Protecting Water Sources to Conserve Biodiversity: Financial Mechanisms for Watersheds Protection in Colombia, Ecuador and Venezuela

Protecting water sources to conserve biodiversity: Financial mechanisms for watersheds protection in Colombia, Ecuador and Venezuela

Northern Tropical Andes Conservation Program The Nature Conservancy 2007-2012

Proposal by Marta Echavarría (Ecodecisión) Adapted by Natalia Arango, Lila Gil, Pilar Barrera, Silvia Benitez and Aurelio Ramos (TNC) February 2007

TABLE OF CONTENT

Executive summary ...... 3 I. INTRODUCTION...... 5 A. FONAG: a model to replicate ...... 6 II. WHY MAKE THIS PROPOSAL?...... 10 A. PRECAUTIONARY PRINCIPLE...... 10 B. GLOBAL DEVELOPMENT GOALS...... 11 C. WORLD WATER FORUM ...... 11 III. PROJECT OBJECTIVES...... 13 A. GENERAL OBJETIVE ...... 13 B. SPECIFIC OBJETIVES...... 13 IV. BASIC ASSUMPTIONS ...... 13 V. SELECTED ACTION SITES...... 14 A. METHODOLOGY FOR SELECTING SITES...... 14 B. SELECTED SITES ...... 15 VI. COMPONENTS AND ACTIVITIES...... 16 A. FINANCIAL MECHANISM SET UP...... 17 B. DEFINITION OF BIODIVERSITY CONSERVATION AGENDA...... 18 C. UNDERSTANDING NATURAL HYDROLOGICAL REGIMEN...... 23 D. ADAPTATIVE MANAGEMENT ...... 24 E. DEMAND-SIDE MEASURES ...... 25 F. LEVERAGE FUNDING...... 25 VI. EXPECTED RESULTS ...... 28 VII. BUDGET...... 31 VII. REFERENCES ...... 37 A. INTERVIEWS...... 41 B. APPENDIX: UN MILLENNIUM DEVELOPMENT GOALS RELATED TO WATER AND ENVIRONMENT ...... 42 Goal #1: Eradicate extreme poverty and hunger...... 42 Goal #4: Reduce child mortality ...... 43 Goal #6: Combat HIV/AIDS, malaria and other diseases...... 43 Goal #7: Ensure environmental sustainability ...... 43 Goal #8: Develop a global partnership for development ...... 44 C. APPENDIX: DESCRIPTION OF SELECTED SITES...... 46 A. VENEZUELAN CONTEXT...... 46 I. Barquisimeto...... 47 C. COLOMBIAN CONTEXT ...... 48 I. Bogota...... 52 II. Cali ...... 55 D. ECUADORIAN CONTEXT ...... 57 I. Cuenca...... 58 II. Loja and Zamora ...... 60

Protecting water sources to conserve biodiversity: Financial mechanisms for the protection of watersheds in Colombia, Ecuador y Venezuela

Executive summary Water resources management is a global priority. Throughout the world, there is recognition that water quality and flow are being affected by land use changes. Institutionally, water management faces a complex situation of multiple governing institutions with differing points of view and a generalized lack of controls. Despite the numerous efforts to protect watersheds or establish drinking water projects, few programs address the link with protected areas, which in many cases where originally created to protect water sources. Therefore, the level of investment in the conservation of water sources in minute considering the need to guarantee the regeneration capacity of the resource.

The UN Millennium Goals aim to reduce by half the number of people without drinking water and sanitation by 2015. This requires an extraordinary level of investment. For example, 5 billion dollars are needed to meet this target for Ecuador alone. Meeting this ambitious goal is vital for social welfare, and requires not only mobilizing investment, but ensuring its environmental sustainability as well. Deforestation, agricultural development and urbanization are heavily impacting drinking water sources.

The Nature Conservancy, and in particular the Northern Tropical Andes Conservation Program, has worked for over a decade establishing financial and institutional mechanisms that protect biodiversity, as well as conserve water sources for human consumption. One of the Conservancy’s key successes and models has been the Quito Water Protection Fund, otherwise known as FONAG. Quito, Ecuador’s capital city of 1.5 million inhabitants derives 80% of its water from flows originating in three national parks, Cayambe, Antisana and Cotopaxi. Set up in 2000 with a seed capital of $21,000 dollars, it is now a trust fund with a capitalization of over $3 million that is investing in watershed programs and projects around the Quito water sources. In addition, the Sustainable Waters Program of The Nature Conservancy has pioneered efforts

to conserve aquatic biodiversity; an area greatly ignored compared to terrestrial ecosystems.

Our working hypothesis is better functioning ecosystems provide cleaner water and stabilize flow. Although there is widely accepted evidence supporting the link between conservation and water quality worldwide, flow is more complex and dependent on site-specific conditions. However, the hydrological benefits provided by Andean grasslands and montane forests have been well documented. The ecological integrity of these ecosystems also provides other important environmental services such as carbon fixation in biomass, as well as soils. As the mechanism is institutionalized carbon sequestration opportunities can also be identified and quantified, including avoided deforestation, as well as new plantations or forestry projects.

The proposed program aims to establish multi-stakeholder institutional mechanisms for sustainable finance of watershed conservation that simultaneously support biodiversity protection (and eventually carbon sequestration) and ensure water supplies at 6 sites in Venezuela, Colombia and Ecuador. The Conservancy’s conservation portfolio may entail the following sites: in Venezuela, the city of Barquisimeto and the Dinira National Park; in Colombia, the city of Bogotá which depends on water sources in Chingaza and Sumapaz National Parks, and the city of Cali involving the Farallones and Las Hermosas National Parks; and in Ecuador, the cities of Loja and Zamora, dependent on Podocarpus National Park and the city of Cuenca dependent on the Cajas and Sangay National Parks and the Mazán Ecological Reserve.

The expected results of this project are environmental and social; by creating an institutional framework for decision-making that will commit water users to protect the natural land cover of close to 2 million acres and improving the living conditions of rural populations living in the watersheds that supply drinking water to cities.

The Nature Conservancy will invest US$ 395,000 dollars annually and estimates that for every dollar invested, $10 dollars will be mobilized for conservation in these areas. The Conservancy has identified fiscal sources of funding that could be tapped to capitalize the water funds being proposed.

Protecting water sources to conserve biodiversity: Financial mechanisms for the protection of watersheds in Colombia, Ecuador y Venezuela

I. INTRODUCTION Water resources management is a global priority. Throughout the world, there is recognition that water quality and flow are being affected by land use changes. Institutionally, water management faces a complex situation of multiple governing institutions with differing points of view and a generalized lack of controls. Despite the numerous efforts to protect watersheds or establish drinking water projects, few programs address the link with protected areas, which in many cases where originally created to protect water sources. Therefore, the level of investment in the conservation of water sources in minute considering the need to guarantee the regeneration capacity of the resource.

This omission generates financial risk for drinking water companies, utilities and agricultural users, with the subsequent social negative impacts. Currently, companies are incurring in a long list of costs, such as high water treatment and dredging costs, lower storage capacity in dams which leads to a reduction in generating capacity, higher maintenance costs and high pollution levels which can affect agricultural outputs.

The Nature Conservancy’s mission is to preserve the plants, animals and natural communities that represent the diversity of life on Earth by protecting the lands and waters they need to survive. Considered one of the leading conservation organizations in the world, the Conservancy has developed scientific tools to plan conservation efforts so that they are effective to save land and water diversity. The Conservancy has determined to work with other organizations globally to save 10% of all major habitats in the world by 2015.

To achieve such an ambitious goal, the Northern Tropical Andes Program1 has been working in four general strategies: support the national park systems,

1 The Northern Tropical Andes Conservation Program is one of the five conservation programs that The Nature Conservancy has in South America. It includes Colombia, Ecuador, Northern Peru and Venezuela, excluding Amazonian ecoregions of these four countries.

support private lands conservation, work with local communities and reduce threats from infrastructure development. At the same time, The Nature Conservancy has the Sustainable Waters Program (http://www.nature.org/initiatives/freshwater/strategies/cities.html) to generate scientific methodologies to help decision makers to address aquatic biodiversity.

In Latin America, the Conservancy has been promoting the development of financial and institutional mechanisms to involve water users in the conservation of areas in Central and South America. Some of the places that have been involved include:

• Guatemala: Sierra de las Minas • Bolivia: Tarija • Colombia: Bogotá Chingaza • Ecuador: FONAG - Quito y Water Fund for Zamora/Loja

To guarantee the long term viability of water sources, it is necessary to invest in their conservation. With support with USAID, the Conservancy began to design a model that entailed the establishment of a fund with the support of all water users (water and electrical utilities, private organizations, and all those interested in watershed protection). The resources would have a transparent and accountable system to guarantee that the interests are used in effective long-term projects for watershed conservation and management within the protected areas and their surrounding areas.

A. FONAG: a model to replicate One of the Conservancy’s key successes and models has been the Quito Water Protection Fund, otherwise known as FONAG. Quito, Ecuador’s capital city of 1.5 million inhabitants derives 80% of its water from flows originating in three national parks, Cayambe, Antisana and Cotopaxi. Set up in 2000 with a seed capital of $21,000 dollars, it is now a trust fund with a capitalization of over $3 million that is investing in watershed programs and projects around the Quito water sources.

Protected area Management PLAN

WATER USERS FUND Watershed Projects

OTHER SOURCES OF

FUNDS

The mechanism aims to bring together water users to pay for conservation efforts on a voluntary basis. The funds are managed by a financial institution and can only be spent on uses and activities stipulated in the trust fund contract. By using an independent financial vehicle transparency is increased and multiple stakeholders with a shared interest in common water sources can be brought together. Actions to be financed should be coherent with the management plans that are being promoted for the protected area and watershed and include water protection efforts, as well as reforestation. Unlike other watershed projects, which last 5 years at the most because project financing runs out, this institutional arrangement allows for funding to be available in the long-term, and in line with the ascending “learning curve”. For every dollar that FONAG is investing in watershed programs and projects, 3 dollars are being raised from other sources (national and international).

FONAG is an inter-institutional forum comprised of a Governing Board, a Technical Secretariat, and a Technical Advising Committee, as illustrated in the graphic above.

The Board is composed of all the signatories of the fiduciary contract, or those users that have committed resources to the fund, who have voting power. The Technical Secretariat is responsible to implement

the decisions of the Board, with the support of the Technical Committee. The Financial entity is the administrative organization in charge of the resource allocation, which minimizes the bureaucracy involved.

By Ecodecision

The Graph below indicates the evolution of the fund overtime and the interests that are estimated to be generated annually.

Financial growing FONAG (USD)

8000000 7.436.000 7000000 6.264.000 5.495.000 6000000

5000000 4.414.000 3.674.452 4000000 2.693.452 3000000 2.112.553 1.172.000 2000000 1.450.053 981.000 739.548 1.081.000 662.500 769.000 1000000 621.942 580.899 828.111 0 2000-02 2003 2004 2005 2006 2007 2008 2009 2010

Yields Total Fund

By Ecodecisión

Investments began in 2003 in watershed projects around Quito’s watersheds. Currently, with financing from the Inter-American Development Bank Dutch Fund, a master water resources plan is being developed with the active participation of the communities living around the city. This Plan aims to strengthen the “water culture” and manage in an integrated fashion Quito’s water sources.

