Perú
| A worker of the International Potato Center (CIP) harvests potatoes grown for two months without water at an experimentation station in San Ramon in Peru's central jungle August 27, 2010. Credit: Reuters/Enrique Castro-Mendivil |
ICA, Peru |
(Reuters) - The World Bank, which has lent millions of dollars to turn Peru's fragile desert coast into verdant farmland, has stumbled into a film noir scene straight out of Roman Polanski's 'Chinatown' about the violent water wars of 1930s Los Angeles.
When a World Bank employee went in April to investigate complaints that loans made by its private sector arm had hastened the drying up of the Ica aquifer, he was shot at by gunmen after he spotted land pockmarked by clandestine wells.
Though the World Bank and its International Finance Corporation have been involved in a more sustainable project in northern Peru that uses water from the Amazon to irrigate fields, its work with well water in Ica has put it in the middle of a vexing problem.
Peru is South America's third-largest country and a top exporter of high-value specialty crops like asparagus. Farmers say it could become a breadbasket like Brazil or Argentina, well-positioned to feed a growing global population.
But it suffers from acute water shortages on its Pacific Ocean coast and they are expected to worsen as its ice fields in the Andes, the world's largest collection of tropical glaciers, melt because of climate change.
In Ica, where there is little control over who pumps water, the aquifer could dry up before the government comes up with a plan to pipe in rainwater from the Andes or the Amazon as it has done in northern Peru.
"People talk about the land and how valuable it is. But it's the water," says Jorge Checa, who co-manages Agricola Athos, a 600-hectare asparagus and grape farm in Ica.
Because Ica sits next to the Pacific Ocean, the risks of overpumping are severe as saltwater could leach into the aquifer and, like in fertile parts of California, spoil the farmland.
Demand for water has intensified as Peru, long a leading minerals exporter, has sought to diversify its economy. Peru's export council, ADEX, says the country has ideal temperatures and soils along its coast.
Peru is already the world's top asparagus exporter, shipping $389 million in 2009, and the third-largest producer of artichokes. Its farm sector, which has attracted a wave of foreign investment, has grown rapidly, helped by laws allowing bigger land holdings and free trade agreements with the United States and Asian countries.
What's lacking is water. The coast's main source of fresh water, Andean glaciers, are quickly retreating and big investments in farming are "asymmetrical" with available water, said Raul Roca Pinto, a director in the agriculture ministry.
WATER DISPUTES IN ICA
The towering sand dunes in Ica, 185 miles south of the capital Lima, belie a lucrative agricultural export industry that has grown fourfold in a decade.
One of Peru's biggest asparagus producers is Agrokasa, which in 15 years and with $23 million in loans from the IFC has spread over 4,900 acres of arid desert.
The IFC is now conducting an audit of its loans in Ica and an internal ethics investigation after Agrokasa was poised to be approved for a fourth loan despite the objections of the lender's environmental review staff.
It is also investigating whether there was a conflict of interest in making the loans to Agrokasa, since the company's president is married to a World Bank employee.
Just days after Agrokasa approached the IFC in mid-2009 for a $10 million loan, an IFC ombudsman began receiving complaints that its loan would exacerbate the Ica water shortage.
Agrokasa's chief executive Jose Chlimper said the proposal, to build an underground tunnel to transfer water from the wells on one of its farms to a farm seven miles away whose wells were running dry, would ease the stress on the Ica aquifer. It would also expand the company's innovative drip irrigation system.
Jose Luis Rueda, an IFC sustainable agriculture consultant, visited Ica to assess Agrokasa's proposal and then recommended scrapping the loan, but he was soon removed from the team and the project was approved anyway, a World Bank source said.
After months of controversy, Agrokasa withdrew its request for funding in September. The IFC internal inquiry is ongoing.
"We are on the frontier of science but because of this IFC issue, we've become the icon of water misuse in Ica," Chlimper said. "I don't care. I don't need the IFC's money."
For Federico Vaccari, the president of one of Ica's water use associations, the hullabaloo over the Agrokasa project was reminiscent of Ica's water wars in the 1950s, when the aquifer supporting big cotton farms temporarily went dry.
"Fifty years ago, people here killed for water, and unless we do something, that is where we are headed," said Vaccari. "Our development could be the cause of our downfall."
David Bayer, an environmental activist and a former USAID administrative officer in Lima, predicts Ica's aquifer will dry up within a decade. He says Ica's six largest growers -- which consume 78 percent of Ica's groundwater -- should take half their lands out of production.
