River Basin Management and Environment Protection through a Conservation Trust Fund in Quito, Ecuador

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Case Description
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Geolocation: -0° 14' 28.8787", -78° 30' 38.8435"
Total Population 2 million
Total Area 47004,700 km²
1,814.67 mi²
Climate Descriptors Moist tropical (Köppen A-type), Moist, Dry-summer, temperate, alpine
Predominent Land Use Descriptors agricultural- cropland and pasture, agricultural- confined livestock operations, conservation lands, industrial use, forest land, urban- high density
Important Uses of Water Agriculture or Irrigation, Domestic/Urban Supply, Hydropower Generation, Industry - consumptive use, Industry - non-consumptive use, Livestock

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Management of the river basin system surrounding Quito, Ecuador struggles to bridge conflicting interests between upstream and downstream users. This struggle is exacerbated when unsustainable economic development of upstream users directly threatens the ecology of the basin and puts at risk the further development of large urban and industrial centers in downstream locations. The basin system consists of Guayllabamba, Oyacachi, Papallacta, and Antisana rivers as well as a number of ecological reserves high in the Ecuadorian Andes. The unique ecology of the upper basin is vital to the continued supply of water to downstream users, who comprise the citizenry and industry of Quito. However, economic activities of upstream users—indigenous people with ancestral rights to the land, who populate the upper basin and ecological reserves—have damaged the fragile ecology of the region. The basin provides over 80 percent of the drinking water for Quito and its quickly expanding population, as well as supplying water for industry, hydroelectric power generation, and irrigation of agriculture. Here we find a water resource preservation mechanism that attempts to link downstream water demands with upstream ecological preservation through direct cash payments that fund education, environmental rehabilitation, and sustainable development programs. The preservation mechanism is in the form of a trust fund that is being managed in a sustainable manner and has proven successful at raising capital and leveraging investments with partner organizations and local corporations. The fund, which has been replicated widely, is contributing to preserving current and future water resources for Quito, and serves as a good model of a mechanism that harmonized knowledge frames and incentivized stakeholder participation.

Natural, Historic, Economic, Regional, and Political Framework

Quito and the surrounding areas, which are among Ecuador’s most populous with over 2 million residents, receive their water from high plateaus of the Andean mountains that surround the valley in which the city is located. With Quito’s rapid urban expansion and economic development set to continue in the future, the demand for water is expected to increase by nearly 50 percent by 2020.[1] The vast majority of Quito’s water supply comes from fragile ecosystems highly susceptible to land degradation.[2] Despite the environmental fragility, Quito has a reliable source for consistent, high-quality water and has developed its water resources sufficiently to meet expected demand until 2015.[2] As stresses on the water supply have become more pronounced, the preservation of the sensitive ecological areas that source Quito’s water has become a priority—particularly for downstream users.

Physical Features

Quito City is located in an inter-Andean valley at elevations between 2800 and 3200 meters.[3] The city lies in an area known as the “Valley of the Gods,” as it is surrounded by a series of volcanoes that the local people associate with deities.[3] Quito’s water source is runoff from the Andean peaks that surround the city, primarily coming from national parks and protected reserves, which include the Cotopaxi National Park to the southeast, the Cayambe-Coca Ecological Reserve to the east, and the Antisana Ecological Reserve to the southeast. Combined, these reserves span over 520,000 hectares and are the sources of 11 important rivers that flow down from the Andes.[1] The river system is vital to Quito: it supplies much of Quito’s drinking water and is used for agriculture irrigation and hydroelectric power.

