VZCZCXYZ0000
RR RUEHWEB

DE RUEHSJ #0859/01 3051250
ZNR UUUUU ZZH
R 311250Z OCT 08
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC 0228
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RHMFIUU/CDR USSOUTHCOM MIAMI FL

UNCLAS SAN JOSE 000859 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA, WHA/CEN, WHA/EPSC, EEB AND OES 
PLEASE PASS TO EPA 
 
E.O. 12958: N/A 
TAGS: EAGR ECON ETRD OVIP PGOV PINR PREL CS SENV
SUBJECT: COSTA RICA: PLENTIFUL WATER, POOR MANAGEMENT 
 
¶1. (U) SUMMARY:  A rain-rich climatic regime supplies Costa Rica 
with more than enough water.  However, the growing threat of 
contamination and chronic underinvestment in infrastructure 
threatens potable water resources, and undermines Costa Rica's 
"clean and green" international image.  Urban expansion in the San 
Jose area and the rapid expansion of private real estate 
developments along the Pacific Coast (in many cases associated with 
AmCit investors) test the capacity of the overlapping government 
agencies responsible for protecting, regulating, developing, 
maintaining, and delivering water resources.  The public sector 
recognizes the need for legislative reform and public investment 
while also engaging with the private sector to tap capital in order 
to develop new water projects.  Nonetheless, given other GOCR 
priorities (such as domestic security) competing for legislative 
attention, and the diminished political capital of the Arias 
administration, systemic reform is unlikely before the next 
elections in 2010.  END SUMMARY. 
 
------------------------------- 
98 PERCENT RUNNING WATER . . . 
------------------------------- 
 
¶2. (U) According to the latest "State of the Nation" (SotN#13) 
report, nearly all of Costa Rica's population -- 98 percent -- 
receives water from pipes and almost all Costa Rican households -- 
94 percent - have access to running water.  The Costa Rican Water 
and Sewage Institute (AyA), a national but autonomous public 
utility, states that 82 percent of the population receives potable 
water and that 16 percent receives untreated water classified by AyA 
as unpotable. 
 
------------------------------ 
BUT GROWING WATER DEMAND . . . 
------------------------------ 
 
¶3. (U) Costa Rica's rapid urban development has overtaken 
institutional capacity to develop and maintain the potable water 
resource.  Resort development along much of the Pacific Coast has 
largely exhausted nearby existing fresh-water sources during the 
December-May dry season, prompting calls for major investment in new 
projects.  The San Jose Greater Metropolitan Area obtains about 80 
percent of its potable water from aquifers that are reported to have 
reached their extraction capacity, likewise prompting calls for 
major investment. 
 
¶4. (U) Yet, Costa Rica's geography is such that even those areas of 
Costa Rica with potable water deficits during a portion of the year 
have clear potential to tap one of many sources:  areas inland of 
the Pacific coastal boom towns have underexploited aquifers; tourist 
boom towns have obvious access to sea water; numerous rivers drain 
into the Pacific and the Caribbean; and the mountains north and 
south of the capital city of San Jose are laced with many streams. 
Costa Rica's looming water shortage is thus not due to major 
physical limitations. 
 
------------------------------ 
. . . NO ONE CLEARLY IN CHARGE 
------------------------------ 
 
¶5. (U) The water sector in Costa Rica suffers from a crisis in 
governance.  Several governmental entities share overlapping (and 
sometimes conflicting) responsibility for water management.  The 
Water Department of the Ministry of Environment, Energy and 
Telecommunications (MINAET) is arguably the logical custodian of 
water resources, but it is currently an underfunded bureaucracy with 
a confused mandate.  The GOCR assigns responsibility for reviewing 
water quality to the Ministry of Health.  The National Irrigation 
and Surface Water Service (SENARA) has responsibility for the 
evaluation of groundwater resources and for the country's largest 
agricultural water project.  The National Forest Finance Fund 
(FONAFIFO), a department within MINAE, manages the payment of 
environmental services to preserve aquifer recharge areas.  The 
Public Services Regulation Authority (ARESEP) approves water usage 
rates charged to individual users by the various system operators. 
 
¶6. (U) Other institutions that regulate land use, and therefore 
impact water management, include the National Parks service, the 
Forestry Department of MINAE, the Ministry of Agriculture (MAG), the 
Institute of Housing and Urban Development (INVU), and local 
municipalities.  Though these agencies have responsibility for 
various aspects of water management, none/none of these agencies 
actually deliver water to the user. 
 
