This chapter examines the circular economy policies of the selected Latin American countries and assesses how each dimension of the circular water economy – reduction, reuse, recycling, and recovery – is addressed by sectoral policies in the region. The chapter concludes by identifying governance gaps that need to be addressed to achieve a fully integrated circular water economy in Latin America.
The Circular Water Economy in Latin America

2. The governance of the circular water economy in Latin America
Copy link to 2. The governance of the circular water economy in Latin AmericaAbstract
Circular economy policies in Latin America
Copy link to Circular economy policies in Latin AmericaIn Latin America, national and subnational governments are increasingly developing long term visions towards a circular economy in the form of strategies, roadmaps and plans to foster sustainability and resource efficiency (Box 2.1). Half of these countries – Brazil, Colombia, Costa Rica, Mexico, and Uruguay – have formulated, or are set to implement, national strategies, while Chile, Paraguay, and Peru have opted to develop Circular Economy Roadmaps. Furthermore, Uruguay’s earlier Circular Economy Action Plan served as a foundational initiative leading to the formulation of its strategy. In Mexico, a national circular economy policy has been under development since 2023. Some countries have also begun to develop circular economy regulations. For example, Brazil and Costa Rica drafted legislative proposals in 2022 and 2023, respectively. Additionally, Buenos Aires and Mexico City have demonstrated leadership in advancing circular economy initiatives at the local level by enacting subnational circular economy laws in 2021 and 2023.
Box 2.1. Examples of circular economy policies in Latin America
Copy link to Box 2.1. Examples of circular economy policies in Latin AmericaIn Argentina, while there is no overarching national circular economy policy, various initiatives have emerged at both the national and subnational levels. The 2021 National Strategy for Sustainable Consumption and Production led by the Ministry of Environment and Sustainable Development acknowledged the circular economy as a means to achieve more sustainable consumption and production patterns, however it does not set specific objectives or targets related to the circular economy (Ministry of Environment and Sustainable Development, 2021[1]). In 2019, the Association for the Study of Solid Waste created a Circular Economy Coalition gathering business, academia and NGOs. In 2019, the Coalition drafted a document outlining preliminary considerations for the future development of a national strategy, including the need for public procurement policies with circular criteria, regulatory updates in the field of waste management, and new regulations for Extended Producer Responsibility (EPR) (ARS, 2019[2]). At the subnational level, the Autonomous City of Buenos Aires enacted the 2021 Framework Law on Circular Economy (Law No. 6468), establishing the principles and guidelines for implementing the circular economy within its territory, and launched in 2024 the 2024-2028 Circular Economy Strategy which focuses on four main areas for intervention: textile, food, waste from vehicles and energy (City of Buenos Aires, 2024[3]).
Brazil has taken several steps towards a circular economy transition. First, in 2019, the federal government, as part of the National Regional Development Policy, launched a Circular Economy Roadmap, focusing on recycling, renewable energy and water sources (MIDR, 2021[4]). By the end of 2020, the Roadmap led to the creation of two subnational hubs, the Cerrado Circular and Paraíba Circular. Both formed management committees and created project portfolios. Second, in 2022 Brazil started to work on the Circular Economy Bill, which is still under procedure (Federal Senate of Brazil, 2022[5]). Third, in 2024, Brazil enacted the Decree N° 12.082, which establishes the National Strategy for the Circular Economy (Government of Brazil, 2024[6]) and the National Forum for the Circular Economy, a governance body responsible for advice, monitoring and evaluation of the National Strategy.
In 2021, Chile launched the 2040 Circular Economy Roadmap that targets green jobs creation, reduction of waste generation, enhancement of material productivity and increase in recycling rates, both overall and for municipal solid waste. Additionally, it focuses on recovering sites affected by illegal disposal (Government of Chile, 2021[7]).
In 2019, Colombia launched the National Circular Economy Strategy, which prioritises material, water and energy efficiency, with actions including the development of monitoring frameworks and the implementation of measurement standards (Ministry of Environment, 2019[8]). It focuses on six lines of action based on metabolism analyses: i) flow of industrial materials and mass consumption products; ii) flow of packaging materials; iii) flow of biomass; iv) energy sources and flows; v) flow of water; and vi) flow of construction materials. The Strategy presents a series of indicators to measure the progress. At subnational level, seven regional circular economy pacts have been signed to advance in the National Circular Economy Strategy implementation, including the 2018-22 Regional Pact of Bogota and the 2018-22 Regional Pact of Antioquia in Medellin.
In 2023, Costa Rica introduced both the National Circular Economy Strategy and the Circular Economy Bill (Government of Costa Rica, 2023[9]). The National Circular Economy Strategy establishes objectives, indicators and targets for the materials, waste, energy and water flows, as well as for environmental impact, competitiveness, just transition, economic development, industry and innovation and climate change adaptation. The Circular Economy Bill, still under discussion, addresses the circular economy from a value chain approach, including measures to be taken in five value chains: construction and building, commerce and services, the agricultural sector, manufacturing industry and the water value chain.