The Guayllabamba river watershed is located within three cantones or counties—Quito, Mejía, and Rumiñahui—with additional tributary flow from two others in the northeast, Pedro Moncayo and Cayambe—all in the province of Pichincha. The Guayllbamba is joined by the San Pedro and Pita Rivers, which flow from the south and southeast of Quito, and join the Guayllabamba River as it passes the city to the east and then north. The watershed is topographically dynamic, covering over 4,700 km2 of varied highland territory.[3]

The region receives generous precipitation with mean annual rainfall of 1,250mm. Precipitation varies considerably depending on elevation, with some low-lying areas experiencing only one-third the average rainfall. At the same time, high mountains, which reach nearly 6,000 meters above sea level, receive the greatest and most consistent precipitation throughout the year, experiencing precipitation even during the dry summer months. As a result of the relative surplus of precipitation on the surrounding mountains, glacial melt and snowmelt supply water to the lower-lying areas during the dry summer months.[3]

Between the volcanic peaks and the valley floors are the páramos, which are vital to the hydrological cycle of the region and serve as the headwaters for the rivers that hydrate the towns and cities further down the basin. Páramos are high Andean grasslands that are uniquely designed to function as water sinks, experiencing high humidity and low temperatures that limit evaporation.[4] The grasslands work like a sponge, with each hectare of soil able to absorb between 1,000 and 6,000 cubic meters of water, about half of which can exit the soil and continue into the watershed.

Although the páramos only make up five percent of Ecuador’s surface, their importance cannot be ignored. Despite lacking any estimates for the exact contribution páramos make to the water supply, the literature on the subject argues that a majority of the country depends on páramos for their water. The argument is based on the fact that the entire country sources its drinking water from the Andes, for which the páramos function as a reservoir and intermediary. Additionally, the páramo is of high social and cultural importance due to the large proportion of the population and economic activity that relies on it. Public opinion in Ecuador at large holds that the páramos and high forest regions in the Andes are the source of their water, and while this sentiment has helped conservation efforts, it does little to help legal enforcement of environmental laws, which suffer greatly in a country were corruption is widespread.[4]


In the early 1990s, the United States Agency for International Development (USAID) sponsored the Sustainable Uses for Biological Resources (SUBIR) project, which focused on three major protected areas in northern Ecuador: the Cotacachi-Cayapas Ecological Reserve, the Cayambe-Coca Ecological Reserve, and the Yasuní National Park. The goal of the SUBIR project was “to contribute to the conservation and management of Ecuador’s renewable natural resources for sustained economic development.”[5] USAID gathered a consortium to manage the undertaking using the Integrated Conservation and Development Project (ICDP) approach. USAID initially collaborated with international nonprofits, including CARE International/Ecuador (the lead entity), The Nature Conservancy (TNC), and the Wildlife Conservation Society, which were each responsible for one or two technical components of the project.[6] The local Ecuadorian agency that partnered with USAID was the Ministry of Agriculture’s Forest, National Areas and Fauna Institute (INEFAN).[5]

When SUBIR shifted to its second phase, the management structure was adjusted to a consolidated model, which attempted to partner with local nongovernmental organizations (NGOs) to fulfill project objectives. The consolidated project model strengthens local NGOs administratively, financially, and technically, with international NGOs functioning as backstops.[6] Of additional note was SUBIR’s commitment to local participation. Though groups were not directly involved in the administration of the project, SUBIR consulted with over 200 nonprofit, indigenous, and community organizations during the project design phase. Well over 100 public and private Ecuadorian organizations, including NGOs, social groups, and private businesses, as well as 100 tribal and minority communities from environmentally threatened regions, participated in the project design process.[5]

In the late 1990s, Quito government officials recognized that policies regarding water pricing needed to be reformed and increased transparency was required, and there was a need to end subsidies for irrigation and drinking water in Quito. In 1998, the Quito water utility company, EPMAPS, collected enough fees to pay for 54 percent of its costs. A 2000 survey of water users in Quito suggested that they were willing to pay more for water services.[1] Although fees increased to cover operation and maintenance costs, EPMAPS initially did not consider integrated watershed management.

