Overall Assessment of Chile’s Water Policy and Its Challenges

What is it about?

Chile was one of the early economic reformers in Latin America, instituting a series of market based policies. As a result of the structural policy reforms, since Chile’s return to democracy, real per capita GDP per capita increased in real terms over 100%. In response to this accelerated growth, , total granted consumptive and permanent surface and groundwater water flows grew. Water rights markets in Chile have also enabled this economic growth by facilitating the reallocation of water use from lower to higher value users and providing access to water resources at a lower cost than alternative sources such as investment in water infrastructure and desalination. Water markets have not eliminated the need for government agencies in water management in registering WR, providing market information to buyers and sellers, and in regulating trades that change the location of water-use in arid basins. Higher income has increased the demand for stricter regulation for water so as to increase water quality and reduce aquatic ecosystem deterioration. Policies that regulate the environmental quality of the waters in Chile have advanced significantly. However, it has taken about 22 years to be implemented and thus, at present, there are significant water quality problems and challenges. A number of advances and reforms of Chile’s institutional and legal framework for water management have fallen short of what is needed to address the issues that Chile faces in its current phase of development. Adopting an integrated water resources management approach is a priority so that Chile can face its current and future water management challenges.

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Why is it important?

Chile is illustrative of a transition from command and control to market based water management policy, where economic policy incentives (EPI) play a significant role in water rights allocations. This review of Chile’s Water Policy leads to the identification of lessons that must be considered in order establish an effective and sustainable water management.