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In recent years, Chileans have got used to hearing about La Niña. In contrast to El Niño, the climatic phenomenon brings unusually hot, dry weather to South America’s Pacific Coast, reducing rainfall from southern Chile to northern Colombia.

Last year it struck again. The latest figures from Chile’s National Water Board (DGA), part of the Public Works Ministry, show that the country’s reservoirs were at just one third of their total capacity with water levels 45 percent below their historic average.

The drought has been less severe than the previous one in 2007-2008 with water shortages declared in just nine zones compared to 34 zones three years ago, but central Chile has been badly hit.

This time it is the region of Coquimbo that has been worst affected.

In January, the Public Works Ministry declared a water emergency for the whole region and parts of neighboring Valparaiso, as it became apparent that low rainfall last year could threaten water supplies to farmers.

This gives the government power to intervene in irrigation systems, provide emergency water supplies to rural communities and animal feed for herds left without sufficient pasture.

Given the importance of farming in Coquimbo – the region produces 40 percent of Chile’s citrus exports and more than half of its potatoes – the drought threatens to have a serious impact on its economy which, like the rest of Chile, has been recovering from the 2008 financial crisis.

With less water in irrigation dykes, farmers are planting less and pruning existing trees back so they don’t bear fruit and survive the drought, says Sergio Gahona, governor of the Coquimbo region.

This means less to pick and pack with a potentially dramatic impact on seasonal employment in the region’s agriculture which accounts for 8 percent of the workforce in Coquimbo.

“The problem is not going to be this season but the next one,” says Gahona.

As many as 3,000 jobs could be lost as a result of the drought, while economic growth may be curtailed by one percentage point, he adds.

The regional government is now preparing emergency job programs to help keep people in work through the dry spell. Many will be employed in projects to improve water supplies, deepening and widening existing water wells and strengthening canals.

In total, Gahona estimates the government will spend an additional US$10 million this year to mitigate the drought’s impact in the region.

While Coquimbo has borne the brunt of the drought, La Niña is being felt throughout central and southern Chile through its impact on power supplies.

Low reservoirs

Hydroelectricity accounts for around 45 percent of installed capacity in the country’s main power grid, the Sistema Interconectada Central (SIC), but just one reservoir in the whole country – Laja – has capacity to store water from one year to another, which makes the system highly vulnerable to annual variations in rainfall.

Last year’s dry winter has left water levels at hydropower reservoirs near historic lows and, in some cases, plants are struggling to produce electricity. Water levels at the giant Rapel reservoir, 120 km southwest of Santiago, have fallen so low that buildings flooded by its construction have become visible for the first time in almost 40 years.

As a result, hydroelectric generation has fallen by almost 20 percent compared to a year ago.

Unfortunately, this scenario is all too familiar to Chileans. An energy crisis in 1998, caused by a dry winter, forced the government to implement rolling blackouts to save water, which was followed by another crisis in 2008.

The government is confident that rationing will not be necessary this time but, as a precaution, it has ordered reservoirs further south to preserve water, cut the voltage in the SIC by 10 percent and urged households and industry to reduce consumption. Daylight saving time has also been extended by a couple of months to keep the sun up during the energy-intensive evenings.

The bigger impact though will be on electricity prices as the power industry turns to more expensive oil-fired power plants to cover the shortfall. Power prices in the SIC have already more than doubled in recent months to around US$220 a megawatt hour.

This means higher bills for households and industry which is driving up inflation, although it is the power companies themselves, exposed to spot prices, that may be worst affected.

One solution is to build more reservoirs, but after decades of development the best and easiest sites have already been developed, says Mining and Energy Minister Laurence Golborne. Those remaining are either less efficient or in environmentally and socially sensitive areas.

The bulk of Chile’s hydropower potential lies in the remote southern region of Aysén where Colbún, Endesa and Xstrata are pushing plans to develop reservoirs despite vehement opposition from environmentalists. Unlike central Chile, Aysén is not subject to the same cyclical rainfall which regularly cripples hydropower further north, ensuring a much more reliable energy source.

But, due to difficulties in permitting and transporting the power to centers of consumption, it remains uncertain when, or if, these dams will be developed.

In the meantime, the power industry is looking increasingly to thermoelectric plants to meet Chile’s growing demand for electricity, which would reduce the impact of future droughts on power supplies but raise other concerns, especially environmental ones.

Climate change

While the impact of this year’s drought may be limited and short-lived, it appears that such events are becoming more frequent and form part of a wider trend.

"This is not a new problem,” says Coquimbo’s Gahona. “There has been a shortage of water during the last ten years, evidently the problem is accumulative.”

One suspect is climate change: a 2009 report by Santiago’s Catholic University into the impact of global warming on Chile suggested that the country will become hotter and drier over the next century, meaning balmier summers in the south but potentially catastrophic effects on the already arid north.

The future impact of global warming is far from clear. In fact, other models suggest northern Chile could see more rain as a result, but it is a risk that companies are taking seriously.

Around the world, water is increasingly viewed as a strategic asset by business and government, particularly where it is in short supply.

This is certainly the case in northern Chile, home to the world’s driest desert, where, after two decades of rapid expansion, cities, agriculture and the mining industry are finding themselves increasingly at loggerheads over the region’s scant water supplies.

In some river basins, the government has taken action, for instance, by banning the granting of new water rights from the Calama aquifer. In others, such as the Copiapó Valley, it appears to be too late. Extraction rights granted by the government exceed the volume of water available, and the level of the underground aquifer has consequently been falling for years.