In 1995, as part of the second phase of SUBIR, the Ecuadorian Ministry of Environment with the support of USAID tasked the local environmental NGO, Fundación Antisana, to develop a management plan for the Cayambe-Coca and Antisana Ecological Reserves.[7][1] The findings of Fundación Antisana’s analysis pointed to a number of measures that would increase understanding of the environment and preserve the local hydrology.[1] The limitations in funding for the Ecuadorian park service forced Fundación Antisana to find alternative means of funding. In collaboration with USAID and TNC, Fundación Antisana developed the idea for an independent fund “dedicated to financing watershed protect around Quito,” and the groundwork for the establishment of Fondo para la Protección del Agua (Fund for the Protection of Water, FONAG) began.[7][1]


Creation of FONAG

The study of two ecological reserves, the Cayambe-Coca Ecological Reserve and the Antisana Ecological Reserve, revealed their central importance in supplying Quito’s municipal water. Although the water was sourced from protected areas, thousands of people with ancestral rights to the land lived and made their livelihoods in the reserves. In the late 1990s, reserve residents engaged in agriculture and cattle grazing as their primary source of income.[1] The sensitive areas of the watershed were threatened by the deforestation and overgrazing from the cattle and unsustainable agricultural land use practices of communities both within the ecological reserves and at their periphery.[1]

In response to these threats, Fundación Antisana and TNC championed creating a trust fund to support programs seeking to mitigate the environmental degradation of the vital ecosystems.[8] Among other key functions, the fund was designed to charge downstream water users a consumption fee that would contribute to the environmental protection projects. They were able to find an initial partner in the Quito Public Metropolitan Company of Water and Sanitation (Empresa Pública Metropolitana de Agua Potable y Saneamiento, EPMAPS), which manages the collection and distribution of the water supplied from the ecological reserves.[1]

EPMAPS gained a leadership role due to its ability to collect fees from water users, and in 2000, the fideicomiso or trust fund was established with initial seed capital of $21,000.[1] [9] Under the terms of the fund, EPMAPS contributed one percent of its annual sales revenue to FONAG, which was estimated to be $25,000 per month, but actually amounted to $14,000 per month on average.[10] [1] Although the initial seed capital was committed in 2000, it wasn’t until 2007 that an ordinance was passed that codified FONAG as government policy and raised EPMAPS’s contribution from one percent to two percent of water sales.[11]

Overall the growth of the fund has been slow, but it has built a base of partners. In 2001, FONAG partnered with the electricity supplier for Quito (Empresa Eléctrica de Quito, EEQ), which agreed to contribute $45,000 per year.[10] At the time, EEQ was drawing 22 percent of its hydropower from the Quito watershed and saw the potential for declining stream flow due to a lack of watershed management.[9] [1] In 2003, Cervecería Andina, a national beer brewing company, agreed to commit $6,000 annually.[10] FONAG added additional partnerships with COSUDE (the Swiss Development Cooperation Agency) in 2005, the Tesalia Springs Company (a bottled water company) in 2007, and the CAMAREN Consortium (Training System for the Management of Natural Renewable Resources) in 2010. FONAG has also diversified its partnerships such that some provide financial support while others offer technical and programmatic support.

The fund has succeeded in increasing its value since its modest seed money of $21,000. In 2004 the fund estimated that it spent $585,000 on projects to protect the watershed. Of the project funding for that year, $215,000 came from the fund, which controlled capital near $1.5 million in total.[12] The remaining $370,000 was leveraged from other organizations. The fund’s ability to leverage additional capital is one of its strengths—one that developed as the fund has grown in size. In 2008, FONAG had a budget of $4.1 million, $700,000 of which came from yields on the endowment assets, with the remaining $3.4 million contributed by donors and partners.[13] The most recent data show that the fund controlled over $8 million in assets at the start of 2011. The fund is able to leverage three dollars from partners and counterparts for every one dollar spent.[13]

Issues and Stakeholders

Management and Institutional Credibility

NSPD: Governance, Assets
Stakeholder Types: Local Government, Supranational union, Non-legislative governmental agency, Environmental interest, Industry/Corporate Interest, Community or organized citizens

• FONAG was designed to function independently of elected officials and to be managed sustainably.

