In Chile, the excesses of the “water markets”
As in many other countries, water in Chile is a public good. But, as in Australia and some U.S. states, its management is entrusted to the holders of “water rights,” and public authorities limit their involvement to the bare minimum.
Elisabeth Lictevout, University of Concepción; Hervé Jourde, University of Montpellier and Véronique Leonardi, University of Montpellier
The legal and institutional framework there remains governed by the 1981 Water Code, one of the neoliberal reforms implemented by General Pinochet’s military regime—which was in power from 1973 to 1990. This legislation adheres to free-market principles, in which the role of the state is kept to a minimum. The role of public authorities—through the General Water Directorate (DGA)—is thus limited to granting “water rights”: these are always tied to a maximum annual volume of water pumped (m³/year) and a maximum instantaneous flow rate (l/s orm³/s). Once acquired, these rights may be sold or transferred without notifying the DGA. The DGA also assesses resource levels and may decide to close, either temporarily or permanently, overexploited watersheds and aquifers.
“Water rights” are managed like real estate and protected by the Constitution: acquired in perpetuity by purchasers, they are transferable and unrestricted in their use. This is because the Water Code does not define any priority uses in allocation: drinking or washing does not take precedence over an income-generating economic activity, as the market—not the state—is supposed to regulate the economically efficient allocation of water.
This approach has been praised by some authors for its economic success: water rights provide legal certainty, which has encouraged private investment. From a social and environmental perspective, however, it appears unfair.
An unfair and inefficient system
Water rights are granted to any applicant, whether an individual or a corporation. Applications are processed on a first-come, first-served basis, which favors large companies that have the resources to prepare the application.
Conversely, small-scale users are often denied access. Sometimes this is simply because they have not applied for it: this is the case for indigenous communities. For them, this resource has been traditionally linked to the land, whereas Chilean law separates land ownership from water rights. The administrative process is also complicated and costly. It is also common for small-scale users to sell their water rights to large companies, particularly in watersheds and aquifers closed to new water rights—under a declaration of restriction.
When an aquifer is subject to a restriction order, users are theoretically required to form an aquifer management committee. However, since the committee’s board of directors is composed in proportion to water rights, those with the most rights hold the most votes. In the case of the Pampa del Tamarugal, in the north of the country, farmers were thus excluded from the board of directors, which was dominated by the large mining company and the drinking water company.
Underestimated water resources
The system therefore appears to be particularly harmful to the population, especially in the arid regions of northern Chile, where mining operations consume large amounts of water in certain basins.
Its operation relies on understanding and assessing the variability of water resources, which are estimated by the DGA through a hydrometric and piezometric network—a system of stations that continuously measure various variables such as precipitation, river flow, and groundwater levels. However, this network has significant shortcomings, both in terms of geographic coverage—it does not account for all water reserves—and in terms of the representativeness and quality of the data.
However, the studies funded by the DGA to estimate the availability of this resource are all based on these data and sometimes reach contradictory conclusions. When this happens, stakeholders rely on the study that best suits their interests. This includes the government, which does not hesitate to support large-scale mining projects… under the guise of stimulating economic growth.
Furthermore, the allocation of water rights based on flow rates (volume per unit of time), a lack of transparency regarding transactions between water rights holders, and limited capacity to monitor water withdrawals make it impossible to determine the actual demand for water or its actual use.
The Case of the Pampa del Tamarugal
The Water Code provides the DGA with several crisis “management” tools, in particular the declaration of a water shortage (for surface water) or of restrictions or bans (in the case of groundwater), which entail a permanent or temporary suspension of the granting of new water rights. However, since these assessments are open to criticism, such decisions are often based on erroneous information.
In the far north of Chile, a study of the Pampa del Tamarugal case has shown that the aquifer restriction, declared in 2009, was unjustified. Recent research reveals that the decline in groundwater levels is neither widespread nor significant relative to the thickness of the aquifer.
Furthermore, the calculations presented by the DGA to justify the restriction order contain numerous biases: among other things, they fail to account for recharge in the availability estimate, and there are errors and uncertainties regarding the terms of the groundwater balance, particularly with regard to withdrawals. The decision was therefore made on the basis of highly uncertain data.
Conflicts and the water rights market
As a result, the number of water-related conflicts has continued to rise in recent years. Granting water rights to anyone who requests them without a clear understanding of water resources has led to the overexploitation of certain aquifers, as well as the imposition of restrictions on more than a hundred of them.
These are concentrated in the arid and semi-arid northern regions of Chile. Mining operations—which extract copper in the Andes Mountains and nitrate and lithium in the Atacama Desert—require large amounts of water to process the ore, placing constant pressure on water rights holders, particularly farmers.
A market has thus emerged around these water rights, which are sold at exorbitant prices—one liter per second costs between $80,000 and $100,000. In the case of the La Ligua Valley, Copiapó, and the Pampa del Tamarugal, highly questionable calculations were used to justify declaring a restriction on the aquifer for the benefit of major economic players, who use it to eliminate their competitors.
Although official estimates of available flow showed that no additional permits could be issued, they did not call existing permits into question and allowed new applications to be approved.
The need for a participatory process
An analysis of the actions taken by the various stakeholders (mining companies, water utilities, farmers, and Indigenous peoples) revealed that each was pursuing its own strategy, notably by using water management issues and the information available (or unavailable) to further its own interests.
However, the retrospective generation of scientific data has not been able to break this status quo. As a result, many small-scale users remain excluded from access to water and its management.
The establishment of a participatory aquifer management process—now being called for by farmers and indigenous peoples—based on validated scientific information would make it possible to address the issue of how much water should be extracted from the aquifer.
In this way, it would be possible to establish a “desirable” extraction volume based on various development scenarios. To achieve this goal, it will be necessary to rebuild trust between the government and large corporations on the one hand, and between the government and Indigenous peoples on the other, as well as to amend Chilean legislation.
Elisabeth Lictevout, Researcher, University of Concepción; Hervé Jourde, Researcher, University of Montpellier and Véronique Leonardi, Researcher, University of Montpellier
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