Mexico announced in 2023 the development of the National Circular Economy Strategy and Action Plan by the Department of Environment and Natural Resources (Government of Mexico, 2023[10]). It aims to minimise resource consumption and waste by promoting design, maintenance, repair, and long-lasting recycling, as part of the National Development Plan (2019-2024) and contribute to climate mitigation objectives outlined in the updated 2020 Nationally Determined Contribution. To advance in this effort, in 2024, Mexico published the Diagnosis for the Development of the National Circular Economy Strategy, conducting a national metabolism analysis of the material, energy, and water flows and identifying key sectors for the development of the national strategy (Government of Mexico, 2024[11]). At the subnational level, the 2023 Circular Economy Law in Mexico City champions technology adoption and research support to enhance resource efficiency (CDMX, 2023[12]).
Paraguay’s circular economy efforts primarily target packaging through the 2024 Roadmap for Circular Economy of Packaging that promotes recycling and waste reduction (Ministry of Industry and Commerce, 2024[13]). The Roadmap was launched by the Circular Economy Driving Group, coordinated by the Ministry of Industry and Trade, the Ministry of Environment and Sustainable Development and the Moisés Bertoni Foundation, with the support of the Innovation Lab of the Inter-American Development Bank. This strategy aims to increase the post-consumer packaging recycling rate, boost the use of recycled materials in packaging manufacturing, expand the export of secondary raw materials to more countries, and enhance the recognition of grassroots recyclers in municipal waste management plans.
Peru developed the Circular Economy Pact in 2021 (MINAM, 2021[14]) and the National Circular Economy Coalition in 2023 (Government of Peru, 2023[15]), which led to the 2030 National Circular Economy Roadmap (MINAM, 2023[16]). The Roadmap establishes 10 targets to be achieved by 2030. These include: increasing the circular economy’s contribution to GDP and employment by 1%; lowering the country’s ecological footprint; cutting greenhouse gas emissions by 40% compared to the business-as-usual scenario; boosting funding for research, development, and innovation in circular economy initiatives by 50%; labelling 25% of mass-consumption products with information on environmental impacts; incorporating circular economy principles into the development plans of over 70% of Regional Governments; valorising at least 10% of municipal solid waste and 70% of non-municipal waste; sourcing 64% of the national electric grid’s energy from renewables; and developing financing mechanisms and capacity-building programmes to promote circular practices across sectors (MINAM, 2023[16]). In addition, the country hosted the First International Forum on the Circular Economy in 2018 and approved the Roadmap to a Circular Economy in the Industry Sector in February 2020.
In Uruguay, there have been two main circular economy milestones: the 2019 Circular Economy National Action Plan and the 2024 Circular Economy National Strategy. The Action Plan, led by the National Committee on the Circular Economy, allowed for the articulation of some circular economy initiatives in sectors such as forestry, food, packaging waste, and material recovery. This included, for instance, integration of circular economy criteria for public procurement of food and packaging, industry transition through an awareness programme, and the design of a Technological Centre for Circular Bioeconomy. The National Circular Economy Strategy aims to optimise resource use and promote dematerialisation and is grounded in a metabolism analysis at the national level of five priority flows – biomass, construction, housing and infrastructure, energy and mobility, consumer goods, and water. It is an inter-institutional effort involving four ministries – the Ministry of Environment, the Ministry of Industry, Energy, and Mining, the Ministry of Livestock, Agriculture, and Fisheries, and the Ministry of Economy and Finance – along with actors from the private sector, academia, and civil society organisations.
In recent years, water resources and sanitation have been included in circular economy policies across Latin America. According to the 2020 OECD Survey on the Circular Economy in Cities and Regions1, 65% of surveyed cities and regions acknowledge water and sanitation as essential component of circular economy strategies (OECD, 2020[17]). Among the 10 surveyed Latin American countries in this report, seven have already implemented circular economy policies, while Mexico is currently in the process of developing one. However, six countries – Brazil, Chile, Colombia, Costa Rica, Peru, and Uruguay – explicitly include water resources in their circular economy policies (Table 2.1). Early initiatives, such as Uruguay's 2019 Circular Economy Action Plan and 2019 Brazil's Circular Economy Roadmap, set the stage for ad hoc measures and localised efforts to include water, like the integration of circular economy criteria for public procurement of food in Uruguay or the development of a digital platform to promote the adoption of water efficient technologies and establishment of circular economy hubs in Brazil. However, more recent policies since 2023, such as Costa Rica's Circular Economy Bill and Strategy and Mexico's Diagnostic for the Development of the National Circular Economy Strategy (Box 2.2), incorporate national-scale metabolic analyses of water, material, and energy flows, alongside the introduction of concrete targets and monitoring indicators. Additionally, countries are starting to develop dedicated policies for the circular economy in the water sector, such as Colombia’s 2020 Circular Economy in the Management of Drinking Water Services and Wastewater Handling (CONPES 4004) and Peru’s 2024-2030 Roadmap to a Circular Economy in Drinking Water and Sanitation.
