of bulk water by between USD 0.03-0.07 cents per m3). The use of flocculants and coagulants to remove microalgae from the water also increases the cost of water in the area. As a result of these technical issues, the price paid for water in Olmos is one of the most expensive in the country, at a rate of USD 0.07 per m3, in comparison to other areas which have also invested in massive irrigation projects, such as the Chavimochic project in La Libertad, where the average price of water is 4 times lower (USD 0.015).
There is a clear gap in poverty rates and access to services between the inhabitants of the department situated downstream (Lambayeque) and those communities settled upstream, in the department of Piura, especially in the province of Huancabamba, which shows alarming poverty rates (67.8%), according to the National Institute of Statistics and Information Technology (Instituto Nacional de Estadistica e Informatica, INEI) (2013[5]) (Table A B.1). In this area of the country, universal access to water and sanitation remains a significant challenge.
Institutional features
The Olmos River Basin belongs to the Jequetepeque-Zarumilla Administrative Water Authority, which contains 31 hydrographic units and 9 Local Water Authorities (ANA, 2019[8]). The Olmos River Basin is administered directly by the Motupe-Olmos La Leche Local Water Authority, which holds competency over 12 666.01 km2 of land, amounting to 20.40% of the total land under the auspices of the Jequetepeque-Zarumilla Administrative Water Authority. The Olmos River Basin makes up only 8.44% of this land, or 1 069.21 km2 (ANA, 2019[9]). Both authorities are deconcentrated bodies of ANA, the National Water Authority (Figure A B.4).
Figure A B.4. Institutional mapping of the Olmos River Basin
There is a wide variety of players involved in water governance in the Olmos River Basin (Table A B.2), stemming from the differing interests at play between the players situated in the “old” and “new” parts of the valley, as well as the communities established upstream, with respect to the users that are located downstream. The stakeholders can be grouped into four categories (Table A B.2):
Direct players, as those directly impacted by the PEOT, are the main users of the water stemming from the irrigation project. They are water boards, agricultural associations and 20 agro-export companies.
Indirect players, as those indirectly involved in the affairs concerning the PEOT, such as governmental and administrative institutions.
Water management institutions, as those responsible for managing the technical and economic aspects of the physical distribution of the water to the users.
Peasant communities, as those communities situated upstream who have a traditional relationship with the water resources originating in the Andes and with whom PES mechanisms may be established.
Table A B.2. Players involved in water governance in the Olmos River Basin
Source: MINAM (2019[1]), Ficha Técnica “Cuenca del Río Olmos.
Key water governance challenges
Some key governance gaps can be identified in the basin, such as:
Incomplete institutional framework: Though efforts have been made to implement a River Basin Council, to date this has still not taken place due to opposition from different stakeholders in the area as to what kind of laws and regulations should govern this council in practice. The main issue is that the PEOT has a large infrastructural component and works extend over several hydrological basins in different departments (Cajamarca, Lambayeque and Piura). Stakeholders ask that the current legislation be adapted to better encompass all the stakeholders involved in the transfer works, which run across several basins. As such, there is the feeling that the current structure of the river basin would not fit this situation and that a specific regulation should be made for Olmos. In addition to the debate on the appropriateness of the river basin councils’ current legal framework, there are disagreements as to whether the basin should belong to the existing Chancay-Lambayeque River Basin Council. Some stakeholders feel the territorial scope of this basin council is not appropriate for the demands of the Olmos River Basin.
Lack of enforcement and accountability: Illegal abstraction and a weak water culture are a consequence of the difficulty in enforcing laws and regulations. There is a lack of effective implementation of the laws governing water distribution, water use and concession arrangements. Many stakeholders claim that the concession agreements, especially the most sensitive ones, which governs the distribution of water for irrigation, are not being respected nor effectively implemented.
Disputes across users: In 2018, the Lambayeque department was nearly on the brink of a state of emergency due to the violent protests generated as a result of the blocked dialogue between the representatives of the Water User Board, the agro-exports industry, the regional and local governments and the concession holders. There is room to enhance multisectoral dialogue to address water challenges in relation to water distribution, but also access to water and sanitation.
Lack of transparency: A number of stakeholders complain about the lack of transparency in the technical and financial aspects of the infrastructure works that are being financed by the public sector. Data and information are not always available, nor accessible.
Payments for Ecosystem Service (PES), in the form of MERESE, are not implemented in the whole Olmos River Basin. The Ministry of the Environment (MINAM) is currently encouraging the design and implementation of a PES mechanism in the Olmos River and the Huancabamba River basins, between the companies involved in the PEOT and the peasant communities (who are engaged and committed to conservation efforts) in the transfer area of the Huancabamba River. Indeed, Peru’s water and sanitation regulator (Superintendencia Nacional de Servicios de Saneamiento, SUNASS) has recently provided technical assistance to the local water operator EPSEL in the municipality of Chiclayo for the implementation of a PES intervention plan, the conformation of a good governance platform and the establishment of a monitoring system (SUNASS, 2018[10]). The objective of this PES mechanism would be to increase the availability of water through conservation efforts in the mountain forests and moorland, mainly in the district of Carmen de la Frontera on Lake Shimbe. The headwaters of the Huancabamba River, where these very humid moorlands are situated, are an area of opportunity to extract more water for its use downstream. In the city of Lambayeque, the water utility EPSEL, whose rate is established at 1% of total tariffs charged, recovers approximately PEN 3 million per year. In the city of Lambayeque, funds are currently being collected. However, they are still not being effectively used upstream for conservation efforts.
