Monteria, Colombia,

Most of the 300,000 citizens of Monteria, a small city in northern Colombia, live in abject poverty. With a local economy dominated by livestock production and processing, the city lacks revenues for even the most basic public services. Water supply is sporadic at best, averaging only about three hours a day. Sanitation services are well below minimal international standards.

In 1992, the Monteria city council approved a plan to dismantle the city-owned utility company and set up a joint venture for water and sewerage operations. Although operating costs were fairly low, the new water utility could not generate enough income to expand capacity and service.

Water and sewerage companies throughout Colombia and elsewhere face similar problems. Large capital requirements for service expansion and rehabilitation, coupled with limited financial muscle, create enormous gaps in service provision. More and more municipalities, Monteria among them, are turning to the private sector for help.

Under an initiative structured by the Colombian government and financed by the Inter-American Development Bank, Chemonics is working to make expansion capital available by creating the right environment for private investment in Monteria's water and sewerage system. As a first step, the firm helped design the best option for investment – a concession for operation, rehabilitation, and expansion – and secure winning bids for its management under a transparent and competitive selection process.

The concession – an internationally accepted investment scheme that directly responds to problems in service provision – will help fund $80 million in improvements needed to generate reliable, low-cost water services for residents. Investors will take responsibility for operations and required capital improvements, significantly lowering financial burdens and commercial risk to municipal and national governments.

For investors and water operators, the project is a unique opportunity to enter the Latin American market. Moreover, it is an opportunity to generate positive cash flow and attractive returns over a 20-year period. The result will be a new model for public-private partnership, soon to be applied in other Colombian cities seeking viable infrastructure investment schemes.

These advantages only begin to tell the story. Associated with substandard water and sanitation are critical social and public health issues. While these problems are beginning to garner attention in large cities such as Bogota and Cartagena, so-called tertiary cities like Monteria have been left to fend for themselves.

"Larger cities dominate donor and international investment interest," said Doug Tinsler, Chemonics senior vice president. "But secondary and tertiary cities are an increasingly important focus in infrastructure finance both because of their potential for positive development impact as well as their manageable size."

The project has followed a fast track since it began in late 1997. Tinsler says progress is a tribute to the talents of a world-class team Colombian national policymakers, Monteria authorities, the IDB, the investment banking firm Selfinver, and Chemonics' own staff.