Box 2.2. Leveraging metabolism analysis to shape a circular economy strategy in Mexico
Copy link to Box 2.2. Leveraging metabolism analysis to shape a circular economy strategy in MexicoIn 2024, Mexico published its Diagnostic for the Development of the National Circular Economy Strategy. To lay the groundwork for this strategy, which had been under development since 2023, Mexico has undertaken a comprehensive metabolic analysis of its economy, assessing the inputs, uses, and outputs of three key resource flows at the national level: 1) materials, including biomass, fossil fuels, metallic and non-metallic minerals, mixed products, and waste streams; 2) water, covering water use by type and sector, such as industrial activities and electricity generation, as well as sources, including surface and groundwater; and 3) energy, examining Mexico’s electricity mix, disaggregated by energy source. This metabolic analysis is represented for each resource flow using the Sankey diagram, providing a visual of economic flows.
Source: Government of Mexico (2024) Bases para la Elaboración de un Diagnóstico de la Estrategia Nacional de Economía Circular en México, https://www.gob.mx/semarnat/prensa/semarnat-presenta-las-bases-del-diagnostico-para-transitar-a-una-economia-circular
Circular economy initiatives in Brazil, Chile, Colombia, Costa Rica, Peru, and Uruguay share a common objective of integrating water resource management into their broader sustainability strategies, emphasising water reuse, efficiency, and the reduction of environmental impacts. For example, Uruguay’s 2024 National Circular Economy Strategy identifies water as a priority resource flow and promotes measures such as recirculation technologies and resource recovery from wastewater. Similarly, Costa Rica’s 2023 Circular Economy Bill emphasises rainwater harvesting and wastewater reuse in key sectors, including agriculture and construction. Brazil’s Circular Economy Roadmap highlights water reuse as a key component of promoting circularity across various sectors, particularly in the semi-arid regions. Chile, on the other hand, has implemented a more targeted approach through its 2021 Circular Economy Roadmap, which specifically addresses water resources via initiatives to enhance information systems and updates regulations for waste management, particularly greywater reuse. Despite progress in some countries, significant gaps remain, particularly in the systematic integration of measures for the recovery of energy and materials. While Peru and Uruguay address nutrient recovery and biosolid recycling, many countries fail to prioritise recovery or adequately target underrepresented sectors, such as urban water use and energy.
The distinctive features of each country’s strategy are shaped by their unique environmental challenges and governance structures. Colombia’s approach, through the 2020 National Circular Economy Strategy and CONPES 4004, relies on targets for increasing water productivity and reducing water pollution, supported by detailed monitoring and evaluation frameworks. Costa Rica’s strategy focuses instead on integrating water management into broader eco-friendly practices, such as public procurement and sector-specific guidelines. Peru and Uruguay prioritise water efficiency and recycling within the context of their broader sustainability goals, with Uruguay notably identifying water as one of its five priority flows in the 2024 National Circular Economy Strategy.
Despite the distinct challenges each country faces, common patterns emerge in their efforts to advance circular economy goals. Brazil and Colombia face the need for effective implementation of their circular economy strategies, particularly in regions with significant water scarcity and pollution issues. In Chile and Costa Rica there are regulatory hurdles, specifically for adopting new technologies and practices in water reuse and wastewater management. In Peru and Uruguay, the challenge lies in ensuring that newly established roadmaps and strategies can be effectively operationalised in sectors like water and sanitation, where infrastructure and resource limitations are significant. Despite these challenges, all Latin American surveyed countries share a commitment to fostering innovation, enhancing regulatory frameworks, and building partnerships across sectors to achieve their circular economy objectives.
Funding mechanisms to support circular water economy policies show diverse approaches, with some countries leveraging innovative financing tools and others focusing on more traditional public funding. Countries like Colombia, Costa Rica and Uruguay have developed comprehensive financial strategies that integrate green financing, incentives for businesses, and public-private partnerships. For instance, Colombia encourages private-sector participation through favourable credit conditions and seed capital. Costa Rica offers tax credits, accelerated depreciation, and income tax reductions to promote water-saving technologies and innovation. Uruguay’s approach includes financial tools with circularity criteria to guide investment. In contrast, Brazil and Paraguay exhibit a more limited approach, with fewer details available on dedicated financing mechanisms. In Peru, emerging financing mechanisms, including between the IDB and the Peruvian Federation of Municipal Savings and Credit Banks, along with green bonds issued by Banco de Crédito del Peru, support circular economy initiatives. In general, the adoption of blended finance models, along with targeted incentives and capacity-building support, is critical for scaling up circular water initiatives. However, the lack of detailed financial strategies in some countries could impede the effective implementation of circular water policies in those countries.
