Environmental Technologies Industries

Environmental Technologies Industries

Market Plans

Venezuela Environmental Export Market Plan

Chapter 4

Water and Sanitation

Market Overview

Investment in the water and sanitation sector in Venezuela is expected to be more than $300 million for 1998. This figure is partly attributed to the major restoration efforts that the government is implementing in most of its coastal cities and water bodies, and partly to the development of water projects supported by multilateral entities.

The Venezuelan market for water supply equipment is estimated at $95 million. This market is expected to increase approximately 9 percent annually. The wastewater treatment equipment market is estimated at $80 million for 1998, with a growth rate of 25 to 30 percent over the next three years.

Domestic production of water supply and wastewater treatment equipment remains low, representing 15 percent of the total market. U.S. suppliers dominate the water supply equipment market with a 60 percent market share. U.S. companies have remained competitive in the supply of pumping systems, water filtering laboratory equipment (physical and chemical concentration parameter measurement), and wastewater treatment plant components.

Infrastructure

Current potable water coverage in Venezuela is close to 80 percent, while sewage collection is at 60 percent. Unaccounted for potable water is close to 60 percent of the total production. Currently, it is estimated that only 26 percent of the water produced is billed to users. To rectify this situation and to generate more resources for system upgrades, HIDROVEN is making a concerted effort to improve the country's metering and billing systems.

Institutional Structure

Three government entities are responsible for developing and overseeing the country's water sector. The main institution in charge of the development of the water sector is the Ministry of the Environment and Renewable Natural Renewable Resources (MARNR). Its infrastructure division is responsible for developing the investment plans for the water sector. The Central Office of Coordination and Planning of the President's Office (CORDIPLAN) works together with the MARNR to develop the investment plans for the water sector, which are outlined in a document called Law for Water (Ley para Aguas). This document also lays out the government's investment priorities for a one-year period. The Ministry of Sanitation and Social Service (MSAS) serves as a technical consultant for the MARNR and sets the standards for potable water.

Government Priorities and Opportunities

The Decentralization Model: The Venezuelan water sector has undergone numerous institutional changes in an effort to provide better service to the population. In 1943, the Venezuelan Government created the National Institute of Sanitary Works (INOS) to aid the federal government with the installation of potable water and sewage services. It was a completely centralized system, paid for out of the federal treasury. In 1977, the MARNR was created and proposed the creation of state and municipal councils. These councils would be responsible for day-to-day operations, with the MARNR in charge of financing major investments. Bureaucratic politics intervened and these local councils were never formed.

CASE STUDY: OWENS-ILLINOIS

Owens-Illinois, a U.S. company that produces glass, has been recycling in Venezuela for about 12 years. It sponsors 75 collection centers throughout the country, which include places to leave sorted recyclable
materials, as well as processing facilities that use machines such as feeder hoppers or chutes, crushers, rotary mixers, washers, trucks, and scales. Owens-Illinois has contributed to educating the public on the importance of recycling and reuse of material. While this education has led to increased awareness, the future of formal municipal programs in Venezuela is unclear due to the existence of informal recycling systems. These informal systems involve children and the poor who pick through dumps for cans to redeem them for a few bolivares. Cities could potentially face local resistance if these “income sources” are eliminated.

Today, the operation of water systems is overseen by Hidrologica Venezolana (HIDROVEN), the national water holding company. The government created HIDROVEN in 1990 as a transitional company to serve for a period of ten years. HIDROVEN’s central goal is to oversee and speed the transfer of the operation and administration of water and sanitation services to the municipal and state levels. The goal is to create self-financing municipal or state water companies by the year 2000. Implementation has suffered due to
Venezuela's poor economic performance. Therefore, the deadline for achieving this goal will likely be extended.

The decentralization has led to joint state- and municipal-controlled water authorities in the states of Lara (HIDROLARA) and Monagas (Aguas de Monagas). These new water companies will require investments in infrastructure maintenance and expansion of between $50 and $70 million each. Other local water companies will also be created in the short to medium term, with support from the World Bank and the Inter-American Development Bank (IDB).

