Developing Economic Arrangements for Water Resources Management—The Potential of Stakeholder-oriented Water Valuation - Water and Agriculture: Sustainability, Markets and Policies - page 130

(Platt et al., 2000). The negotiations that started in 1995 resulted in an agreement in
principle later that year: “There were more than 200 meetings, many of them bitter and
unproductive. But in the end - the last details were worked out at 4:20 yesterday
morning - the combatants agreed on a plan.” ( New York Times , 1995). In January 1997
the final Memorandum of Agreement (MOA) was signed and formally executed.
Conclusions from the case
In the case of the New York City Watershed Agreement, the establishment of an
economic payment scheme was the result of a difficult negotiation process, which
eventually led to an agreement on specific types of activities to be included in the
payment scheme. New York City was a key player in this process, combining significant
economic and political weight in the region with a clear motivation to avoid an enormous
investment in a filtration plant for its drinking water.
Fondo ambiental del agua (FONAG) in Quito
Description of the FONAG
The Quito valley is one of the most densely populated areas in Ecuador, and includes
the Quito metropolis with more than 2 million inhabitants. It faces large water related
problems because of high water demands combined with contamination of limited water
resources. In Quito, a water protection fund, 'fondo ambiental del agua' (FONAG), has
been established to collect money from the downstream beneficiaries of water-related
services in the Quito metropolis, to provide donations to the national park administrations
and to support local programmes of interest to FONAG in the watersheds that supply
water to Quito. These activities include reforestation, environmental education,
surveillance and monitoring of water quality, and investigation of sustainable community
production alternatives. Although at this point it remains difficult to quantify the impacts
of these projects, some conditions have been laid out to ensure that funds are spent
wisely, including limits in the amounts of money that can be spent on the management of
the fund and on studies (Lloret, 2005). The FONAG should help to safeguard downstream
interests, consisting of water sources for the city of Quito, including drinking water for
households and water for industry, and power generation in a hydropower reservoir.
Membership of FONAG is on a voluntary basis and consists of both public and
private organisations, who entered into a long-term agreement. The diversity of members
and their long-term commitment is considered to be one of the strong features of the fund.
It means that FONAG is not constrained by the many rules and regulations that apply to
public agencies, making it, for instance, easier to attract foreign donor investments, while
the fund's (semi) public members and its constitution provide safeguards that the fund's
activities are beneficial to public interest.
FONAG is, like the New York City Watershed Agreement, another example of a PES
scheme, and during recent years, many similar payment schemes for environmental
services have been implemented in the Latin American region (FAO, 2004c; Kiersch et
al., 2005). The FONAG features in many of the recent overviews of payment schemes for
environmental services, from an article in the Economist (2005), to the Millennium
Ecosystem Assessment (MA, 2005), the Katoomba Marketplace (Katoomba, 2005),
recent work by FAO (2002, 2004c) and the FAO/Netherlands Conference on Water for
Food and Ecosystems (Lloret, 2005).