FONAG’s activities are directed by a Board of Trustees comprised of representatives from the constituent organizations. The Board of Trustees directs the Technical Secretariat, which is responsible for administering the programmatic initiatives the fund finances, and a Technical Committee functions as an advisory body to the Technical Secretariat.[14] Free from political influence, the fund can focus on its long-term preservation goals rather than those that are politically popular. The independent administration of the fund gains it legitimacy in a country that has had trouble with corruption, and that legitimacy in turn has built trust with stakeholders and partner organizations. Additionally, the trust fund is sustainably managed so that project funding is limited to the interest payments earned by the fund, ensuring that the fund will remain solvent and not overextend its expenditures.[15]

Stakeholders include:

  • FONAG and associated organizations
    • EPMAPS
    • EEQ
    • TNC
    • USAID
    • Mayor of Quito
    • FONAG Technical Secretariat
    • National Brewery
    • COSUDE
    • Tesalia Springs Company
    • CAMAREN Consortium
    • Civil Society

Stakeholder Participation

NSPD: Governance, Values and Norms
Stakeholder Types: Local Government, Non-legislative governmental agency, Environmental interest, Industry/Corporate Interest, Community or organized citizens, Cultural Interest

• Power within the Board of Trustees for the fund is determined by the amount of money the entity contributes.

Voting power on the Board of Trustees is contingent on the amount of money a stakeholder contributes to the fund. Consequently, as EPMAPS has donated the most money, the utility company has the most decision-making power. While it does provide an incentive for stakeholder participation, the “pay-to-play” system limits which stakeholders can influence the programs financed by the fund.[10] The public-private nature of the Board of Directors means that representatives from both local government and private sector are part of the decision-making process. However, poor segments of the population, who may have a significant interest in which programs are funded, are potentially further marginalized. The fund provides space for non-contributing stakeholders to be represented and allows for negotiation and collaboration among stakeholders, such as civil society and NGOs.[16] The allocation of voting power on the Board of Trustees skews the priorities of the fund toward moneyed interests and makes decision-making based on consensus unlikely.

Significantly, FONAG was established without any indigenous group involvement. While the indigenous people living in and around the ecological reserves were consulted at various points throughout the development of the fund, they were not directly involved; rather, FONAG arose from the collaborations of a local NGO, USAID, and TNC. The basic goal of the fund exposes its bias: FONAG was designed to be a permanent source of financing for preservation of the watershed and ecological reserves—a clear downstream interest—which may not be in the interest of upstream subsistence farmers.[10] Even though the fund does not seek to directly disenfranchise the subsistent farmers in the buffer zone of the ecological reserves in favor of downstream water users, the fund does not consult with them over what projects they think are most vital.[3]

Stakeholders Include

  • FONAG and Contributing Organizations
    • EPMAPS
    • EEQ
    • TNC
    • National Brewery
    • COSUDE
    • Tesalia Springs Company
  • Rural Upper Basin Residents
  • Non-contributing stakeholders

Agricultural Practices, Land Use and Ecological Impacts

NSPD: Water Quantity, Water Quality, Ecosystems, Values and Norms
Stakeholder Types: Local Government, Non-legislative governmental agency, Development/humanitarian interest, Environmental interest, Industry/Corporate Interest, Community or organized citizens, Cultural Interest

• Traditional land use and agricultural practices in the upper basin areas threaten the sensitive ecological features that supply water to the entire region.

For the 30,000 people living in and around the ecological reserves that supply Quito’s water, dairy production and timber are their primary economic activity. Burning and overgrazing of sensitive grasslands is common practice, despite the lack of sustainability and damage to the páramos that result.[1] FONAG’s programs have focused primarily on mitigating and protecting the vital ecosystem that is the source of Quito’s water. For example, programs have rehabilitated over 2,600 hectares through re-vegetation and reforestation with native plants.[11] Community development projects are also focused exclusively in the rural, upper reaches of the basin, with over 20 projects involving 400 families in agro-ecology, grassland improvement, integral farms, and medical plant production.[13] Unlike other preservation initiatives, FONAG sought to integrate individuals living in the key reserves rather than purchase their land or forcibly displace them, which prevented land conflicts from arising. However, FONAG’s preservation goals are still not harmonized with the region’s traditional agricultural and land use practices.

