Water Rights that Affect Chilean Agriculture

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Water rights can be complicated when looking for an agricultural property for sale or lease in Chile. The most crucial issue is that you don’t automatically own the water on or under your property. So you could have a river the size of the Rio Plata running through your farm in Chile, but unless you own water rights from that river or canal, you’re not legally entitled to use any of its water.

Having said that, Chile has one of the largest water reserves in the world, so there is plenty of it, but not necessarily all in the right locations for exploitation. Water rights in Chile are private property, an asset that owners can sell, lease, donate, or take out a loan against as a guarantee, and they can also be subject to inheritance.

The General Directorate of Water (DGA or Director General de Aguas) is the government agency within the Ministry of Public Works that regulates water rights. This is the entity to which you can apply to get water rights. The availability of rights depends on the type of water right you are looking for. In the case of surface waters ( canals, etc.), most of the Permanent Consumptive Water Rights have already been allocated to private parties. Other types, such as Eventual Consumptive Water Rights, are still available as Non-consumptive Rights.

Underground Consumptive and Non-Consumptive Water Rights are relatively unexploited resources. With the help of an expert, a person or entity can apply to DGA for water rights. DGA studies the capacity availability of the water source. The diminished water flow can imply reduced capacity to distribute, and then send a letter informing the applicant of the available amount and conditions. Then the applicant has to answer if they accept these conditions or not. All this assumes that you can find a water source that has no owner yet. Nevertheless, DGA may take one or two years to issue the final resolutions, which give ownership. This long wait for a resolution, combined with water scarcity, is why companies are often willing to pay a financial premium to start a business immediately. Two years of waiting may be more expensive than buying the water rights, even at a high price.

Consumptive and Non-Consumptive Uses

Non-Consumptive water means the owner can use it and then return it to the same source, clean and clear. In other words, the water can not be ‘consumed’. Usually used by hydroelectric companies, fish farms or cranberry and similar type producers. Non-Consumptive water rights have suction and restitution points determined by specific GPS coordinates.

Speculation can be an issue. In the early years, several hydroelectric companies bought or requested water rights without using them. According to the Water Code of 1981, the holder of a water right, consumptive or non-consumptive, is not compelled to actually “use” it. But today, after the modification of the water code, DGA stimulates the use of water by private owners holding water rights that are not in use by taxing them. Consumptive water means the owner can use it without the obligation to restore it. Usually used for domestic purposes, irrigation and animal consumption.

Farmers and Water Supplier Companies usually own these kinds of water rights. Land without a water right is known as “rulo”. Since consumptive water does not need to be returned to the source, it only has a suction point defined by a GPS coordinate. A water share is the unit of measurement for water rights, and, according to the Chilean Water Code, it corresponds to 1 l/s. It is said that a hectare can be irrigated with 1 l/s in the south of Chile and 2,0 to 2,5 l/s in the Northern part of Chile.

Resales of water rights represent the most apparent feature within this active market. It should also be emphasised that, since 1992, nearly all transfers of water rights have not been included in Chilean water rights transfers. Water Rights have their own separate title and are treated the same as any other real estate. Regardless of the method of accessing water rights, legal ownership is validated by its registration in the CBR (Conservador de Bienes Raíces). One important fact is that a person or company may own the water rights but not the land. These two assets can be sold separately. The paperwork to transfer water rights includes title studies and certifications.

Always check with a local Chilean legal advisor before buying. We can help with contacts if you need them.

Notes:

Here is an excellent resource for more information

GTSA-SA

Founded in 2004, GTSA began as a single office in Buenos Aires. Since then, it has grown into a vibrant regional network, providing professional real estate marketing services to clients in AR, BR, CL, PY, PE, and UY.