FONAG is a financial entity that does not implement activities. Rather, it works closely with existing organizations to strengthen their institutional capacity. FONAG has determined to invest 80% of its financial returns in programmes, meaning permanent activities for the long-term and 20% in short term projects. The programmes currently underway are: forestry, park guards and control for protected areas, environmental education, and outreach; and in development a hydrological monitoring program.

Additionally, FONAG has allowed an important capital mobilization. From 2004 to 2006, the FONAG activities were financed by other institutions in almost 65%. In 2006, FONAG raised around USD3 for each invested dollar. As part of the process, FONAG is developing

impact indicators that will allow measuring effectiveness of the expenses.

II. WHY MAKE THIS PROPOSAL?

A. PRECAUTIONARY PRINCIPLE Our working hypothesis is that it is cheaper to protect than mitigate. Cities, such as New York, have decided to make large scale investments in ecosystem management to protect water quality, rather than invest in filtration plants2 Bogotá, the capital city of Colombia, has found that treatment costs for the water coming from protected areas are a sixth of the cost of water from other sources, that are not protected formally3. The list of examples can be long.

Though the discussion on the relations of land use and water quality and flow are long and complex, this proposal assumes that better functioning ecosystems can provide better quality and flow, as well as respond to changing weather conditions and extreme events. These engineering solutions can solve water provision problems at a high cost and for the short term. Considering the hydrological functions of Andean ecosystems, high-Andean grasslands or paramos and cloud forests are considered “water factories” that need to be protected. Robert Hofstede, a renowned paramo specialist, has calculated that paramo soils can contain up to 1,000 a 6,000 cubic meters of water per hectare in the rainy season (cited in Echavarria et al 2002). De Biévre et al 2005 (in Wunder and Alban, on prep.) have studied the peak and base flow relation for well-conserved versus intervened paramos to demonstrate the flow regulation capacity of paramos.

Cloud forests are not only effective to control erosion and stabilize soils, but also their complex structure generates what has been called horizontal precipitation, fine mist and cloud particles captured by the vegetation in areas between 1,800 to 3000+ meters above sea level.

2 Information provided by Al Appleton, Ex-Commissary of Environment for the city of New York. 3 World Bank, Juan Pablo Ruiz Soto, June 2005.

Horizontal precipitation can amount to 80%-100% above the regular rainfall (Bruijnzeel and Hamilton, 2000, cited in Moreno, 2006).

B. GLOBAL DEVELOPMENT GOALS4 The UN Millennium Goals intend to fight against world poverty by establishing a set of critical social indicators. Under the MDG framework, rather than measure welfare in terms of income, it articulates a set of global objectives for health, education, political power, security, sustainability and equal access. Such is the case for health where access to clean water is considered vital, therefore, the MDG proposed is to reduce by 50% the number of people without access to clean water. The UN recognizes the environmental sustainability as being directly related to human welfare since the poorest segment of the population is highly dependent on natural resources (food, energy, etc.). In addition, they are the segment of the population most vulnerable from the impacts from extreme climatic events or deteriorating soil and water conditions. For example, it is estimated that for children under 5 years of age, 20% of the illnesses are caused by unsanitary conditions such as lack of water or waste disposal.

Therefore, to guarantee access to water for all sectors while the ecological conditions to generate the resource are maintained is a global challenge that requires viable institutional arrangements, as well as infrastructure, for the long-term. A global development alliance is needed so that developed countries provide the resources to finance sustainability.

C. WORLD WATER FORUM Since 1997, the World Water Commission has been hosting the World Water Forum with the objective to create awareness globally on water issues. This forum promotes participation and dialogue among multiples actors with the objective to affect national policies to ensure human welfare and sustainable development5.

4 The Environment and Millennium Development Goals Magazine. 5 http://www.worldwaterforum4.org.mx/home/genwwf.asp?lan=spa

At the 4th World Water Forum hosted in Mexico 2006, the mayors declaration promised to work, among others, to control pollution, to promote integrated water resources management, collaborate inter- institutionally to improve access and sanitation and mobilize resources to reduce poverty, particularly in rural areas. Local governments asked national and international entities to recognize the role they play in the adequate management of water resources and to contribute to meet the MDGs and the Johannesburg action plan6.

For actions in a watershed to effectively manage water resources, they need to be coordinated with its inhabitants7. The proposed mechanism of a water fund adds the ingredient that we feel has been missing which is the involvement of the rural communities in specific projects that translate urban resources to the field. This way, water funds have the capacity to improve rural livelihoods depending on the decisions made and initial conditions present in the areas of investment. For example, measures to improve agricultural production can improve farmers’ income, at the same time that environmental impacts are minimized. Park guards programs that involve local community members generate rural employment, at the same time, that involves the people who sometimes know the most about the local conditions.

The long term goal (20 years) of this project is ambitious since it involves the conservation of water and the ecosystems that generate the resource. Therefore, it involves the participation of many stakeholders to work together for a common cause. In that regard, the project integrates private and public entities, as well as multilateral organizations, linked together by a financial contract establishes a stable and long-term relationship that can contribute to change the present tendency of deterioration.

6 Informative Technical Magazine (Revista Técnica Informativa) N° 34, Article “Statement of Mayors and Local Authorities about Water in the 4th Global Water Forum, March 21, 2006. Mexico (in Spanish), Jan - March 2006. 7 CEPAL, Dourojeanni Axel, Public Policies for Sustainable Development: Integrate Watershed Management, June 1994, page 37 (in Spanish).

III. PROJECT OBJECTIVES

A. GENERAL OBJETIVE This project seeks to generate institutional and financial arrangements for watershed protection and biodiversity conservation for five cities in Colombia, Ecuador y Venezuela.

B. SPECIFIC OBJETIVES

1. Establish a forum for deliberation for the protection of water resources that is participatory and accountable.

2. Commit water users (domestic and industrial) in the protection of land cover necessary to protect hydrological services.

3. Provide resources to improve the livelihoods of communities in upstream watersheds in terms of reducing risks to their health, improve production activities and generate alternative employment.

4. Strengthen the understanding of the hydrological regime and its link to land use practices in close to 2 million acres in 5 major cities.

5. Generate a replicable model for other cities in South America and the world.

IV. BASIC ASSUMPTIONS The proposed work model is based in a series of assumptions that guide implementation:

• Water is a basic human right that must be protected. • Introducing the economic value of water can improve decision making processes. • Community participation plays a key role to success, particularly linking urban and rural users.

• Need to guarantee the participation of the public and private sectors. • Implement activities with the involvement of civil society organizations • Apply science to define goals and objectives, incorporating social and economic variables. • Include a monitoring system to measure success. • This is a long term commitment that aims to be institutionalized for the long-term. • Aim to protect aquatic, as well as terrestrial biodiversity.

V. SELECTED ACTION SITES

A. METHODOLOGY FOR SELECTING SITES Based on The Nature Conservancy’s portfolio of sites and the Cordillera Real Oriental ecoregional assessment conducted in 2003, a number of conservation sites were selected and overlapped on the hydrological maps of Venezuela, Colombia and Ecuador. The maps that located key sites for water demand (cities with population over 100,000 inhabitants) were overlapped on the first map to generate a number of cities where we could potentially work. At the same time, drinking water projects in the pipeline of the leading multilateral agencies were identified. As a result, a list of potential sites was generated.

Using secondary sources and interviews, the potential actors (drinking water companies, NGO’s, universities) were evaluated to select places where politically and institutionally this proposal could work. The results of this exercise are available for consultation (see project proposal Spanish version).

Meetings and discussion groups have been held with representatives from leading stakeholders at the following sites. These have expressed interest and willingness to collaborate with the Conservancy in the development of an integrated watershed management and conservation program:

B. SELECTED SITES For a longer and detailed description of each site, see the Appendix or the project proposal which was completed in Spanish.

Barquisimeto, Venezuela: With a population close to 4 million people, it is a city of national and regional importance. The Tocuyo River watershed provides water to the area and its headwaters are located in the Dinira National Park.

Bogotá, Colombia: With a population of over 7 million, the city’s water supply comes from Chingaza and Sumapaz National Parks. The water company (EAAB) is currently developing an environmental management program and the local environmental authority (CAR) is developing watershed management plans. These efforts could be excellent avenues for collaboration in order to prioritize biodiversity conservation work where The Nature Conservancy can play a major role.

Cali, Colombia: The Cauca Valley has had a local environmental agency (CVC) since 1959 where watershed conservation efforts are of underway. However, these efforts have been divorced from the two national parks, Farallones and Hermosas, which are key providers of water for Cali and Palmira, the leading two cities. The Cauca Valley montane and dry forests are a priority conservation interest.

Cuenca, Ecuador: With one of the longest running environmental management programs in the country, the municipal water company of Cuenca, ETAPA, is interested in developing a water fund to involve other water users in the watershed protection efforts underway. As the third largest city in Ecuador, Cuenca has had excellent leadership to implement innovative conservation efforts, such as managing the Cajas National Park, the first such effort in Ecuador.

Zamora and Loja, Ecuador: As the two southern most cities in Ecuador, these cities rely on water that flows from the Podocarpus National Park. The municipal authorities are interested in valuing the water resources

of the watersheds around the cities and compensate landowners to protect the water sources.

GENERAL INDICATORS IN THE AREAS WHERE THE PROJECT WILL BE PROMOTED

Indicator Quito Cuenca Loja Zamora Cali Population 1.399.378 417.632 175.077 21.791 2.075.380 Poverty (%) 33,60% 42,40% 49,40% 64,40% 48,18%

Empresa Pública Empresa de Agua Municipal de Unidad Municipal de Unidad Municipal Empresas Potable y Teléfonos, Agua Agua Potable y de Agua Potable y Water Company Municipales de Cali Alcantarillado de Potable y Alcantarillado Alcantarillado (EMCALI) Quito (EMAAP-Q) Alcantarillado (UMAPAL) (UMAPAZ) (ETAPA)

Potable water: Potable water: Urban: 99,1% Potable water: 97% Water supply (%) 36.07% 97,43% Rural: 61,8% Sewer: 96.91% Sewer: 34.73%

Losses: 70% Losses: 45% Illegal connections: 5% Losses Payment efficiency: Public services: 15% 82% Inefficacy: 50%

Homes: 2 Potable water: USD/month 0,285 0.086 0.078 USD/month Fares Commercial or 0,21ctvs./m3/month ctvs/m3/month ctvs/m3/month Sewer: 0.071 industrial: 4 USD/month USD/month

Water consumption - volume (monthly) User consume 32.32 m3/month 794.708 m3

Good quality before getting the city, Accomplishes with deterioration in the Basic control, physical-chemical and bacteriological analysis, heavy physical-chemical Quality city and poor metal analysis, and hydrogen sulfide concentrations analysis and bacteriological quality for standards. contamination after leaving the city

VI. COMPONENTS AND ACTIVITIES The following activities described below have been grouped in work action components, which are estimated in the budget section of this proposal to try to calculate an estimated cost for each replication of the FONAG model.

The value of the activities implemented in the field is assumed to be paid by the water users themselves. Therefore, the costs estimated in the budget are to catalyze efforts and monitor their effectiveness. The Nature Conservancy’s involvement aims to be a supporting role to facilitate decision-making processes.