Table 2.1. National circular water economy policies in surveyed Latin American countries
Copy link to Table 2.1. National circular water economy policies in surveyed Latin American countries
Country |
Policy |
Year |
Explicit mention of circular water economy dimensions |
Water-related objectives, targets and measures |
General and water-specific funding mechanisms |
||
---|---|---|---|---|---|---|---|
Reduction |
Reuse & recycling |
Recovery |
|||||
Brazil |
2019 |
× |
✓ |
× |
Promote the adoption of technologies that optimise water resource usage and reuse in semi-arid regions. To this end, it was developed the Sabiá Platform, a web that features a database of available technologies and education courses. |
× |
|
2022 |
× |
× |
× |
Raise public awareness on the better use of resources, including energy, water, and raw materials. |
The Just Transition Mechanism provides financial resources to promote investments, access to loans, startup creation, and innovation and helping high-carbon sectors adopt low-carbon technologies. |
||
2024 |
× |
× |
× |
× |
Financing schemes, incentives for public procurement of circular goods and services and appropriate tax policies to reduce pollution and waste. |
||
Chile |
2021 |
× |
✓ |
× |
|
It includes actions such as channeling international impact investing funds towards national circular economy projects, defining funding priorities and designing public financing fund programmes to incentivise the development of secondary markets and ensuring that the financial sector expands its offer of green financing for circular projects and firms |
|
|
2019 |
✓ |
✓ |
× |
|
Creation of incentives for businesses and entrepreneurs (e.g. favorable credit or seed capital) to build capacities, provide access to technical assistance and promote innovation and R&D. |
|
Circular Economy in Management of Drinking Water Services and Wastewater Handling (CONPES 4004) |
2020 |
✓ |
✓ |
× |
With baseline 2018, 4 targets by 2030:
|
Measure to review and improve resource allocation and spending efficiency in the aqueduct and sewerage sector, as well as adjustments to financing instruments related to the drinking water sector (water usage fees) and wastewater management (retributive fees). The policy includes a participatory budget involving various national entities amounting to nearly USD 8 million. |
|
Costa Rica |
2023 |
✓ |
✓ |
× |
|
Two main funding areas: innovation in the circular economy – including technology transfer, creation of clusters for innovation and cooperation among private sector and academia – and less water-intensive agriculture, promoting rainwater harvesting, efficient irrigation systems and reducing evaporation, erosion, and nutrient loss. Additionally, it sets incentives for individuals or legal entities engaged in waste repair, recovery, treatment and reintegration into production processes. These incentives are: 1) a tax credit for interest paid on loans classified as green by financial institutions, 2) accelerated depreciation of assets for income tax deductions, and 3) 2% reduction in the income tax. |
|
2023 |
✓ |
✓ |
× |
|
Investments in startegic areas such as climate change adaptation, bioeconomy, industrial digitalisation for a circular economy, and green entrepreneurship. Creation of multilateral organisations, funding agencies and multisectoral partnership for co-financing and financial frameworks focused on compensating socio-environmental impacts. |
||
Peru |
2023 |
✓ |
✓ |
✓ |
|
Financing strategy that requires an estimation of implementation costs, technical resources and capacities, identification of funding sources, key stakeholders and risks. Financing mechanisms such as debt-for-nature swaps, global funds for sustainable development, public treasury budgets, regional development funds, and sector-specific funds. |
|
2030 Roadmap to a Circular Economy in Drinking Water and Sanitation |
2024 |
× |
✓ |
✓ |
6 goals for 2030:
|
× |
|
|
2019 |
× |
× |
× |
× |
× |
|
2024 |
✓ |
✓ |
✓ |
Water as one of the five priority flows with 6 measures:
|
|
Note: Among the surveyed countries Argentina, Honduras and Mexico they do not have a circular economy national policy and the Honduras’s 2024 Roadmap for Circular Economy of Packaging does not relate to water. A “✓” indicates it is in place while an “×” implies it is not in place.
Source: OECD/IDB (2024) OECD/IDB Survey on Water and Circular Economy in Selected Countries of Latin America
Water frameworks including circular dimensions
Copy link to Water frameworks including circular dimensionsThe results of the OECD/IDB Survey highlight two complementary policy approaches to address the circular water economy. On the one hand, some countries are developing circular economy policies that, in some cases, mention the link to water or establish specific measures and/or targets related to one or more dimensions of the circular water economy. On the other hand, sectoral policies and initiatives, primarily in the water and sanitation and water resource management policies but also in climate change policies, embed considerations that focus on specific dimensions of the circular water economy.
The OECD/IDB Survey also reveal that the surveyed countries have established goals and principles related to water reduction and efficiency in their regulatory frameworks, accompanied by the development of standards, certifications, and indicators for evaluation and monitoring. In addition, many countries have implemented economic and regulatory instruments as well as water-saving measures, technologies and infrastructure modernisation. Finally, improved data and information on water use and the development of capacities and awareness initiatives are also being developed in most countries. Regulations have been established to delineate the types of water uses and several countries have conducted studies and assessments on the potential uses of wastewater. To a lesser extent, some practices encourage the generation of data and information on water reuse and recycling and engage stakeholders in defining urban reuse plans. However, nutrient recovery and energy generation are not widely considered in current legal and regulatory frameworks in the surveyed countries in Latin America.
The next section provides a detailed review of the relevant regulatory and policy initiatives that have been undertaken in the surveyed countries to help support the circular water economy.
Reducing water use and using it efficiently
All surveyed countries have established regulatory frameworks to promote water reduction and efficiency. They have set targets and implemented specific measures to control water losses, encourage recycling, and optimise usage, with notable progress in laws and reforms across the region.
In Argentina, the Environmental Management of Waters Regime (Law No. 25688) sets minimum environmental budgets for the preservation and rational use of water.
