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«MANAGEMENT MODELS FOR SMALL TOWNS Municipal Water Company in San Julián, El Salvador Carlos Linares Abstract This case study describes a successful ...»

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MANAGEMENT MODELS FOR SMALL TOWNS

Municipal Water Company in San Julián, El Salvador

Carlos Linares

Abstract

This case study describes a successful approach to the provision of water supply services

in San Julián, El Salvador, using the model of an autonomous municipal company. San

Julián is a small municipality with a total population of 22,700, which includes an urban

center with 5,200 people. In 1997, by municipal decree, the municipality formed an autonomous company to manage the water system for the urban center. An elected board of directors and a permanent staff of five people manage the company. San Julián is currently the only fully functioning example of a municipal company in El Salvador. It has a new water supply system built with external funds and an old unimproved wastewater collection system.

Since beginning full operation in 1998, the company has been very successful. Most of the population (96%) has access to the municipal water supply system and every household connection is metered. Service is provided 24 hours per day. User fees cover all recurrent costs and depreciation, and generate excess revenues to finance modest system expansion.

The case of San Julián provides an example of a very simple management model that has the potential to bring about a dramatic improvement in services. This model is available to any country that has delegated responsibility for water supply and sanitation (WS&S) services to municipalities. The case study discusses the factors that need to be addressed for the model to be sustained and replicated in other municipalities in El Salvador. In particular, it demonstrates how a small rural municipality can improve WS&S services if it has a reasonable measure of autonomy of operations from the municipality, improved infrastructure, and technical assistance in the early stages.

1. Background and Context Country Overview El Salvador is the smallest and most densely populated country in Latin America. It has a population of approximately 5.7 million people in an area 21,000 square kilometers in size.

The population is 50% rural and 50% urban. Population growth trends show El Salvador becoming more urbanized, with the highest percentage of the population (25%) living in the metropolitan area of San Salvador, which comprises 14 municipalities. These highly urban municipalities have an average urban/rural population distribution of 80% and 20%.

Municipal Water Company in San Julián, El Salvador 1 Carlos Linares El Salvador's gross domestic product (GDP) showed positive signs of growth in the post- war period of 1988-1997, increasing at an average annual growth rate of 2.2%1. The GDP in 1997 was US$ 7,663 million (in 1990 dollars). Measured in constant 1990 US dollars, the GDP per capita in 1997 was $1,293, showing only a slight increase over 1988 ($1,274), due to a slowdown in economic growth (reported in 1996 and 1997). El Salvador’s GDP per capita is one of the lowest in Latin America.

El Salvador has a high degree of income inequality, both in urban and rural areas. The incidence of poverty in rural areas is much greater than that of urban areas. The incidence of rural poverty is estimated at 55% of the total population, while in urban areas, it is only 16%.

The Inter-American Development Bank (IDB) attributes the slowdown in economic growth, as well as the widening gap in income distribution and access to basic public services, to institutional rigidities and inadequate public structures, which the Government of El Salvador (GOES) is endeavoring to correct.

Sector Situation and Organization

The primary source of water for El Salvador is the Lempa River. It is estimated that 63% of the country's available water resources come from the Lempa River basin, with the balance drawn from other surface and underground water resources. Water is used to generate electric power, irrigate farmland, and supply drinking water. The principal user of water resources, although not the main consumer, is the electricity sector since over 60% of the country’s electric power comes from hydroelectric plants. Irrigation accounts for the largest proportion of water consumption, distributing the resource over some 46,000 hectares of farmland. Human water consumption is relatively low, averaging 120 liters/person/day in San Salvador and less in the smaller municipalities owing to reduced production capacity2.

The discharging of untreated wastewater into receiving water bodies has seriously compromised water quality. Only 2% of all municipal and industrial discharges receive some kind of treatment before reaching a receiving body of water. Various studies indicate that about 90% of the country’s surface waters are contaminated and unsafe for human consumption. Water shortages are widespread, yet El Salvador does not have an agency responsible for overall management of water resources. What exists instead is the disjointed and unsustainable use of the resource within each sector. “Water belongs to everyone, and to no one” is a popular expression with sector professionals in El Salvador.

1 All macroeconomic statistics and socioeconomic data are taken from Inter-American Development Bank’s Loan Proposal document: “Reform Program for the Water Sector and the Potable Water and Sanitation Subsector in El Salvador,” May 1998.





2 Ibid.

Municipal Water Company in San Julián, El Salvador 2 Carlos Linares There is no mechanism for allocating water rights, and the communities, municipalities, farmers, land developers, and national agencies all compete for the utilization and ownership of the country’s water, to the point where this competition has led to social conflict in many places. The current situation is critical with respect to quality, quantity, distribution, and conservation of water resources. El Salvador does not have a clean water act, and its environmental law falls short of providing adequate coverage on the above issues. The country has a series of uncoordinated and sometimes contradictory legal instruments that touch upon management and conservation of water resources.

It is estimated that only 57% of El Salvador’s population has access to clean water: 78% of the population in urban areas and only 25% in rural areas (other sources indicate 16%).

This is the lowest figure for overall water coverage in Central America. Indicators of quality of service for those who have access to piped water show a great deal of fluctuation. It is safe to say that no city in the entire country has water service 24 hours a day. Higher income families, other institutions, and private enterprises solve this problem by using water storage tanks with automatic pumping systems. In the area of sanitation, some 60% of those living in urban areas nationwide have access to sewerage systems while in rural areas, sewage systems are practically nonexistent; however, 52% of the population use latrines. These factors have a direct impact on the serious public health and environmental sanitation problems that confront the country.

