Category 18 April 2019

Ecuador Fund for Water Protection – FONAG

The Fund for the Protection of Water (Fondo para la protección del Agua – FONAG) is promoting sustainable practices in water cycle management in Ecuador. The fund has helped maintain a sustainable water cycle in Quito by setting up collaborative grants targeting upstream landowners. These landowners are taught and assisted in water conservation and protection of biodiversity. The Fund further contributes by informing all stakeholders about the importance of water protection and raising consumer awareness.

The challenge:

Global water use has been growing at more than twice the rate of population increase in the last century[i]. As a result, more and more regions are experiencing water scarcity. In and around Quito, Ecuador, activities such as oil extraction, and demands from agriculture, were threatening water security.

The measure:

The Fund for the Protection of Water (Fondo para la protección del Agua – FONAG) was established in Ecuador around the turn of the century.

FONAG is a trust fund providing finance to upstream landowners to use sustainable farming practices and conserve natural areas. Its overall aim is to ensure there is a sufficient quantity of water – of good quality – to supply the City of Quito and its surrounding area.

The fund is organised into a number of long term programmes:

Communication and dissemination of information;Vegetation restoration;Education and outreach;Water management;Surveillance and water cycle monitoring.

Within these priority areas, grant funding is allocated to short term projects (up to two years), which are led by local organisations and communities. Funded activities include: forest restoration and planting; research and monitoring; providing tailored training to farmers and land owners; field trips for children.

The FONAG was initiated by The Nature Conservancy – a non-profit organisation – in collaboration with the Government of Quito. From an original seed fund of USD 21,000, the FONAG now manages funds in excess of USD 10 million. Annual contributions come from Quito’s electrical company and large private companies such as the local brewery and bottling company which depend upon a reliable water supply. 2% of all payments made by Quito consumers to the water utility company are also earmarked for the FONAG.

The Water Fund concept has proven to be very successful and has spread across Latin America and the Caribbean where more than 20 water funds are now operational.

Lessons learnt:

Many schemes look to subsidise ecosystem services or protection. By being more project based, and providing support to networks and partnerships, FONAG doesn’t create a situation wherein landowners become reliant on subsidies.

This system illustrates the potential of the ‘beneficiary/consumer voluntarily pays’ as an alternative to the ‘polluter pays’ system that governs most water quality improvement programmes.

The fund grew slowly but sustainably thanks in large part to the fact that its financial support was limited to yields from interest and investments.

Further deployment:

Though each fund has its own characteristics, the practice has been successfully replicated in different forms throughout Latin America, the Caribbean and beyond. GML 9.