A. FINANCIAL MECHANISM SET UP The starting point is to define among the key water users, based on a consensus building exercise, the institutional arrangement that will guarantee participation and effectiveness, determining financial obligations and decision-making power.

In the first place, the model assumes political will to participate on the part of the water company and its managers, which in most cases have a strong dependence with city governments. In the second place, other key water users, such as electrical utilities or agricultural users are involved as fundamental partners to have the necessary clout for decision-making. When these parties are willing, the contract needs to be drafted and negotiated.

The Conservancy can provide an initial seed capital, minimal in its proportion since it is not a direct water user.

To get the process rolling over and guarantee that the different activities are implemented, a part time coordinator is recommended. Over time, this person can be hired full time to become the Technical Director of the Fund. Therefore, the budget includes resources to pay for this staff and thus complement the administrative costs initially when hiring staff would seem to onerous.

Resources are also needed for legal concepts or economic evaluations. The model proposes the financial figure of a trust fund which has to be designed according to local regulations using the financial markets to guarantee transparency and expenditure controls. The legal viability of the mechanism needs to be secured and though the legal departments of the water companies can help, they may need external support to

commit to the proposal. A public bid for proposals from financial institutions maybe necessary, so legal fees may have to be paid.

This phase will end with the signing of the contract that creates the fund and the definition of the decision-making rules within the board. But after the second year, outreach efforts are included to be able to communicate effective to the public how their money is being invested and the state of the natural resources. The Conservancy is currently working in a pilot experience in Ecuador with RARE to generate a model for replication based on Quito and FONAG. This project will produce a series of indicators that will be widely distributed to the public (press and radio) so they understand what is being achieved. Similar designs would be included in the different sites selected.

In parallel, the Conservancy and the local actors, like utilities, municipalities and local NGOs will be identifying existing or potential sources of funding that would capitalize the fund in the long term. These may be taxes, fees, or special contributions that can be leveraged. To do so, resources are sometimes needed for studies or lobbying efforts that will mobilize these opportunities effectively.

B. DEFINITION OF BIODIVERSITY CONSERVATION AGENDA At the same time, the geographic scope of the instrument has to be determined. This means including the watersheds of interest of the different stakeholders involved currently or in the future. Therefore, water sources have to be mapped and the conservation interests of all stakeholders (national protected area system, private reserves, landowners on the river stream, wetlands, waters sources, forested areas, etc.). This is the time to understand past, present and future conservation efforts in the areas.

Conservation Area Planning A methodology developed by the Conservancy and worldwide standardized is Conservation Area Planning (5s or CAPs)8. This

8 Conservation Area Planning. Further information: http://conseronline.org/workspaces/cap/1/2/2/Manual_PCA_Spanish.pdf/download

methodology allows developing science-based conservation strategies with local stakeholders’ participation.

5s is a planning methodology for sites’ conservation that was developed by The Nature Conservancy since 1977 with experiences in United States, Asia and Latin America. The conservation goal is to maintain viable sites of conservation objects, that means, a functional site where the object can develop and accomplish functions under parameters that depend of characteristics of the object and the context.

The methodology identifies conservation strategies around conservation objects and their main threats in different scales – species, communities and ecological systems. The five “s” make reference to Systems, Stresses, Sources, Strategies and Success. There is a six element, the stakeholders and the situation. This one was included in the last version of 5s, changing to E5s (from Enhanced).

After objects are identified, the methodology allows establishing the external causes that can be affecting the permanence and persistence of these objects over the time and space. Thus, different strategies are designed in order to reduce the negative factors or for increasing the factors that ensure the viability of the conservation objects. Finally, a monitoring system is developed based on key factors of these conservation objects.

Systems It is the first step and the first “s”. It gathers conservation objects of the site and the natural processes that maintain them. Once the objects are identified the question “what do we want to conserve?” is solved. Based on the methodology guidelines, the objects should not be more than eight in order to facilitate the strategies’ design.

A conservation object is a natural element that has special value for any or several of these reasons: a) it represents, in conjunction with other objects, the biodiversity of the area; b) it is under threat; c) it is an endemic or rare species or has a restricted range; d) it is representative and emblematic of the area.

Criteria for defining conservation objects: The conservation object must be inserted in a functional landscape that guarantees its viability in a long-term. Traditionally, conservation objects have been defined with a biologic type in three scales – species, communities and ecological systems – and in different geographic scales.

The objects should be viable, it means, objects whose population have enough numbers in order to allow their reproduction.

There are other important aspects that are crucial for objects’ persistence and that are affected by antropic intervention, these are the key attributes. Considering the defined attribute, the viability is analyzed under three aspects: size, condition and landscape context.

Sources and Stresses On this phase, the methodology identifies the factors or situations that affect the selected conservation object and type of damages that these factors provoke. The sources are the agents that generate the stresses: the stresses are processes that produce degradation or destruction of the conservation object. Both stresses and sources are the threats.

Strategies Strategies allow determining what we have to do in order to conserve the object. They are developed to mitigate threats; generally speaking, the strategies are designed to diminish the stresses or direct causes that affect the conservation objects. It is important to determine which sources are more important to achieve lasting and bigger outcomes. If it is not possible to work with the sources, it is important to identify them and develop strategies that diminish the stresses (i.e. restoration strategies for conservation objects).

Monitoring It is the only way to know if the actions are effective to conserve the object. It is key to identify indicators that are related to ecological attributes. They also should be efficient and easy to finance.

Financial analysis All these actions should count with budgets and funds. Although costs can be estimated, it is fundamental to have defined values and project them over the time. The Conservancy has a great experience with methodologies that help define financial requirements for both public and private conservation areas.

On the other hand, a geographic information system is needed to be able to systematize the conservation and hydrological information that is being gathered. The public opinion benefits of presenting information in a map can not be overestimated. For the first year, the budget assumes the purchase of equipment, software and images, while for the following years; it estimates the cost of the staff, which would be a geographer. This could be in-house or outsourced.

The potential areas of investment to protect water resources and biodiversity are:

Land Tenure and Purchases: It maybe necessary to purchase or negotiate property rights of certain areas to insure hydrological or biodiversity functions.

Park guards and control: If protected areas are involved, operational control of these areas is necessary.

The budget includes resources to provide support such as communication, training and effectiveness evaluations.

The Nature Conservancy and its partners have been working with the national park systems for many years to improve management and financial sustainability. However, this continues to be a problem as shown in the following chart, which highlights present and future needs for the protected areas involved in this proposal. It is important to highlight that the figures are not comparable since they were generated with different methodologies.

In the case of Ecuador, a recent evaluation was conducted nation wide to determine the minimal financial needs of each protected area (includes control, administration and planning costs)9.

In Colombia, the rough estimates for 2006, determine an average annual cost $190,43510 dollars per park in order to achieve what is proposed in the management plans (UAESPNN 2005). Chingaza national park estimates $209.13011 dollar annually to cover basic operations and seven key investment projects identified (UAESPNN 2002).

Wetland protection: Despite the lack of information, wetlands need to be identified and protected. This may entail negotiations with land owners due to activities that are detrimental to the hydrological functioning of wetlands. It is common practice worldwide to drain, dredge and transform wetlands. Resources are stipulated for the protection of these critical aquatic ecosystems.

Fencing-off of streams and rivers: Riverbeds need to be protected to insure ecological functions but also to prevent disasters. In rural areas, it is common to have cattle walk down to drink in rivers and streams, which generates erosion of riversides and fecal pollution. It is necessary to fence off areas that need to be regenerated and finance water sites for cattle and other domestic animals. Other eroded or deforested sites considered hydrological important may need to be fenced off. The cost of designing these activities is included, as well as the monitoring of its effectiveness.

Fire prevention: Due to vandalism or extreme weather conditions, fires are common in natural areas and affect native vegetation and thus soils. These actions maybe coordinated with local fire departments which have the budget to do so. However, the watershed program needs to coordinate that the prevention measures are taken.

9 Ministry of Environment, August 2005, page 57 10 Exchange rate: $2,300 Colombian pesos per dollar. It is equal to$438 million COP (consulted on November 6th, 2006) 11 Idem 8. It is equal to $438 million COP.

Application of Best Management Practices: There maybe minor or major measures to be taken with local landowners to insure that good management practices are instituted, such as:

• “agricultura de conservación” or sustainable agricultural practices, • stabled cattle management, • watering sites for cattle away from riversides, • tree planting, • agropastoral production systems (cattle with trees), • soil conservation measures, • communal vegetable gardens • tree nurseries, • reforestation efforts

The Nature Conservancy with partners such as Fundación Natura and CIPAV in Colombia, Ecociencia and Funan in Ecuador y others in South America and other parts of the world, has gained substantial experience in conservation arrangements that allow productive activities in benefit of local populations, while minimizing environmental impacts.

The application of BMPS can be implemented directed with landowners by establishing direct compensation measures (payments or easements) or through extension services. The aim is to insure cost efficiency and environmental effectiveness for biodiversity and hydrology. The budget includes follow-up for monitoring results.

C. UNDERSTANDING NATURAL HYDROLOGICAL REGIMEN As in many parts of the world, in the Andean region there are a series of assumptions about the hydrological relations between native and planted forests and water flow and quality. This proposal argues that better functioning ecosystems should provide better quality and flow, which could be debated. Surprisingly, the majority of water utilities or authorities lack reliable and permanent monitoring systems. Therefore, this project aims to catalyze their establishment and the use of the

information for modeling and predictive tools. It is necessary to continue to study and determine the causal relationships between land cover and hydrology.

In the last decade, Ecuador, Colombia and Venezuela have begun to regulate minimal in stream flows, called “ecological flows” in Spanish, due to the common practice of drying up whole river segments. However, this focus is questionable since it does not consider the ecological conditions that require those specific river systems and aquatic communities. The Nature Conservancy’s Sustainable Waters Program (SWP) has proposed methodologies and measures to measure hydrological alteration in the USA to adapt management of hydropower plants and dams with the Army Corps of Engineer. The set of tools developed by the SWP have been used by more than a thousand specialists throughout the world to understand the natural regime of rivers, streams and lakes. Other tools, such as the application of SWAT in Andean settings, have been adapted by bilateral cooperation efforts, which are useful for understanding impacts and protection measures. These tools need to be replicated in different places in order to adjust them and validate them. However, it can be an alternative to be applied in these cases to make sound decisions.

D. ADAPTATIVE MANAGEMENT Considering the complexity of factors involved in this initiative, it is vital to assume the work as a long term process with short and medium term goals that have to be fine tuned and adapted. All activities need to be monitored and gradually expanded to insure effective investment. BMPS can be effective in certain settings and detrimental in others. Therefore the importance of measuring progress and make amends when needed. The different activities should be evaluated in order to adapt them and

The Sustainable Waters Program suggests the following steps as adaptive management (http://www.nature.org/initiatives/freshwater/strategies/cities.html) which will be the guiding principle for the work proposed in this project:

• Determine the natural requirements of the ecosystem • Determine the human influences over the system • Identify the areas of incompatibility • Develop a collaborative dialog to identify solutions • Develop a pilot project or experiment to validate those solutions proposed • Design your watershed management plan

Therefore, the budget includes resources to do the necessary evaluation of the process, determining a base line and monitor progress annually.