"The water crisis is real, and small and mid-size farmers are being nudged out," Bayer said.
Ica's water deficit is in part due to inefficient irrigation systems and Peru's government says most small farmers cannot afford drip irrigation.
"If you use new technologies like this drip system, it can buy you some time," said Lonnie Thompson, a Ohio State University professor who has been tracking Peru's ice caps since the 1970s.
PUBLIC IRRIGATION PROJECTS
Farmers say the only long-term solution for Ica is to have the government sponsor a massive irrigation project, like Chavimochic or Olmos in northern Peru, that pipes in water from rivers in the Andes or the Amazon basin.
World Bank loans helped plug seeping canals and repair dilapidated irrigation systems for the Chavimochic project, which broadened access to water, raised farm workers' average incomes and attracted billions of dollars in investment.
Some 370,000 acres of desert have been converted into farmland and 200,000 new jobs were created in Chavimochic, according to Peru's export council. The World Bank says that expanding irrigation and labor-intensive farming best meet its mandate of creating jobs.
The Olmos project, which critics have decried as too costly, aims to avoid any reliance on glacial melt. Instead, Brazil's Odebrecht, which won the concession, will bore a 20-km tunnel through the Andes and bring water from the Amazon Basin to irrigate about 247,000 acres of coastal land. It plans to sell the land and the water in package deals to farmers starting in 2012.
In Peru, Tiny Loans Add Up to Big BusinessBack in February, in the crowded district of San Juan de Lurigancho in Lima, Peru, where offices advertise English classes and instant loans, Maria Sanchez opened a Yumi juice stand out of the first floor of her home.
"I've worked two jobs for 15 years. It's nice to have my own business," she says, surveying the small cafe outfitted with bright new appliances and furniture, which she purchased with a 15,000 nuevo sol ($5,400) loan from MiBanco, Peru's largest microlender.
Sanchez's is among hundreds of new businesses to open here in recent years with the help of microloans.
Others are using their access to microcredit to improve already-existing small businesses. Zulma Mendoza, 46, pays 380 soles ($136) in monthly debt payments on the microloan that enabled her to purchase a high-tech machine for her hair salon that allows clients to try on different styles virtually. "We started with zero. We were five, and no one was taking a salary. Now even my two children work and get paid."
Latin America Leadson Microloans
Microloans have taken off in Peru, where informal employment is high and access to credit is low. The concept became widespread around the world through the efforts of the Grameen Bank of Bangladesh, and its pioneering founder, Muhammad Yunus, who jointly won the 2006 Nobel Peace Prize for their successful microloan program.
Now, Peru ranks No. 1 in the annualEconomistIntelligence Unit survey of world's best business environments for microlending. Five of the top 10 countries are in Latin America.
Private capital has played a part in microlending for a decade, but it wasn't until Mexico's Banco Compartamos went public in 2007, generating $407 million, that interest in the business among investors became clear. With 1.75 million clients, Compartamos is Latin America's biggest lender. But the bank, which mainly lends to groups of women in rural areas, came under fire from Yunus in 2007 over interest rates that averaged 90%.
$4.5 Billion in Peruvian Loans
By contrast, in Peru, which has the largest microlending industry in Latin America, a competitive lending environment has driven down rates, while the average loan size has increased to $1,300, according to the Microfinance Information Exchange. More than 200 lenders made small loans totaling $4.5 billion in 2009, a sevenfold increase from 2000. Lionel Derteano, vice president at microlender Edyficar, estimates that the sector could expand by 40% annually in coming years.
"The banking system is very profitable, and yet there's a huge unserved market," says Enrique Ferraro, head of investments for Washington, D.C.-based nonprofit ACCION International, which holds a 15% stake in MiBanco and also holds publicly traded shares in Banco Compartamos.
Strong returns and an established set of norms are now attracting big commercial banks to the industry, according to Lucy Conger, co-author ofThe Mustard Tree,a history of microfinance in Peru.
"The regulation is excellent, and there is international recognition of that," she says. Borrowers face credit checks, and the savings deposits lenders use to steer capital into microloans are federally insured. "There is actually a successful channeling of resources from the cities out into the rural areas," Conger says.
Expanding in South America
Mineral exports and private investment are fueling strong growth in Peru, where the economy is projected to grow 8% this year, one of the fastest paces in the world. Still, Peru's poverty rate hovers around 33%, and only 25% of the population has formal access to credit, according to the country's banking regulator.
