The Economic Value of Basin Protection to Improve Potable Water
Supply Services: Some Evidence from Ecuador
Loja the capital of Ecuador's Loja Province is located in the southern portion of the country. The
city has a population of 119 thousand and is situated 2,100 m. above sea level. It has a mild
Andean climate, ranging between 16 and 30°C. As with many other growing cities in developing
countries, the demand for water services in Loja is increasing. Between 1996 and 2006, the
number of households connected to the Loja public water system more than doubled increasing
from almost 11,000 to about 25,000 households. A high percentage of households (about 19%)
connected to the water system have access to water for less than six hours per day. Most
households in the city consider their water supply to be insufficient (78% of the households) and
rate their water quality as poor (70% of households) (Benavides and Arias, 2005; NCI, 2006).
One option being considered to improve the Loja water supply system is to protect the
nearby micro-basins of “El Carmen” and “San Simon” that are among the main sources of water
to the city. These two micro-basins are part of the “Zamora Huayco” basin which covers an area
of 3,113 hectares. Between 1976 and 1998 human activity has cost the basin approximately 25%
of the natural forested area. Simultaneous with the reduction in forested area, urban settlement
within the basin increased nine-fold (Benavides and Solano, 2005).
This study estimates the willingness to pay (WTP) of Loja’s households to protect the “El
Carmen” and “San Simon” micro-basins that supply over 40 percent of potable water used by
Loja. This information will provide policy makers with information to help them assess the
benefits and costs of plans designed to protect the two micro-basins. This study contributes to
the basin protection economic valuation literature because it estimates the economic value that