Water and Green Growth Case Study Report 5 Ecuador Water Fund Mechanisms for Watershed Protection Rights and Permissions Please obtain permission from the authors before reproducing this work in whole or in part. About the Report This case study report has been prepared as part of Phase 2 of the Water and Green Growth project, a collaborative research effort by the Government of Korea, as represented by the Ministry of Land, Infrastructure and Transport and K-water, and the World Water Council. The Water and Green Growth Report Edition II follows from and further develops the contents of the Water and Green Growth Report Edition I, which was published in March 2012. Disclaimer The findings, interpretations, arguments, and conclusions expressed in this report are UHVSRQVLELOLW\RIWKHDXWKRUVDQGGRQRWQHFHVVDULO\UHÀHFWWKHYLHZVRI.ZDWHUDQG:RUOG Water Council. Prepared for Ministry of Land, Infrastructure and Transport, Republic of Korea and K-water (Korea Water Resources Cooperation) in cooperation with the World Water Council. Authors 0DUFLD0%UHZVWHU 6HQLRU&RQVXOWDQW1DXWLOXV,QWHUQDWLRQDO'HYHORSPHQW&RQVXOWLQJ,QF1HZ<RUN NY, USA) and Lorena Coronel Tapia (Local Sub-Consultant for the case study) Peer Reviewer %RQQLH$+DUNHQ $,$3UHVLGHQW1DXWLOXV,QWHUQDWLRQDO'HYHORSPHQW&RQVXOWLQJ,QF Acknowledgements We gratefully acknowledge the contributions of all those who have made this report possible. In particular, ZHH[SUHVVRXUWKDQNVWRFROOHDJXHVDWWKH:DWHU3URWHFWLRQ)XQG )21$* IRU4XLWRDQGRWKHUZDWHU funds in Ecuador, as well as Karin Krchnak, Director of Freshwater Program at World Wildlife Fund ::) IRUVKDULQJWKHLUH[SHUWNQRZOHGJH:HH[SUHVVRXUJUDWLWXGHWRDOOWKHSHUVRQVZKR¿OOHGLQWKH questionnaires and participated in interviews. Finally, we are most grateful to fellow members of the Water and Green Growth team at K-water Institute and the World Water Council for their support and feedback on this report. Contents 223 List of Figures 224 List of Tables 225 List of Pictures 226 Abbreviations and Acronyms 228 Executive Summary 232 I. Introduction 232 1. Purpose of the Case Study 233 2. Case Study Context 233 3. Case Study Methodology 234 4. Organization of the Report 235 II. An Overview: Water Funds in Ecuador 235 1. About Ecuador 237 2. Timeline for Water Management Milestones 237 III. The Case Study 239 1. Exogenous Factors 239 1-1. Economic Factors 246 1-2. Social Factors 256 1-3. Political Factors 258 1-4. Environmental Factors 264 1-5. Technical Factors 267 1-6. Concluding Remarks 268 2. Water Resources Governance and Institutions 268 2-1. State-driven Institutions 272 2-2. Market-oriented Institutions 277 2-3. Community-centered Institutions 278 2-4. Concluding Remarks Ecuador Water Fund Mechanisms for Watershed Protection ● 221 278 IV. Performance of Water Funds in Ecuador 279 1. Generic Performance 280 2. Economic Performance 281 3. Social performance 282 4. Environmental Performance 284 5. Overall performance 284 5-1. Water Resource Management 284 5-2. Performance outside Ecuador 285 V. Lessons Learned and Conclusion 288 References 291 Annex A. Interviews 222 ● Water and Green Growth Case Study Report 5 List of Figures 235 <Figure 1> Map of Ecuador Showing 24 Provinces 241 <Figure 2> Workforce Employed in Agriculture, Industry, and Services in Ecuador, 2000-2012 242 <Figure 3> Land Use in Ecuador 245 <Figure 4> Population Density in Ecuador, 2010 245 <Figure 5> Ecuador Population Pyramid, 2010 246 <Figure 6> Urban Population in Ecuador, 2010 247 <Figure 7> Map of Ecuador, Showing Four Geographical Regions: Galápagos Islands, the Pacific Coast, the Andes, and the Amazon 250 <Figure 8> Distribution of Ethnic Groups in Ecuador 252 <Figure 9> Participation of Men and Women in the Labor Force in Ecuador, Latin America and the Caribbean Region, and Upper Middle Income Countries 260 <Figure 10> Protected Areas in Ecuador 273 <Figure 11> Location of Water Fund Watershed Areas in Ecuador 283 <Figure 12> Map Showing Three Protected Areas That Comprise the Watershed Area Covered by FONAG Ecuador Water Fund Mechanisms for Watershed Protection ● 223 List of Tables 239 <Table 1> Ecuador: GDP in US $ billion (Constant 2005 Prices), GDP Annual Growth, GDP per Capita (Constant 2005 US $) and Annual Growth, 2000-2012 241 <Table 2> Ecuador: GDP Value Added by Sector (% of total GDP) 243 <Table 3> Rate of Industrial Growth in Ecuador 244 <Table 4> Ecuador: Imports and Exports of Goods and Services (Constant 2005 US $ billion), 2000-2012 245 <Table 5> Annual Population Growth Rate and Population Density in Ecuador 2000- 2012 245 <Table 6> Population Distribution by Age in Ecuador 246 <Table 7> Urbanization Trends in Ecuador: Urban Population, Percentage of Total Population, Annual Growth 252 <Table 8> Human Development Indicators for Ecuador 253 <Table 9> Gini