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GUATEMALA WATER FUND:
Partnering with the Private Sector for Biodiversity Conservation in the
Sierra de las Minas Biosphere Reserve (SMBR) through a Payment for Environmental Services
(PES) Mechanism
Karin M. Krchnak
WWF-US
October 27, 2013
Guatemala Water FundProject Objectives
• Achieve long term financial sustainability in the conservation and management of the SMBR through implementation of a PES mechanism.
• Implement an innovative financial mechanism linking downstream water users with upstream watershed management and conservation to ensure an abundant and clean water supply.
Guatemala Water FundMesoamerican Caribbean Reef (MAR) Ecoregion
Guatemala Water FundSierra de las Minas Biosphere Reserve
• Declared in 1989 the jewel of the PAS in Guatemala.
• 592,800 acres
• Oldest mountain range in the region
• Altitude ranges from sea level to 10,496 ft
• 66% of mammal species in Guatemala, including endangered species like the resplendent Quetzal, jaguar, yellow-cheeked warbler, ocelot
• “Gene bank” for economically important coniferous species
63 permanent rivers originate in core zone
• Approximately 500 poor communities in buffer zone
• Declared in 1989 the jewel of the PAS in Guatemala.
• 592,800 acres
• Oldest mountain range in the region
• Altitude ranges from sea level to 10,496 ft
• 66% of mammal species in Guatemala, including endangered species like the resplendent Quetzal, jaguar, yellow-cheeked warbler, ocelot
• “Gene bank” for economically important coniferous species
63 permanent rivers originate in core zone
• Approximately 500 poor communities in buffer zone
Management of SMBR
Guatemala Water FundSierra de las Minas Water Users Market
Two watersheds selected because:
• 21 industry plants
• Water is important input in industrial processes
• Significant water quantity and quality reduction during dry season (Montagua Valley is one of Central America’s most arid zones)
• Industry’s willingness to pay
• Existing base information
Two watersheds selected because:
• 21 industry plants
• Water is important input in industrial processes
• Significant water quantity and quality reduction during dry season (Montagua Valley is one of Central America’s most arid zones)
• Industry’s willingness to pay
• Existing base information
Guatemala Water FundProject Concept
PES MECHANISMPES MECHANISM
PES Financial MechanismMarket Study
Industries categorized by:
• Geographic location: 21 industries in Motagua basin
(located in 3 of 82 sub-watersheds)
• Extraction techniques: surface (rivers) and underground (wells)
• Water is important input in industrial processes
• Size Large (Coke bottling plant, Rum plant, Paper, others) 6Medium (hydro-power, agro-industry, others) 10Small (hotels, others) 5
21
PES Financial Mechanism DesignAssumptions
• Well-known cause-effect
• Very low fixed cost
• Mix of financial instruments
• Custom made to market needs
• Balance between conservation and development objectives
• Balance between short- and mid-term results:
Micro Direct impact to industry Focus on water and energy use optimization (reduction of effluents) Short-term impact
Macro Conservation and management of watershed Focus on PA or forest owners Community projects Mid-term impact
Financial Mechanism DesignImplementation Structure
BOARD OF DIRECTORS
Sector Committees
Industry sector
Other Sectors
Policy level
Investment Policies
NGO’s+
Donors
Financial Mechanism DesignImplementation Structure
$$
Other sector accounts
$
Industrial account
SOURCE DONORSInvestment
policies
Investment technical
committee
Investment decisions
and supervision
Management and operation of
Guatemala Water Fund
INDUSTRY
PROJECTS
$
Management account
+
$
$
Trust fund or endowment
Investment Committee by sector
Investment decisions and supervision
Director
Financial Accountability Unit
Technical Unit
Management and
supervision of Water Fund
Specialized support• Financial audit• Marketing• Technical experts (e.g. hydrology)• Monitoring
Project proposal (technical support)
Outsourcing
Financial Mechanism DesignImplementation Structure
Investment Committee
Financial Mechanism DesignFinancial Feasibility (Projected Cash Flow in US$)
INCOME Y1 Y2 Y3 Y4 Y5 Y6
A. User fees (membership) 75,000 120,000 134,000 148,000 152,000 152,000
B. Donations 165,000 150,000 150,000 75,000 75,000 75,000
C. Interest earned 15,555 77,903 110,373 128,563 128,563 128,563
Total Income 257,305 351,903 401,123 361,063 367,813 370,563
EXPENSES Y1 Y2 Y3 Y4 Y5 Y6
D. Project allocations 120,000 180,000 220,000 220,000 220,000 220,000
E. Endowment transfer 35,000 45,000 55,000 55,000 55,000 55,000
F. Management costs 90,000 85,000 85,000 85,000 85,000 85,000
Total Expenses 245,000 310,000 360,000 360,000 360,000 360,000
Cash Flow (accumulated) 12,305 54,208 95,330 96,305 104,205 114,768
Project Update
• Built data base starting 1995• Conducted awareness, research and information activities with key
stakeholders• Ongoing conservation activities to preserve high biodiversity areas in
basin • Clearly identified cause-effect relationship on at least three sub-
watersheds showing clear dependency on upper watershed• Identified users’ willingness to pay through market studies • Established 10 community-based watershed committees • Signed agreements with three main industries (Paper plant, and rum
and Coca Cola bottling plants)• Completed diagnosis and business plans to optimize water use and
reduction of effluents in all three plants
WWF & Coca-Cola Activities
• Share lessons learned in PES projects driven by Coca-Cola and WWF • Share industrial experience of BMP’s in water use implementation
promoted by Coca-Cola and WWF-Other bottling plants• Present Water Savers Tool Kit developed by WWF and Coca-Cola• Share BMP’s training initiatives developed by WWF and Coca-Cola to
date for water use optimization and analyze training needs at ground level
• Phase 2 Core Basin: 2013-2020
• Freshwater Conservation, Value chain & Valuing Nature
Sierra de las Minas
Rio Motagua
Rio PolochicSierra Merendon
Rio Chamelecon
Manchaguala
Pueblo Viejo
Teculutan
WWF-TCCC Areas of work
© WWF-Canon / Martin Harvey
Believe it or not, branding a PPT is easier than dancing with an elephant.
GRACIAS!