Stakeholders include:

  • FONAG and Associated Organizations
  • Rural Upper Basin Communities

Programmatic Reach - how do you implement effective outreach and education for stakeholder communities?

NSPD: Water Quantity, Water Quality, Ecosystems, Governance, Assets, Values and Norms
Stakeholder Types: Local Government, Non-legislative governmental agency, Development/humanitarian interest, Environmental interest, Industry/Corporate Interest, Community or organized citizens, Cultural Interest

• FONAG has financed a wide variety of programs and has striven for an integrated approach to ecosystem preservation.

FONAG’s first project was to perform a diagnosis of the upper basin areas.[7] It has gradually expanded its programmatic portfolio to include the following: 1) a communication program designed to promote the fund’s activities; 2) a vegetation cover recovery program restoring native flora in the páramos; 3) a monitoring and control program in the buffer zones to ensure preservation of the reserved areas; 4) a “water steward” program designed to education young people about water issues; and 5) a program seeking to promote integrated water resource management (IWRM) through dialogue and consensus at the basin level.[17] Despite its attempts to create basin-wide consensus and to engage in outreach to downstream users, Quito’s citizens still remain uneducated about their water use. With the balance of FONAG’s programs focused on land management practices in the upper regions of the watershed, the disconnect between downstream users and the source of their water remains an obstacle to basin integration.[3]

Stakeholders Include:

  • FONAG and Associated Organizations
  • Rural Upper Basin Residents
  • Indigenous and Ancestral Native Populations
  • Urban Downstream Water Users

Analysis, Synthesis, and Insight

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Key Questions

Integration across Sectors: How can consultation and cooperation among stakeholders and development partners be better facilitated/managed/fostered?

Once information was gathered about the nature and location of threats to key ecological features in the Quito watershed, consultation among downstream stakeholders produced a mechanism to alleviate and mitigate the environmental threats. The creation of FONAG is an example of multiple knowledge frames harmonizing toward the common goal of ecological preservation that stand to benefit all stakeholders in the long-term. The governance structure of the fund demonstrates an effective way to incentivize stakeholder participation, which in context is monetary contribution. Without a harmonized knowledge framework, however, it is unlikely that incentives would lead to cooperation between stakeholders.

