Abstract

This research focuses on the determination of the factors that led to the failure of water management in the Copiapo Basin in Chile. Interestingly, the existence of full private ownership and free tradability of water rights has not prevented the overexploitation of groundwater resources. In the paper, firstly, water regulation and the role of the regulator in Chile are briefly discussed. Secondly, the evolution of water resources in the Copiapo region is characterized and analyzed, and the granting of water use rights in the basin in the last 30 years is concisely described. Thirdly, we examine and analyze prices and quantities traded in the water market of the Copiapo region. We will argue that this crisis is a consequence first of failure in regulatory implementation and second of an extremely rigid regulatory framework that leaves limited room for adjustment to changing conditions, especially regarding the emergence of new information concerning water availability. We believe this investigation is not only relevant for this case in particular, but also for other regions and countries where water markets are in place.