In Brazil, Law 11.445/2007 (modified by Law 14.026/2020) establishes the "reduction and control of water losses, promotion of energy efficiency, recycling of sanitary effluents, and rainwater harvesting." The National Water and Sanitation Agency sets standards for the reduction and control of water losses. Ordinance No. 490, 2021 proposes a substantial 90% reduction in losses between 2025 and 2026.
In Chile, the reform of the Water Code (Law 21.435 of 2023), initially enacted in 1981, promotes a balance between efficiency and security in the productive uses of water. The Draft Law 1317909 of 2020 encourages the rational use of water in the productive sector.
In Colombia, Law 373 of 1997 defines annual targets for reducing losses in aqueduct systems and integrates water-efficient programmes into regional and municipal plans. Moreover, the 2010-2022 National Policy for the Integrated Management of Water Resources establishes the principle of "savings and efficient use" of water.
The Water Law in Costa Rica, amended in 2012 addresses water efficiency, sets measures to tackle scarcity and promotes rationalisation.
In Honduras, the Drinking Water and Sanitation Sector Law identifies water wastage in unauthorised activities as infraction, penalising behaviours that undermine authorised water use. It also mandates service providers to inform users about the benefits of low-consumption sanitary fixtures.
In Mexico, the General Law of Ecological Balance and Environmental Protection, enacted in 1988 and updated in 2024, mandates authorities to promote water conservation. The CONAGUA promotes efficient water use and manages consumption patterns.
In Paraguay, Law 1614 of 2000 establishes the regulatory framework for the reduction of water losses, amongst others. The Water Resources Law 3239 of 2007 and the 2023 National Drinking Water Supply and Sanitation Plan promote a rational and efficient use of water.
In Peru, the Water Resources Law establishes water efficiency as a fundamental principle, and the Framework Law for the Management and Provision of Sanitation Services prioritise efficiency in service provision.
In Uruguay, the Water Code and Decree 253/979 emphasise the state's and operators' responsibility to promote water conservation and efficient use.
Half of the surveyed countries employ economic and financial instruments to incentivise water use reduction, utilising measures such as fines, usage fees, and dedicated funds to promote efficient water management across various sectors. In Brazil, Decree nº 11,599/2023 allocates financial support to reduce losses in treated water, with goals to be set in the planning instruments by the municipalities. Costa Rica utilises the Fee for Water Utilisation (Executive Decree No. 32868-MINAE), to incentivise improved water resource management across different sectors, including human consumption, agriculture, and industries. Honduras addresses water wastage through the Drinking Water and Sanitation Sector Framework Law (No. 118-2003), imposing fines on users who commit infringements. In Peru, Decree Law 1284 establishes a Safe Water Investment Fund, providing financial support for programmes and projects enhancing the economic and operational efficiency of sanitation service providers. In Uruguay, the National Water Policy advocates for the rational use of water through cultural and educational aspects and introduces charges for usage as an economic instrument to encourage efficient water utilisation.
Most countries have implemented measures to modernise infrastructure and adopt new technologies aimed at improving water efficiency, with initiatives ranging from energy-efficient projects to the adoption of digital tools and low-consumption technologies. In Brazil, the Energy Efficiency Project in Water Supply and the pilot project "Digital Platform Sabiá" implement energy-efficient measures and leverage new technologies for optimising water use. In Colombia, the National Policy for the Integrated Management of Water Resources and its Action Plan encourage the adoption of technologies promoting water savings, alongside improvement of obsolete water supply infrastructure. Also, Law 373 of 1997 and the 2022-2026 National Development Plan further advocate for the adoption of low water consumption technologies, digitalisation, smart metering, and innovation in the water and sanitation sector. Costa Rica, through the Decree No. 30413 and the Code of Hydraulic and Sanitary Installations in Buildings, sets goals for infrastructure expansion and improvements, including in water purification and treatment plants. Honduras, under the General Water Law (No. 181-2009), addresses infrastructure by creating incentives for the implementation of technologies that reduce water use and consumption. In Mexico, the General Law of Ecological Balance and Environmental Protection assigns authorities the responsibility of promoting water-saving measures. In Peru, initiatives under the National Water Resources Policy and the National Water Resources Plan focus on modernising distribution and irrigation systems, establishing efficiency parameters, and promoting research and application of technologies for efficient water use. In Uruguay, the National Water Plan (Decree 205/2017) and the Integrated Waste Management Law incentivise the use of efficient technologies for inputs, including water and energy. Uruguay's National Water Supply and Sanitation Company adopted water loss reduction techniques within two water treatment plants between 2013 and 2019, resulting in a cumulative savings of 89.3 million cubic metres.
Data-driven approaches and capacity-building initiatives are less commonly used for reducing water use and enhancing resource management in the region. In Colombia, Law 373 of 1997 establishes educational campaigns to raise public awareness about the rational and efficient use of water resources. Additionally, Colombia's Guide to saving and efficient use of water provides specific directives to environmental authorities and water concessionaires for planning and implementing measures that enhance efficient water use. This initiative focuses on capacity building, ensuring that relevant stakeholders have the necessary knowledge and skills to actively contribute to water conservation efforts. In Costa Rica, the Environmental Accounts of the Central Bank include a water account, providing essential data and metrics to better understand water usage patterns and identify areas for improvement. In 2023, Paraguay introduced the Water Information System, a web platform anticipated to facilitate the generation of efficient and sustainable water resource management (GPSDD, 2023[18]). Similarly, Honduras uses the Agua de Honduras platform to provide reliable and free information on water resources, combining scientific methods and digital technology to support more efficient decision-making in water management. Additionally, the Drinking Water and Sanitation Sector Framework Law (No. 118-2003) seeks to educate users on the advantages of adopting low-consumption habits.
