Cablegate: Garcia's Promise of "Water for Everyone"

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FM AMEMBASSY LIMA
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RUEHCV/AMEMBASSY CARACAS 9719
RUEHBU/AMEMBASSY BUENOS AIRES 2534
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RUEATRS/DEPT OF TREASURY WASHINGTON DC

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E.O. 12958: N/A
TAGS: ETRD ECON EINV EFIN PGOV PE
SUBJECT: GARCIA'S PROMISE OF "WATER FOR EVERYONE"

REF: A) Lima 2532 B) Lima 2534 (C) State 128599

1. (U) Summary. President Alan Garcia has made his Agua Para Todos
(Water for Everyone) program a top priority. The $5 billion program
sets an ambitious five-year target of reducing by half the five
million Peruvians without access to potable water. It includes nine
major water treatment, infrastructure, and credit projects in Lima
and five other provinces. Financing will be by government austerity
measures, donor assistance, private concessions and a water guaranty
fund. Garcia faces strong pressure to demonstrate results before
the November regional/local elections, especially in the southern
and jungle regions that are Humala strongholds. End Summary.

Peru's Water Crisis
-------------------
2. (U) Roughly one quarter of Peru's 28 million do not have piped
water and almost one half have no access to sewage or drainage
systems. Peru's narrow coastal plain, the hub of Peru's industry
and export agriculture, and where over 70 percent of Peruvians live,
annually experiences water shortages. Rapid population growth,
deforestation, glacial melting, inefficient water management, and
poorly built water transportation infrastructure in the highlands
and jungle have all exacerbated Peru's water shortage. Communities
often resort to purchasing trucked water in the black market. Over
40 percent of the country's water production is unaccounted for --
due to leakages and illegal connections -- and over 70 percent of
the water/sewage systems built in the 1990s are inoperative.

Agua Para Todos
---------------
3. (U) In his July 28 inauguration speech, President Garcia
introduced his Agua Para Todos (Water for Everyone) program and set
an ambitious target of reducing by half the five million Peruvians
without access to potable water in the next five years. The $5
billion program aims to modernize Peru's infrastructure and expand
water services to the country's neediest communities. It
prioritizes nine major water treatment, infrastructure, and credit
projects in Lima and five other provinces. Garcia announced that
financing has already been secured by international donors --
including the InterAmerican Development Bank, the Community of
Andean Nations, and the governments of Japan, Germany, Canada, and
Switzerland. Funding will also be provided through government
austerity measures (including salary cuts), concessions and a water
guaranty fund. Performance-based incentives and public-private
partnerships will round out the program.

4. (U) Housing and Sanitation Minister Hernan Garrido Lecca (Septel)
spearheads the program and described it to DepEconCouns on July 19.
The first priorities outside of Lima are inadequate drainage in the
major jungle cites -- Puno, Iquitos, Pucallpa and Tambopata. Garcia
proposes to build sewage systems and water treatment plants to
decontaminate key water sources like Amazon tributaries and Lake
Titicaca that have been contaminated by debris and raw sewage.
Garrido Lecca stressed that contaminated water affects health and
education; prioritizing water is the first step in advancing
Garcia's health and education goals.

5. (U) A second priority is to strengthen existing infrastructure
projects to prevent water loss and address declining agricultural
production, such as relining the Tinajones canal in Lambayeque. A
third priority is to expand potable water access to small towns
(3,000-8,000 inhabitants) by providing credit to local water
companies.

Long-term Sustainability?
-------------------------
5. (SBU) Garcia's ambitious water program has sparked debate about
its long-term sustainability. SUNASS, Peru's national water
regulatory agency, argues that Garcia's targets in Lima will be
unsustainable if water-user rates are not increased by 44 percent
over the next five years. (Note: Recent water infrastructure
projects have failed to recover costs because of the politically
sensitive issue of raising water-user rates, especially during the
election season. End Note.) Garcia's team agrees that increasing
water rates will be necessary but remains vague about the details.
Water guaranty fund director Jose Salazar told DepEconCouns in
conversations since July 28 that the program is funded for the next
few years, but he is hoping for some expertise from the EPA to help

design the fund.

Comment:
--------
7. (SBU) Program success will depend on financing, but as important
will be success in regulating water companies, enforcing rate
increases and ensuring efficient spending. For example, SEDAPAL,
Lima's state-owned water company, has been rated among the worst
water service providers in Latin America. The U.S./Peru Free Trade
Agreement and associated Environmental Cooperation Agreement will
provide opportunities to cooperate with Peru to achieve water goals.
USAID has several water initiatives in various stages of
implementation and will continue to prioritize water projects as a
foundation for rural development. Whatever the feasibility of
Garcia's promises, Garrido Lecca is an impressive leader for this
program.

STRUBLE

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