Water supply and sanitation in Costa Rica

Costa Rica has made significant progress in the past decade in expanding access to water supply and sanitation, but the sector faces key challenges in low sanitation connections, poor service quality, and low cost recovery.

Access

"Source": Joint Monitoring Program WHO/UNICEF( [http://www.wssinfo.org/en/welcome.html JMP] /2006). Data for [http://www.wssinfo.org/pdf/country/CRI_wat.pdf water] and [http://www.wssinfo.org/pdf/country/CRI_san.pdf sanitation] based on the "Global Water Supply and Sanitation Assessment" (2000) from the Water Supply and Sanitation SectorQuestionnaire (1999).

Costa Rica, with a population of 4.3 million, of which about 61% are located in urban areas, has made meaningful progress in expansion of water services in urban areas over the past decade.

Approximately 99% of the urban population is connected to water supply (as compared to an average of 90% in the LAC region), a significant increase from 92% in 1990. Around 48% had urban sanitation connections to public sewerage or had individual septic tanks. In 2006 the Japanese Bank for International Development (JBIC) signed the Metropolitan San José Environment Improvement Project loan to develop sewer plant, installation of sewage pipes, and consulting services. [ [http://www.jbic.go.jp/autocontents/english/news/2006/000026/index.htm JBIC] ]

Rural coverage is lower, with about 92% of the 1.7 million rural inhabitants connected to public water supply and about 97% connected to sanitation services, mostly through the use of septic tanks..

Service quality

The countrywide increase in coverage rates in water and sanitation masks shortcomings in the quality of service. In 2005, only about 70 % of the population received water of potable quality [ Estimated by AyA’s National Water Laboratory ] . Furthermore, 96% of all urban wastewater collected is discharged into rivers and receiving bodies without any treatment, generating public health risks and water resources contamination.

In most of the regions of the country, water production capacity is very close to current demand, so the risk of facing water deficits in the near future is high and in fact, various cities already suffer from water shortages and rationing.

Pollution

The existing on-site sanitation installations, such as septic tanks, are not always an adequate solution. Some of them contaminate aquifers which are used as water supply sources. Furthermore, the sludge removed while cleaning septic tanks is usually disposed of in rivers and constitutes a source of pollution in addition to the discharge of raw sewage mentioned above.

Recent developments

AyA’s management is politically nominated and frequently replaced on the basis of political cycles. The sanitation services that it provides are deficient and its financial situation has been deteriorating since 1999.

AyA is aiming to increase rural coverage to 98% in the next three or four years with the agreement between the Banco Popular and the Central American Bank for Economic Integration (CABEI) signed on March 2007. The main goals of the agreement are to promote ASADAS sustainability and to help it achieve 100% coverage, as well as to register ASADAS into an automated information system to improve operations records and tariff collections. [ [http://www.bnamericas.com/story.jsp?idioma=I&sector=4&noticia=384629 CABEI] ]

Responsibility for water supply and sanitation

Policy and regulation

The main institutions involved in the policy and regulation of the Costa Rica water and sanitation sector are:

* the Ministry of Health (MINSALUD), which oversees the water sector;
* the Regulatory Authority for Public Services (ARESEP) created in 1999, which is responsible for economic regulation including tariff setting, monitoring and control of efficiency and quality of service, among other duties; [ [http://www.aresep.go.cr/cgi-bin/menu.fwx ARESEP] ] and
* the Ministry of Environment and Energy (MINAE), which is responsible for water resource management in Costa Rica in accordance with the Environment Law, as well as for environmental licensing.

Other Ministries also have a role in the sector, sometimes with overlapping functions and responsibilities.

De facto AyA has an important indirect policy and regulatory role since it monitors the compliance with technical norms, can take over failing systems and advises the Ministry in the development of the sector. This double role implies a conflict of interest.

Service provision

According to the Drinking Water Law of 1953 the country's 81 municipalities (called cantons) are responsible for the provision of water and sanitation services. However, in reality service are provided by the following entities: [ Kristen Welsh: Assessing Access to Potable Water in Rural Communities in Costa Rica, Tropical Research Bulleting 2006, p. 67 [http://www.yale.edu/tri/pdfs/bulletin2006/066Welsh.pdf] ]

* The Costa Rican Water and Sanitation Institute (AyA), which is a centralized public institution reporting to the Minister of Health. AyA is in charge of directly administering and operating water and sanitation systems serving 46% of the population, mostly in urban areas. AyA directly serves 3% of the rural population;
* Municipalities, which in total serve 16% of the population;
* The Heredia Public Services Company (ESPH S.A.), which is an autonomous multi-services public utility constituted under private law that provides water, sewer and electricity services to Heredia in the North of the country, which serves 5% of the country’s population [ [http://www.esph-sa.com/portal/page?_pageid=33,62282&_dad=portal&_schema=PORTAL ESPH] ] ;
* Administrative Committees of Rural Water Systems (CAARs) and Administrative Associations of Rural Water and Sanitation Systems (ASADAS), which serve a total of 24% of the country’s population in 1,620 communities.
* other private organizations that operate water systems, such as housing developers, serving about 5% of the population.

