Environmental Technologies Industries

Environmental Technologies Industries

Market Plans

Chile Environmental Export Market Plan

III-Water Pollution Prevention and Control

Priorities in the Water and Wastewater Sector

The urban population explosion, caused primarily by strong economic growth and migration from rural areas, has put increased pressure on Chile’s water resources and water delivery and wastewater systems. Public health concerns and the need to ensure that agricultural products meet the high safety standards of such export markets as the United States are driving the country to address its severe water contamination problems.
Water availability varies widely by region. While water is scarce in the northern arid region, it is more abundant in the Mediterranean-like climate of the central zone, which has an average annual rainfall of 14 inches, and in the southern region, which has an average annual rainfall of 20 to 90 inches. During 1997, Chile experienced above average rainfall after several years of severe droughts that forced strict water rationing in many areas, including Santiago.

Water Supply. Water supply systems in Chile provide drinking water to 98.9 percent of the urban population, 75 percent of the rural population in the more populated areas, and 15 percent in the more sparsely populated areas. Overall, water is supplied to approximately 13.2 million people, with average consumption reaching approximately 700 liters per capita per day for domestic, industrial, and mining uses. Because of population growth and urban migration, demand for potable water is expected to double by the year 2020, putting increased pressure on scarce water resources in the capital and northern regions.
Municipal Wastewater Collection and Treatment. There are over 225 municipal sewage systems in the country, and although approximately 87 percent of urban residents have access to wastewater collection services, only about 19 percent of the sewage collected by these services undergoes any form of treatment. In Santiago, only 3 percent of the sewage collected undergoes any form of treatment.

Table 4 illustrates the potable water, sewerage, and treatment coverage provided by Chile’s major water companies. There are also nine privately owned and operated systems with more than 500 connections, six of which are in Santiago, that provide potable water and sewage collection to about one million people. The Chilean Government plans to extend provision of potable water to 100 percent of the population, collect 100 percent of municipal wastewater, and treat 70 percent of municipal wastewater by the year 2000.

Table 4: Coverage for Water Supply and Wastewater Treatment (1996)

Region	Water Companies*	Water Supply Coverage (%)	Sewer System Coverage (%)	Wastewater Treatment (%)
I	ESSAT	99.7	96.1	99
II	ESSAN	99.8	94.2	12
III	EMSSAT	98.2	84.5	66
IV	ESSCO	99.2	86.0	93
V	ESVAL	96.1	87.0	41
VI	ESSEL	97.7	76.1	35
VII	ESSAM	99.2	90.7	2
VIII	ESSBIO	98.4	80.1	10
IX	ESSAR	99.4	83.8	21
X	ESSAL	97.1	77.9	13
XI	EMSSA	100	80.2	11
XII	ESMAG	99.9	96.7	0
Metropolitan Region	EMOS	99.7	97.1	3
Overall		98.8	87	19

* institutional structure overview for description of water companies.
Source: Superintendency of Sanitary Services, “Annual Potable Water and Sewerage Coverage Report,” 1997.

Institutional Structure Overview
In 1989, in an effort to improve water and sanitation services, the Chilean Government divided responsibility for water and sewage management to 13 regional publicly held companies, each called the Sanitation Services Enterprise of its specific region, all managed under the umbrella of the Chilean Development Corporation (CORFO) (see table 5). To oversee these public companies, the government also created the Superintendency of Sanitary Services in 1988. SSS controls and approves the budgets of the public companies, establishes service fee guidelines, provides technical support, and regulates these companies.
Privatization Initiatives
Chile has had fairly limited experience in the privatization of water supply and wastewater services. In keeping with Chile's privatization efforts, CORFO’s subsidiaries were allowed to sign concessions with private companies for these services. Sanitary Services Enterprise of Los Lagos (ESSAL) in Valdivia was one of the first to offer a concession for potable water and sewerage services, through an international bid. The system, serving 120,000 people, came on-line in January 1995 and is operated by Aguas Decimas S.A., a consortium of Spain’s Aguas Barcelona and local Chilean firms. Aguas Barcelona is also involved in a project in Valparaiso, through the consortium Aguas Quintas S.A., to improve water supply and sanitation services in the southern part of the region. The consortium is committed to investing $60 million over 25 years, half for potable water and half for primary treatment of wastewater that will be discharged via an ocean outfall.