The problems of the WS&S sector can be traced primarily to its management structure.

Under the Organic Act of 1961, the National Water and Sewage Administration (ANDA), created as an autonomous public service agency reporting to the Ministry of Public Works, is responsible for providing services throughout the country. The act stipulates that ANDA is the only institution authorized to regulate, standardize, plan, set tariff rates, and operate water and sewage services. As a result, the structure for provision of water and sewage services can be described as a centralized public monopoly, paralleled by a growing number of private, informal operators not subject to regulation of any kind, as well as various independent water systems in urban and rural communities supported by external donations and lending programs. The Ministry of Health (MOH) is responsible for sanitation services; for example, latrine construction programs would fall under the ministry’s responsibility.

In rural communities, neighborhood associations (Juntas Vecinales de Agua) serve as community water boards and manage their own systems, which are generally built with external funding without ANDA’s participation.

ANDA operates 150 water and sewage systems in 181 of El Salvador’s 262 municipalities, ranging from the country’s largest—the Greater Metropolitan Area of San Salvador, with 300,000 connections—to some of its smallest, with less than 200 connections. There are 78 municipalities that operate their own (urban area) systems without ANDA participation. Of these, 72 are managed, de facto, by the municipal government itself, and 6 are managed by other mechanisms, such as a nongovernmental organization (NGO), private concessions, and mixed economy models. San Julián is among the latter and is the first and only case in El Salvador where a municipal government created a decentralized, and autonomous, Municipal Water Company in San Julián, El Salvador 3 Carlos Linares municipal company for the purpose of managing its own urban water and sanitation system. San Julián, as well as all the above-mentioned systems—urban and rural, operates unregulated by the national government. ANDA does not intervene. The policy is implicitly laissez-faire. San Julián is unique at present in the degree of autonomy that it has. ANDA has the power to grant concessions and has done so in a few cases.

Two particular and important characteristics of the country, which have implications for

the study of the management model of San Julián, are the following:

§ El Salvador has a highly fragmented municipal administrative structure (a small country with 262 municipalities, each having an average area of 80 square kilometers).

Each municipality is like a county, with an urban center and rural communities.

§ El Salvador has a large number of small towns with populations under 10,000 people — 89% of total urban areas. In fact, no municipality other than San Salvador would be considered medium-sized by most definitions.

Public Sector Reform

The GOES has made significant strides in modernizing and reforming the country’s public sector. The reform programs the government has introduced have redefined the concept of public service and are bringing about changes in areas previously operated as centralized state monopolies. Positive and profound changes have already occurred in areas such as energy, telecommunications, transport, ports, and financial services, limiting the state primarily to the role of regulator, policymaker, and promoter.

The water sector is not immune to this process. Its reorganization carries particular economic and social importance for the country. In fact, efforts to reform this sector can be traced back 20 years. During this period, several drafts of a water law, or water code, to reform the water sector and create a regulatory agency for the WS&S subsector were considered and rejected by the GOES.

Current efforts to reform both the water resources sector and the WS&S subsector began early in 1995 with the creation by executive decree of the Coordinating Committee for Restructuring of the Water Resource Sector (COSERHI). COSERHI’s purpose is to coordinate studies and activities to initiate the modernization process in the sector.

COSERHI, through its technical arm, the Coordinating Unit on Modernization (UCM), and with special support from the Office of the Chairman of ANDA, worked closely with the IDB during 1997 and 1998 to prepare a US$60 million loan proposal. This included a reform program for the water sector and the WS&S subsector. In mid-1998, the IDB approved this sectoral reform loan (the total amount of $60 million includes a loan of $43.7 million for water supply and sanitation).

Disbursement of funds, however, is contingent upon the presentation of two laws to the Salvadoran Legislative Assembly. The first is a general Water Law that would provide a framework for managing water resources, and the second is a law to provide the regulatory Municipal Water Company in San Julián, El Salvador 4 Carlos Linares framework for the WS&S subsector. The GOES, through ANDA and with the technical support of the President’s Technical Secretariat (STP), is currently preparing these two laws.

Current Status of Reform

After taking office in mid-1999, President Flores moved quickly to sign concession contracts for three WS&S systems under the mixed economy company model: Tetralogia, Plan de la Laguna (under private concession), and San Jose de Villanueva (under the San Julián model). Others being considered for decentralized management are the cities of Caluco and Suchitoto. ANDA’s plan was to have 12 to 14 pilot projects ready by the time the laws are submitted to Congress, but the lack of resources for infrastructure investments, institutional strengthening, and technical assistance has slowed down the decentralization process. No new contracts have been signed since January 2000.

As of December 2000, drafts of the Water Law and WS&S Regulatory Law have been prepared. Discussions on specific content have generally not been open (outside of government circles) to the public or stakeholder groups. The draft Water Law provides for the establishment of a water authority that will regulate the use of water resources and the allocation of water rights, using a private market-oriented approach. The draft WS&S Regulatory Law would establish centralized regulatory authority that would have the sole power to grant concessions using a variety of models of private, semi-private, and community-based administration of WS&S systems. These models are based on present day experiences, including autonomous municipal companies (like the San Julián operation), mixed economy companies (like Tetralogia), community-based associations, NGOs, and concession contracts to private companies (like ASEVILLA in Plan de La Laguna, on the outskirts of San Salvador). These laws are expected to be presented to Congress in early 2001.

San Julián



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