E. DEMAND-SIDE MEASURES A major weakness facing water users is the lack of consideration of efficiency and demand side measures. Water utilities could make significant savings by promoting water saving and new fixtures and controls. Yet, most planning departments only address new engineering solutions with the construction of new projects to expand water demand. Tariff structures are not necessarily the most effective for sustainability of the resource or service. These measures could be a source of funding to invest in the protection of the supply. Considering that the cases proposed have different conditions and institutional and managerial capacity as described in the appendix the resources have been allocated to explore this area of work at each site. This is a determining factor for the success.

F. LEVERAGE FUNDING The project will reveal to users the importance and economic, social and environmental benefits of investing in the conservation of their watershed. The Water Funds are the financial mechanism.

The Nature Conservancy will invest US$ 395,000 dollars annually and estimates that for every dollar invested, $10 dollars will be mobilized for conservation in these areas. Sources include multilateral financial resources, fiscal sources of funding and private donations.

Multilateral financial resources: The Andean Developing Bank (CAF), the Inter American Bank (IDB), the World Bank and other multilateral organizations are giving loans, credits and other financial resources to Colombia, Ecuador and Venezuela. Their financial portfolio is wide.

The Conservancy has hired financial and policy experts to develop a proposal to multilaterals banks in which conservation components are included in the financial loans and credits:

a. Include a fixed conservation component in water loans to Water Facility Companies and municipalities.

b. Generate “green credits” to water facility companies and municipalities in which re-payments can be done by the returns generated from decontaminations saving, capital gains from postponed future construction of infrastructure, reduction in climate change and other environmental risks, among others.

The Conservancy is currently in close conversations and negotiations with CAF and IDB.

Fiscal sources: The Conservancy has identified fiscal sources of funding that could be tapped to capitalize the water funds being proposed. Fiscal resources vary along countries like Colombia, Ecuador and Venezuela. Each country has a different fiscal and legal framework and additionally institutional arrangements are also diverse.

FONAG in Quito-Ecuador has been able to capture long-term sustainable financial resources from an official water fee structured specifically for conservation purposes, lobbied with the support of the Conservancy.

In the case of the Water Funds in Colombia, three potential sources for supporting this work and creating the capitalization necessary include:

• Enforce Article 111 of Law 99, 1993, which states that all municipalities should assign at least 1% of their property taxes to purchase lands for watershed protection. This could mean tens of millions of dollars.

• A portion of the revenue generated from the sale of water by water facility companies to other municipalities.

• Use of revenue derived from the reduction of current water treatment costs and avoidance of future costs as a result of implementing conservation activities in the watershed. Preliminary calculations estimate that the Bogota Water Facility Company could save up to $15 millions a year. Treatment costs are expected to increase as forest cover is lost and contamination continues in the watershed. The Bogota Water Facility Company is committed to invest the savings in conservation efforts in the watershed.

Colombia has other economic and legal instruments that could be used to invest resources in the watersheds. Colombia is currently reviewing its Water Law and a strategy on Payment for Environmental services. There is field for innovation in order to enhance watershed managements and biodiversity conservation for the benefit of humankind. Venezuela has other sources of fiscal opportunities that The Conservancy and partners will need to further explore.

Private Donations: Many users are willing to invest in watershed conservation. FONAG was able to capture resources from a local beer company and the Swiss International Cooperation. The Conservancy and USAID are negotiation an important contribution from Coca-Cola Company. The Conservancy donors have also supported with substantial resources the work of FONAG.

In Colombia, the sugar-cane association, sugar-cane factories, the industrial sector and chamber are willing to support with financial resources once the Water Fund is generated in Cali.

Due to the transparency and governance allowed by the structure of the Water Funds, The Conservancy expects many private institutions and donors to give substantial resources. The Conservancy is highly committed to make this happen.

VI. EXPECTED RESULTS

Financial: Additional resources for investments in rural sector. As this project aims to have an investment of USD 395,000 per year by the Conservancy (average), we estimate that each dollar raised can mobilize 10 dollars by other entities through fiscal and volunteer scenarios of investments.

Social: • Direct: o Diminish of healthy risks in people around watersheds by its protection. o Training in best agricultural and cattle ranching practices. o Employment as park guards.

• Indirect: o Guaranty of good-quality water for more than 10 million people

POVERTY INDICATORS BY CITY *

Bogotá Cali Cuenca (3) Loja (3) Zamora (3) Barquisimeto (4)

Population 6.740.859 (1) 2.075.380 (6) 417.632 175.077 21.791 3.683.699

Poverty 43,4% (2) 48,18% 42,4 49,4 64,4 56% (5)

* Data can not be compared since the information does not use the same measuring methodology

(1) www.dane.gov.co, census 2005 (2) http://www.bogotacomovamos.org/bogotacv/scripts/ComoVa.php?men=5&con=11 (3) SIISE, version 3.5 (4) West Central Region (40% is about State of Lara, city of Barquisimeto) (5) It is about 56$ of poverty in West Central Region (6) www.dane.gov.co, census 2005 (7) Governmental Program, Apolinar Salcedo Caicedo (Major of Cali), 2004-2007, page 6

Capacity Building

• Five new financial and institutional mechanisms working in 2011 that promote inter-institutional dialogue and coordination of actions for effective conservation in selected watersheds.

• Strengthen financial capacity for controlling and vigilance of more than 1,9 million acres (785,000 hectares).

• Commitment in the protection of forests’ coverage by water users: water companies, hydroelectric power companies, private sector and municipalities.

• Models that allow replication processes in other 20 places in Colombia, Ecuador and Venezuela and considered as conservation tool by The Nature Conservancy.

Conservation

• Financial and human resources that contribute specifically with these areas in order to guarantee effective conservation.

• Barquisimeto (Venezuela) o 111,000 acres (45.000 hectares) effective conserved in Dinira National Park

• Cuenca (Ecuador) o 74,000 acres (30,000 hectares) effective conserved in Cajas and Mazán National Parks. o 247,000 acres (100,000 hectares) effective conserved in Sangay National Park

• Loja (Ecuador) o 445,000 acres (180,000 hectares) effective conserved in Podocarpus National Park

• Cali (Valle del Cauca-Colombia) o 320,000 acres (130,000 hectares) effective conserved in Cali, Palmira, Florida, Pradera and part of municipality of Jamundí. From these, around 136,000 acres still have natural habitats.

• Bogotá (Colombia) o 740,000 acres (300,000 hectares) in 26 municipalities. Around 197,000 acres still have natural habitats

VII. BUDGET

TOTAL PROJECT BUDGET (USD)

COMPONENT YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 TOTAL ACTIVITIES

A. Establishment of financial or 191.500 72.000 39.000 39.000 39.000 380.500 institutional scheme B. Conservation agenda preparation 184.000 84.000 162.000 162.000 162.000 754.000 C. Understanding hydrological regime 78.600 153.600 98.600 78.000 408.800 D. Adaptive Management 15.000 5.000 3.000 3.000 26.000 E. Demand-side management 10.000 10.000 measures SUBTOTAL 375.500 249.600 359.600 302.600 282.000 1.569.300 Administrative Costs 75.100 51.920 71.920 60.520 56.400 1.198.800 TOTAL 450.600 311.520 431.520 363.120 338.400 1.895.160

BUDGET YEAR 1 (USD)

UNIT COMPONENT TIME AMOUNT VALUE ACTIVITIES

A. Establishment of financial and institutional mechanism

Seed capital 120.000 Coordinator (part-time) 1.500 12 18.000 Legal Concept 15.000 Specialized consultancies (SWP / in-country) 36.000 Financial institution selection 2.500 SUBTOTAL 191.500 B. Definition of conservation agenda

Conservation Areas Geographical Information Staff/ 1.500 12 28.000 System equipment

Conservation Planning Process 120.000 Economic valuation of conservation agenda Study 30.000 Communications for Park Guard and Control Follow-up 500 12 6.000 System SUBTOTAL 184.000 SUBTOTAL YEAR 1: 375.500 Administrative Costs 75.100 TOTAL YEAR 1: 450.600

BUDGET YEAR 2 (USD) UNIT COMPONENT TIME AMOUNT VALUE ACTIVITIES A. Establishment of financial and institutional mechanism Coordinator part time 1.500 12 18.000 Legal studies for PSA contracts 6.000 6 36.000 Specialized consultancies 3.000 6 18.000 SUBTOTAL 72.000 B. Definition of conservation agenda Operation GIS 1.500 12 18.000 Communications for Park Guard and Control System 500/month 12 6.000 Design of wetland and riverside protection measures 3.000 6 18.000 Fencing-off of recharge areas / lineal m lineal 2.000 6 12.000 Design of best management practices 30.000 SUBTOTAL 84.000 C. Understanding of hydrological regime Operation of monitoring system 300/month 12 3.600 Flow and quality baseline study 5.000 Design of monitoring system 1.000 12 10.000 Natural hydrological regime measures SWP 60.000 SUBTOTAL 78.600 D. Adaptive Management: Indicators to determine effectiveness of investment 15.000 SUBTOTAL 15.000 E. Demand-side management measures Technical expertise for Management 10.000 SUBTOTAL 10.000 SUBTOTAL YEAR 2: 259.600 Administrative Costs 51.920 TOTAL YEAR 2: 311.520

BUDGET YEAR 3 (USD)

UNIT COMPONENT TIME AMOUNT VALUE ACTIVITY A. Establishment of financial and institutional mechanism Coordinator full time 3.000 12 36.000 Design of outreach program 3.000 SUBTOTAL 39.000 B. Definition of conservation agenda Operation of SIG 1.500 12 18.000 Communications for Park Guard and Control System 500 12 36.000 Monitoring of wetland and riverside protection measures 500 12 36.000 Monitoring of effectiveness of fencing-off of recharge areas 500 12 36.000 Monitoring of application of best management practices 500 12 36.000 SUBTOTAL 162.000 C. Understanding of hydrological regime Operation of monitoring system 300 12 21.600 Installation of monitoring stations 1.000 12 72.000 Natural hydrological regime measures SWP 60.000 SUBTOTAL 153.600 D. Adaptive Management: Evaluation of first year 5.000 SUBTOTAL 5.000 SUBTOTAL YEAR 3: 359.600 Administrative Costs 71.920 TOTAL YEAR 3: 431.520

BUDGET YEAR 4 (USD)

C. Understanding of hydrological regime

Operation of monitoring system 300 12 21.600 Flow and quality study (every 2 years) 5.000 Installation of monitoring stations 1.000 12 72.000 Natural hydrological regime measures SWP SUBTOTAL 98.600 D. Adaptive Management: Evaluation second year 3.000 SUBTOTAL 3.000 SUBTOTAL YEAR 4: 302.600 Administrative Costs 60.520 TOTAL YEAR 4: 363.120

BUDGET YEAR 5 (USD)

UNIT COMPONENT TIME AMOUNT VALUE ACTIVITIES A. Establishment of financial and institutional mechanism Coordinator full time 3.000 12 36.000 Follow-up outreach program 3.000 SUBTOTAL 39.000 B. Definition of conservation agenda Operation of SIG 1.500 12 18.000 Communications for Park Guard and Control System 500 12 36.000 Monitoring of wetland and riverside protection measures 500 12 36.000 Monitoring of effectiveness of fencing-off of recharge areas 500 12 36.000 Monitoring of application of best management practices 500 12 36.000 SUBTOTAL 162.000 C. Understanding of hydrological regime Operation of hydrological monitoring system 500 12 6.000 Installation of additional monitoring stations 1.000 12 12.000 Natural hydrological regime measures SWP 60.000 SUBTOTAL 78.000 D. Adaptive Management: Evaluation third year 3.000 SUBTOTAL 3.000 SUBTOTAL YEAR 5: 282.000 Administrative Costs 56.400 TOTAL YEAR 5: 338.400

VII. REFERENCES

• Aguilar, Patricia. Revista Agua Yaku N°6, Nuestra Tarea con los Objetivos del Milenio, marzo del 2006.

