Paraguay and the IDB Sign Contract for the Recovery of the Lake Ypacaraí Basin

The Government of Paraguay and the Inter-American Development Bank (IDB) signed a USD 154 million loan agreement yesterday to finance the ambitious Ypacaraí Lake Basin Sanitation Program, a large-scale project that seeks to reverse decades of environmental degradation in one of the country's main freshwater reserves. This effort, led by the Ministry of Public Works and Communications (MOPC), aims to improve the basin's environmental conditions and ensure sustainable, climate-resilient, and low-carbon development, while promoting access to thematic and green debt markets for the water and sanitation sector.

The program includes a series of strategic interventions to increase sanitary sewer coverage, improve wastewater treatment, and restore environmentally degraded areas. Specific actions include the construction of 370 km of sewer networks, 48 km of pumping lines, pumping stations, and a wastewater treatment plant equipped for nutrient removal. These works will directly benefit more than 27,000 households in priority areas of Capiatá, Itauguá, Areguá, and San Bernardino, and will generally improve the quality of life of approximately 800,000 people throughout the basin. In addition, the pumping line connecting to the San Bernardino Wastewater Treatment Plant will be reconstructed, allowing for more efficient management of liquid waste in the area.

One of the program's core focuses is the restoration of environmentally degraded areas, which involves implementing measures to reduce pollution from industrial and diffuse sources. This includes industrial restructuring plans and the adoption of stricter regulations to prevent future pollution in the watershed. These actions, along with the regulation of industrial discharges and proper solid waste management, will significantly contribute to restoring the ecological health of Lake Ypacaraí, which has suffered a progressive degradation process due to human activity and the lack of an efficient sanitation system in the region.

To ensure the sustainability of these investments, the program also aims to improve the management of water and sanitation services in prioritized areas. This includes strengthening the technical and operational capacities of service providers, ensuring that the implemented infrastructure operates efficiently and sustainably over the long term. Furthermore, institutional strengthening of the Ministry of Public Works (MOPC), which will receive support to optimize the management of the Ypacaraí Lake watershed, design climate- and nature-oriented investments, and establish effective monitoring, reporting, and verification (MRV) mechanisms to assess the program's impact on climate and biodiversity.

Funding for the program comes from IDB Climate, an initiative of the Inter-American Development Bank aimed at promoting sustainable development projects in Latin America and the Caribbean. Paraguay is one of the first adopters of this program, which allows it to access a 5% benefit on the loan subsidy, conditional on meeting specific environmental recovery objectives. This incentive reinforces the country's commitment to achieving climate and environmental goals aligned with international standards and strengthens its position in green debt markets.

Parque Nacional Ypacaraí

The IDB Climate Program adopts an innovative approach that seeks to link environmental investments with measurable results in terms of carbon emissions reduction, climate resilience, and biodiversity preservation. This positions Paraguay as a leader in the implementation of sustainable environmental projects in the region and lays the groundwork for future green infrastructure projects.

The program's impact goes beyond the lake's environmental restoration. By significantly improving the environmental conditions of the Ypacaraí Lake basin, it will also boost the real estate value of the surrounding areas, increasing their attractiveness for residential, tourist, and commercial development. Infrastructure and sanitation improvements, along with a restored natural environment, will position cities like San Bernardino, Areguá, and Capiatá as highly attractive investment hubs for national and international developers.

The Minister of Public Works, Claudia Centurión, highlighted the historic importance of the project: "Lake Ypacaraí will once again be the blue lake we all dream of, a heritage of all Paraguayans and a part of our identity." The contract signing took place in Santiago, Chile, during the annual meeting of the IDB Board of Governors, where the Minister of Economy and Finance, Carlos Fernández, and the IDB President, Ilan Goldfajn, formalized their commitment to the program's implementation.

This IDB-approved financing is also part of a broader agreement reached during the 2023 COP in Dubai, where Paraguay and the IDB agreed on two budget lines of USD 778 million for sustainable development projects in infrastructure, energy transition, and water resource management. These funds will not only improve the water quality of Lake Ypacaraí, but also strengthen the country's institutional capacity to design and manage sustainable environmental projects.

The Ypacaraí Lake Basin Cleanup Program represents a historic opportunity to reverse the environmental degradation of the lake and its surrounding areas. The implementation of these actions will not only ensure the preservation of this emblematic natural resource but will also lay the foundation for a more efficient and sustainable environmental management model. With this investment, Paraguay reaffirms its commitment to sustainable development, climate resilience, and the promotion of a cleaner and healthier environment for future generations.

The transformation of Lake Ypacaraí will not only restore its natural splendor but will also have a positive impact on the local and national economy, boosting tourism, attracting investment, and promoting more balanced and responsible urban development. The commitment of the Government and the IDB is clear: to restore Lake Ypacaraí's natural beauty and ecological value, while ensuring that this restoration translates into tangible benefits for the entire community.