This report identifies opportunities and challenges for local financing of water utilities in Peru and suggests recommendations for removing barriers and creating incentives for scaling-up local financing to local water utilities. It was developed with an understanding that meeting the Millennium Development Goals (MDGs) in water and sanitation in Peru will require scaling up local financing for the sector and that efficiency and effectiveness can be enhanced by greater involvement of local institutional investors and other parties. This joint study exposes many of the barriers to local private financing facing the urban water supply and sewerage (WS&S) sector in Peru. In short, the majority of local water utilities cannot meet credit rating and governance standards required to access private financing. Consequently, loans from financial markets are rare. These findings are probably not specific to Peru. Accordingly, there is great value for central governments to undertake similarly detailed studies to identify the obstacles preventing access to local financing unique to their country's WS&S sector. | Este informe identifica oportunidades y retos para el financiamiento local de las Empresas de Agua (EPS) en Perú y sugiere recomendaciones para eliminar las barreras y crear los incentivos que permitan expandir el financiamiento local a las EPS. Fue desarrollado partiendo de la premisa de que el logro de los Objetivos de Desarrollo del Milenio en Perú, en materia de agua y saneamiento, requerirá la expansión del financiamiento privado al sector; asimismo, que es posible incrementar la eficacia y la eficiencia de las EPS por medio de una mayor participación de inversores institucionales locales y otros actores.

Between 1996 and 2005, natural catastrophic events had an estimated cost of US$575.2 billion world-wide. In particular, it has been observed that developing countries are relatively more affected by such events, since its gross domestic product (GDP) have showed sharper declines than developed countries' ratios. On August 15, 2007, an earthquake measuring 7.9 on the Richter scale shook the southern part of the central coast of Peru, with devastating consequences. Given the magnitude of the damage caused, one wonders how much less the cost of rehabilitating water and sanitation systems might have been if public investment projects and management of urban utilities (companies in charge of the water and sanitation provision), had incorporated disaster risk reduction measures. For this reason, and because this is a key public sector service for the wellbeing of population, the World Bank's water and sanitation program commissioned Apoyo Consultoria S.A.C. to conduct a research on the water and sanitation sector in order to attend the following inquiry: how much unpreparedness cost to the sector providing water and sanitation services? In other words, in economic terms, what will have been the gain to society or the reconstruction savings if risk prevention measures had been included in the management of services in the sector proposed for the analysis?