4. The Socio-Economic Context of Chilean Water Consumption and Water Markets Growth: 1985–2015

Chile was one of the early economic reformers in Latin America, instituting a series of pro-market policies. These reforms included, liberalization of the capital accounts, steep reduction and harmonization of import tariffs, liberalization of foreign exchange markets, and aggressive privatization of state-owned companies, including public utilities. During the 1990s Chile promoted a strong trade liberalization agenda that reinforced the export-based model by subscribing a series of Free Trade Agreements. Chile entered a virtuous cycle of strong economic growth led by exports, and strengthened by the return to democracy which put an end to social unrest. This growth is also reflected in fast poverty alleviation. However, unequal income distribution has only improved marginally. The economy is based mainly on exports that are highly dependent on water, such as mining and agriculture. Water withdrawals in Chile average approximately 4300 m³/s, equivalent to 136,000 million m³/year. Of this, almost 85% is used in non-consumptive hydroelectric generation. Consumptive water use in Chile is dominated by irrigation representing 82%, followed by industrial, mining and potable water supply, which account for 8%, 3% and 7% of total water consumptive water use, respectively. Since the 1990s total consumptive water use has increased 13%, mainly driven by economic growth.