Peru faces US$36bn water infrastructure shortfall

Peru is facing a US$36bn water infrastructure shortfall as rural areas have been left behind amid the advances of the last 20 years, while bureaucratic issues have slowed investments, according to local authorities, academics and analysts from the World Bank.

“A lot of our problems are carryovers of more than 20 years,” José Luis Bonifaz, chief of the economics department of the University of the Pacific in Lima said during a water investment webinar held by the college and the World Bank.

Bonifaz said a 2019 analysis by his department found an initial US$29bn investment shortfall, but that was later updated to US$36bn when it added factors such as water quality, service continuity and pipeline resilience, among others.

The World Bank’s senior water and sanitation specialist, Carmen Yee-Batista, said a good part of the gap was reflected in poor conditions in rural water systems, as 60% of those without services in Peru live in rural areas.

However, the bank also noted that the water problems do not just affect the residential segment as two out of three schools in the country don’t have “adequate” access to water and sanitation, and the same applies to half of the country’s health centers. 

Yee-Batista said that the solution is “territory-based policies” that take into consideration the specific needs of each region, as the geographical, demographic and weather conditions of more remote areas make “traditional solutions more expensive.” 

Another problem cited by the bank was the high fragmentation of water utilities, as there are 50 firms serving 21mn people, while another 5mn receive water from municipalities and the remaining 7mn are served by 27,000 non-profit communal administrators known as JASS (Juntas Administradoras de Servicios de Saneamiento).

These entities operate under different standards, which for Yee-Batista increases operating costs and makes coordination with the State more difficult.

RED TAPE

Although Lima’s water utility Sedapal has a 4.5bn-sol (US$1.1bn) investment portfolio for the next five years, the firm decided to put projects in the plan out to tender under the UN’s Office for Project Services (UNOPS) instead of the local procurement system SE@CE, due to the delays that plague the auction process.

“We need to create more transparent, more expedite mechanisms,” Sedapal chairman Francisco Dumler told the webinar. He also claimed that infrastructure projects could take up to 20 years to be completed due to legal wrangling, arbitration and other conflicts.

In April, Sedapal awarded a US$317mn waterworks contract, the Nueva Rinconada water and wastewater project, through the UNOPS system. 

Meanwhile, construction and sanitation undersecretary Javier Hernández admitted that rural projects could involve up to 2,000 technical documents, which can increase to nearly 50,000 for larger initiatives.

“I ask myself, how much of this will be used in the project’s execution?” he said, while adding that in the 1990s this was not the case and he expressed doubts about whether more extensive documentation results in more sustainable infrastructure.