7th GEF Biennial International Waters Conference in Barbados Presentation on Guatemala Water Fund by Karin M. Krchnak

1. GUATEMALA WATER FUND:
Partnering with the Private Sector for
Biodiversity Conservation in the
Sierra de las Minas Biosphere Reserve (SMBR)
through a Payment for Environmental Services
(PES) Mechanism
Karin M. Krchnak
WWF-US
October 27, 2013

2. Guatemala Water Fund
Project Objectives
• Achieve long term financial sustainability in the
conservation and management of the SMBR through
implementation of a PES mechanism.
• Implement an innovative financial mechanism linking
downstream water users with upstream watershed
management and conservation to ensure an abundant and
clean water supply.

3. Guatemala Water Fund
Mesoamerican Caribbean Reef (MAR) Ecoregion

4. Guatemala Water Fund
Sierra de las Minas Biosphere Reserve
• Declared in 1989 the jewel of the PAS in
Guatemala.
• 592,800 acres
• Oldest mountain range in the region
• Altitude ranges from sea level to 10,496 ft
• 66% of mammal species in Guatemala,
including endangered species like the
resplendent Quetzal, jaguar, yellow-cheeked
warbler, ocelot
• “Gene bank” for economically important
coniferous species
63 permanent rivers originate in core zone
• Approximately 500 poor communities in buffer
zone

5. Management of SMBR

6. Guatemala Water Fund
Sierra de las Minas Water Users Market
Two watersheds selected
because:
• 21 industry plants
• Water is important input in
industrial processes
• Significant water quantity
and quality reduction during
dry season (Montagua
Valley is one of Central
America’s most arid zones)
• Industry’s willingness to
pay
• Existing base information

8. Guatemala Water Fund
Project Concept
PES MECHANISM

9. PES Financial Mechanism
Market Study
Industries categorized by:
• Geographic location:
21 industries in Motagua basin
(located in 3 of 82 sub-watersheds)
• Extraction techniques: surface (rivers) and underground (wells)
• Water is important input in industrial processes
• Size
Large (Coke bottling plant, Rum plant, Paper, others) 6
Medium (hydro-power, agro-industry, others)
10
Small (hotels, others)
5
21

10. PES Financial Mechanism Design
Assumptions
• Well-known cause-effect
• Very low fixed cost
• Mix of financial instruments
• Custom made to market needs
• Balance between conservation and development objectives
• Balance between short- and mid-term results:
Micro
 Direct impact to industry
 Focus on water and energy use optimization (reduction of effluents)
 Short-term impact
Macro
 Conservation and management of watershed
 Focus on PA or forest owners
 Community projects
 Mid-term impact

13. Financial Mechanism Design
Implementation Structure
Policy level
BOARD OF DIRECTORS
Sector Committees
NGO’s
Industry sector
Donors
Other Sectors
+
Investment
Policies

14. Financial Mechanism Design
Implementation Structure
INDUSTRY
SOURCE
$
$
$
$
Other sector
accounts
P
R
O
J
E
C
T
S
+
Industrial
account
$
Trust fund or
endowment
Investment
policies
DONORS
Investment
technical
committee
$
Management
account
Investment
decisions
and
supervision
Management
and operation of
Guatemala
Water Fund

15. Financial Mechanism Design
Implementation Structure
Investment
decisions and
supervision
Investment
Committee
by sector
Director
Financial Accountability
Unit
Management
and
supervision of
Water Fund
Technical Unit
Outsourcing
Specialized support
• Financial audit
• Marketing
• Technical experts (e.g. hydrology)
• Monitoring
Project proposal (technical
support)

16. Investment Committee

17. Financial Mechanism Design
Financial Feasibility (Projected Cash Flow in US$)
INCOME
Y1
Y2
Y3
Y4
Y5
Y6
A. User fees (membership)
75,000
120,000
134,000
148,000
152,000
152,000
B. Donations
165,000
150,000
150,000
75,000
75,000
75,000
C. Interest earned
15,555
77,903
110,373
128,563
128,563
128,563
Total Income
257,305
351,903
401,123
361,063
367,813
370,563
EXPENSES
Y1
Y2
Y3
Y4
Y5
Y6
D. Project allocations
120,000
180,000
220,000
220,000
220,000
220,000
E. Endowment transfer
35,000
45,000
55,000
55,000
55,000
55,000
F. Management costs
90,000
85,000
85,000
85,000
85,000
85,000
Total Expenses
245,000
310,000
360,000
360,000
360,000
360,000
Cash Flow (accumulated)
12,305
54,208
95,330
96,305
104,205
114,768

21. Project Update
• Built data base starting 1995
• Conducted awareness, research and information activities with key
stakeholders
• Ongoing conservation activities to preserve high biodiversity areas in
basin
• Clearly identified cause-effect relationship on at least three subwatersheds showing clear dependency on upper watershed
• Identified users’ willingness to pay through market studies
• Established 10 community-based watershed committees
• Signed agreements with three main industries (Paper plant, and rum
and Coca Cola bottling plants)
• Completed diagnosis and business plans to optimize water use and
reduction of effluents in all three plants

23. WWF & Coca-Cola Activities
• Share lessons learned in PES projects driven by Coca-Cola and WWF
• Share industrial experience of BMP’s in water use implementation
promoted by Coca-Cola and WWF-Other bottling plants
• Present Water Savers Tool Kit developed by WWF and Coca-Cola
• Share BMP’s training initiatives developed by WWF and Coca-Cola to
date for water use optimization and analyze training needs at ground
level
• Phase 2 Core Basin: 2013-2020
• Freshwater Conservation, Value chain & Valuing Nature

24. WWF-TCCC Areas of work
Manchaguala
Pueblo Viejo
chic
Rio Polo
rr
Sie
don
ren
e
aM
ec
amel
io C h
R
Sierra de las Minas
Rio
ua
otag
M
Teculutan
on

25. Believe it or not,
branding a PPT is
easier than dancing
with an elephant.
GRACIAS!
© WWF-Canon / Martin Harvey