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IDB approves $50 million loan for rural water investment program in Guatemala

The Inter-American Development Bank today announced the approval of a $50 million loan for Guatemala to help finance a program to expand the coverage of water and sanitation services that will be provided by community-based associations in rural areas throughout the country.

The program, which will be carried out by the Guatemalan municipal development agency, Instituto de Fomento Municipal (INFOM), was designed to benefit at least 500,000 new rural consumers. Families will have easier access to safe drinking water, which will improve their health and save them the time and effort they spend on carrying water from remote sources.

Building on lessons learnt from previous water and sanitation projects in Guatemala, the new program will finance the construction of water and sanitation systems for individual communities or groups of communities with an average of 900 people.

The communities will take all key decisions related to their respective projects, selecting the system that best suits their needs and capacity. Autonomous water associations established by the residents of each village will manage the services, covering their administration, operation and maintenance costs by collecting tariffs from users.

Specialized companies or NGOs will provide information on sanitation and environmental issues at a local level and help communities develop their projects by explaining the benefits and the costs of the different alternatives and assisting them during the construction phase and the first year of operations and maintenance.

The program will finance the capital costs of the water and sanitation projects with a combination of reimbursable and grant resources, depending on each community’s financial capacity. Reimbursements of funds will allow INFOM to extend the program to more communities in subsequent years.

The program reflects the IDB strategy of supporting Guatemala’s efforts to improve social equity and invest in human capital by providing water and basic sanitation services in rural communities where family incomes are below the national average. The increased potable water coverage in rural areas will enable Guatemala to make substantial progress towards meeting the U.N. Millennium Development Goal relating to increasing access to water and sanitation services.

The loan was granted for a 25-year term, with a 4-year grace period, at a variable interest rate, currently at 5.80 percent a year. Interest costs will be partially offset using resources from the IDB’s Intermediate Financing Facility. Local counterpart funds will total $5.6 million.

The IDB is currently preparing water and sanitation projects for Costa Rica, Mexico and Panama.

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