Reusing water and recycling treated wastewater
Several Latin American countries have established regulations to promote the sustainable management of water resources through reuse of untreated water (e.g. rainwater harvesting) and recycling of treated wastewater across various sectors, including domestic, agricultural, and industrial use. In the area of recycling, Colombia's Climate Change Law and Resolution 1256 sets targets for treated wastewater use in domestic applications. Costa Rica further enforces treatment standards and accountability for wastewater management across various sectors. Regarding agricultural use, in Argentina, the Guiding Principles of Water Policy emphasise advocate for water recycling, with regional resolutions focusing on agricultural applications, while Mexico’s National Water Law supports municipal wastewater recycling for agriculture, ensuring compliance with health standards. Similarly, Brazil's laws encourage the recycling of sanitary effluents, rainwater harvesting, and greywater reuse in urban and agricultural settings. Peru's National Water Resources Plan and comprehensive legal framework align wastewater recycling with enhancing water resource availability and environmental protection. Industrial wastewater recycling is emphasised Paraguay's 2023 National Plan that supports wastewater technologies in urban and industrial developments, reflecting a similar commitment. Finally, Chile and Honduras focus on incentivising greywater reuse and regulated recycling for ecological preservation and urban applications, with Honduras additionally targeting environmental education and aquifer recharge.
Half of the surveyed countries adopted standards for wastewater recycling. In Brazil, the ANA establishes reference standards for the recycling sanitary effluents, aligning them with environmental and public health standards. Costa Rica, through the Wastewater Discharge and Reuse Regulation (Decree No. 33601), defines maximum permissible limits for the discharge and recycling of wastewater from commercial, industrial, and service activities. In Mexico, NOM-006-CONAGUA-1997 establishes maximum permissible limits for contaminants to ensure the safe recycling of wastewater in public services, contributing to the protection of public health and the environment. In Paraguay, Resolution 222 of 2002 specifies the different types of treated water for domestic supply (special, conventional or simplified water treatment), while Law 5428/2015 defines technical requirements for effluent treatment and specific rules for recycling sewage effluent. Similarly, in Peru, the Supreme Decree No. 003-2010-MINAM approves maximum permissible limits for effluents from domestic or municipal wastewater treatment plants and mandates the establishment of a monitoring programme in these plants, reinforcing the commitment to maintaining water quality standards in recycled wastewater.
A few countries carried out research and assessments to understand opportunities and challenges associated with wastewater recycling. In Argentina, an assessment conducted in 2023 by the Secretary of Infrastructure and Water Policy highlighted the critical need for a National Plan for Wastewater Treatment. This study serves as a foundational step toward recognising the importance of wastewater management and developing strategic plans for its treatment and recycling. In Colombia, the 2018-2030 Water and Basic Sanitation Master Plan undertook a review of regulations to facilitate the recycling of water. Moreover, Colombia's CONPES 3934 Green Growth Policy diagnosed inefficiencies in water resource use and advocated for increased reuse of grey water and rainwater, emphasising the importance of improving efficiency in water use and wastewater treatment. The 2022-2026 National Development Plan in Colombia urged the preparation of a study that analyses and documents techniques for the reuse and recycling of domestic, industrial, agricultural, and rainwater wastewater.
Other practices focus on economic incentives, data and information and stakeholder engagement. In Costa Rica, the 2016–2045 National Policy on Wastewater Sanitation includes two strategic actions: first, it aims to establish a national information system for discharges and water recycling, with the goal of achieving full operationalisation by 2025, emphasising the importance of data and information in effective wastewater management. Second, it foresees to develop a strategy for the safe and valued reuse and recycling of wastewater, actively engaging stakeholders in the decision-making process. In Honduras, the General Water Law (No. 181-2009) designates the Water Authority as responsible for creating incentives to encourage the implementation of wastewater recycle systems. This approach recognises the significance of providing incentives and support to promote sustainable wastewater practices. In Peru, the ProInnóvate National Programme for Technological Development and Innovation, established by Supreme Decree No. 009-2021-PRODUCE, focuses on enhancing the capacity of municipal officials with a specific emphasis on recycling wastewater. This programme addresses the need for skill development, technology adoption, and funding to support effective wastewater recycling initiatives.
