81242 Economics of Sanitation Initiative NICARAGUA The Cost of Inadequate Sanitation The Water and Sanitation Program (WSP) is a multi-donor partnership administered by the World Bank to support poor people in obtaining affordable, safe and sustainable access to water and sanitation services Economics of Sanitation Initiative Nicaragua: The Cost of Inadequate Sanitation Author Bjorn Larsen Head of Publication Nelson Medina Main Advisory Guy Hutton Local Research Team Damaris Hernandez Proofreading Olivia Yerovi Layout and Infographics Shinny Montes Sergio Fernandez Translation Luis Miguel Espejo Peer Review from Technical Experts Maria Angelica Sotomayor Caroline Van den Ber Photos from the Cover (from left to right, top to bottom) Rio San Juan - Servicios. www.flickr.com/chiaramar Nicaragua: family wash day. Peter Mulligan. www.flickr.com/nagillum U.S. Department of Defense, Humanitarian and Civic Assistance Mission in Nicaragua. Danielle Grannan, U.S. Air Force Nicaragua Water Crisis. ONE DROP Foundation. www.onedrop.org Toilet Instalation. Adan Horacio Blanco Hernandez First edition: June 2013 Second edition: August 2013 © 2013 Water and Sanitation Program, World Bank www.wsp.org wsplac@worldbank.org Rights and Permissions The World Bank encourages dissemination of its knowledge, and allows parts of this work to be reproduced for noncommercial purposes as long as full attribution to this work is given. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. Acknowledgments This study was elaborated by the World Bank’s Water and Sanitation Program (WSP) team in Nicaragua. It’s based on the Economics of Sanitation Initiative (ESI) methodology and it was enriched by previous studies from Asia and Africa. The content was produced by Bjorn Larsen (Consultant / Environmental economist) with the main advisory of Guy Hutton (Senior Economist), the collaboration of Damaris Hernandez (Consultant), under the supervision and direction of Nelson Medina (WSP Nicaragua / Country Coordinator). The authors would like to acknowledge the contributions of the Nicaraguan Government Officials, who participated in the presentation of the preliminary results of this study; Ana Lilia Reyes, Head of Regulation, Research and Development of the New FISE (Emergency Fund of Social Investment) for her support in the collection of data and the dissemination of the results; and the members of the Water and Sanitation Network in Nicaragua for disseminating this study. www.wsp.org 3 Abbreviations BCN Central Bank of Nicaragua (Banco Central de Nicaragua) C$ Cordoba (Nicaraguan currency) ENACAL Nicaraguan Company of Aqueducts and Sewers (Empresa Nicaragüense de Acueductos y Alcantarillados) ESI Economics of Sanitation Initiative GDP Gross domestic product ID International Dollar INIDE National Institute of Development Information (Instituto Nacional de Información de Desarrollo) MDGs Millennium Development Goals PPP Purchasing power parity UNICEF United Nations Children’s Fund US$ US Dollar WHO World Health Organization WSP World Bank’s Water and Sanitation Program 4 Contents 1. Introduction 6 Impacts on water resources 13 Country basic figures 8 Impacts on tourism 14 Background 9 Other impacts non-assessed on welfare 16 2. Results: Economic impacts of inadequate sanitation 10 3. Conclusions 18 Impacts on health 12 4. Recommendations 21 www.wsp.org 5 Nicaragua: The Cost of Inadequate Sanitation 1. Introduction Central America This report analyzes the economic and social Population with access to impacts derived from the lack of sanitation in Nicaragua. The study on which it is based has been improved sanitation promoted by the Economics of Sanitation Initiative (ESI), led by the Water and Sanitation Program of the World Bank (WSP). The study used national data and surveys, Cuba 91% other small-scale research studies and experts consultations. Belize Guatemala 90% Jamaica Haiti 78% Honduras 80% 17% It includes basic information on Nicaragua, records 77% of sanitation in the country and the results of the Dominican analysis of the economic impacts on health, water Republic resources, tourism, and other impacts on welfare. 