Liquid assets: Why Latin America is embracing investments in water
Key takeaways
• Latin America is treating water as a strategic investment priority as climate pressures, urbanization, and industrial demand expose a USD37 billion annual infrastructure financing gap.
• Governments and investors are accelerating public-private partnerships, circular water systems, and technology-driven efficiency projects to strengthen resilience and attract long-term private markets capital.
• Recent policy reforms and water scarcity concerns are reshaping investment opportunities across sanitation, desalination, agriculture, mining, and sustainable infrastructure throughout the region.
Across the region, governments recognize water as critical to sustainable development. The next step is the rolling-out of innovative financing models at scale to secure the region’s future.
Throughout Latin America, water is increasingly seen as something more than a basic service. As a strategic enabler of socioeconomic development, water is taking on greater importance to policymakers and to institutional investors.
“This shift in perspective opens up a greater opportunity to promote investments that not only address current gaps but also strengthen territorial resilience in the face of climate challenges,” said Mariella Sánchez Guerra, Executive Director of Aquafondo, a water fund created to protect the water supply in Peru’s capital, Lima.
On the face of it, Latin America is remarkably water-rich, possessing about a third of the world’s renewable freshwater resources while supporting just 8% of its total population. But much of that water is concentrated in the Amazon basin and sparsely populated Andean regions, far from the major urban, agricultural and industrial centers where demand is highest.
Throughout the region, an estimated 150 million people live in areas deemed highly water-scarce, while 400 million lack adequate sanitation. And supply struggles to cope with the competing needs of agriculture, mining, households and industry – including two major emerging sectors: data centers and green hydrogen production.
Achieving resilience will require massive spending on reservoirs, treatment plants, desalination, modern irrigation, leak reduction, watershed restoration and sanitation networks. But an estimated USD37 billion annual investment shortfall stands in the way.
New financing methods for investing in water
Closing that gap will require “new combinations of financing and innovative coordination between public, private, and climate actors,” said Global Water Partnership President Pablo Bereciartua at the launch of the Regional Investment Initiative in Water and Climate Resilience in October 2025.
Fabian Ibarburu, CFA and CEO at CAF-AM Uruguay, the specialized asset management subsidiary of CAF, the Development Bank of Latin America, notes that public-private partnerships (PPP) have been the most bankable route to water investment in the region, converting politically complex infrastructure needs into investable, long-duration cash-flow assets. PPP laws have been implemented widely across Latin America.
Even without such laws, he argues that bankable structures can be created where there is a reliable and creditworthy offtaker, predictable income stream, and a contract that clearly lays out how disagreements between the parties are handled and the conditions under which they can end their agreement.
In addition, Ibarburu stressed the importance of a take-or-pay clause, ensuring payment even if water is not needed or used.
“As far as you can, you should also be able to measure everything in the contract,” he said.
Many water projects, however, require complex financing. A project that shores up water supply for both industry and consumers, for example, could be financed using a combination of project finance and public-private partnerships, supported by a mix of private and municipality offtake agreements with variable revenue streams.
“It’s really difficult for regular banks or investors to create the sophisticated mechanisms needed to support such projects at scale,” explained Mauro Solis, CFA, Senior Asset Manager at North American Development Bank (NADBank).
“If we could find a formula that works and we can repeat that, it would be easier. But in practice, water projects are very complex, and we may need a bespoke mechanism most of the time.”
To accommodate that, NADBank launched a USD400 million water resiliency-fund, in 2025 to support water conservation and diversification in the US-Mexico border region.
According to Solis, NADBank is open to innovative structures. “The water resiliency fund is a good example of such flexibility, as it considers a mix of grants and financing and technical assistance for projects to flourish. It is this flexibility that allows us to work with the public and private sector to tailor financial solutions for their infrastructure needs,” he said.
“I can’t say that we’ll approve any kind of structure,” added Solis, “but we will seriously consider any idea that could expand water access.”
Evelyn Balassiano, Partner at White & Case, said the lack of an established recipe makes creativity essential. She pointed to an emerging financing model in Brazil – which she described as “a sort of corporate-slash-project structure” – where companies raise financing at the corporate level for a specific portfolio of water projects, offering investors greater cash flows for debt service than in a pure project financing while obtaining more flexible covenants.
Balassiano also sees the private-to-private partnership model that is gaining traction in the US water sector as a methodology that can easily be exported to Latin America. This generally involves specialized water technology or service companies partnering with private industrial and commercial developers to design, build, own and operate water and wastewater systems. “It's the functional equivalent of a long-term concession with stable revenues,” she said.
Adopting such approaches more widely is constrained, however, by a shortage of technical and institutional capacity to structure bankable projects, said Ibarburu. While capital is available, many countries still depend on external expertise to design and implement complex, climate-resilient structures.
Guerra added that stronger impact measurement tools could help attract investment by making the economic, social and environmental benefits of water investments more visible.
“This also requires reinforcing multi-stakeholder platforms, such as water funds, which facilitate the identification and implementation of projects with a territorial approach,” she said.
A changing climate
Water insecurity in Latin America has been exacerbated by more frequent and intense droughts and floods, pushing the issue to the forefront of policy agendas. This is leading to the introduction of new regulation that spurs new investment in water infrastructure.
In Chile, for example, mining companies now face a cap on their freshwater use and are turning to recycled water, said Balassiano.
In Brazil, the 2020 New Legal Framework for Sanitation mandated the aggregation of municipal water services into regional blocks, making it easier for large institutional investors to underwrite projects efficiently. “That needs to happen for desalination as well to make projects economically feasible,” said Balassiano.
Meanwhile, policy shifts are forcing corporates to make their operations less water intensive. Google, for instance, redesigned its USD850 million data center in Canelones, Uruguay, to use air cooling instead of water after a public backlash during the severe drought of 2023. The original design would have consumed as much water as 50,000 people, noted Ibarburu.
Moreover, several major Latin American economies have begun implementing circular water policies (see figure 1), closing the loop through recovering, treating and reusing water within industrial, agricultural or domestic systems.
Efficiency revolution
Investment in technology to drive water efficiency is also gathering steam.
“We are seeing growing adoption of water monitoring, measurement and efficiency technologies, such as sensors, telemetry and smart management systems that help optimize water use and support more informed decision-making,” said Guerra.
One major target is leakage. In many cities, around half of the treated water that is pumped into the distribution system is lost before it reaches customers. Ibarburu said that Uruguay is deploying sensors throughout its water network to detect when and where the leaks occur.
Agriculture – by far the largest consumer of water across the region (see Figure 2) – also offers significant potential. Precision farming, supported by sensors and artificial intelligence, is greatly improving water management.
Solis highlighted technology developed by US start-up InnerPlant, whose genetically engineered crops act as “living sensors” that emit fluorescent signals when under stress, including water shortages. By providing real-time data, this technology can significantly improve conservation.
Turning the tide
Governments across Latin America are increasingly embedding water resilience into core economic decisions, especially in energy, mining, agriculture and urban development, said Guerra.
Still, key gaps remain, she said. “These include institutional articulation, which is essential for scaling solutions efficiently; the valuation of water as a strategic asset, which helps make its contribution to development more visible; and the development of innovative financial mechanisms, especially for nature-based solutions.”
Confidence is growing that these shortcomings will be addressed in time to deploy capital into Latin America’s water sector at the scale required to achieve resilience. “The cost of not doing it is just too high,” said Balassiano.
To learn more about Latin America investment trends, explore these stories:
Why Latin America’s equities are capturing global attention
Family offices in Latin America: From wealth preservation to wealth strategy
How private credit investment is filling a funding gap in Latin America
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