Academic journal article Fuzzy Economic Review

Water Infrastructure Financing in Spain: Potential for Securitization

Academic journal article Fuzzy Economic Review

Water Infrastructure Financing in Spain: Potential for Securitization

Article excerpt

JEL Classification: G23, G32, H54, L95


Water is a utility with a wide variety of uses but there are certain regions where its availability is uncertain. This situation explains the fact that the water issue has been, and still is, an ongoing cause of dispute, as well as why it periodically reappears on the political agenda of many countries as an outstanding problem. Spain is no exception to this rule. Water has traditionally been a source of conflict given the climatic conditions of the country, with a marked contrast between dry and wet Spain. This has generated debate about whether the solution should be technical, economic or political. In fact, the answer to the problem of water has varied over time. In the early twentieth century, for example, water was considered the key resource for the country's modernization through the extension of irrigation.

Therefore, it was considered necessary to build water infrastructures like dams or canalizations that increase water supply in those areas where water was scarce. However, in the twenty-first century this water policy based on increased water supply has given way to a policy that prioritizes sustainability criteria and respect for the environment. The current challenges for water policy no longer focus solely on increasing availability, but also on water quality and promoting more efficient use by improving distribution systems or the reuse and recycling of water.

Beyond the actual purpose of water policy in Spain, the main obstacle to developing the required infrastructure has always been funding. The aim of this paper is to explain the traditional funding sources for hydraulic infrastructures in Spain and suggest securitization as a viable alternative in the context of public finance restrictions, as well as providing an optimization program that could be used to facilitate its implementation. Firstly, we analyze how the perception of the water problem and the water policy itself have evolved in Spain. Secondly, we explain the traditional financing system for hydraulic infrastructures. Thirdly, we analyze the advantages and disadvantages of financing these infrastructures through securitization and the possibilities for applying this system in Spain. Finally, we present an optimization program to facilitate the implementation of public securitization processes by determining the optimum volume of cash transfer in each period and we solve this using fuzzy programming.


Although the water supply per capita in Spain is comparable to other European countries, almost 80% of the country is semi-arid. This means there is a marked difference between wet Spain and dry Spain. This irregular spatial distribution of water across the country has resulted in the water issue being perceived differently in each region.

The discussion about water has a long-standing tradition in Spain. In the seventeenth century, with the creation of technical engineering schools and the emergence of hydraulic "arbitristas", large hydraulic construction projects began to multiply in Spain. People believed that the country's water supply was sufficient to cover existing needs and, therefore, the solution was to develop hydraulic networks that regulated the natural flow and ensured a stable supply of water for both human consumption and economic activities.

This approach to the water problem was reinforced in the late nineteenth century by the regenerationism ideas of Joaquin Costa, who established a link between the country's modernization and the water issue: an increased supply of water would promote the expansion of irrigation and agricultural productivity, while at the same time generating employment in the construction of water infrastructures, enabling hydropower energy, and allowing the population to settle throughout the territory.

In fact, these regenerationist thoughts were reflected in the successive hydraulic plans developed in Spain during the twentieth century1. …

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