Financing watershed conservation: Lessons from Ecuador's evolving water trust funds

In early 2000, the city of Quito, Ecuador, established the Water Protection Fund (FONAG) to provide sustainable financing for the management and conservation of surrounding watersheds. FONAG was innovative in that it pioneered the use of trust funds in a voluntary, decentralized mechanism for financing watershed conservation. Since then, at least 15 water trust funds have been created or are under development in the Northern Andes, seven of which are in Ecuador. Ecuador's later water funds share many similarities with FONAG, but there are also important differences. This article analyzes the evolution of Ecuador's water trust funds since the creation of FONAG. It does so by comparing the development and effects-to-date of two of the most-recent Ecuadorian water funds: the Fund for Páramo Management and Fight Against Poverty in Tungurahua and the Regional Water Fund (FORAGUA). The article compares these newer water trust funds with FONAG and early payment for environmental services programs to identify four lessons regarding the financing of watershed conservation and related changes in community-level watershed management within Ecuador. The evolution of Ecuador's water trust funds highlights their ability to adapt to different socio-cultural and political conditions, including those that oppose the commodification of natural resources. As such, water funds provide an innovative model for providing sustainable financing for watershed conservation in countries like Ecuador where privatization is not possible for either legal or cultural reasons.