Table 5: CORFO Subsidiary Water and Wastewater Companies

Region	Company
Tarapac�	ESSAT
Antofagasta	ESSAN
Atacama	EMSSAT
Coquimbo	ESSCO
Valparaiso	ESVAL
Libertador	ESSEL
Maule	ESSAM
BioBio	ESSBIO
Araucania	ESSAR
Los Lagos	ESSAL
Aisen	EMSSA
Magallanes	ESMAG
Metropolitan Santiago	EMOS

In the city of Antofagasta, located in northern Chile on the edge of the Atacama Desert, Sanitary Services Enterprise of Antofagasta (ESSAN) entered into a contract with BAYESA (a joint venture of Biwater and its local partner, Aguas y Ecologia) to construct an interceptor and sewer lines to carry additional wastewater to the existing treatment plant and to upgrade the treatment facility. To carry out these works, BAYESA invested $10 million over a three-year period; the concession was given to BAYESA for 30 years. In this region where water is scarce, a key component of this project is treating effluents for reuse in industrial and agricultural applications, thereby conserving potable water. Most recently, in the city of Arica, Tarapac�, Sanitary Services Enterprise of Tarapac� (ESSAT) signed a contract in May 1997 with a Chilean-Spanish consortium to construct a reverse-osmosis plant. Construction must be completed in one year, and after 11 years the facilities become the property of ESSAT. The investment in this facility is $12 million.
In addition to CORFO’s subsidiaries, private companies and municipalities are allowed to provide water supply and wastewater treatment services. Currently, 39 private companies operate such systems, providing water to just over one million people. Companies can present proposals to provide potable water services to community, housing, or tourist developments. England’s Biwater has benefited from this opportunity (see box).

Biwater Forms Joint Venture to Supply Water to Housing Development
In 1994, England’s Biwater formed a joint venture with a Chilean investment group to secure water and sewerage concessions for greenfields housing in the affluent Santiago neighborhoods of Valle Escondido, Nueva Suiza, and Asturias. The joint venture, Servicios de Agua Potable Biwater S.A. (SABPSA), has been extremely successful, with gross revenues of over $22 million. During 1996, the company expanded services in its concession areas and put in bids for new concessions in neighboring areas. In October 1997, Biwater bought out its local Chilean partners.

While the CORFO companies have been able to award concessions for water services, actual privatization of these companies was under debate in the Congress for the last two years. The decree to privatize the water and sanitation companies was passed on November 17, 1997, and goes into effect in early 1998. Under the decree, the companies will be privatized over a predetermined time period. Public ownership of the companies cannot exceed 49 percent in the first two years or 35 percent by the end of four years. The move to allow full private ownership will transform this sector over the next five years. The two companies likely to be privatized first are EMOS S.A. in Santiago and ESVAL S.A. in Valparaiso. EMOS S.A., which serves the metropolitan Santiago area, is one of the best performing water companies in Latin America, with net profits in 1994 of 37 percent of total sales.

Municipal Water Supply and Wastewater Treatment

The principal short- to medium-term opportunities in Chile’s municipal water supply and wastewater treatment sector are in the construction of wastewater collection and treatment infrastructure in Santiago and the rehabilitation and expansion of existing water supply infrastructure in several other regions. To meet the government’s goals of extending water supply and sewage services to 100 percent of the population and wastewater treatment to 70 percent, it is estimated that investments of approximately $1.05 billion will be required over the next three years for the CORFO water and sanitation companies (see table 6). The privatization effort, expected to begin in mid-1998, will be an important mechanism to raise the funds needed to improve and upgrade Chile’s water supply and sanitation systems. Together, the sanitation companies invested $146 million in 1996, $16.27 million on feasibility and investment studies and the rest on public works. Over half of this money was spent by EMOS and ESVAL.