Major Cleanup Projects: Large quantities of untreated municipal and industrial wastewater have been discharged directly into Venezuela's rivers, lakes, and coastal marine waters, causing significant pollution problems. The Venezuelan Government has started an ambitious program to clean up the most polluted sites. In dollar terms, there is a large volume of projects either under way or about to commence in 1998. Most of these projects are multiphase and therefore present multiple bidding opportunities for U.S.
companies.

Current major cleanup projects are:

Tuy River Cleanup: The Tuy River, located near Caracas, the capital, serves as a potable water supply source for the city. However, the river also receives part of the city's wastewater. Currently, it supplies 2m 3 /s of drinking water. The Venezuelan Government is actively promoting the clean up of the river basin through an integrated range of actions such as wastewater treatment plants for the industrial facilities throughout the basin, improvement of municipal sewage collection, and construction of municipal wastewater treatment facilities. The project is estimated to require close to $200 million over the next ten years to achieve its goals. Although several works are under way, a complete financial package has yet to be completed. One financial plan being proposed is a pollution tax to be assessed on industries in the basin.
Maracaibo Lake Cleanup: This $188 million project includes treatment of the municipal wastewater
of Maracaibo, the second largest city in Venezuela, with a population of 1.7 million inhabitants. The project also entails treatment of industrial discharges and the reuse of the water by the Jose Petrochemical Complex. The Corporación Andina de Fomento (CAF) and PEQUIVEN are jointly financing the project.
Valencia Lake Cleanup: The Valencia Lake Sanitation project ($125 million) is near completion and includes the installation of seven wastewater treatment facilities in the lake basin. This project, financed with IDB and local funds, was the pilot project for sanitation projects across the country.
Additional Basin Cleanup Projects: There are three basin cleanup projects spurred by the environmental protection treaty, “Convencion de Cartagena para la proteccion del Ambiente Marino” (Cartagena Convention for the Protection of the Environment), signed between the countries of the Asociacion de Estados del Caribe (Antigua, Bahamas, Barbados, Belize, Colombia, Costa Rica, Cuba, Dominica, Dominican Republic, Salvador, Grenada, Guatemala, Guyana, Haiti, Jamaica, Mexico, and Venezuela). The projects entail the installation and rehabilitation of wastewater treatment facilities in the shore cities and the construction of urban discharge collection systems.

The cleanup effort is divided into three regional projects:
Eastern Basin Cleanup Project, financed by the Export-Import Bank of the United States (Ex-Im Bank) and export credit agencies from Germany and England with a cost of $93 million;
Sanitation of the Central Basin, with an estimated cost of $136.5 million, will be financed by Ex-Im Bank and IDB;
Western Basin Sanitation Project, with an investment plan of $80 million, will be financed by Ex-Im Bank and HERMES Gauf from Germany.

Municipal and Industrial Wastewater Treatment

The country has very serious water pollution problems. Less than 5 percent of municipal water is
treated. This situation has contributed to the country's rivers and basins being polluted.

Currently, less than 15 percent of industrial wastewater receives any treatment. Industrial wastewater
contributes significantly to Venezuela's sewage discharge problems. One published study estimates
that out of 2,000 companies, only 390 possess any form of wastewater treatment. Even Venezuelan firms that have completed and submitted investment plans have been slow to achieve compliance with current regulations due to adverse economic circumstances, combined with weak enforcement.

A company that is an exception to this situation is PDVSA, the state-owned oil company. It reportedly treats 100 percent of its effluents according to international standards. With PDVSA’s plans to rapidly expand the number of new wells drilled, opportunities will be opening up for U.S. companies in the treatment of water used for injection during oil exploration.

The market for industrial wastewater treatment is expected to grow significantly with the implementation
of the World Bank-supported Environmental Management Project. This project should develop an effective enforcement body and strengthen the operations of the MARNR.

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