¶7. (U) On the operational side, AyA manages water systems serving 46 
percent of the Costa Rican population and has nominal legal control 
over the systems operated by 1,800+ independent community water 
associations ("ASADAS") that serve another 25 percent of the 
population.  Municipalities manage another 18 percent, the regional 
Heredia Public Utility Company (ESPH) has close to 5 percent, and 
the remaining roughly 6 percent receive water on their own or are 
not in the survey. (Data from SOTN#12, pg 233). 
 
--------------------------------- 
. . . REVENUE COLLECTION PROBLEMS 
--------------------------------- 
 
¶8. (U) The Arias Administration adopted water usage and discharge 
fees by decree in 2006, yet, to date, only private holders of water 
concessions have been paying the fee.  Public institutions avoid 
payment of the water usage fee, while the discharge fee was 
re-defined and is slated to go into effect late this year.  Jose 
Miguel Zeledon, current director of the MINAET Water Department, 
continues to be optimistic that the water usage fee will yield a 
total of $10 million per year by 2013 when it is fully in effect, 
with 43 percent generated by SENARA, 29 percent from hydroelectric 
projects (mostly from the Costa Rican Electrical Institute (ICE)), 
13 percent from water systems (AyA, ASADAS, and municipalities) and 
the remainder from individual wells and agricultural use.  The Water 
Department will spend half those funds on the department itself, and 
dedicate the other half to reforestation and conservation projects. 
 
 
----------------------- 
. . . AND CONTAMINATION 
----------------------- 
 
¶9. (U) Contamination of the water resource has become increasingly 
evident in recent years, contradicting Costa Rica's international 
reputation as a "clean and green" country.  Fecal contamination is 
universal in urban waterways; the Tarcoles River leading from the 
Central Valley to the Central Pacific coast has been categorized as 
"San Jose's Open Sewer."  AyA's own statistics for 2007 show that 
only 3.5 percent of Costa Rica's sewage is treated under operator 
control, underscoring the extent of the problems: 
 
Sewage Lines & Treatment Plant with Operator     3.5% 
Latrines                                         3.5% 
Sewage Lines & Treatment Plant w/o Operator      4.9% 
Sewage Lines w/o Treatment Plant                20.1% 
Septic Tanks                                    67.3% 
 
AyA estimates that 50 percent of the septic tanks don't work.  Thus, 
AyA claims that 37 percent of the waste water in Costa Rica -- 3.5 
percent plus 33.5 percent -- is treated. 
 
¶10. (U) Aquifer contamination also threatens water quality.  Not 
only may river water and badly functioning septic tanks eventually 
introduce fecal contaminants into the aquifers, but gasoline storage 
tanks have already shown the potential for pollution.  Agriculture 
pollution is a recurrent danger given that Costa Rica's relatively 
wealthy agricultural sector, geared for export production, makes 
heavy use of agricultural chemicals.  In the coastal zones, salt 
water intrusion into the aquifers is an imminent threat as lax 
management of the aquifers leads to excessive drawdown and exposure 
to sea water contamination. 
 
¶11. (U) Although the problem has been building for years, fecal 
contamination of coastal waters has become a front-page issue.  A 
series of tests off of the Pacific coast tourist mecca of Tamarindo 
Beach revealed high levels of contamination along the beachfront and 
in the ocean.  There is no public sewer system in Tamarindo and many 
hotels ignore the requirement to treat their own water.  Recently, 
water tests at the Central Pacific resort town of Jaco revealed 
fecal contamination exceeding 1100 parts per 100 milliliters of 
water.  (COMMENT:  the recommended EPA threshold for swimming is 200 
parts per 100 milliliters of water.  END COMMENT.) 
 
¶12. (U) Health officials finally responded by closing and citing 
establishments in the Tamarindo area, while AyA officials continue 
to test for pollutants along the coast.  The five-star Hotel Resort 
Allegro Papagayo was partially closed from February to mid-September 
2008 after repeated water pollution violations.  The port city of 
Puntarenas, further to the south, dumps most of its sewage in the 
estuary adjacent to the city, prompting AyA to include a sewage 
system for that city among its future projects. 
 
-------------------------------- 
FINANCING AND THE PRIVATE SECTOR 
-------------------------------- 
 
¶13. (U) Private water suppliers in Costa Rica are severely limited. 
All fresh water in Costa Rica is legal property of the state. 
Landowners do not own the water that originates on/under their land 
or flows over it, and groups of private landowners who provide 
potable water or sewage services to themselves are on shaky legal 
ground.  Recent legal opinion has tended to confirm AyA's long 
insistence that it, the municipalities, and regional authorities are 
the sole legal providers of these services and everyone else (ASADAS 
and landowner groups) must operate at the pleasure of AyA. 
 