52% 83% Nicaragua 90% Panama The results are of special interest for Government El Salvador 95% 65% authorities, experts on issues of sanitation, civil Costa society organizations, and international cooperation Rica agencies. With access to sanitation Without access to sanitation Source: Progress in water and sanitation (Update report 2012), Joint WHO/UNICEF Joint Monitoring Programme (JMP) for Water Supply and Sanitation ACCESS TO Improved facilities 80% 6 Nicaragua: The Cost of Inadequate Sanitation NICARAGUA Less access REGIÓN AUTÓNOMA Population with access to DEL ATLÁNTICO a sewer connection Jinotega Nueva Segovia 10.7% NORTE Madriz 3.2% Esteli 4.3% 0.6% 19.9% 8.9% Chinandenga Matagalpa 17.6% León Boaco 28.1% 8.2% Región Autónoma More access del Atlántico Sur MANAGUA Masaya Chontales 4.5% 1.5% 55.1% 20.3% Granada Carazo 13.1% 13.8% 1.9% Percentage of population: Rivas Río With less than 3% of access 16.9% San Juan With more than 20% of access Source: INIDE 2006-2007 O SANITATION IN LATIN AMERICA AND THE CARIBBEAN Open defecation Shared facilities Unimproved facilities 4% 7% 9% Source: Progress in water and sanitation, WHO/UNICEF Joint Monitoring Programme (JMP) for Water Supply and Sanitation 2012. www.wsp.org 7 Nicaragua: The Cost of Inadequate Sanitation Country basic figures Total population * 5,74 million inhabitants Total percentage of rural and urban population* Rural population 41,7% Urban population 58,3% Annual growth of the population (2009) * 1,3% Population under 5 years of age (2009) * 11,8% 25,6 Mortality rate in children under 5 (2009) * (per 1,000 births) Female population* (2009) 50,5% Population living in poverty (US$ international)¹ Daily income under US$ 2 * 31,9% Daily income under US$ 1,25 * 15,8% 1 Purchase power adjusted to US dollars. The ID (international dollar) is a hypothetical monetary currency used to translate and compare costs between two countries, using the American dollar as a reference. It is calculated using the purchase power parity (PPP), in other words, the amount of local monetary units needed to purchase, within the country, the same number of goods that could be purchased in the US with USD1,00. 2 It doesn’t include homes with sanitation facilities shared with other homes. 8 Nicaragua: The Cost of Inadequate Sanitation Background Economy Nicaragua has a total coverage of 52% of Currency Cordoba (C$) the population with improved sanitation — which is below the average of other countries Exchange rate C$ to US$* US$ 20,34 in Latin America and the Caribbean1. GDP per capita (US$)* US$ 1070 Even when the coverage between 1990 and GDP per capita (international US$)¹* US$ 2660 2008 increased from 43% to 52%2 (which shows a significant progress), it is still Improved sanitation insufficient to fulfill the 72% that Nicaragua set out as a goal for 20153. Total (2008)* 52% The efforts to raise the sanitation coverage have to compete with the demographic growth4, which shows that every year some 80 thousand Nicaraguans need improved Rural (2008)* 37% sanitation infrastructure, a number that adds up to the 2,75 million citizens which still lack those facilities. Urban (2008)* 63% Likewise, there are still great differences between the access to improved sanitation systems of the urban and rural sectors. The percentage of the population without access Nationwide sewer 23% to sanitary services surpasses 20%5 in the five departments with the highest poverty connection * rates in 2005. In contrast, “only” 2% of the population in Managua lacks access to Rural sewer sanitary facilities. connection * 1% (2006-7) Urban sewer connection * 40% (2006-7) 1 “Progress in water and sanitation: Update Report 2010” WHO/UNICEF, 2010. 2 The reported figures do not include homes with sanitation SOURCES: infrastructure shared with other homes, according to the definition of the “WHO / UNICEF Joint Program for * Nicaraguan Central Bank (2010) * World Health Organization / UNICEF (2010) Monitoring the Supply of Water and Sanitation” regarding * World Bank (2010) * National Institute of Development Information (2008) improved sanitation. 3 Within the Millennium Development Goals (MDGs). 4 Estimates starting in 2008, World Bank 2010. 