FONAG: The Water based finance mechanism of the Condor. Bioreserve in Ecuador

Quito and its neighboring towns and villages, among the country's most populated regions, receive their water supply form the high plateaus of the Andean mountain range. Some of these watersheds are located inside protected areas, such as the Antisana and Caymabe-Coca Ecological Reserves, and the Cotopaxi and Sumaco National Parks that together comprise the Condor Bioreserve. Although in good condition and abundant at the source in these protected areas, this water does not enjoy unlimited or permanent availability - it needs protection.
Threats to the watersheds come from a variet yof sources. The Cayambe-Coca Ecological Reserve is inhabited by 7,000 persons dispersed throughout the area and in small communities. Inhabitants require water for crop and vegetable cultivation , and use the plateau for extensive livestock grazing. In the adjoining region, approximately 20,000 inhabitants live in tenant farmer cooperatives, indigenous communities, and as private landholders. Their main activity is the raising of dairy cattle and the controlled harvesting of wood. Poor agricultural practices, such as overgrazing and the burning of scrub land seriously damage the high plateaus. Several important development initiatives affect the Reserve including the construction of a highway by the Quito Municipal Sewage and Water Agency (EMAAP-Q), an irrigation project, and several hydroelectric projects. Unregulated development of these activities threatens the ecological balance of the reserves, as well asthe long-term viability of the activities themselves. The degradation of water quality as it flows downstream affects the water supply reaching Quito and its neighboring communities. Erosion causes sedimentation in water flows and reduces power generation capacity. Unfortunately, the lack of resources for the operation and protection of the reserves threatens the long-term conservatio of these vital ecosystems and the water services they provide. The Nature Conservancy (TNC)and Fundación Antisana, a non-governmental organization, with support from the United States Agency for International Development (USAID), proposed the creation of a water consumption fee to fund conservation projects and improved management of the watersheds located in the reserves. Fees would go into a trust fund to be managed by an experienced asset management company to ensure financial stability, and generate revenues from interest on investments. In addition to fees collected from water users the fund would eventually solicit additional support from national and international entities. The initiative was formally launched in April 1998 as the Water Conservation Fund (Fondo para la Conservacion del Agua – FONAG). The overall objective of the fund is to collect a user fee from those who benefit from the water from the Bioreserve.