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Guatemala receives $100 million from Spain and the IDB to improve water and sanitation services

Thanks to $100 million in assistance from the Government of Spain and loans from the Inter-American Development Bank, Guatemala will expand safe water and sanitation services to approximately 600,000 people in 280 rural communities and 60 urban and periurban areas that today lack those services.

In addition to enhancing and expanding water and sanitation services, the program will foster organized participation by the rural communities and the municipalities in order to ensure that the systems constructed are sustainable over time. The funds will also serve to consolidate and strengthen the institutions needed for the planning, regulation and delivery of the services.

The program will lend support to a comprehensive plan drawn up by the Government of Guatemala to reduce the shortfall in coverage of these services. Current water and sanitation service coverage, nationwide, is 75 percent and 47 percent, respectively, which means that nearly 3 million Guatemalans still lack public water services and approximately 6 million lack sanitation services.

In the rural areas of Guatemala, water coverage is 60 percent, sanitation 36 percent. The worst shortfalls are found in areas with predominantly indigenous populations. According to Government estimates, only 15 percent of the water distributed in the country can be considered potable and barely 5 percent of the sewerage systems properly treat wastewater prior to disposal. To achieve United Nations Millennium Development Goals, Guatemala would have to invest an estimated $1,602 million in improving these services.

This is the fourth project financed jointly by the IDB and the Spanish Cooperation Fund for Water and Sanitation in Latin America and the Caribbean (the Spanish Fund), an entity established last year at the initiative of the President of Spain, José Luis Rodríguez Zapatero.

In July 2009, the IDB and the Government of Spain signed an agreement to finance and execute joint projects, using a portion of Spanish Fund grants. The partnership will benefit from the IDB’s experience with a large portfolio of water and sanitation projects and from its network of sector specialists in its country offices in the region, in order to ensure swift and efficient execution of projects identified as priorities by governments in Latin America and the Caribbean.

“This partnership is a historic gesture of solidarity with our region by the people of Spain,” said the President of the IDB, Luis Alberto Moreno. “These generous grants will enable us to leverage IDB funds and finance much more ambitious projects, which will improve the health and quality of life of millions of people living in some of the poorest communities in the hemisphere.”

As the Spanish ambassador in Guatemala, María del Carmen Díez Orejas, reiterated: "Without water and sanitation there can be no development.”

Apart from the project in Guatemala, the IDB and Spain are co-financing projects in Haiti, Bolivia and Paraguay (see links to press releases on the right), and between now and mid-2010 they are expected to finance projects located in Brazil, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Honduras, Peru and Uruguay. All in all, Spain will donate $407 million to those projects, while the IDB will contribute $213 million in grants and loans, in addition to defraying the bulk of the their preparation and implementation costs. Some 4 million people living in low-income urban and rural communities are expected to benefit directly from these projects.

Initially, the program will be executed by the National Peace Fund (FONAPAZ) with the support of the Ministry of Public Health and Social Assistance. Nineteen months into the Program, responsibility for executing it will pass to the Municipal Development Institute (INFOM/UNEPAR).

Of the loans granted to the program by the IDB, $40 million will be for a 30-year term, with a 5.5 year grace period, at a variable interest rate based on Libor, while the remaining $10 million will be for a 40-year term with a grace period of 40 years, and an interest rate of 0.25 percent. The IDB could eventually consider financing a second phase of the program with an additional $100 million loan.

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