5 National Institute of Development Information. www.wsp.org 9 Nicaragua: The Cost of Inadequate Sanitation 2. Results Economic impacts derived from inadequate sanitation (2009) Lack of sanitation and hygiene causes negative effects on: Health C$ 1,430 million | US$ 70.3 million $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Tourism C$ 245 million | US$ 12.1 million $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Time wasted C$ 177 million | US$ 8.7 million (time spent to access toilets, etc.) $ $ $ $ $ $ Water resources C$ 59 million | US$ 2.9 million (drinking water) $ $ $ $ C$ 1912 million | US$ 95 million $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Total loss $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 10 Nicaragua: The Cost of Inadequate Sanitation The economic losses due to the lack of sanitation and hygiene in 2009 amount to C$ 1,900 million (US$ 95 million). Health In order to have a clear idea of the relative 75% impact on the Nicaraguan economy, where the level of average prices corresponds to 41% of that in the US, the impact in international dollars (ID) is 293 million, Tourism or ID 51 per capita every year. 13% In the case of Nicaragua, the impacts were evaluated according to these categories, because they all have a great importance nationwide. Time wasted Of the assessed impacts, health represents 9% 75% of the economic costs estimated in the impact, followed by the 3% of what a person spends in order to access drinking water, 9% of additional time used to access Water resources precarious sanitation systems, and 13% of (drinking water) losses suffered by international tourism. 3% Such impacts could cause a wide range of direct financial losses, as well as indirect or non-monetary losses for the Nicaraguan Total loss (percentages) population, which would have to pay for health services or clean water supply, or lose income on account of tourism or health problems. Tourism 13% 75% Health 9% Time wasted 3% Drinking water www.wsp.org 11 Nicaragua: The Cost of Inadequate Sanitation Impacts on health Lack of sanitation and hygiene Lack of sanitation and hygiene causes almost causes over 4,6 million episodes of diseases or infections, and almost 500 premature deaths every year. The resulting economic impact corresponds to some C$ 1,430 million (US$ 70 million) per year. The impacts on health and the associated costs with the lack of sanitation and hygiene are assumed out of all proportion by the poor. 500 The estimated annual cost per PREMATURE capita ranges from C$ 160 in the DEATHS PER YEAR departments with lower poverty rates (for example, Managua) to over which economic impact corresponds to some C$ 400 in the departments with higher poverty rates (for example, million C$ 1430 every the Región Autónoma del Atlántico Norte). year US$ 70 million every year Health annual per capita costs C$ 400 Región Autónoma (In C$, 2009 PPP*) (US$ 20) del Atlántico Norte 400 350 300 250 C$ 160 (US$ 8) 200 Managua 150 100 50 0 0% 10% 20% 30% 40% 50% 60% 70% 80% *Purchasing power parity (Poverty rate per department, 2005) Source: Estimated from World Bank data (2010) 12 Nicaragua: The Cost of Inadequate Sanitation Impacts on water resources A poor sanitation system contributes to a great extent The economic costs associated to polluted water due to the pollution of water resources. This adds up to to lack of or poor sanitation systems represent C$ households with access to a clean, safe water supply. 110 million (US$ 5,4 million) per year, without considering the access to clean water unrelated Costs of treating water to human consumption, as well as the loss of the Reported by the Nicaraguan Company productive value of fishing and agriculture due to of Aqueducts and Sewers polluted water. Around 320 million cubic meters of water were produced in 2010 by drinking water suppliers. The cost of treating water reported by the Nicaraguan C$200 Company of Aqueducts and Sewers (ENACAL) is MILLION EVERY YEAR around C$ 20 million (US$ 1 million) per year, of which 75% could be avoided if there were no US$ 10 million every year pollution risks due to sanitation. The economic cost ranges from C$ 85 and C$ 136 million (US$ 4,2 – 6,7 million) per year, with an average estimate of C$ 110 million. 