Between development and banking: the KfW Development Bank in Latin America’s water sector

ABSTRACT

This paper sheds light on the question to what extent public development banks can, and do, contribute to achieving the United Nations’ Sustainable Development Goal (SDG) 6 on water and sanitation under the current political economic conditions, drawing on the case of the German KfW Development Bank and its activities in Latin America. It concludes that bankable, large water supply and sanitation services (WSS) infrastructure projects based on cost-recovery models can hardly deliver the WSS systems needed in Latin America in a sustainable manner. Achieving SDG 6 requires long-term subsidies for public water utilities and addressing the political conditions of WSS governance on the ground.

KEYWORDS:

• Public banks
• development banks
• Sustainable Development Goal (SDG) 6
• water and sanitation
• Latin America

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. Safely managed = drinking water from sources located on premises, free from contamination and available when needed, and using hygienic toilets from which wastes are treated and disposed of safely (WHO, 2019).

2. For better readability, the abbreviation KfW is used hereafter to refer to the KfW Development Bank.

3. Interviews were conducted in German or Spanish and translated into English by the author.

4. Even if KfW credits are passed on from the government to the water utility as grants, the credit remains external state debt.

5. Which, in fact, has not happened so far in the cases analysed in this study (Nicaragua and Mexico).

6. As mentioned above, although the infrastructure was supposed to be handed over to the municipality after the contract period ends, this has not happened so far in the analysed cases. Hence, while the infrastructure was supposed to be public, it is in fact a complex public–private fabric.