WB: Oaxaca to Enjoy Improved and Sustainable Drinking Water Supply

June 17, 2014

It Seeks the Modernization of the Institutional Framework for the State-Owned Water and Sanitation Sector

Inhabitants from 18 municipalities in the Mexican state of Oaxaca will benefit from a US$55 million World Bank loan to support the institutional modernization of the state-owned water and sanitation sector, as well as an improvement in the sustainability and quality of the water supply in urban areas of the state.

“The project seeks to improve the administrative and distribution mechanisms for water resources to address the basic needs of part of the population that right now only has access to a discontinuous service, creating obstacles to state development and significant productive losses,” said Gloria M. Grandolini, World Bank Director for Mexico and Colombia. “It also represents a significant addition to the broad package of services we have been providing to the state since 2011, including knowledge and convening services through which we share proven successful experiences from other parts of the world and implement them in Oaxaca,” she added.

The project will be carried out in 18 municipalities of Oaxaca, where 58 percent of the population lives under the poverty line. It is expected that improvements to the sustainability and quality of the water supply will have multiple advantages, among them: prevention of water-related diseases, as well as a strong impact on productivity. The goal is for 650,000 people to benefit from higher quality water in the first five years of implementation.

The state of Oaxaca has the third lowest drinking-water coverage (79 percent) after Chiapas and Guerrero, and the lowest sanitation coverage (71 percent) in the country. This contrasts with the high level of availability of water resources in Oaxaca, the state with the fifth biggest groundwater reserve in the country.

The state chose to use an innovative financial instrument called Program for Results, which will provide financing as results are obtained. The modernization of the water and sanitation sector is a priority for the Government of Oaxaca, established in its State Development Plan (2011-2016). In 2012, the government prepared a strategic plan for the sector that calls for increased investment with the objective of further development for the state. The World Bank has been supporting the Government of Oaxaca’s program of inclusive growth reforms since 2011 through knowledge, convening and financial services.

The project will cost US$93.5 million, US$38.5 million of which will be provided by the government via the National Water Commission’s (CONAGUA) Drinking Water, Sewage and Sanitation in Urban Areas Program (APAZU, in Spanish), while US$55 million will be financed by the WB. The National Public Works and Services Bank (BANOBRAS) will act as borrower for the WB loan, which in turn will reloan the funds to the Government of Oaxaca. The loan has a fixed interest rate and margin, an 18-year maturity period and includes a 5-year grace period. 

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