75% of this expense could be avoided if there were no pollution risks due to sanitation Costs of access to drinking water per year (Average cost estimated in millions of Cordobas) Cost of ltering in households C$ 2.45 US$ 0.1 Costs of boiling water C$ 11 US$ 0.5 Cost of bottled water C$ 13 US$ 0.6 Cost of municipal water treatment C$ 13.8 US$ 0.7 Cost of household chlorination C$ 19 US$ 0.9 0 5 10 15 20 Source: Estimated from authors and an environmental health study of the World Bank. www.wsp.org 13 Nicaragua: The Cost of Inadequate Sanitation Impacts on tourism Income of international tourism per arrival (In US$, PPP*) 2500 US$2064 2000 US$1601 US$1420 Costa Rica 1500 El Salvador 1000 US$770 Honduras Guatemala 500 Nicaragua US$1041 0 0% 20% 40% 60% 80% 100% *Purchasing power parity (Percentage of the population with access to an improved sanitation) Source: Estimated from World Bank data (2010). Tourism is an important source of jobs and tax income for The economic losses are clear due to the existing gap between Nicaragua, generating C$ 7,000 million in revenue (around the current tourism income and the eventual income with US$ 346 million). a higher number of visitors with higher daily expenses, and extended visits, which sanitation and hygiene could generate. The number of tourists who chose Nicaragua as a vacation destination is related, among other aspects, with the sanitary The tourism income per arrival in Nicaragua was US$ 322 conditions of the country, such as the quality of the water in 2008. The correlation between the coverage of improved resources, the quality of the outdoors (landscapes pleasant to sanitation and the income from international tourism per the sight and smell), food safety (hygiene in the preparation), arrivals (adjusted PPP / US$) for Nicaragua and neighboring availability of comfortable toilets and privacy in hotels, countries is presented in the previous chart. Incidentally, restaurants, tourist locations, bus terminals, and the implied Nicaragua has the lowest population coverage with access health risks. to improved sanitation services than neighboring countries. 14 Nicaragua: The Cost of Inadequate Sanitation Considerations for choosing a touristic destination A Food safety B Quality of the outdoors C Availability of D Implied comfortable toilets health risks www.wsp.org 15 Nicaragua: The Cost of Inadequate Sanitation Other non-assessed impacts on welfare Several impacts derived from the deficiencies in sanitation and hygiene could not be quantified due to lack of information, but the influence they have in people’s behavior and general welfare are well-known: Health problems (typhoid) Lack of adequate bathrooms (people’s preference or habits to defecate in a safe, convenient, and private place) Expenditure for water treatment to be used for productive purposes Additional expenses in the fishing industry Reduction of opportunities and the recreational value of areas close to sources of polluted water Less economic activity and foreign investments 3 000 En venta 1 4. 20.000 Less availability and value of the land 16 Nicaragua: The Cost of Inadequate Sanitation If we could quantify all these effects in the study, the total impact would far exceed the estimate of C$ 1,912 million, thus the savings would be much more than C$ 1,600 million. C$ 1,600 million US$ 80 million www.wsp.org 17 Nicaragua: The Cost of Inadequate Sanitation 3. Conclusions 1 Big losses The lack of sanitation represents big economic losses for the Nicaraguan economy, not only in the private sphere of the people, but also for the public and commercial sectors. 2 More investments The results of the study support the need to make more investments in sanitation infrastructure and in the promotion of better hygiene practices. 18 Nicaragua: The Cost of Inadequate Sanitation 3 Implications for development The results show that the lack of sanitation and hygiene entail big losses with serious implications on the social and economic development of Nicaragua, and the dif culty to overcome the development goals. 4 Link with the MDGs The study emphasizes the existing relationship between improved sanitation and the rest of the Millennium Development Goals (MDGs) such as poverty reduction, child health improvement, and larger access to safe drinking water. www.wsp.org 19 Nicaragua: The Cost of Inadequate Sanitation Conclusions 5 Most vulnerable population The study demonstrates that the lack of sanitations affects the whole population, especially the households with no improved sanitation systems, corresponding to the poorest and most vulnerable segment of the population. 6 Prioritizing sanitation Sanitation should receive more attention from all levels of the Government in Nicaragua, donors, private sector, and people. 