• Alexander von Humboldt 2004. Estudio preliminar de representatividad ecosistémica de las áreas protegidas en jurisdicción de la CAR.

• Albert Appleton, comentario realizado el 28 de junio del 2006 en Bogotá. Evento: protegiendo el Agua para Conservar la Biodiversidad.

• Asociación de Municipalidades del Ecuador (AME), Catastro Urbano, nov. 2005.

• Banco Mundial, Anexo 3, Reseña Ciudad de la Muestra.

• CEPAL. Dourojeanni Axel, Jouravlev Andrei y Chávez Guillermo, Gestión del Agua a Nivel de Cuencas Teoría y Práctica, agosto 2002, pag, 9.

• CEPAL, Dourojeanni Axel, Políticas Públicas para el Desarrollo Sustentable: Gestión Integrada de Cuencas, junio 1994, pag 37.

• CONPES 3320, “Estrategia para el Manejo ambiental del Río Bogotá”, Dirección Nacional de Planeación y Ministerio de Ambiente, Vivienda y Desarrollo Territorial, Bogotá, 6 de diciembre del 2004.

• Crespo, L. (Ed). 1999. Venezuela Tierra Mágica. Dinira, Parque Nacional, Estado Trujillo. Corpoven. Pag. 20.

• Dinnerstein, E., D.Olson, D.Graham, A.Webster, S.Primm, M.Bookbindder and G.Ledec. 2005. a Conservation Assessment of the Terrestrial Ecoregions of Latin America and the Carribbean. WWF-The WorldBank. Washington, D.C.

• Dirección Nacional de Planeación, Documento Visión Colombia 2019, Capítulo IV, pag 1 y 2

• Dirección Nacional de Planeación y Ministerio de Vivienda y Desarrollo Territorial – Dirección de Agua Potable y Saneamiento Básico y Ambiental, Lineamientos de Política para un Plan de Desarrollo Sectorial de Agua Potable y Saneamiento Básico y Ambiental, Bogotá, octubre 2004.

• Echavarria, Marta. “Juntos Podemos Cuidarla!” Propuesta de Creación Fondo para Unidad Técnica Regional del The Nature Conservancy, 1999.

• Echavarria, Marta, Joseph Vogel, Monserrat Albán y Fernanda Meneses. “The impacts of payments for watershed services in Ecuador: Emerging Lessons form

Pimampiro and Cuenca.” International Institute Environment and Development, Environmental Economics Programme, January 2004.

• Freile, J.F. y T.Santander. 2005. Áreas importantes para la conservación de las Aves en Ecuador. Pag. 283-470 en BirdLife International y Conservation International. Áreas importantes para la conservación de las Aves en los Andes Tropicales: sitios prioritarios para la conservación de la biodiversidad. Quito, Ecuador: BirdLife International (Serie de Conservación de BirdLife No.14)

• http://www.ambiente.gov.ec/paginas_espanol/4ecuador/docs/areas/sangay.htm (consultado el 20 de septiembre del 2006)

• http://barquisimeto.intercable.net.ve/riotocuyo/Documentos.htm

• http://www.cali.gov.co/modules.php?op=modload&name=Corporativo&file=index& id=227 (consultado 22 de agosto del 2006)

• http://www.bogotacomovamos.org/bogotacv/scripts/ComoVa.php?men=5&con=11

• http://www.sedbogota.edu.co/secretaria/export/SED/seducativo/edubogota/sector _educativo.html

• http://www.dane.gov.co

• http://www.emcali.com.co (consultado 22 de agosto del 2006)

• http://www.hidrolara.com.ve/index.asp (consultado 22 de agosto del 2006)

• http://www.hidroven.gov.ve/marcoley.htm (consultado 22 de agosto del 2006)

• http://www.parquesnacionales.gov.co (consultado el 6 de noviembre del 2006)

• http://www.parkswatch.org/parkprofile.php?l=spa&country=ven&park=dinp), fuente:

• http://www.worldwaterforum4.org.mx/home/genwwf.asp?lan=spa (consultado 28 de agosto del 2006)

• Landell-Mills, N., y I.T. Porras. 2002. Silver bullet or fool’s gold? A global review of markets for forest environmental services and their impact on the poor. IIED. London.

• Ley de Conservación Ambiental de Venezuela, art. 67, 70,72 y 75.

• López, Fausto. Fundación Arco Iris. Parque Nacional Podocarpus: Reservorio de Agua y Biodiversidad, 2005.

• Millenium Project. 2005. Environmental Sustainability Task Force. “Environment and human well-being: a practical strategy”. Achieving the Millenium Development Goals. London: Earthscan.

• Ministerio de Ambiente, Análisis de las Necesidades de financiamiento del Sistema Nacional de Áreas Naturales Protegidas en el Ecuador, agosto 2005.

• Ministerio de Desarrollo Urbano y Vivienda, Subsecretaría de Agua Potable y Saneamiento Básico, Política Nacional de Agua y Saneamiento, Quito, enero 2002.

• Moreno S., R. 2006. Una Revisión Bibliográfica sobre el Bosque de Niebla: Presiones Antrópicas y Bienes y Servicios Ambientales Asociados. Documento interno de Trabajo. Instituto de Investigación de Recursos Biológicos “Alexander von Humboldt.” Bogotá.

• Parques Nacionales Naturales de Colombia. Sin fecha. “Bases para una estrategia de parques nacionales de Colombia.

• Parques Nacionales Naturales de Colombia. 2005. Implementación de la estrategia financiera de Parques Nacionales Naturales de Colombia 2002-2005.

• Parques Nacionales Naturales de Colombia. 2005. “Instrumentos Económicos y Financieros en Parques Nacionales y Naturales”.

• Parques Nacionales Naturales de Colombia. 2005. “Elementos para la participación de Parques Nacionales Naturales en los planes de ordenamiento y manejo de Cuencas”.

• Plan Maestro de Acueducto y Alcantarillado de Bogotá D.C. - Presentación Power Point, Acueducto Agua y Alcantarillado de Bogotá, Dirección de Planeación y Control de Inversiones, julio 2006.

• Plan Nacional de Desarrollo Regional, Venezuela. http://www.eumed.net/oe- ve/b3/reg-c- occ.pdf#search=%22PLAN%20NACIONAL%20DE%20DESARROLLO%20REGIONA %20VENEZUELA%22.

• Programa de Gobierno de Apolinar Salcedo Caicedo, 2004-2007.

• Proyectos de Ordenanza para la Gestión Económica y Ambiental del Agua para Consumo Humano en el Cantón Loja, Unidad de Gestión Ambiental del Municipio de Loja, Loja, diciembre 2005.

• Revista Técnica Informativa N° 34, Artículo “Declaración de los Alcaldes y Autoridades Locales sobre el Agua en el IV Foro Mundial del Agua, México, 21 de marzo del 2006”, enero-marzo 2006.

• Revista Agua Yaku N°6. Kramer, Andrea. “El Marco Legal Sectorial en el Agua y Saneamiento: Un Estudio Comparativo en la Región Andina”, marzo del 2006.

• Revista Agua Yaku. Aguilar, Patricia, “Nuestra Tarea con los Objetivos del Milenio”, pag. 6. Elaborado por la Subsecretaría de Agua Potable, Saneamiento, y Residuos Sólidos del MIDUVI, marzo 2006.

• SIISE en el 2004, fuente: censo de Población y vivienda INEC, citado de SIISE versión 4.0.

• Valoración del Recurso Hídrico em Microcuencas Abastecedoras de Energia Hidroeléctrica del Cantón, Zamora, Naturaleza y Cultura, Loja, Agosto 2006, pág. 50.

• World Bank, Hurtado. Martín, Bolt Hatharine, y Hamilton Kirk, “The Enviroment and the Millenium Development Goals Magazine”, Edited by Communications Development Incorporated, 2002.

• World Bank, Juan Pablo Ruiz Soto, Comments to Country Enviromental Analysis, June 2005.

• Wunder, S. y M. Alban, en preparación. Decentralized payments for environmental services: the cases of Pimampiro and PROFAFOR in Ecuador

A. INTERVIEWS

COLOMBIA • Alberto Galán, FUNBAP Director, Bogotá, Colombia • Claudia Martínez, Social and Environmental Responsibility VP, CAF, Caracas, Venezuela

ECUADOR • Pablo Lloret, Technical Secretariat FONAG • Steven Stone, Drinkable Water and Environment • Patricia Aguilar, Formulation and Evaluation Projects Director, Sub Secretariat of Drinkable Water and Basic Services. • Ing. Luis Andrade, Subdirectory, Praguas Project, MIDUVI • Mario Hurtado, Environmental Issues, CAF • Doris Cordero, GTZ • Ing. Álvaro Castillo, Association of Municipal Companies of Water, Sewage and other Services (ANEMAPA) • Janeth León, Environmental Management Director, Cuenca • Renzo Paladines, Fundación Naturaleza and Cultura Internacional • Freddy Altamirano, Loja Municipality • Milto Tapia, Association of Municipalities of Ecuador

B. APPENDIX: UN MILLENNIUM DEVELOPMENT GOALS RELATED TO WATER AND ENVIRONMENT

Goal #1: Eradicate extreme poverty and hunger

• Reduce by half the proportion of people living on less than a dollar a day • Reduce by half the proportion of people who suffer from hunger

In rural areas, the improvements in agricultural practices play a key role to reduce the poverty. But that is not possible if soils are degraded and if people have no-access to water. The degradation of soils and waters is a big threat in the agricultural productivity, which sustains many rural sectors.

Have access to drinkable water and fuel reduces the time that women and girls take in getting them. That allows they can be involved in productive activities and school assistance.

Incomes for natural resources exploitation, included water, play a key role in poor homes, due to a high proportion of them comes from this type of activities.

Degradation of natural resources affects dramatically poor people because those resources are part of the actives that they have. They have a great dependence of them.

In 2003, according to DANE (the Agency of Colombian Statistics), more than 12,6 million people lived in rural areas of Colombia. Of this population, 5,9 million do not have with water supply and 5,3 million do not have sewage systems12.

In Ecuador, according to information of 1,999, 39% of the 5,3 million rural inhabitants had access to drinkable water but they did not have sewage systems’ access. It is important to highlight that according to 2001 assessment of SIISE

12 DNP and MAVT, October 2004, page 5

in Ecuador, the rural population dropped down 4,7 million people, which explains the migration phenomenon in both Ecuadorian cities and other countries.

United Nations recognizes that the protection of watersheds is a clear objective linked to improve the quality-of-life. For example, a good-shape watershed reduces the impact that hydrologic events could cause over poor communities.