Recovering energy and materials from wastewater treatment
Half of the surveyed countries implement standards and regulations to ensure the sustainable management of by-products like sludges and biosolids from wastewater treatment plants. These measures encompass criteria for their use, disposal, or elimination and the creation of databases to track these by-products. Argentina, through Resolution 410/2018, established national criteria for managing sludges and biosolids, allowing their use in afforestation, floriculture, landscape restoration, and more. The resolution also urges the creation of a database for these by-products. Chile set conditions under which sludge can be recovered and reused as compost in Decree 4 of 2009. Colombia’s Decree 1287 of 2014 sets criteria for using biosolids, while the National Development Plan 2022-2026 encourages alternatives for by-product recycling. In Costa Rica, the Integrated Waste Management Law and its Regulation address waste from water management, promoting reduction, reuse and recycling, and valorisation. Costa Rica’s Regulation for the Management and Final Disposition of Sludge and Biosolids focuses on responsible waste management and reducing the environmental footprint. In Paraguay, Law 5428 of 2015 establishes specific regulations or standards for the recycling of sewage effluent. Peru's Supreme Decree 015-2017-HOUSING regulates the reuse of sludge as biosolids in various activities, promoting their use in agriculture, industry, forestry and ceramics.
Countries are taking steps towards a comprehensive approach to energy generation and decarbonisation in the water and sanitation sector. In Chile, the water utility Aguas Andinas introduced bio-factories as a circular economy solution in 2017, transforming wastewater into electricity, natural gas, and fertiliser for agricultural purposes (Aguas Andinas, 2022[19]). Moreover, the 2030 Sanitation Agenda aims to reduce the carbon footprint of the sanitation sector and promote the circular economy in water resource management by 2030 (Government of Chile, 2023[20]). In Colombia, Law 2169 of 2021, the Climate Change Law, focuses on reducing greenhouse gas emissions by expanding the coverage of domestic wastewater management and utilising biogas in Wastewater Treatment Plants with anaerobic technologies. The 2022-2026 National Development Plan addresses the treatment of industrial wastewater to prevent methane emissions and meet the energy demand of wastewater treatment plants. Costa Rica's National Decarbonisation Plan from 2018 to 2050 underscores the importance of effective wastewater and liquid waste management and reuse as crucial components in driving emissions reduction efforts. In Paraguay, Law 5428 of 2015 establishes specific standards in the use of sewage for the generation of non-conventional energy under the responsibility of the Ministry of Environment and Sustainable Development.
Governance gaps
Copy link to Governance gapsAccording to the OECD/IDB Survey, the three most prominent challenges to transition from a linear to a circular water economy (Figure 2.1) are regulatory gaps (50% of the surveyed countries), insufficient financial resources (40%), and institutional fragmentation (40%) (OECD, 2023[21]).
Figure 2.1. Challenges to the circular water economy in surveyed Latin American countries
Copy link to Figure 2.1. Challenges to the circular water economy in surveyed Latin American countries
Note: Countries ranked the 9 obstacles in the figure from most to least important, using a scale of 1 to 9.
Source: OECD/IDB (2024) OECD/IDB Survey on Water and Circular Economy in Selected Countries of Latin America
Regulatory gaps. A lack of clear, supportive regulations can impede progress towards the circular water economy as existing regulatory frameworks may fall short in addressing the nuances of circular economy practices. Four countries – Argentina, Brazil, Costa Rica, and Mexico – reported that regulatory and policy gaps are the top challenge in implementing a circular water economy. Only half of the surveyed countries, including Argentina, Colombia, Costa Rica, Paraguay and Peru, implement standards and regulations to ensure the sustainable management of by-products like sludge and biosolids from wastewater treatment plants. On the other hand, four countries – Chile, Colombia, Costa Rica and Paraguay – are taking steps to a comprehensive approach towards energy generation and decarbonisation in the water and sanitation sector. Conflicting regulations may create additional roadblocks, hindering the seamless implementation of circular water initiatives. For example, in Peru, while the water and sanitation regulator SUNASS operates under a strategic plan that aims to optimise water usage and promote sustainability, significant challenges remain in translating these ambitions into practice. The lack of technical capacity, limited enforcement mechanisms, and insufficient integration with broader policies have hindered tangible progress in SUNASS prioritising circular economy principles within water and sanitation services.
Insufficient funding and financial incentives. The successful transition to circular water management practices requires substantial upfront investments in new technologies, infrastructure upgrades, and comprehensive training programmes, amongst others. The lack of robust financial incentives or support from governmental and institutional bodies represent a barrier to the widespread adoption of circular economy initiatives in the water sector. Three of the ten surveyed countries – Chile, Colombia and Uruguay – reported the lack of financing or financial incentives as the main challenge in transitioning to a circular economy in the water sector. While half of the countries, namely Brazil, Costa Rica, Honduras, Peru and Uruguay, have economic incentives to encourage the reduction of water use, economic instruments are still needed to encourage the recycling of treated wastewater and the recirculation of by-products. Honduras stands out as the only country whose General Water Law promotes the creation of incentives to encourage the implementation of wastewater recycling systems.
Institutional fragmentation. Overcoming hurdles in circular water management requires a holistic vision, currently jeopardised by institutional fragmentation within the water sector in the surveyed countries. A circular approach to water requires alignment with energy, waste, agriculture, and urban planning policies, among others. This requires establishing coordination mechanisms between departments and levels of government. None of the countries analysed have specific coordination mechanisms to advance the implementation of circular economy policies in the water sector. This is identified as the main challenge to advance in circularity in the water sector in Paraguay and Peru.