20 Nicaragua: The Cost of Inadequate Sanitation 4. Recommendations 1 Provide higher priority to investments in the sanitation and hygiene promotion The economic loss due to lack of sanitation in 2009 was C$ 1912 million US$ 95 million This amount could have covered: The public expenditure in education for 470 thousand school children* * BCN Nicaraguan Central Bank, June 2009. The economic costs (C$ 1,912 million or US$ 95 million) are considerable, because they represent 1.5% of the GDP in 2009. Therefore, the benefits for development derived from investments in this matter are huge, because they will allow saving at least C$ 1,600 million. The investments will even contribute to alleviate countless impacts that haven’t been assessed in the study. Having an improved sanitation will allow reaching other development goals, including some key MDGs. www.wsp.org 21 Nicaragua: The Cost of Inadequate Sanitation Recommendations 2 The sanitation programs must direct investments to the poor urban and rural areas Rural areas The sanitation programs must focus mainly Sanitation programs that terminate open-air on families with small children, because they defecation have to be proposed in order to represent the most vulnerable segment of reduce the event of diseases to the limit. the population facing the negative effects of inadequate sanitation in the public health. Special attention should also be given to the rural areas where families practice subsistence farming, and have limited income and purchasing power. Likewise, the sanitation programs should focus on a comprehensive coverage aiming to eliminate open-air defecation in order to reduce the event of diseases to the limit. Poor urban areas Another priority should be the support Support sanitation in depressed urban areas. Human of sanitation systems in depressed urban excreta with no adequate treatment contaminate areas where ownership of houses is low, water sources and boost the public health risks. and therefore families cannot improve their sanitation conditions individually, but through a community response. In these confined spaces, human excreta that are not adequately disposed of or treated will contaminate water sources, drains, rivers, Canals, riverbeds, and will skyrocket the public health risks in the population living nearby. 22 Nicaragua: The Cost of Inadequate Sanitation 3 Strengthening promotion and information campaigns to improve personal hygiene practices. HANDWASHING The study demonstrated that significant economic losses derive from the lack of personal hygiene practices. A simple and low- cost intervention such as washing hands with soap can generate monetary benefits since it represents a lower rate of morbidity and savings of public health costs. www.wsp.org 23 Nicaragua: The Cost of Inadequate Sanitation Recommendations 4 Improving monitoring and evaluation of the impact caused by the options of improved sanitation in Nicaragua. It is necessary to introduce a systematic and practical structure of qualitative water surveillance in the country It is necessary to introduce a systematic and practical structure of qualitative water surveillance in the country involving the evaluation of health risks, in order to analyze —in a periodical and realistic manner— the water quality and to inform how to prevent the public health risks posed by the different sources of pollution. An evaluation system needs to be created to detect the areas with higher risk, in order to improve the health conditions of the people. 24 Nicaragua: The Cost of Inadequate Sanitation The national economic benefits that were expected through the improvement of the sanitation systems will produce useful information to advocate and formulate national policies. Nevertheless, the selection of the sanitation program must be carried out after knowing the costs and benefits of every sanitation option available. The financial and economic public/ private costs/benefits must be understood in depth according to specific contexts in order to enhance the formulation of policies, the program design, the participation of the community, and the funding options. www.wsp.org 25 Nicaragua: The Cost of Inadequate Sanitation www.wsp.org 27 Water and Sanitation Program The World Bank Nicaragua Office 5to. Piso Edificio Cobirsa Km 6,5 Carretera a Masaya, Managua +505 2270 0000 wsplac@worldbank.org www.wsp.org