Benefits of action and costs of inaction in a water reservoir project for agricultural purposes in Azacualpa, Honduras


Integrated Drought Management Programme (IDMP) Case Study


Drought in the central American region is characterised by a variation in rainfall distribution, manifested by a few rainy events among long periods without rainfall within the rainy season, among other aspects (GWP 2014). This situation severely affects production cycles of agricultural producers, who heavily rely on rain-fed agriculture and lack adequate technology to face droughts; negatively influencing overall economic and social stability, and wellbeing.

This study analyses the cost of inaction and the benefits of action in Azacualpa, a small village in the outskirts of Tegucigalpa, the capital City of Honduras, where 27 reservoirs were built as a strategy to face drought, which had been affecting up to 70% of horticultural production; by an alliance involving financial, technical and organizational support from the public sector, the international cooperation and the community itself; to support Azacualpa’s small scale horticultural producers.

In order to account for the cost and the social and economic benefits of action, and the cost of inaction; the analysis compares scenarios before and after the construction of reservoirs, comparing costs and benefits in each scenario, through an analysis of the current value of action and an estimation of its value in ten years’ time (the cost of the reservoirs was apportioned among ten years), including the flow of damages suffered during the ten years of inaction, plus the current value of the cost of adaptation in ten years, and the costs of residual damages from then on. The first scenario (inaction) runs a cost benefit analysis considering the costs of inputs for horticultural production before the reservoirs were built, whereas the second scenario (action) runs the analysis considering the costs of the reservoirs plus horticultural inputs. Both scenarios also consider income through sales of products and other social benefits as less migrations, employment generation, etc. Afterwards, both cost- benefit indexes are compared.

The calculations for this case study were based on historical productivity data, and were validated through a survey to compare the social and economic status of the population under study, establishing average values for the last five years; which in turn, allowed a comparison projected to ten years, to analyze action vs. inaction.

If no action was taken, meaning, if the reservoirs had not been built, other type of agricultural productive investments would have not taken place. Deeper losses and a greater migration of the population would have occurred.

The main benefits found for the population under study, through the implementation of the reservoirs, were significant improvements in employment (from 30% to 70%), better organizational capacity, more productivity, social cohesion and well-being, income levels (rising from US$ 1.60 to $3.84 per day), economic turn overs (36% return on investment), diversification of crops (from 10 to 15), increasing the yearly production cycles (a range from 1 to 4), food security (26% maize and 23% beans production increase), better market access, increased access to financial services, increased land value (by 47%), and a decrease in migration patterns. On the other hand, the cost of inaction would have income levels losses related to production of US$ -99,783.21 for the population under study, and the annual loss would have been greater than 50% of the investment in production inputs.

The calculated cost benefit estimate for this case study yielded a value of 0.21, which before the reservoirs, was 30.6, indicating an increase in social well-being that goes beyond economic aspects (the closer the value to zero, the greater the benefits).

Therefore, access to water for year-round production has been a determining factor for social and economic change to face droughts; coupled with community contributions, organisation, participation, and leadership; plus, a responsive public sector.