Index in Ecuador, 2000-2010 265 <Table 10> Institutions Participating in Science and Technology Activities 281 <Table 11> Contributions to FONAG Endowment (US $ thousand) 283 <Table 12> The Parameter of Analysis for the Study 285 <Table 13> Status of Water Funds in Latin America and the Caribbean 224 ● Water and Green Growth Case Study Report 5 List of Pictures 249 <Picture 1> Indigenous Children in the Highland Areas of Ecuador 258 <Picture 2> Quito Watershed in Protected Area 260 <Picture 3> Cuyuja River in Protected Area of Napo Province 261 <Picture 4> FONAG Program in Cuyuja, Napo in the Andean Highlands Outside Quito 261 <Picture 5> Natural Páramos Are threatened by Unsustainable Agricultural Practices in Highland Areas 281 <Picture 6> Children Participating in the FONAG Conservation Program 282 <Picture 7> Community Capacitation with the Ranger of the Antisana National Park 283 <Picture 8> Cotopaxi National Park Ecuador Water Fund Mechanisms for Watershed Protection ● 225 Abbreviations and Acronyms ALBA AlianzaBolivarianapara los Pueblos de NuestraAmérica (Bolivarian Alliance for the Peoples of Our America) AP Alianza País (AP) BACI Before-after, control-impact approach CAMAREN Consortium for Training in Renewable Natural Resource Management (Consorcio de Capacitación para el Manejo de Recursos Naturales Renovables) CI Conservation International (Ecuador) CONAIE Confederation of Indigenous Nationalities of Ecuador COOTAD Código Orgánico de Organización Territorial (OrganicCodefor Territorial Organization) CNPC China National Petroleum Corporation CREO Movement for the Creation of Opportunity party (Movimiento Creando Oportunidades) ECLAC Economic Commission for Latin America and the Caribbean EEQ Empresa Eléctrica Quito (The Quito Electric Company) ELECAUSTRO the Austro Electric Company EMAAP-Q Quito Metropolitan Area Potable Water and Sewage Company (Empresa Metropolitana de Agua Potable y Alcantarillado de Quito) – changed name to EMAPS (see below) in 2008 EMAPA Ambato Potable Water and Sewage Company [Empresa Municipal de Agua Potable y Alcantarillado de Ambato] EMAPAL Watershed Management Company of Azogues (Empresa Municipal del Agua Potable y Alcantarillado de Azogues) ENEMDU National Survey on Employment, Unemployment and Underemployment EPMAPS Quito MetropolitanArea Potable Water and SanitationCompany (Empresa Pública Metropolitana de Agua Potable y Saneamiento) – changed from EMAAP-Q in 2008 ETAPA Municipal Telecommunications, Drinking Water, Sewage and Environmental Sanitation Company of Cuenca (Empresa de Telecomunicaciones, Agua Potable, Alcantarrillado y Saneamiento de Cuenca) EXA Ecuadorian Civilian Space Agency FAN National Environmental Fund FAO Food and Agriculture Organization of the United Nations FEMSA Fomento Económico Mexicano, S.A.B. de C.V FMPLPT Tungurahua Water Fund for High-grassland Management and Poverty Reduction 226 ● Water and Green Growth Case Study Report 5 FONAG Fondo para la Proteccióndel Agua (Water Protection Fund) in Quito FONAPA Fondopara la Conservación de la Cuenca de Paute [Water Fund for the Conservation of Paute Watershed] FONES Fund for the Protection of Water in Espíndola, Loja (Fondo para la protección del Agua en Espíndola) FOPAR Riobamba Water Fund for the Protection of the Chambo Sub-Basin FORAGUA Fondo Regional del Agua (Regional Water Fund) FTA Free Trade Agreement FTAA Free Trade Area of the Americas FUNAM Environment Defence Foundation (based in Argentina) GAD Decentralized Autonomous Government (Gobiernos Autónomos Descentralizados) GEF Global Environment Facility IACHR Inter-American Commission on Human Rights INAR National Irrigation Institute, Ministry of Agriculture (Instituto Nacional de Riego) IEOS Ecuadorian Institute for Public Works and Sanitation (Instituto Ecuatoriano de Obras Sanitarias) INEC Instituto Nacional de Estadística y Censos (National Statistics and Census Institute) INERHI Ecuadorian Institute for Hydraulic Resources (Instituto Ecuatoriano de Recursos Hidráulicos) INHAMI National Institute of Meteorology and Hydrology (Instituto Nacional de Meteorología e Hidrología) MAE Ministry of the Environment (Ministerio del Ambiente) MIDUVI Ministry for Urban Development and Housing (Ministerio de Desarrollo Urbano y Vivienda) MSP Ministry of Public Health (Ministerio de Salud Pública) NCI Nature And Culture International OAS Organization of American States PAHO Pan-American Health Organization RIOS Resource Investment Optimization System SENACYT Secretaria Nacional de Ciencia y Tecnologia (National Science and Technology Department) SENAGUA Secretaría Nacional del Agua(National Water Secretariat) UNASUR Union of South American Nations UNDRIP United Nations Declaration on the Rights of Indigenous Peoples USAID United States Agency for