Ways forward to strengthen water governance
Encourage dialogue between stakeholders for more integrated and resilient water governance
The creation of a space for dialogue would help manage disputes across stakeholders. The creation of the River Basin Council as a multi-stakeholder platform could help improve plans and dialogues across players in the old and new parts of the Olmos Valley, as well as between the peasant communities established upstream and the water users downstream. Most water users in the Olmos River Basin recognise the need and importance of co‑operating to ensure sustainability.
However, stakeholders from the basin have made it clear that if a river basin council were to be created in Olmos, it would have to provide the flexibility to adapt to the specificities brought about by the complex nature of the PEOT. Ways forward could involve a consultation process between stakeholders for the creation of this ad hoc River Basin Council for which a specific legal coverage would have to be given by the national lawmakers. The existing dialogue tables dealing with the conflicts in the area could be used for this consultation process and provide a forum for exchange between all the different parties involved. Ensuring water security in the water-stressed Olmos River Basin requires long-term planning and strong collective action. The development of trust and engagement of all stakeholders in the process is crucial for the success of the department’s ambitions and the management of the impending water crisis.
Water users in both the “old” and “new” valley already recognise the need and importance of co‑operating across the Huancabamba and Olmos Basins to ensure the sustainability of the water resources. The awarding of two hydroelectric plants through public procurement processes could be a timely opportunity to revisit the first concession agreement for the distribution of the water as part of the irrigation component. The aim would be to ensure participation and inclusion of all stakeholders, effective design and enforcement. The distribution arrangement established in the concession contract between GORE Lambayeque and H2Olmos could be modified in order to accommodate demands from the small and medium-sized farmers in the “old” valley, where appropriate, in order to stimulate economic development across this area of the basin. This represents an opportunity for local, regional and national governments to work together to ensure the legal framework surrounding the PEOT adapts to present and future demands. A water stewardship initiative is taking place in Olmos since October 2020 when the CEOs of 4 Big Agri-Export companies (such as Agrovision, and Agrícola Pampa Baja) signed and announced their Commitment with Water Stewardship and the implementation of the AWS Standard.
Invest in data collection and monitoring
Local, regional and national governments should join forces to ensure greater data collection and monitoring. Water balances and water quality assessments for the basin (ground and surface water) and long-term projections for the basin for different combinations of climate and socio-economic scenarios help to guide authorities in the long term. With regards to the sedimentation issues affecting the Limón Dam, though there is information on how much sediment is invading the river basin. However, there is no information available on where exactly this sedimentation lies or its direct causes, though deforestation in the upper basin is thought to have a great impact. Collecting, using and disseminating more data will not only reinforce the technical solutions but they will also encourage greater transparency and stakeholder engagement. This data and information could be made available to the stakeholders as well as to the general public through a web portal in a clear and timely manner. This may go a long way to aid in the resolution of disputes and increase transparency. However, this measure would require a clear allocation of responsibilities across authorities and agreement on what should be prioritised in terms of data collection, as well as the target groups.
Build capacity
Further capacity and resources are needed to deal with arising technical issues now, before advancing the PEOT’s plans any further. The knowledge and expertise that has already been collected during the first years of operation should inform the future projects that are currently being planned. This increase in capacity could help optimise the use of water, aid in the efficient choice of crops and increase profitability for all stakeholders, which will help avoid future social conflicts in the area over acquired rights and water safety, due to non-compliance with granted volumes.
Ensure policy coherence
Water management policies should be accompanied by the implementation of other transversal social policies since the basin headwaters are in areas (such as Huancabamba) where the population mostly does not have access to public services. The regional government of Lambayeque has established a clear economic priority for the department, as is shown by the ambitious reach of the PEOT, its objective of turning the whole of the valley into fertile agricultural land and the recent kick-off of the New City of Olmos project, with aspirations of making Lambayeque the economic hub of the north. Nevertheless, water authorities may consider the re‑evaluation of the priorities established in their planning tools and work towards greater cross-sectoral co‑ordination and complementarities. This may lead to the implementation of measures to address immediate concerns such as universal access to water and sanitation, especially in light of the objectives recently established by the 2018 Regional Sanitation Plan for Lambayeque, to achieve 100% access to water and sanitation for the urban population and 80.2% and 70.1% for rural populations respectively, by 2021.
References
[9] ANA (2019), Administración Local del Agua Motupe-Olmos-La Leche, Autoridad Nacional del Agua, http://www.ana.gob.pe/organos-desconcentrados/aaa-jequetepeque-zarumilla/ala-motupe-olmos-la-leche.
[8] ANA (2019), Autoridad Administrativa del Jequetepeque-Zarumilla, Autoridad Nacional del Agua, http://www.ana.gob.pe/organos-desconcentrados/autoridad-administrativa-del-agua-jequetepeque-zarumilla.
[3] Azabache, L. and S. Quiroz (2017), “Estrategia competitiva para el desarrollo económico del Valle Viejo de Olmos del distrito de Olmos”, Universidad Señor de Sipán, http://repositorio.uss.edu.pe/handle/20.500.12802/4079.
[7] INEI (2017), Censos Nacionales 2017, http://censo2017.inei.gob.pe/publicaciones/ (accessed on 17 March 2021).
[6] INEI (2015), Mapa de la Pobreza 2013.
[5] INEI (2013), Mapa de Pobreza Provincial y Distrital.
[1] MINAM (2019), Ficha Técnica “Cuenca del Río Olmos.
[4] MVCS (2017), Presentación de la Nueva Ciudad de Olmos.
[2] PEOT (2019), Proyecto Especial Olmos Tinajones, Lambayeque Regional Government, https://www.regionlambayeque.gob.pe/web/?pass=MTA1Nw.
[10] SUNASS (2018), “Lambayeque: Regulador brinda asistencia técnica a Epsel sobre MRSE”.