Goal #4: Reduce child mortality

Reduce by two thirds the mortality rates among children under five: 20% of children under five suffer diseases related to environmental conditions such as no-access to drinkable water, lack of basic sanitation, diseases related to mosquito vectors and air contamination both inside and outside homes.

Goal #6: Combat HIV/AIDS, malaria and other diseases

• Halt and begin to reverse the spread of HIV/AIDS • Halt and begin to reverse the incidence of malaria and other major diseases

One of the malaria and tuberculosis contagion vectors are the contaminated water sources. Population that lacks of drinkable water access use other mechanisms for storing water those are easier to contaminate.

Goal #7: Ensure environmental sustainability

Integrate the principles of sustainable development into country policies and programmes; reverse loss of environmental resources

If countries want to achieve the UN millennium goals, it is necessary that they take the way of the sustainable development. To achieve the sustainability means to ensure that current actions do not reduce the wellbeing of people in the future. This implies to manage adequately the resources that countries have such as human capital, physical capital and natural capital.

This UN Goal focuses in including the environment in the policies and programs that governments are working on. Likewise it focuses in reducing the loss of natural resources and improving the access to environmental services, particularly of people in marginal areas.

Due to this Goal is so ambitious, the MDM idea is to focus in some important resources that today are been degraded or are in high risk of disappearing. Those are land, water, forests, biodiversity, clean air, climate change and ozone deterioration.

Reduce by half the proportion of people without sustainable access to safe drinking water

As global population grew up three times last century, thus the water use raised around six times. The Global Water Commission estimates that water use will be incremented 50% in the next 30 years. The current use of the water is depredating the water sources, affecting the water’s reserves and contaminating the underground places. Consequently, the big global challenge is to guarantee water access for agriculture, industries and homes while its ecological functions are maintained. This goal establishes the guidelines for putting together institutional frameworks, creation of management tools and infrastructure development with a long-term perspective in order to conserve the water sources.

In Ecuador, experts estimate that 5,000 million dollars should be invested in the drinkable water and sanitation sector in order to achieve an adequate service. The Colombian government considers 2,9 USD billions from 2004 to 1015 to achieve the same service13 .

Achieve significant improvement in lives of at least 100 million slum dwellers, by 2020

Goal #8: Develop a global partnership for development Developed countries should contribute as follow:

13 DNP and MAVT, 2004, page 5 (equivalent 7,2 billion pesos, Exchange rate: 1USD= 2407.5 pesos, http://www.bankofcanada.ca/cgi-bin/famecgi_fdps)

o Reducing emissions that provoke climate change and degradation of ozone layer. o Providing resources to developing countries to finance biodiversity, land degradation, basic sanitation and improvement in quality-of-life of poor people

Developing countries should: o Co-finance actions to reduce desertification o Raise the opportunity cost of lands in protected areas o Avoid the use of substances that degrade the ozone layer o Finance the infrastructure for water access.

C. APPENDIX: DESCRIPTION OF SELECTED SITES

A. VENEZUELAN CONTEXT On December 31, 2001 the Venezuelan Organic Law for the Provision of Drinking Water and Sanitation Services was approved. Within this legal framework, an institutional model has been set, in which the functions of the State with regard to drinking water and sanitation services are clearly distinguished14.

Within this Law’s main principles, the most significant concerning this proposal are: access for all citizens to the provision of drinking water and sanitation services, and management models based on criteria of quality, business efficiency, trust, equity, and without discrimination or profitability.

HIDROVEN (Anonymous Venezuelan Water Company) was established in May 24, 1990. It began to function jointly with ten Regional Water Companies who are responsible for developing policies and programs for the provision of drinking water, collection and treatment of sewage water and urban drainage. This is in addition to the establishment of guidelines for the administration, operation, maintenance and extension of the systems in the care of each of their subsidiaries.

Furthermore, Article 63 of the Organic Law for Environmental Conservation in Venezuela establishes that, in order to ensure integral management of natural resources and biological diversity, watershed areas are taken into account during territorial planning processes.

This law also established that the usage of natural resources within watershed areas is subject to the formulation and implementation of management plans which ensure that the watershed’s capacity for regeneration or recovery is not exceeded. Measures for improvement, recovery and restoration would be adopted by the National Environmental Authority15.

14 http://www.hidroven.gov.ve/marcoley.htm 15 Environmental Conservation Law of Venezuela, articles 67, 70, 72 and 75.

I. Barquisimeto City of Barquisimeto is located within Venezuela’s West Central Region (it has 71 municipalities), with 8.9% of the national land area, a population (1998) of 3,783,699 inhabitants, 16.3% of the nation’s total, and population density of 46.3 per km2.

Conservation Priority Areas for Agencies, State, and The Nature Conservancy associates. In Venezuela’s West Central Region, where Barquisimeto is located, there are 685 km of coast, 1.163 hectares of national parks (Yacambú, Terepaima, Morrocoy and Los Médanos de Coro), natural monuments like Cerro Santa Ana and Loma de León, wooded areas like Nirgua- Aroa and El Baúl-Corralito, and wild animal reserves like Cuare and the Chiriguare estuary. There are also 14 designated tourist recreational areas which include beaches, islands, mountains and highly-used plains: the peninsula of Paraguaná, the mountain ranges of Falcón, Lara and Yaracuy, and the high plains of Portuguesa.

In addition, besides having very limited water sources, the region also has a difficult landscape with regard to the management and conservation of water resources. The national parks and natural monuments decree, and the establishment of buffer areas, had the aim of conserving the region’s biodiversity and water resources.

The Tocuyo River basin, the largest on the Caribbean side of Venezuela, is today the region’s main source of water and contributes nearly 80% of water requirements for the urban population of the state of Lara, especially for the city of Barquisimeto.

The higher watersheds, protected areas and main tributaries of the Tocuyo River have been subject to encroachment by the expansion of agricultural boundaries and urban settlements, causing progressive deterioration. In recent years this has led to serious repercussions in terms of a decrease in available water volume, even generating a need to ration supplies. Up until now most action has been directed towards building infrastructure to exploit the water resources of the Tocuyo River basin, and little has been done in relation to biodiversity

conservation and increasing the (re)generation of water resources. Few recuperative initiatives exist and the measures undertaken until now have been isolated and lack continuity, and therefore have had little impact.

The Nature Conservancy Barquisimeto uses water from the Tocuyo basin, which has its source in the Dinira National Park. This park was created in 1988 with the purpose of protecting the upper watersheds of the Tocuyo, Chabasquén and Boconó rivers, whose waters are essential for the development of the country’s West Central Region. The park has an area of 103,000 acres (42,000 hectares), containing various types of vegetation, such as paramos (high attitude grasslands) and mountain forests. In the park there are endangered species such as the spectacled bear (Tremarctos ornatus) and the helmeted curassow (Pauxi pauxi). Dinira Park has the only paramos in the state of Lara, which, by being geographically isolated from the remainder of the paramos of Trujillo and Mérida, have a potentially high degree of endemic species. Some endemic plant species have been recorded in this paramo, amongst them, the carnivorous sundew Drosera cendeensis16

Agencies

• Hidroven – Hidrolara • Barquisimeto City Hall • Regional Tourist and Agricultural Industries • Department of the Environment • Tocuyo River Basin Inter-institutional Conservation Commission

C. COLOMBIAN CONTEXT The environmental sector in Colombia is governed by the decentralized National Environmental System (Law 99 of 1993), which established extensive autonomy for planning, administration and budget management as much for

16 Cited on Parks-Watch http://www.parkswatch.org/parkprofile.php?l=spa&country=ven&park=dinp), source: Crespo, L. (Ed). 1999, page 20.

the 33 Regional Environmental Authorities (CARs) as for the six urban environmental authorities. These bodies are responsible for environmental management nationally, and hold 86% of investment resources for the sector17.

In Colombia, legal reforms to provide an appropriate legal framework for water management, were expressed in the 1991 Constitution. This raised the legal status of public domestic utilities at a constitutional level, and these were then formalized in a sectorial law in 199418.

In 2002, the National Government, in the document CONPES 3177, prioritized actions and guidelines for residual water management. As part of the implementation of this policy, the then Department of the Environment (now the Department of Environment, Housing and Land Development (MAVDT) put into effect Decree 3100 of 2003 which regulates payment for discharging waste water directly into the local water network. In addition, the MAVDT supervised the formulation of Sanitation and Wastewater Management Plans on the part of municipalities and companies offering sewage services.

Colombia relies on extensive regulation to protect its water and water catchments areas. According to a publication by Colombian National Parks19, watershed areas are the most accepted territorial units for the integrated management of water resources. Within its policies, Colombia is as much committed to defining goals for the integrated management of its water resources, as it is in relation to sustainable development.

The areas within the National Nature Parks System, supply water directly to 31% and indirectly to 50% of the Colombian population. Their protected areas include 12% of Latin America’s dry and humid reserves, four of the country’s six most important river confluences, and more than 62% of the nation’s aquifer sources. In addition, the System protects 7% of the nation’s lakes and natural

17 The main investment sources in environmental sector come from the resources manager by CAR s defined in the Law 99 of 1993. Conpes 3320, pag 2. 18 Kramer, Andrea. Revista Agua Yaku N°6, El Marco Legal Sectorial en el Agua y Saneamiento: Un Estudio Comparativo en la Región Andina, marzo del 2006. 19 Participatory elements of National Natural Parks in the management plans of watersheds. National Natural Parks Plans, Bogotá, 2005

marshes, and contains 20% of the water resources which supply the country’s electrical power20.

In 2004, the Colombian government contributed USD $5,7 million dollars to the National System of Nature Reserves. In 2005, income from the System amounted to USD $10.3 million dollars including international donations and visitor payments21.

If the municipalities located within its jurisdiction are taken into account, the protection the System provides to its bodies of water directly favors nearly 20 million people. This is equal to an annual demand of 1,329 million cubic meters. The profit from this population’s domestic consumption of drinking water reaches USD $15.6 million dollars22 monthly23.

Despite its importance, drinking water usage does not pay for the conservation of the National Nature Parks. Nevertheless, it was agreed that from the year 2000, income from water taken from the National Parks’ watershed areas should go to the Parks Unit instead of the CAR.

In the case of the CARs, they also hold key conservation areas and watershed protection within their remit. In some cases, they have identified key areas for conservation or restoration, given the importance of the quality and flow of their water. This takes place as much within the National Parks’ jurisdiction areas as within those of the CARs and municipalities.

Financing the Drinking Water and Basic Sanitation Sector Drinking water provision for Colombian cities and municipalities rose from 94.6% in 1993, to 97.4% in 2003. Sewerage provision rose from 81.8% to 90.2% in 2003. In rural areas, drinking water provision covers 53.1% of the population and sewerage systems (based on acceptability of conventional systems from a technical and health point of view) 57.9%.

20 Participatory elements of National Natural Parks in the management plans of watersheds. National Natural Parks Plans, Bogotá, 2005, pag 10. Cited PFI, 2005. 21 Juan Pablo Ruiz Soto, Comments to Country Environmental Analysis, The World Bank, June 2005. 22 Exchange rate: 2.300 Colombian pesos per dollar, Consulted November 7, 2006. In COP it is equal $36 thousand million pesos. 23 Idem 21.

