Monetising Water Savings (MWS) in Latin America


Context 

In Guanajuato, Mexico agriculture accounts for about 84% of water rights. Significant growth in agricultural production and use of groundwater wells have led to a 2 metre annual decrease in groundwater levels. Improving agricultural irrigation practices has the potential to address agricultural water inefficiencies for water-stressed regions like Guanajuato. MWS is a collaborative approach to improve economic outcomes for farmers, create resilient supply chains, and increase water efficiency by using ‘pay for performance’ to accelerate sustainable agriculture practices in water-stressed regions. 

Stakeholders involved 

  • Anchor corporate partner 
  • Water management experts and technical advisors 
  • Public sector partner (water utilities, state governments, water districts, municipalities) 
  • Civil society organisations (CSOs) 
  • Farmers  
  • Independent impact evaluator 

Problem 

  • Globally, climate variability is having a significant impact on water availability. Unsustainable and inefficient use of water by agricultural producers increases the vulnerability of smallholder farmers in water-scarce regions and impacts water supply and food production. 
  • Like most of the country, Guanajuato practices flood irrigation which is the most cost effective but least efficient method of irrigation.  
  • Many small farmers in developing and emerging countries lack the resources, business models to participate in, and/or incentives to implement sustainable solutions. 

Innovation

  • MWS is a collaborative initiative involving government, corporations, and agricultural producers to mobilise investment into sustainable agriculture and incentivise water conservation in water-scarce, agriculture-intense areas.  
  • MWS will provide loans on favourable terms to farmers to enable purchase of efficient irrigation systems and implement sustainable agriculture practices.  
  • Once operational the MWS model will generate two revenue streams from producers and utilities, and a corporate partner committed to purchasing the agricultural products.  
  • Loan repayments are made through increased crop revenues, reduced cost, and improved access to markets. 

Results and impact 

  • Improved water efficiency of grain producers in Guanajuato: The pilot project focused on grain producers, targeting 4,000 farmers across an area of 20,000 hectares in Guanajuato (the second highest water-stressed region in Mexico). 
  • Increased yield and reduced water consumption by farmers: the MWS model is expected to result in a 30% increase in farmers’ yields while reducing annual water consumption by 3,500 cubic metres per hectare (seven olympic-sized swimming pools of water each year). 
  • Improved biodiversity and climate resilienceMWS delivered a number of environmental benefits including improved biodiversity, increased resilience to climate events such as droughts, and contribution to long-term water security.? 
  • Technical assistance and training for farmers: MWS also provided initial and ongoing technical assistance and training to farmers in order or reduce the risks associated with the operations and enhance that payment is consistent and reliable. Technical assistance include training on drip irrigation systems, adopting conservation practices, and continuous project financing support. 

Key lessons learnt: 

  • Legal and administrative ambiguities in Mexico water governance: The governance structure is complex with different regulatory bodies responsible for different administrative capacities (e.g. monitoring water usage, investing in solutions, etc). Navigating the system and coordinating stakeholders to acquire approvals was challenging, time consuming and importantly it required an understanding of the legal and administrative environment. Leveraging partnerships and relationships with organisations – for example FEMSA Foundation and WRI – who are experienced in working with the authorities was important in managing these relationships, navigating administrative systems and bureaucracy and identifying solutions



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