¶14. (U) Although AyA insists upon legal dominance in the water 
sector, its true power is reflected by its ability to harness 
private capital to develop public water infrastructure.  According 
to AyA Legal Director Rodolfo Lizano, AyA's current public-private 
efforts are based on a 1968 law that stipulates when urban 
infrastructure is not already built, a developer may build that 
infrastructure and deliver it to AyA.  In exchange, for a period of 
5 years, subsequent land developers must first pay the developer who 
built the infrastructure. 
 
¶15. (U) One project, near the Manuel Antonio National Park on the 
Pacific coast, has been successfully built and delivered to AyA. 
Further north in the Coco/Sardinal area on the Gulf of Papagayo, 
another project stalled because the inland community (Sardinal) 
which is to supply water  to a beach resort (Coco), protested. 
Nevertheless, AyA and the Arias Administration acted decisively to 
persuade community leaders that the project benefits the community. 
It is likely to be finished.  Two other projects in the Tamarindo 
area will likewise be financed in the same manner, comments Lizano, 
and are ready to move ahead once the controversy in Sardinal passes. 
 
 
¶16. (U) The Executive President of AyA, Ricardo Sancho, has been a 
strong proponent of public/private financing schemes and has also 
commented that Costa Rica needs to be more willing than it has been 
in the past to go into debt to build water and sewage projects.  An 
example is the $230 million sewer system project designed to serve a 
portion of the San Jose Metropolitan Area.  The Japan Development 
Bank agreed to a $130 million loan (AyA pays $30 million; the GOCR 
pays $100 million).  AyA will finance the remaining $100 million 
through rates levied on users of the system.  This project is also 
an illustration of the dangers inherent in the requirement that the 
national legislature approve all sovereign debt.  Despite the 
manifest need for modern sewage treatment, this legislative project 
languished for years and was finally approved in October of 2006 
when Costa Rica was about to lose the Japanese loan. 
 
------------------------- 
ANY PROPOSALS FOR REFORM? 
------------------------- 
 
¶17. (U) Costa Rica's existing water law is over 60 years old, yet 
concerted attempts to draft a new water law have stalled.  Dr. Pedro 
Leon, a top environmental advisor to President Arias, told Emboffs 
on October 14 that the GOCR hopes to push a new "Water Resources 
Law" through for approval in 2009 in concert with President Arias' 
"Peace With Nature" initiative.  The debate over water resources has 
generated heated turf battles between AyA, ASADAs, ESPH, MINAET, the 
Health Ministry, SENARA, and ARESEP. 
 
¶18. (U) In addition, more philosophical objections are enunciated by 
Carlos Manuel Rodriguez, ex-Minister of MINAET during ex-President 
Pacheco's administration, who states that the current water bill is 
more "commercial" (and therefore less acceptable) than the law 
drafted during Rodriguez's tenure at MINAET. Rodriguez believes that 
the legislature will not approve the water bill as currently 
proposed.  Nevertheless, both he and the Arias administration agree 
on two types of water use payments (see para 8 above):  a water use 
fee ("canon de aprovechamiento de agua") and a pollution or 
discharge fee ("canon de vertimiento al agua"). 
 
------- 
COMMENT 
------- 
 
¶19. (SBU) Costa Rica's water sector presents great potential that is 
stymied by ineffective law, interagency bickering, and AyA's 
struggles to exert operational control while ceding a portion of its 
expansion to private/public agreements.  As with other public 
infrastructure problems here (i.e., regarding highways, ports, and 
electrical production), the continued public demand for potable 
water will force actors in the sector to do something.  The need for 
large water and sewer projects in the booming Guanacaste tourist 
areas and the rapidly growing San Jose Central Valley is generally 
accepted, as is AyA's role as the lead institution in managing those 
projects. 
 
¶20. (SBU) However, we believe that any reform to existing water laws 
is unlikely to advance during the remaining 18 months of the Arias 
administration.  There are simply too many more pressing legislative 
and political challenges to address, such as the growing domestic 
security problem and the impact of the world financial crisis.  The 
conflicting challenges of delivering improved water and wastewater 
services in Costa Rica will likely wait until the next 
administration takes office in 2010. 
CIANCHETTE