As for water quality, in 2001, 99% of the population of the country’s 23 main cities (including Bogota and Cali) had acceptable levels. In the other municipalities water quality deteriorates dramatically. In a sample of 439 municipalities, only 16% passed tests of minimum quality and in 58% of municipalities, 50% of the samples did not pass the minimum test.

The Colombian Government provides subsidy and investment resources to the drinking water and basic sanitation sector, through the General Participation System (SGP). Decree 849 in 2002, established that these resources may be earmarked for conserving micro-watersheds which supply the system, protecting water sources and for reforestation. It is estimated that municipalities within the Bogota River watershed area will receive USD$ 80 billion dollars annually between 2004-2007, specifically for the provision of drinking water and sanitation. In addition, the municipalities can use resources for the river’s improvement which are freely available. The District Capital has earmarked 70% of the SGP for subsidies.

Furthermore, Law 99 in 1993 determines compensatory and retributive payment rates, and payment rates for water usage. Its article 44 establishes that not less than 15% and not more than 25.9% of property tax shall be transferred to the Regional Environmental Authorities (CAR) and will be used for the protection of the environment. The article also establishes that in cities of more than one million inhabitants, 50% of these resources shall be given to environmental management within the urban perimeter where it is collected. And finally, it is established in Article 45 that hydroelectric generating companies with an installed capacity of more than 10.000 kW, will transfer resources equivalent to 6% of gross sales of energy generation to the CAR and municipalities in their area, to finance basic sanitation projects and environmental improvements.

As for tax incentives in Colombia, according to the Tax Statute, there are reductions of up to 20% of liquid income for voluntary investment in the control and improvement of the environment by any legal body, and VAT exclusion on acquisition of goods and elements destined for environmental monitoring and control, subject to certification by the Ministry of Environment.

I. Bogota According to the DANE Census in 2005, Bogota has a population of 6.776.009 inhabitants, adjoining the populations of Soacha and Gachancipá whose water is also supplied by the Water and Sewage Company of Bogota (EAAB), making a total of 7.182.155 inhabitants. The population is expected to exceed 9.500.000 inhabitants by 2020.

Priority Conservation Areas Bogota is supplied by three water catchments areas with very different levels of conservation. These are: the Bogota River system, the Tunjuelo system and the Chingaza system.

A management plan for the river catchments areas will be put in place, designing financial mechanisms and creating regional plans, led by the Government of Cundinamarca, the CAR, the Ministry of Environment and the District. This proposal therefore, is within the immediate interests of these institutions.

On the other hand, the Parks Unit and the EAAB have had a Covenant of Cooperation since 2001, in which one of the goals is to create a fund or other mechanism for the earnings from water resources within the Chingaza system.

TNC Priority Areas The Colombian Andes Eastern chain was probably one of the richest zones of biodiversity in the Northern Andes. Within it, entire biota of Andean and Amazon origin converges. These are enriched by important endemic species, revealed by processes of speciation associated with the population isolation which is found in ‘island’ mountain habitats. Today it is characterized by extreme contrasts in respect to its environmental form. Owing to its history of human occupation from pre-Colombian times, the transformation of natural ecosystems in the north and central regions of the mountain range has been extensive. Today large cities like Bogota, Bucaramanga and Tunja inhabit the area, with the consequent disappearance of valuable ecosystems and their associated benefits and services. Nonetheless, even today important

extensions from high mountain ecosystems have been conserved, which harbor endemic and endangered species of Andean flora and fauna.

In terms of species content, the High Andean paramos and wetlands harbor a significant number of interesting species for conservation. Such is the case with the endemic population of frailejones plants, present only in isolated paramos in the Eastern chain. Its wetlands harbor the best known populations of endemic birds: Rallus semiplumbeus, Cistothorus apolinari, Gallinula melanops, and the subspecies Agelaius icterocephalus bogotensis and Ixobrichus exilis bogotensis; and possibly the best populations of endemic fish Eremophilus mutisii, Grundulus bogotensis and Pygidium bogotense; besides a significant population of the freshwater crab Hipolobocera macropa. Remnants of dry scrubland, mountain forest, wetland and paramo still preserved in the region, are of fundamental importance for Andean biodiversity.

In particular, the area known as the Altiplano Cundiboyacense (high plateau) and its cerros tutelares (hills) is located in a region of vital importance in regard to maintenance of its environmental services, given the total dependence on these by a major part of the country’s population. In maintenance of water quality and quantity alone, these ecosystems are fundamental for nearly 9,000,000 Colombians and approximately 30% of the nation’s industry.

Although this altiplano does not show the wide environmental grading associated with drastic changes in elevation, its topographical heterogeneity and micro-climate allows an important diversity of ecosystems to persist. Unfortunately, it is clear that the small remnants of natural habitat which do remain are under intense pressure to change. These reasons are a key factor in considering this area as a region in environmental crisis.

For The Nature Conservancy and its Northern Tropical Andes Conservation Program the altiplano is an area of great interest, given its location within the Magdalena River valley’s mountain forest ecoregion. It is considered as a priority and as being in crisis, in the light of

advanced regional analysis for the whole of South America. The paramos and mountain forests on the eastern edge of the altiplano are of particular importance because of their role as water cycle regulators.

The presence of the Conservancy in the Eastern mountain range began nearly 20 years ago, working with the Chingaza National Park and protecting the surrounding cloud forests.

As part of its Parks in Peril Project, The Conservancy helped the Natura Foundation develop a financial sustainability proposal for the Chingaza Park. Part of this initiative, included the development of a proposal to create the Chingaza Water Fund which aimed at using income from water users to finance the Park. An economic and legal analysis was carried out; however, due to the difficulty of negotiating a water usage rate contribution towards the Park, the initiative remains unfinished. In the light of recent legal changes and new developments, this proposal could be a good starting point to create a new Fund.

Today, the Conservancy, in prioritizing the world’s habitats and ecoregions, has chosen the Magdalena River valley’s mountain forests as one of its priority zones for work in South America. Part of the argument which justifies this choice is the high degree of threat towards these systems.

To address these priorities, the Northern Tropical Andes Conservation Program is developing work based on the four strategies previously mentioned. A currently designed project which supports municipal initiatives for the creation of protected areas is now in the funding phase. This is a good example of projects which develop conservation strategies for protected public areas. Within this strategy, other initiatives include the reinforcement of existing protected areas. In many cases, reinforcement is achieved by creating financial sustainability for the areas.

Within this framework, the appraisal and recognition of the services given by protected areas to their adjacent communities is fundamental. For the Eastern mountain chain in Cundinamarca, this is particularly

true, as in the case of the Chingaza National Park and Sumapaz National Park and the provision of water for Bogota in both cases. The chain is also important as a feeder for the Orinoco River basin. Other areas like the paramo system which is the source of the Bogota River, although not formally protected themselves, are also the focus of our attention.

Analysis of Agencies With the idea of starting inter-institutional work processes in Colombia, the Conservancy has approached the Water and Sewerage Company of Bogotá (EAAB), the CAR, the IDEAM, the Parks Unit, the Fundacion Natura and Fundación Humedales, the international organizations WWF and Conservation International, and the recently created Fund to Support Biodiversity in Protected Areas - FUNBAP. Although numerous other agencies could be approached, the Conservancy decided to begin with a working party interested in leading a proposal of this nature, before then engaging the participation of other agencies.

The EAAB, through its Environmental Directive and the Chingaza System, has defined its commitment to the initiative. This has already been presented to its General Management and the entire operating group. Likewise, the CAR, another key actor, is also in agreement with the initiative.

II. Cali Valle del Cauca in South-West Colombia, has a Pacific coast stretching 200 Km. Buenaventura, the nation’s most important port, is also located here. It has a land area of 21.195 square kilometers, which represents 1.5% of the nation’s land area. Cali is the capital of the Department of Valle del Cauca which contains 42 municipalities. 81.85% of the Department’s population is concentrated in the cities and 18.2% in rural areas. According to the DANE census in 2004, Cali had 2,369,696 inhabitants, and together with the other municipalities, the total population of the Department of Valley del Cauca was 4,460,850 inhabitants.

TNC Priority Areas The department of Valley del Cauca is characterized by a heterogeneity of climate and topography which has been a deciding factor in the evolution of complex natural systems with extremely high biodiversity values. Their proximity to the tropical Pacific Ocean and the north- south disposition of two of the Colombia Andean mountain chains (Western and Central), results in the juxtaposition of super humid belts (the Pacific side of the Western mountain chain and Pacific platform), dry belt (Cauca River valley) and humid belt (western side of the Central mountain Range), each with their corresponding associated biota. This arrangement of climatic and topographical belts, in conjunction with biota movements from Central America via the Pacific and from the south via the Andes has generated areas with a high concentration of endemic species.

On account of this same natural wealth, the Cauca valley has also been a center for human development. A lot of this development has been supported by the exploitation of natural resources (wood from the geographical valley and from the Pacific), agriculture and intensive stockbreeding on the rich soil of the alluvial valley and hillsides, and hydroelectric production. This development has created a wide transformation of natural ecosystems, in some cases threatening the provision of its benefits and services.

The work of the Conservancy in the Cauca valley began nearly 20 years ago, with the establishment of the Center for Conservation Data Processing, as a place to work with the Valle del Cauca Environmental Authority (CVC). This center systematically documented the presence of valuable or threatened species within the biota of the region. Officials of the CVC, with the technical support of the Conservancy kept records of endemic and threatened plant and animal species within Valle del Cauca. Today, TNC, prioritizing the world’s habitats and ecoregions, has chosen the dry forests and mountain forests of Valle del Cauca as two of its priority zones for work in South America. Part of the argument which justifies this choice is the high degree of threat towards these systems.

To address these priorities, the Northern Tropical Andes program is developing work based on the four strategies previously mentioned. A good example of projects which ‘develop conservation strategies for protected public areas’, is a project we developed to help municipal initiatives which create protected areas (within Tulúa). It is currently waiting evaluation from the funder. Other initiatives within this strategy #1, include the reinforcement of existing protected areas. In many cases, reinforcement is achieved by creating financial sustainability for these areas.

Within this context, the appraisal and recognition of the services given by protected areas to their adjacent communities is fundamental. In the Valle del Cauca this is particularly true for the Farallones National Park near Cali and its provision of water for Cali. It is also the case for the Las Hermosas National Park and its provision of water for a great number of municipalities in the valley whilst also sustaining agriculture in the lower lands. The action zone signifies an area of more than 321,000 acres (130,000 hectares) of conservation interest.

Agencies Analysis The Nature Conservancy began working in June 2006 with the Valle del Cauca Environmental Authority (CVC) and ASOCAÑA, the Association of Sugarcane Growers. The institutions that currently lead the creation of this expedient in Cali, and who have agreed to formalize their alliance through an inter-institutional covenant in order to continue this initiative with other key agencies, are: Acuaviva, Acuavalle, Empalmira and the municipalities of Florida, Pradera, Palmira, Jamundí and Cali.

D. ECUADORIAN CONTEXT Regulation of the water and sanitation sector in Ecuador involves a series of laws at different levels, Constitutional legislation, municipal bylaws, public business statutes and administrative resolutions.

The existing legal framework in Ecuador is still incomplete. Previously, control of water quality was based on health codes under the Department of Health.