Lack of awareness, education and data. A critical impediment to the widespread adoption of circular water management practices is the lack of awareness among key stakeholders, including industry and civil society. Among all the countries surveyed, Peru and Uruguay, through the ProInnóvate initiative and the National Circular Economy Strategy, respectively, stand out as the only countries that have developed actions for capacity building in the circular water economy. Addressing all dimensions of the circular water economy through public awareness actions and capacity building among practitioners and policy making is a key step in the transition. Civil society may not be familiar with the potential benefits and effective approaches associated with circular water management. Honduras identifies the lack of awareness as the main challenge towards a circular water economy in the country. Data collection and monitoring also remain insufficient in surveyed countries, particularly at the subnational level, further limiting effective implementation. For example, in Colombia, the Drinking Water and Sanitation Regulation Commission introduced performance indicators such as the Standard Billed Subscriber Loss Index2 which measures commercial and technical water losses and sets regulatory targets. However, compliance assessment reveals significant data gaps, with approximately 55% of large providers and 85% of medium-sized providers lacking sufficient data to evaluate compliance.
Building on the OECD Principles on Water Governance (Box 2.3), enhancing policy coherence and establishing clear roles and responsibilities emerged as the top governance dimensions to address in the context of circular water economy, highlighted by 9 and 8 out of 10 of the countries, respectively (Figure 2.2). Additionally, 7 out of 10 of surveyed countries highlighted regulatory frameworks and financing as relevant governance aspects.
Figure 2.2. Priority governance dimensions for the circular water economy in surveyed Latin American countries
Copy link to Figure 2.2. Priority governance dimensions for the circular water economy in surveyed Latin American countries
Note: Countries assessed the governance dimensions on a scale of 1 to 4, where 4 denoted the highest level of relevance.
Source: OECD/IDB (2024) OECD/IDB Survey on Water and Circular Economy in Selected Countries of Latin America
Box 2.3. The OECD Principles on Water Governance
Copy link to Box 2.3. The OECD Principles on Water GovernanceThe OECD Principles on Water Governance (Figure 2.3) aim to enhance water governance systems to manage “too much, too little and too polluted” water and foster universal access to drinking water and sanitation in a sustainable, integrated and inclusive way, at an acceptable cost and in a reasonable timeframe. They support effective, efficient and inclusive water governance systems as follows:
Figure 2.3. OECD Principles on Water Governance
Copy link to Figure 2.3. OECD Principles on Water Governance
Governance is effective when it sets clear policy goals and targets, ensures their implementation, and achieves expected outcomes.
Principle 1. Clearly allocate and distinguish roles and responsibilities for water policymaking, policy implementation, operational management and regulation, and foster co-ordination across these responsible authorities.
Principle 2. Manage water at the appropriate scale(s) within integrated basin governance systems to reflect local conditions, and foster co-ordination between the different scales.
Principle 3. Encourage policy coherence through effective cross-sectoral co-ordination, especially between policies for water and the environment, health, energy, agriculture, industry, spatial planning and land use.
Principle 4. Adapt the level of capacity of responsible authorities to the complexity of water challenges to be met, and to the set of competencies required to carry out their duties.
Efficiency involves maximising benefits while minimising costs to society.
Principle 5. Produce, update, and share timely, consistent, comparable and policy-relevant water and water-related data and information, and use it to guide, assess and improve water policy.
Principle 6. Ensure that governance arrangements help mobilise water finance and allocate financial resources in an efficient, transparent and timely manner
Principle 7. Ensure that sound water management regulatory frameworks are effectively implemented and enforced in pursuit of the public interest.
Principle 8. Promote the adoption and implementation of innovative water governance practices across responsible authorities, levels of government and relevant stakeholders.
Trust and engagement focus on building public confidence and inclusiveness through democratic legitimacy and fairness.
Principle 9. Mainstream integrity and transparency practices across water policies, water institutions and water governance frameworks for greater accountability and trust in decision-making.
Principle 10. Promote stakeholder engagement for informed and outcome-oriented contributions to water policy design and implementation.
Principle 11. Encourage water governance frameworks that help manage trade-offs across water users, rural and urban areas, and generations.
Principle 12. Promote regular monitoring and evaluation of water policy and governance where appropriate, share the results with the public and make adjustments when needed.
Source: OECD (2015) OECD Principles on Water Governance, http://www.oecd.org/cfe/regional-policy/OECD-Principles-on-WaterGovernance.pdf
References
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[17] OECD (2020), The Circular Economy in Cities and Regions: Synthesis Report, OECD Urban Studies, OECD Publishing, Paris, https://doi.org/10.1787/10ac6ae4-en.
Notes
Copy link to Notes← 1. The survey gathered 51 responses from cities and regions across Europe (38), North and South America (10), Oceania (2), and Asia (1).
← 2. Standard Billed Subscriber Loss Index is the Standard Billed Subscriber Loss Index (expressed in m³/ subscriber/month) corresponding to the average volume of water per subscriber that is lost in the system, whether through technical or commercial losses. The regulatory standard for this indicator is 6 m³/subscriber/month.