US embassy cable - 03TEGUCIGALPA2584

UNCLAS SECTION 01 OF 02 TEGUCIGALPA 002584 
 
SIPDIS 
 
STATE FOR OES/PCI: PSAMSON 
 
E.O. 12958: N/A 
TAGS: SENV, ETRD, ECON, HO 
SUBJECT: SELECTING CANDIDATE MODEL COUNTRIES ON WATER FOR 
THE UN COMMISSION ON SUSTAINABLE DEVELOPMENT IN LATIN 
AMERICA 
 
REF: SECSTATE 272561 
 
1. Summary.  In response to STATE 272561, Post recommends 
the consideration of decentralized management of urban water 
and sanitation systems in Honduras as a model to be further 
studied by an expert team and eventually presented at the 
upcoming UN Commission on Sustainable Development (CSD). 
End Summary. 
 
2. Access by the urban population to water supply and 
sanitation services in Honduras is decidedly uneven. 
Despite almost universal coverage for residential water 
supply (93 percent of the urban population), access to 
sanitation services is much lower (73 percent).  In 
addition, the high rates of access to water mask the poor 
quality of service delivery and erratic quality of water 
itself.  In terms of sewerage, few wastewater treatment 
systems exist nationally, resulting in the majority of 
residential wastewater being returned to the environment 
without any treatment.  Not surprisingly, improved and 
uninterrupted provision of water and sanitation continues to 
be a priority for urban populations in Honduras, especially 
for the urban poor, those most affected by a lack of piped 
water supply and substandard sanitation services. 
 
3. Over the past 10 years, the de facto decentralization of 
water supply and sanitation has stimulated significant 
advances in delivering basic urban services in secondary, or 
medium-sized, cities throughout the country.  (Rural water 
systems have historically been locally managed, but it is 
worth mentioning more about these rural systems as they 
represent the supply side of the equation of providing the 
water for the lower watershed, urban areas.)  Another 
benefit of decentralization in Honduras has been that 
several rural communities have been able to help stabilize 
water supply in some communities by stabilizing water 
sources in the upper watersheds through activities such as 
reforestation, crop rotation and changes in crops grown. 
Any progress made, however, is being threatened by the 
pressures of urban growth that present real and sometimes 
insurmountable challenges to the provision of water and 
sanitation services. 
 
4. Honduras is a country undergoing a profound demographic 
transition, not unlike the urbanization that many other 
countries in the region have already experienced.  The 
urbanization that is projected to occur in Honduras over the 
next five years (5 percent annual growth, one of the highest 
urbanization rates in all of Latin America) is also expected 
to impact a number of secondary cities throughout the 
country, not only the traditional centers of Tegucigalpa and 
San Pedro Sula.  This high growth rate in the urban 
population has already started to present challenges in the 
provision of basic urban services, specifically water and 
sanitation.  Further, this high growth rate will continue to 
put pressure on the upper watersheds which represent the 
sources of the water for the urban areas. 
 
5. Water and sanitation sector reform is now generating some 
real momentum.  The urban water and sanitation sector is 
expected to undergo a dramatic change over the next five 
years.  Congress recently passed a bill, the Water and 
Sanitation Law (August, 2003), providing for the 
restructuring of the central government's water company, 
Servicio Autonomo Nacional de Acueductos y Alcantarillados 
(SANAA), and transfer of 20 urban water systems to 
municipalities over the next five years.  SANAA would retain 
the operation and management of the Tegucigalpa water and 
sanitation system, and become the principal regulating 
agency of urban water systems elsewhere in the country. 
While this bill has yet to be signed by President Maduro, 
Post believes that there is a very high probability that 
this bill will become law. 
 
6. Passing a law alone does not immediately improve the 
supply of water.  For this reason, USAID Honduras is 
supporting activities in upper watershed management in order 
to ensure that both the supply and demand sides of the water 
equation are being addressed. 
 
7. The reforms included in the Water and Sanitation Law, in 
particular the decentralization of the urban water and 
sanitation systems, were an effectiveness condition of the 
USD 26 million Honduras Potable Water and Sanitation 
Investment Program (1048/SF-HO) funded by the Inter-American 
Development Bank (IDB).  This program has been awaiting 
compliance with this conditionality for several years and 
now, with the passage of this law, can begin disbursements. 
This program will offer loans to eligible municipalities and 
decentralized operators for expansion, rehabilitation, and 
other infrastructure improvements to urban water and 
sanitation systems in selected municipalities, as well as 
technical assistance related to the construction and 
rehabilitation of these civil works.  A preliminary short 
list of 22 potentially eligible municipalities coincides 
with the same group of municipalities that have been 
receiving technical assistance through USAID's Municipal 
Development Project (1994-2003).  In this manner, the IDB 
loan is already capitalizing on the increased capacity of 
the 22 municipalities resulting from USG-funded assistance 
programs. 
 
8. However, the IDB loan does not provide for technical 
assistance for the transfer of the 20 SANAA systems that 
will pass from central management to municipal management 
within five years.  USAID recognizes the importance of 
providing assistance throughout the transfer process, and 
has experience in having done so in 1999 when four urban 
water systems were transferred to municipal governments.  A 
successful transfer of urban water systems in large 
secondary cities such as El Progreso (pop. 157,188), 
Juticalpa (pop. 93,726), Comayagua (pop. 96,450), La Ceiba 
(pop. 140,931), and Danli (pop. 145,024) will be important 
not only for uninterrupted water supply to the populations 
of these urban centers, but also for these decentralized 
operators to become eventually eligible for construction and 
rehabilitation projects financed by the IDB loan. 
 
9. Other bilateral donors, such as the Swedish International 
Development Agency (SIDA), the Japanese International 
Cooperation Agency (JICA), and the European Commission (EC), 
have also demonstrated interest in contributing technical 
assistance to municipalities and decentralized operators in 
order to make them eligible for the IDB loan. 
 
10. USAID-funded technical assistance facilitated the 
transfer of the Catacamas (pop. 87,845) urban water supply 
system, and the establishment of a decentralized entity, 
Servicios Municipales de Catacamas (SERMUCAT), autonomous of 
the municipality.  SERMUCAT now provides a successful model 
of decentralized municipal services provision for water 
supply, sewerage, solid waste management, and street 
cleaning.  USAID-funded assistance also contributed to the 
establishment of an autonomous decentralized entity in 
Puerto Cortes (pop. 103,033).  Similar technical assistance, 
also funded by USAID, was provided in the transfer of the 
Choluteca (pop. 134,452) urban water system.  However, this 
transfer was less successful and the autonomous 
decentralized entity created, Aguas de Choluteca, has had 
more difficulties in consolidating its management of 
municipal services. 
 
11. Other municipalities assisted by USAID-funded technical 
assistance have also developed interesting models for 
addressing basic service delivery from within the municipal 
government, such as Santa Rosa de Copan (pop. 40,309), 
Comayagua (pop. 96,450), and Tela (pop. 82,499). 
 
12. An opportunity exists to generate lessons learned from 
the existing experiences in order to provide additional 
inputs to the increased decentralization of municipal 
services (water supply, sewerage collection, and solid waste 
management) throughout the country. 
 
 
PALMER