Table 6: Planned Investments in Water Supply, Sewage Collection, and Wastewater Treatment by CORFO Water and Sanitation Companies (1998–2000) ($M)

	1998	1999	2000	Total
Water Supply	144.6	137.4	101.2	383.2
Sewage Collection	81.9	84.3	108.4	274.6
Wastewater Treatment	45.8	123.0	226.5	395.3
Total	272.3	344.7	436.1	1,053.1

Source: “Investments 1998–2000 CORFO Companies, Sanitation Sector, Investment Program,” CORFO, 1997.

Metropolitan Santiago Region
For the greater Santiago metropolitan region, the priority is to address the need to collect and treat the 1.2 billion cubic meters of wastewater generated each day by the area’s more than six million inhabitants and its industries. Because just 3 percent of the wastewater of the metropolitian region is treated, vast amounts of raw sewage are discharged into the waterways of Santiago. Reportedly, the Zanjon de la Aguaga Canal and the Mapocho River receive the majority of wastewater discharges, 62 percent and 35 percent respectively, and are heavily polluted. The only wastewater treatment plant currently in operation in Santiago was designed by an Israeli engineering company and built by a consortium of Chilean construction companies.
EMOS S.A. estimates that approximately $1.1 billion will be invested by the year 2024 to treat 100 percent of the wastewater generated in the region. In the short term, EMOS is expected to invest $460 million in the construction of three wastewater treatment facilities. These three facilities are:

Santiago Sur (target completion date: 2001), $175 million.
Zanjon de la Aguada (target completion date: 2004), $97 million.
Mapocho (target completion date: 2009), $188 million.

In addition, a collection system will be constructed for the Santiago Sur treatment plant. This system will channel wastes from the Maip� and Maipo Interceptor, Maipo-San Bernado Emissary, and Santiago Plant Emissary to the Santiago Sur treatment plant. Estimated investment requirements for this system are $56.1 million. The U.S. firm Black and Vetch prepared the preliminary designs.
The feasibility study for the Santiago Sur treatment plant was finalized in 1996. This plant is expected to begin operations with a capacity of 3.4 cubic meters per second in 2001, a capacity which will be increased to 6.5 cubic meters per second by 2024. The plant will serve the southern part of Santiago, treating approximately 20 percent of the region’s wastewater. The environmental impact assessment for the project has been approved by CONAMA, and a tariff study has been presented to SSS.
Outside Santiago
The biggest project currently underway is a $142 million drinking water treatment plant and distribution network in Valparaiso; approximately one-third of the funding for this project came from World Bank loans. Key water supply and wastewater collection and treatment projects currently planned for areas outside of metropolitan Santiago include the following:

ESSVAL plans to construct an $11 million stabilization lagoon and an emissary for Valparaiso and Placilla.
ESSAL plans to invest $60 million in wastewater treatment over a ten-year period for Puerto Montt and surrounding areas.
ESSAR plans to construct a $33 million treatment plant in Temuco. This project was planned for 2003, but it may be accelerated by the privatization of ESSAR.

In addition, numerous small projects are being planned throughout the country. For example, ESSAN plans to improve and expand the water supply and sewer system in Antofagasta ($6 million), and ESSBIO plans to construct a number of small wastewater treatment plants ($2 million).
The recent passage of the law requiring privatization of water companies signals the beginning of a transformation in the municipal water and wastewater market. The government has set ambitious goals, but has not had the financial resources to carry out the necessary projects. In anticipation of this sector’s expansion, many European water companies such as Aguas Barcelona, Aguas de Valencia, and Biwater have set up offices in Chile and begun to lay the groundwork for entering the market.