Every drop counts

For agriculture-dependent regions like Coquimbo, finding ways to use water supplies more efficiently is vital to maintain growth.

Coquimbo’s farmers are relatively efficient at using water and more than half use advanced irrigation techniques, but up to 70 percent of the water is lost in the region’s 536 km network of irrigation canals of which just 10 percent is lined, says Gahona.

The government now plans to spend US$220 million lining the canals at critical points, but the long-term solution is to build a series of new reservoirs over the next decade that will lift the country’s water storage capacity by 25 percent to close to five billion cubic meters.

Seven of these will be built in Coquimbo, raising the region’s water storage capacity by 23 percent to 1.6 million cubic meters.

According to Gahona, the expansion is better late than never. "These are projects which should have been carried out 15 years ago," he says.

More than just adding storage capacity, the new reservoirs will allow Coquimbo to expand its farmland by 50 percent to 113,000 hectares.

"This will be a major boost to development,” the governor says.

But as well as building new infrastructure, Gahona says the region will also have to find ways of using water more effectively including planting crops that need less irrigation such as olives.

Chile has become a major olive producer in recent years, but relatively few are grown in Coquimbo. Producing more crops like this would allow the region´s agriculture to grow without using more water and make it more resistant to droughts, says Gahona.

Thirsty miners

Perhaps the industry most at threat from Chile’s water shortage is the mining industry.

The resource is of vital importance to the sector which consumes huge volumes to separate valuable copper-bearing minerals from heavier ore in giant floatation cells.

But the industry consumes surprisingly little water compared with other activities, says Jorge Proust, a water consultant to the mining industry.

In Chile’s northern regions, mining extracts less than 12 cubic meters per second compared to almost 40 cubic meters used by water utilities and 170 cubic meters by farming.

The trouble is that mining is overwhelmingly concentrated in the arid far-north of the country meaning that it is a major consumer just where supplies are scarcest. In the Antofagasta Region, where agriculture is negligible, the industry accounts for almost two thirds of water consumption.

With water already in short supply, the mining industry has strived with some success to improve efficiency, reusing water over and over to minimize extraction.

According to the Chilean Copper Commission (Cochilco), the mining industry used just 0.79 cubic meters of water to process a ton of ore in 2006, down 28 percent from 1.1 cubic meters in 2000.

But ore grades at almost all mines have been sliding, meaning mining companies must process more ore to produce the same amount of metal.

Alistair Marsh, wastewater manager at local chemical solutions firm Sinquiver, says Chilean industry could do more in terms of reusing water.

Membrane technology allows industries to recycle water almost indefinitely, drastically reducing consumption, he points out.

Such technology is expensive and energy intensive but the benefits would be significant. Chilean pulp producers, under pressure over the environmental impact of their emissions, are considering it, says Marsh.

And soon they may not have a choice. The DGA, together with other public bodies, is looking at introducing regulations that would force companies to recycle water and use it more efficiently.

Still, mining needs more water.

With the price of copper and other metals at record highs, the industry is planning a massive expansion to increase copper production by 35 percent by 2020 and triple gold output.

According to Cochilco, this will imply a 45 percent surge in the amount of water consumed by the industry.

But finding fresh sources of water is increasingly difficult, if not impossible. And, even if new sources are found, other concerns may get in the way.

Plans by BHP Billiton to pump water from aquifers high in the Andes Mountains 190 km to its Escondida copper mine, the world’s largest, were shelved after environmental authorities raised concern about the project’s impact on nearby wetlands.

Water, water, everywhere

A closer source is the Pacific Ocean which has no shortage of water.

This option, whether through desalination or using untreated seawater in processes, is still in its infancy but is expected to gain ground given the lack of alternatives for the industry.

BHP Billiton already supplies water to Escondida from a desalination plant and has submitted plans for a much bigger plant, worth more than US$3.5 billion.

Iron ore miner CAP and Canada’s Goldcorp are considering desalination plants for new mines in the Atacama Region.

Meanwhile, Antofagasta Minerals recently inaugurated its new Esperanza mine, the first in Chile to use 100 percent seawater in its operations.

Using seawater brings additional costs. As well as the installations, desalinating the water and pumping it to the mine requires huge amounts of electricity, especially for operations located far inland and thousands of meters above sea level.

But this is a cost mining companies are increasingly prepared to assume.

“Without seawater, it would have been very difficult given the volume of water that we require,” Christian Thiele, general manager of the Esperanza mine, told bUSiness CHILE at the mine’s inauguration where it was praised as an example of innovation by President Sebastián Piñera.

Some in government see it as the industry’s only option in areas where water is scarce. "The mining industry has to accept that it's got to use seawater,” says Gahona.

Another plan floated by some is to build a giant pipeline to pump freshwater from Chile’s temperate south to the arid north.

The costs could be considerably lower than building a series of desalination plants if done on a sufficiently large scale. But extracting water from the south to supply the north would raise political questions, says Proust.

Southern water-rich regions like Biobío and Araucanía, amongst the poorest in the country, could see their economic development curtailed, while Chile’s bone-dry mining regions grow wealthier.

For now the pipeline remains a pipedream, but the mining industry’s thirst must be quenched for Chile to continue growing. With La Niña a constant threat, Chile must figure out how to manage its water resources efficiently or the seedling of development may wither.

Tom Azzopardi is a freelance journalist based in Santiago