WASHINGTON DC, November 9, 2010 – The World Bank (WB) Board of Directors approved a US$100 million loan for the Mexico Water Utilities Efficiency Improvement Project, which seeks to improve efficiency of participating utilities through technical assistance and financing framed under the sector policy.
The main beneficiaries of this project will be water utilities located in urban communities of more than 20,000 people, which will have increased capacity to efficiency improvement. Eligible water utilities will also benefit from a better management of knowledge and information and will be able to provide efficient, reliable water and sanitation services to their users, who will be the ultimate beneficiaries from the project.
Limited availability and deterioration of water quality impact growth and sustainable development, and has an overall negative impact on the most vulnerable sectors of the population. This is compounded by the inefficient management of water. According to WB research, reversing this effect requires comprehensive actions such as water policies and solid financial mechanisms.
“The efficient provision of drinking water, urban drainage and sanitation services is strategic as well as a priority for this administration; this is why we have determined that the National Water Program will strengthen Water Operators in order to increase their physical and commercial efficiency,” said Jose Luis Luege Tamargo, Managing Director of the National Water Commission (CONAGUA). “With the support and cooperation of the World Bank, we will establish a program that will allow us to better coordinate water sector objectives and strengthen different operators to make this sector one of the most modern,” he added.
Better water management will allow the Mexican government to strengthen ongoing and future initiatives to confront the challenges associated with climate change. Furthermore, it will help to highlight the importance of this resource internationally in the lead up to the climate change meeting (COP 16) that Mexico will host between November 30 and December 10, 2010.
“Lack of access to water services is still a factor in poverty and exclusion. At a time when water shortages have multiplied as a result of climate change, it is crucial that an adequate water management policy is in place. As a consequence, improving its efficiency to achieve a more equitable and sustainable distribution of this resource will allow millions of Mexicans that still lack drinking water to gain access to it,” said Gloria Grandolini, World Bank Director for Mexico and Colombia. “This project supports government efforts to improve the financial sustainability and the efficiency of water service provision, mainly at the municipality level, which is something that should be highlighted,” she maintained.
The project has two key components:
1. Improving information and knowledge management in the water supply and basic sanitation service sectors.
2. Modernizing water operator services by financing mechanisms to improve both physical and commercial efficiency.
Some of the expected results include:
- More water operators increasing their incomes by at least 5% according to production volumes;
- Increasing the number of water operators implementing energy efficiency measures and whose energy consumption per cubic meter has decreased by 5%; and
- A greater number of water operators increasing their income levels by at least 5% thanks to greater commercial efficiency.
The strategic alliance on water issues between Mexico and the WB has grown continuously since 2006, when the Technical Assistance for Efficiency Improvement Program (PATME) began. In June 2010, the Bank approved a US$450 million loan for Mexico to establish public policies aimed at supporting government efforts to promote adapting of its water sector to climate change.
Today’s operation is an integral part of a service package that includes advisory services, technical assistance, knowledge and coordination and meeting services, as well as financing, which will allow the Bank and government to work together in finding better solutions to water shortage and its effects on climate change.
The organization responsible for the implementation of this loan is CONAGUA, which in turn has designated the National Savings and Financial Services Bank (BANSEFI, in Spanish) as financial agent. It will have a total cost of US$200 million, US$100 million of which will be financed by the WB and US$100 million by the government counterparty.
This is an investment loan with a variable interest rate (6 Month LIBOR), plus a variable margin, with a 12-year, one-payment, maturity period. This is a dollar-denominated loan with risk management options. The opening fee has been fixed at 0.25% of the total sum. The project is expected to end on December 2014.