MiBanco's parent company, the nonprofit Grupo ACP, is expanding into Brazil, Latin America's largest country, through a $38 million joint venture with Brazilian microlender Ceape Maranhao. Banco de Credito del Peru, the country's leading bank, bought majority control last year of Edyficar, Peru's second-largest microfinance institution, from CARE, the Atlanta-based antipoverty organization.
And BBVA Continental, Peru's second-largest bank, is finalizing its purchase of Financiera Confianza, another leading microlender, founded in 1992 to provide credit to women in rural areas, the Spanish parent company BBVA confirmed.
Says Luis Derteano, Grupo ACP's chairman: "Commercial banks have discovered that microfinance clients do pay, better even then middle-class clients because they appreciate this chance to improve their lives."
See full article from DailyFinance:http://srph.it/aMQbPQ
"I've worked two jobs for 15 years. It's nice to have my own business," she says, surveying the small cafe outfitted with bright new appliances and furniture, which she purchased with a 15,000 nuevo sol ($5,400) loan from MiBanco, Peru's largest microlender.
Sanchez's is among hundreds of new businesses to open here in recent years with the help of microloans.
Others are using their access to microcredit to improve already-existing small businesses. Zulma Mendoza, 46, pays 380 soles ($136) in monthly debt payments on the microloan that enabled her to purchase a high-tech machine for her hair salon that allows clients to try on different styles virtually. "We started with zero. We were five, and no one was taking a salary. Now even my two children work and get paid."
Latin America Leadson Microloans
Microloans have taken off in Peru, where informal employment is high and access to credit is low. The concept became widespread around the world through the efforts of the Grameen Bank of Bangladesh, and its pioneering founder, Muhammad Yunus, who jointly won the 2006 Nobel Peace Prize for their successful microloan program.
Now, Peru ranks No. 1 in the annualEconomistIntelligence Unit survey of world's best business environments for microlending. Five of the top 10 countries are in Latin America.
Private capital has played a part in microlending for a decade, but it wasn't until Mexico's Banco Compartamos went public in 2007, generating $407 million, that interest in the business among investors became clear. With 1.75 million clients, Compartamos is Latin America's biggest lender. But the bank, which mainly lends to groups of women in rural areas, came under fire from Yunus in 2007 over interest rates that averaged 90%.
$4.5 Billion in Peruvian Loans
By contrast, in Peru, which has the largest microlending industry in Latin America, a competitive lending environment has driven down rates, while the average loan size has increased to $1,300, according to the Microfinance Information Exchange. More than 200 lenders made small loans totaling $4.5 billion in 2009, a sevenfold increase from 2000. Lionel Derteano, vice president at microlender Edyficar, estimates that the sector could expand by 40% annually in coming years.
"The banking system is very profitable, and yet there's a huge unserved market," says Enrique Ferraro, head of investments for Washington, D.C.-based nonprofit ACCION International, which holds a 15% stake in MiBanco and also holds publicly traded shares in Banco Compartamos.
Strong returns and an established set of norms are now attracting big commercial banks to the industry, according to Lucy Conger, co-author ofThe Mustard Tree,a history of microfinance in Peru.
"The regulation is excellent, and there is international recognition of that," she says. Borrowers face credit checks, and the savings deposits lenders use to steer capital into microloans are federally insured. "There is actually a successful channeling of resources from the cities out into the rural areas," Conger says.
Expanding in South America
Mineral exports and private investment are fueling strong growth in Peru, where the economy is projected to grow 8% this year, one of the fastest paces in the world. Still, Peru's poverty rate hovers around 33%, and only 25% of the population has formal access to credit, according to the country's banking regulator.
MiBanco's parent company, the nonprofit Grupo ACP, is expanding into Brazil, Latin America's largest country, through a $38 million joint venture with Brazilian microlender Ceape Maranhao. Banco de Credito del Peru, the country's leading bank, bought majority control last year of Edyficar, Peru's second-largest microfinance institution, from CARE, the Atlanta-based antipoverty organization.
And BBVA Continental, Peru's second-largest bank, is finalizing its purchase of Financiera Confianza, another leading microlender, founded in 1992 to provide credit to women in rural areas, the Spanish parent company BBVA confirmed.
Says Luis Derteano, Grupo ACP's chairman: "Commercial banks have discovered that microfinance clients do pay, better even then middle-class clients because they appreciate this chance to improve their lives."
See full article from DailyFinance:http://srph.it/aMQbPQ
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