Industrial Water Pollution Prevention and Control

Environmental regulations require industries to treat their effluents before discharging them into waterways or sewerage systems. Enacted in 1916, Law No. 3,133 mandated that industries neutralize their wastes before discharging them. The implementing regulation for this law, the Regulation for the Neutralization and Purification of Industrial Wastes, was updated in 1993 and requires industries to have a plan approved for treating their wastewater and to receive a permit from the Ministry of Public Works. A survey done by SSS prior to the promulgation of this regulation indicated that only 38 percent of companies operating in Chile had primary treatment systems, and only 9.2 percent had more advanced systems. Currently, there are provisional standards for industrial effluents discharged into the sewerage system; however, formal standards are awaiting publication in the official journal. Standards for discharges to surface water are also being prepared and are expected in early 1998.
For the most part, companies have been slow to comply with the 1993 regulations. Although the sector has experienced rapid economic growth, companies have successfully made the case that environmental controls will lead to economic hardships. International corporations have led efforts to install wastewater treatment equipment, and domestic industries are beginning to follow suit. Environmental authorities expect that by 1998, the number of companies with some form of wastewater treatment in place will have doubled from 1992 figures.
Since the early 1990s, the Office of Maritime Territories and Merchant Marines (DIRECTEMAR) has been actively controlling industrial discharge in coastal areas. Under the Minimum Environmental Impact Program for Coastal Marine Ecosystems, all companies using the coastal zone must conduct a study to determine the surrounding area’s carrying capacity and comply with the study’s results. Most affected by this program are the chemical and petrochemical, fishmeal-processing, and salmon aquaculture industries. The fishmeal industry in Talcahuano has also been actively participating in the University of Concepci�n’s clean production project, which is investigating methods to recover organic material in the wastewater. To date, the companies, via their industrial association, have invested $800,000.
The mining industry is also actively pursuing options to stem its effluents. Located in areas where water is scarce, this industry is exploring ways to recirculate its wastewater.

Market Summary and Best Prospects

Although the market for water and wastewater is estimated at $305 million for 1998, if several of the water companies are privatized this figure could become much larger. Approximately $250 million will be invested in upgrading the municipal water supply infrastructure and expanding collection and treatment of municipal wastewater. While the industrial wastewater market is still relatively small, it will continue to grow as decontamination plans in the most polluted areas are implemented and as the new standards are put into effect. government estimates suggest the industrial sector will have to invest close to $4 billion in wastewater prevention and control to comply with these standards by 2003. As the U.S. Environmental Protection Agency has been actively involved in providing technical assistance to CONAMA for the development of environmental standards, U.S. equipment manufacturers should have an advantage over competitors. The best prospects include the following:

Sanitary Services. EMOS and ESVAL will likely be the first companies to be privatized. Companies interested in this market should form teams with other international and local companies to offer a full range of services and bring in sufficient financial resources.
Municipal Wastewater Treatment. Notwithstanding the privatization of EMOS, the largest investments in wastewater treatment will be in the Santiago area. Three wastewater treatment plants are proposed and will be constructed over the next ten years.
Drinking Water Supply Systems. Smaller scale systems for communities, industrial developments, and tourist areas will be required.
Innovative Water Reuse and Recirculation Systems for municipal and industrial applications (especially mining) will be an important element in water projects in the arid northern regions.
Pollution Prevention and Control Equipment for key industrial sectors such as mining, fish processing, pulp and paper, and food processing. This includes solvent extraction/electrowinning processes for copper mining, air flotation technologies for fishmeal to recover proteins, chlorine-free pulp bleaching technology, high-pressure spray systems, and evaporators. Mid-sized companies in urban areas will also present good opportunities.
Sludge-Processing Equipment for mining operations.
Pretreatment Technology for wastewater discharged into municipal systems.
Water Quality Monitoring Equipment.

In the municipal market, U.S. companies face tough competition from European companies. Most successful in this market are France’s Degremont, Britain’s Biwater, and Aguas Barcelona from Spain. These companies have a competitive advantage because they have been operating in Chile longer and are competitively priced. Suez-Lyonnaise des Eaux, one of the largest water companies in the world, has also decided to pursue opportunities in the Chilean market, particularly the privatization of EMOS and ESVAL, Lyonnaise des Eaux is successfully operating the water company in Buenos Aires. The most successful U.S. water companies in Chile are U.S. Filter, Emco, Parkson, American Sigma, and Water Link.
U.S. companies have been strong in the water and wastewater equipment market, supplying approximately 40 percent of the imported equipment. European and Asian companies each supply about 30 percent. These companies have successfully entered the market by teaming with local firms. For example, Temac represents Degremont, Aguasin
represents U.S. Filter, Ecopreneur represents Parson, and Nahuelco represents Komline-Sanderson Engineering Corporation. Their competitive advantages come from the use of highly qualified Chilean personnel and reputable equipment that is well-received in the Chilean market.

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