  1. ^ 1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 1.12 Marta Echavarria, "Financing Watershed Conservation: The FONAG Water Fund in Quito, Ecuador," Selling Forest Environmental Services: Market-Based Mechanisms for Conservation and Development.Eartchscan, London and Sterling (2002), 91-102.
  2. ^ 2.0 2.1 Jeff Pugh and Fausto O. Sarmiento, "Selling the Public on Sustainable Watershed Conservation," Bulletin of Latin American Research 23, no. 3 (2004), 303-318.
  3. ^ 3.0 3.1 3.2 3.3 3.4 3.5 Brenna Vredeveld, "Striving for Integrated Water Resource Management in Quito, Ecuador: Public Good Or Economic and Political Good?" (2008).
  4. ^ 4.0 4.1 Marta Echavarria et al., "The Impacts of Payments for Watershed Services in Ecuador. Emerging Lessons from Pimampiro and Cuenca," International Institute for Environment and Development, London (2003).
  5. ^ 5.0 5.1 5.2 Dennis Glick, Sustainable Uses for Biological Resources (SUBIR) Project Prepared for USAID/Ecuador, May 1994: Phase I Evaluation (Gainesville, Fla.: Tropical Research and Development, 1994).
  6. ^ 6.0 6.1 Robert E. Rhoades and Jody Stallings, "Integrated Conservation and Development in Tropical America," SANREM CRSP and CARE-SUBIR, Athens, Georgia (2001).
  7. ^ 7.0 7.1 7.2 “Historia de un proceso,” FONAG. Accessed December 11, 2013. http://www.fonag.org.ec/inicio/quienes-somos/historia.html.
  8. ^ Roberto Troya and Randy Curtis, "Water: Together we can Care for it! Case Study of a Watershed Conservation Fund for Quito, Ecuador," The Nature Conservancy (1998).
  9. ^ 9.0 9.1 Douglas Southgate and Sven Wunder, "Paying for Watershed Services in Latin America: A Review of Current Initiatives," Journal of Sustainable Forestry 28, no. 3-5 (05/13; 2013/11, 2009), 497-524.
  10. ^ 10.0 10.1 10.2 10.3 10.4 Consuelo Espinosa, "Payment for Water-Based Environmental Services: Ecuador’s Experiences, Lessons Learned and Ways Forward. IUCN Water, Nature and Economics Technical Paper no. 2, IUCN—The World Conservation Union," Ecosystems and Livelihoods Group Asia, Colombo (2005).
  11. ^ 11.0 11.1 Veronica Arias, Silvia Benítez and Rebecca Goldman, TEEBcase: Water Fund for Catchment Management in Quito, Ecuador, 2010.
  12. ^ 8th Special Session of the Governing Council/Global Ministerial Environment Forum, "FONAG: Quito's Water Fund, A Municipal Commitment to Protect the Watersheds" (Jeju, Republic of Korea, United Nations Environment Program, March 2004).
  13. ^ 13.0 13.1 13.2 Alejandro Calvache, Silvia Benítez and Aurelio Ramos, Fondos De Agua: Conservando La Infraestructura Verde. Guía De Diseño, Creación Y Operación. Alianza Latinoamericana De Fondos De Agua. (Bogotá, Colombia: The Nature Conservancy, Fundación FEMSA, and Banco Interamericano de Desarrollo, 2012).
  14. ^ “El Fondo,” FONAG. Accessed December 11, 2013. http://www.fonag.org.ec/inicio/quienes-somos/el-fondo.html
  15. ^ Rebecca L. Goldman et al., "Water Funds: Protecting Watersheds for Nature and People," The Nature Conservancy, Arlington, Virginia (2010).
  16. ^ Craig M. Kauffman, "Financing Watershed Conservation: Lessons from Ecuador's Evolving Water Trust Funds," Agricultural Water Management (2013).
  17. ^ “Programas,” FONAG. Accessed December 11, 2013. http://www.fonag.org.ec/inicio/que-hacemos/programas.html.

Facts about "River Basin Management and Environment Protection through a Conservation Trust Fund in Quito, Ecuador"RDF feed
Area4,700 km² (1,814.67 mi²) +
ClimateMoist tropical (Köppen A-type) +, Moist +, Dry-summer +, temperate + and alpine +
Geolocation-0° 14' 28.8787", -78° 30' 38.8435"Latitude: -0.241355182198
Longitude: -78.5107898712
IssueManagement and Institutional Credibility +, Stakeholder Participation +, Agricultural Practices, Land Use and Ecological Impacts + and Programmatic Reach - how do you implement effective outreach and education for stakeholder communities? +
Key QuestionHow can consultation and cooperation among stakeholders and development partners be better facilitated/managed/fostered? +
Land Useagricultural- cropland and pasture +, agricultural- confined livestock operations +, conservation lands +, industrial use +, forest land + and urban- high density +
NSPDGovernance +, Assets +, Values and Norms +, Water Quantity +, Water Quality + and Ecosystems +
Population2,000,000 million +
Stakeholder TypeLocal Government +, Supranational union +, Non-legislative governmental agency +, Environmental interest +, Industry/Corporate Interest +, Community or organized citizens +, Cultural Interest + and Development/humanitarian interest +
Water UseAgriculture or Irrigation +, Domestic/Urban Supply +, Hydropower Generation +, Industry - consumptive use +, Industry - non-consumptive use + and Livestock +
Has subobjectThis property is a special property in this wiki.River Basin Management and Environment Protection through a Conservation Trust Fund in Quito, Ecuador +