These qualifications are currently unclear, and lack a regulating agency such as the Superintendent of Water and Sanitation found in some Latin-American countries (Peru – SUNASS, Bolivia – SISAB, and Venezuela amongst others).

In 2002, the Sub-Secretariat of Water, Sanitation and Solid Waste (SAPSyRS from the Department of Housing and Urban Development (MIDUVI), devised a National Water and Sanitation Policy, which was approved by executive decree. The SAPSyRS is committed to fulfilling the UN Millennium Goals in the water and sanitation sector, to levels set by central government. The Dynamic Growth Scenario predicts a total investment of USD $2,190 million dollars (USD $194 million dollars annually). Aguilar says that “this scenario’s goals and investments are comparable to those of the Millennium Goals scenario, and therefore Ecuador’s commitment is totally feasible".

I. Cuenca City of Cuenca is located in the Azuay province in the south of the Andean chain, 2,500 meters above sea level. It has 450,000 inhabitants being the third largest city in Ecuador.

Priority Conservation Areas Cuenca’s water comes from four rivers: Machángara, Tarqui, Yanuncay and Tomebamba; which flow into the Cuenca River which eventually becomes the Paute River. These rivers are located within the Cajas National Park of 71,000 acres (28,800 hectares), and are of great national importance since they power the hydroelectric system which generates most of the country’s electricity. The action zone represents a conservation interest area of more than 123,000 acres (50,000 hectares).

ETAPA, Direction of Environment ETAPA’s work has been focused mostly in this area due to risks in constructing dwellings and highways. The Tomebamba River watershed is around 81,846 acres (33,122 hectares). The area purchased for protection of the river’s source is 21,643 acres (8,759 hectares), (17,922 acres (7,253 hectares) are paramos, 3,483 acres (1,410 hectares) are for regeneration and 237 acres (96 hectares) for grazing). This purchase allowed the protection of a system of 230 lakes located within the Cajas National Park.

Likewise, 3,494 acres (1,414 hectares) of the Machángara River were also acquired. It is estimated that the Machángara River source will serve until the year 2030. Electroaustro is also located within the purchased area, and work has been undertaken to protect the paramos. An institutional alliance for its management was created with the following organizations: the regantes of Machángara, CNRH, Electroaustro, the Ministry of the Environment, the Provincial Council, CREATES, JUSRM, the University of Cuenca, and ETAPA.

It is notable that in May 2000, the Department of the Environment transferred the responsibility for the operation and management of the Cajas National Park to the Cuenca Municipality. This was a milestone in the decentralization of the country’s environmental resources. In addition, ETAPA has promoted the declaration of the Cajas National Park as a RAMSAR site and UNESCO world heritage site.

The Nature Conservancy The areas where the Cuenca water sources originate are a high priority for conservation. They are located within the mountain forests of the eastern Cordillera Real ecoregion, the northwest mountain forests and the Northern Andes paramos, which have been designated highest priority for conservation within Latin America.

In this area are two protected areas of great importance, the Cajas National Park and the Dudahuaycu Shelter Forests (Mazán). These zones protect important areas of paramos and high Andean woodlands, where forests of the endemic tree Polylepis sp, of great ecological interest, are found. These areas have been recognized by BirdLife International as IBAs (Important Bird Areas) for their importance to birdlife. Some of the important birds’ species are Gallinago stricklandii, Leptosittaca branickii, Hapalopsittaca pyrrhops and Metalura baroni.

The vast quantity of lakes in the region (more than 200), make this a priority area for freshwater ecosystem conservation, and so the park’s wetlands have been internationally recognized as a Ramsar site.

Agencies Analysis ETAPA is the pioneering company in linking activities between river users up and downstream in order to guarantee long term water provision and catchments area protection.

At present ETAPA is setting up a trust approved by their board of directors in June 2006, which is a mechanism to widen participation in protecting water catchments areas by including different water users.

Consequently, they have identified those stakeholders interested in participating through making a capital contribution to the trust:

• The Municipality of Cuenca for drinking water provision. • Potato, grain and vegetable producers. • Cattle Raisers (mainly dairy). • Tourist companies with recreational activities like fishing or thermal waters. • Electroastro, who produce 50% of the electricity for the city of Cuenca, and the provinces of Cañar and Morona Santiago, from the Machángara River. • Hidropaute who supply a significant part of the country’s electricity. • Large estates around the catchments area.

II. Loja and Zamora The population of the Loja canton is 175.077 inhabitants, with 68% in the urban area, 13% on the urban periphery and 19% in rural parishes. This shows a significant population growth. However, it is very low in comparison to the national level, owing to migration away from the canton.

The population of the Zamora canton is 21.791 inhabitants, with 48% in the urban area, and 52% in rural and peripheral areas. Main migration patterns are of a temporary nature to Loja and La Toma (mainly workmen in the La Toma sugar cane industry).

Priority Conservation Areas The water watershed areas that supply drinking water to Loja and Zamora are in the northern part of Podocarpus National Park.

The Zamora canton’s (Zamora Chinchipe province) water supply comes from the micro-watersheds Chorillos (2,275 acres/921.2 hectares) and Sabanilla (45,600 acres/18,454.8 hectares), with a total area of 47,789 acres (19,376 hectares). Their boundary to the north is the Chorillos stream, and to the south, east and west, the Podocarpus National Park. 73% of Zamora’s population takes its supply from the Limón River watershed (1,730 users), which also has its source in Podocarpus National Park. The river supplies water at a rate of 80 liters per second. It was for this reason that Zamora was chosen as a city who would be interested in this proposal.

The micro-watersheds that supply water to Loja canton (Loja province) are: San Simón (1,586 acres/642.1 hectares) and El Carmen (2,769 acres/1,117 hectares) which both source the Zamora River; Jipiro (3,506 acres/1,419 hectares) which sources the Jipiro River; and Curitroje (2,028 acres/821.2 hectares), Namanda (1,823 acres/738 hectares) and Mónica (2,132/863.6 hectares) which source the Malacatus River. These watersheds supply 70% of Loja’s drinking water. The remaining 30% comes from the Jipiro River watershed within the Shucos watershed area.

In Loja, the areas mentioned are under threat particularly by fires, livestock activity waste, the leaching of chemicals used in agriculture and (to a lesser extent) solid waste thrown directly into rivers. In Zamora, there is deforestation and a great amount of unsustainable forest exploitation, especially in areas like Palanda, Valladolid, Numbala and Quebrada Honda. This occurs mainly close to human settlements, as a source of income for the area.

Of the micro-watersheds mentioned, Curitroje is in the best state of conservation as there is no cattle-grazing. In general, within upstream water catchments areas, all micro-watersheds possess natural plant cover in good states of conservation.

Various activities by public and private institutions are undertaken within the area. The following section describes watershed conservation activities which are currently taking place.

Loja Municipality As for watershed management, the Loja Canton Environmental Management Unit carried out a “Ordinance Project for the Environmental and Economic Management of Drinking Water," in which three possibilities are proposed for financing the protection of the watersheds which supply Loja Canton with drinking water. One alternative is to create an Environmental Protection Fund for the watersheds with 25% of the payments collected for water consumption. Another is to take payments for the environmental services which are provided by the Shucos watershed.

This city’s process is considered to be well advanced, and once one of these mechanisms is approved, there will be great momentum to continue the work.

Zamora Municipality The Zamora Municipality has signed an agreement to create a Podocarpus Watershed Protection Fund, promoted by the Fundacion Arcoiris and sponsored by The Nature Conservancy and Conservation International.

In addition, a water resource appraisal of the El Limón watershed (which supplies drinking water to the city of Zamora) has been carried out. This will help establish payment mechanisms for environmental services.

On the other hand, there are some hydroelectric projects in construction such as: the HIDROZAMORA power station, the Sabanilla Hydroelectric Project, the Delsitanisagua Hydroelectric Project, and the Chorrillos Hydroelectric Project.

Fundacion Arcoiris Fundacion Arcoiris is a local NGO associated with The Nature Conservancy, which has begun working in various activities. The principle ones include: protective actions for the Podocarpus National Park, the design and promotion of the Podocarpus Watershed Protection Fund, conservation actions in Loja’s Zamora Huayco watershed, the development of a Management Plan for the Corazón de Oro Forest, which forms part of Tambo Blanco watershed, and an economic appraisal of El Limón watershed in Zamora.

The Fundacion Arcoiris has begun work on the creation of a Watersheds Protection Fund, which is a financial mechanism for the conservation of the water in the provinces of Loja and Zamora Chinchipe, based on financial contributions from foreign and national water users’ institutions. This fund would be administered by a Technical Secretariat, and establish which projects would be financed.

Moreover, in anticipation of more inter-institutional work, an agreement has been signed for the creation of the Watersheds Podocarpus Fund, as well as a Regional Strategic Plan for the Environment (PAER), and a Management Plan for the Shucus watershed.

Nature and International Culture Foundation (NCI) NCI have developed various protection and conservation activities within the area. It has carried out a physical and economic appraisal of the catchments areas of: Chorillos, Sabanilla, El Carmen, Jipiro, San Simón and Curitroje. NCI in collaboration with the Associated Consultants Group (GCA) and within the framework of Loja Municipality activities, has carried out work to evaluate water resources within the catchments areas supplying water to Loja and Zamora.

In both cases, the intention is that water users (water companies in the case of Loja, and hydroelectric projects in the case of Zamora) include an environmental component which would finance activities for safeguarding water sources.

The Nature Conservancy The areas where the Loja and Zamora water sources originate, are a high priority for conservation. They are located within the eastern Cordillera Real mountain forest ecoregion and the Central Andes paramos, which have been designated highest priority for conservation within Latin America.

The Podocarpus National Park is the only National Park in the country’s southern region. The Park, covering more than 346,000 acres (140,000 hectares), contains representative ecosystems from the Southern Andes of Ecuador, with large areas of mountain forests, areas of paramos and wetlands, as well as forests of Podocarpus, a native conifer which gives the park its name. It is important to stress that these ecosystems contain different elements from those in northern Ecuador, due to differing geological and biogeographic factors.

The Podocarpus National Park contains a high degree of biological diversity, and a great number of endemic and threatened species. Examples of these include the Andean spectacled bear and the mountain tapir. Furthermore it has been internationally recognized for its great diversity of birds, and is registered as an IBA (Important Bird Area) by BirdLife International. Some of the important bird species in the park include: Pyrrhura albipectus, Touit stictoptera, Campylopterus hemileucurus, Galpula Pastazae, and Wetmorethraupsi sterrhopteron.

The other micro-watersheds mentioned which supply Loja, but are not themselves within the Podocarpus National Park, are also of great importance as they are vegetation areas that enclose or are close to the park and form corridor zones which help maintain the park’s integrity. Therefore their long-term conservation helps sustain areas of great importance for biodiversity.

Agencies Analysis Stakeholders possibly interested in capitalizing the Watershed Conservation Fund include:

• Water Users:

• Drinking water suppliers: UMAPAZ AND UMAPAL • Electricity: Southern Region Energy Company, Chorrillos Hydroelectric Project, Delsitanisagua Hydroelectric Project, Hidrozamora Power Station, Sabanillas Hydroelectric Project, also private generators • Other Hydroelectric users • Agricultural Irrigation Users