Article 5 of ARESEP’s Law allows the provision of water supply services by the private sector. However, in practice the private sector does not play any role in the sector. In addition to its role of service provicer in its service area AyA is responsible for:

* providing support to rural communities outside of its service area;
* monitoring the compliance with technical norms;
* guaranteeing the continuity of provision of service nationwide (to the point of being able to assume actual operation of failing systems not operated by AyA); and
* leading the development of the sector nationwide.

In particular, the Rural Works Department within AyA is responsible for the planning, design, financing and construction of rural water supply and sanitation systems. It is also in charge of the provision of technical assistance to the water and sanitation associations.

Economic efficiency (water losses)

Non-revenue water ("water losses") in Costa Rican water companies is high, as most systems are operating with losses usually over 50%, a value which reflects a high level of inefficiency and compromises continuity of service.

Financial aspects

Tariffs and cost recovery

Water and sewer tariffs in Costa Rica are approved by the regulatory agency ARESEP. [ For a recent list of approved tariffs of verious service providers see [http://www.aresep.go.cr/cgi-bin/index.fwx?area=11&cmd=servicios&id=0739&sub=2955 ARESEP water tariffs] ] Revenues in the Costa Rican water and sanitation sector do not cover operation and maintenance costs and the financial situation of the sector is precarious.

Tariff levels do not allow for full cost recovery. In the case of AyA, there are cross-subsidies from the metropolitan area of San José to the other urban and rural areas of the country. The tariff is set based on short term cash flow needs rather than on real economic costs of service provision. AyA requests tariff increases when its financial situation is precarious and not a result of long-term investment planning. The regulator tends to approve these requests only partrially..

AyA has not been compensated by the government for assuming its role played as the main subsidy provider to the rural sector. This situation puts a high financial burden on AyA and is one of the reasons for AyA’s financial problems. Since the government does not directly subsidize the rural sector it is not aware of the magnitude of the problem and of its financial impact on AyA.

In rural areas tariffs do not allow for cost recovery either. Rural tariffs vary and stood at an average equivalent to US$ 0.18 per cubic meter in 2001, compared to US$ 0.25-0.28 per cubic meter charged by AyA.

Investment and financing

Great efforts and large investment to the Costa Rican water and sanitation sector are required to improve water and sanitation services. In the past, over 60% of the sector investments came from government resources, half of which was financed by multilateral loans. [ World Bank: Costa Rica Country Assistance Strategy 2004, p. 21 [http://siteresources.worldbank.org/INTCOSTARICA/Resources/CR_CAS_2006.pdf World Bank CAS] ] However, given the current investment needs of the sector, the government can no longer maintain such a high share of sector financing. Consequently, there is a need for increasing internal cash generation by service providers and for the mobilization of commercial financing.

According to the "Controlaría General de la República", US$ 203 million were invested in water supply and sanitation from 1990 to 2006, which is on average US$ 3.3 per capita and year. The investment reached its peak in 1999, when it was US$ 6.3 per capita. Since 2000, it fell back substantially until reaching only US$ 0.7 in 2005 and US$ 1.1 in 2006. Compared to other Latin American countries, this investment level is very low. ["See: Investment in water supply and sanitation in Latin America"]

Most of the investments in rural areas are being financed through grants channeled through AyA.

In 2002 AyA proposed a sector modernization program (2001-2020), which envisages maintaining urban water coverage at 98.5% and drastically increasing coverage of urban sewerage to 89% by 2020. It also envisages an increase in rural water coverage to 90% by 2020. The total investment required for implementing this program amounts to US$1.6 Billion or approximately US$80 million per year, and reflects the many years of neglect in the maintenance of AyA’s assets. This corresponds to four times the average annual investment during 1991-1998. AyA estimated in 2002 [ AyA, Agua Potable y Saneamiento de Costa Rica – Análisis Sectorial, Julio de 2002 ] that, taking into account increased cash generation and efficiency improvements, only about 40% of the investment would still have to be financed by the government.

External support

The major donors involved in the water sector are JBIC, KfW, and CABEI (the Central American Bank for Economic Integration) which had or have ongoing loans to AyA. The IDB assists the government in designing a water and sanitation subnational program. [ [http://www.iadb.org/projects/Project.cfm?project=CR-T1034&Language=English Water and sanitation subnational program] ] AyA has received a JBIC Loan for the wastewater project of San José and the CABEI/Banco Popular rural loan.

Japanese Bank for International Cooperation

* [http://www.jbic.go.jp/autocontents/english/news/2006/000026/index.htm Metropolitan San Jose Environment Improvement Project]

Relevant laws

* Law 1634 of 1953, General Drinking Water Law [http://www.aya.go.cr/html_datos_principal/Digesto_aya/DOCUMENTOS/Normativa/leyes/Ley%20general%20agua%20potable.PDF]
* Law 2726 of 1961, Law creating AyA [http://www.aya.go.cr/html_datos_principal/Digesto_aya/DOCUMENTOS/Normativa/leyes/Ley%202726%20Constitutiva%20de%20AyA.PDF]
* List of all relevant laws [http://www.aya.go.cr/html_datos_principal/Digesto_aya/NORMATIVA/leyes_digesto.htm]

References

See also

*Costa Rican Water and Sanitation Institute [http://www.aya.go.cr/ AyA]
*Central American Economic Integration Bank [http://www.bcie.org/english/bcie/que_hace/cmc.php CABEI]