IDB Approves $100M Loan to Strengthen Uruguay’s Water and Waste Systems

The Inter-American Development Bank (IDB) has approved a $100 million loan to help Uruguay modernize its water management and solid waste systems, with a strong focus on climate resilience, environmental protection, and the circular economy. The initiative will enhance the country's ability to cope with droughts, floods, and pollution while promoting sustainable production and consumption practices.

A Major Step Toward Sustainable Resource Management

The operation—approved by the IDB's Board of Executive Directors—marks the second phase of a two-part programmatic series aimed at strengthening Uruguay's environmental governance and infrastructure. The first loan in the series supported the creation of key policy frameworks; this second loan focuses on implementation, resilience, and regulatory modernization.

The program will directly benefit Uruguay's 3.5 million inhabitants, particularly the two million people living in the Montevideo metropolitan area, where water demand and waste generation are most concentrated.

"This program reinforces Uruguay's commitment to sustainable water and waste management," said IDB Representative in Uruguay, noting that the operation will "improve environmental resilience, stimulate innovation in the circular economy, and protect vital resources for future generations."

Enhancing Water Resilience and Quality

In recent years, Uruguay has faced increasing climate variability, with periods of severe drought and episodes of flooding threatening water security and public health. The IDB-supported program seeks to strengthen the resilience of the national water supply system through infrastructure upgrades, improved management practices, and enhanced regulatory oversight.

Key measures include:

• Water loss management: Reducing leakages and inefficiencies in the water distribution network, particularly in the Montevideo region, to ensure sustainable use of water resources.

• Flood early warning systems: Establishing modern monitoring and forecasting systems in several cities to prevent and mitigate the impact of floods.

• Pollution control and regulatory reform: Developing a new legal and regulatory framework for water pollution to better manage industrial and agricultural runoff and preserve the quality of freshwater ecosystems.

These actions will strengthen the National Water Policy and help safeguard access to clean water for households, agriculture, and industries.

Driving a Circular Economy in Waste Management

Beyond water security, the program places a strong emphasis on circular economy principles, aiming to reduce waste generation, promote recycling, and extend the life cycle of materials. Departmental governments across Uruguay will implement integrated solid waste management plans that prioritize resource recovery over disposal.

The IDB's financing will help launch several strategic initiatives:

1. Food Waste Reduction: The program will advance the National Strategy for Reducing Food Loss and Waste, encouraging food donations and repurposing surplus food to prevent it from ending up in landfills.

2. Electronic Waste (E-Waste) Management: Uruguay will begin developing comprehensive regulations for electrical and electronic equipment waste, promoting the recycling and recovery of valuable materials such as metals and plastics.

3. Construction and Demolition Waste: New guidelines for reusing and recycling debris from civil construction will be established, turning waste into resources for new building projects.

4. Battery Recycling and Traceability: The program will introduce a traceability plan for end-of-life batteries, including those from electric vehicles, enabling the collection, reuse, and recycling of materials such as lithium and cobalt rather than sending them to landfills.

Supporting the Private Sector and Local Economies

In addition to environmental benefits, the IDB program is expected to yield significant economic and social returns. The reforms and investments will encourage private sector participation, particularly in agriculture, manufacturing, and energy, by improving water quality and ensuring access to sustainable resources.

Companies adopting circular economy models—such as recycling, repair, and material recovery—will have new opportunities for green investment and job creation, especially in waste management and renewable energy sectors.

Moreover, departmental and municipal governments will gain institutional and financial support to implement more efficient waste management systems, improving local service delivery and public health outcomes.

Financing Terms and Implementation

The $100 million IDB loan has a 19.5-year repayment term, a 6-year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR). These favorable terms reflect the program's strong alignment with IDB priorities in climate action, sustainable infrastructure, and environmental governance.

Implementation will be carried out by the Ministry of Environment, in coordination with other national and local entities responsible for water and waste management. The program is also designed to leverage additional public and private investments, creating long-term fiscal and environmental benefits.

Building on Uruguay's Environmental Leadership

Uruguay has long been recognized as a regional leader in environmental sustainability, with progressive policies on renewable energy, biodiversity protection, and water management. Nearly 98% of its electricity already comes from renewable sources, and the country has integrated climate resilience into its national planning framework.

The IDB-supported initiative builds on this foundation by targeting two key environmental challenges—water security and waste management—that have become increasingly pressing due to climate change and urbanization.

The program complements Uruguay's National Strategy on the Circular Economy (2021–2025), which seeks to transform production and consumption patterns and reduce the country's ecological footprint.

Toward a Resilient and Circular Future

The loan marks another milestone in the IDB's long-standing partnership with Uruguay. By helping to modernize environmental governance, promote innovation, and strengthen resilience, the initiative will position the country as a regional model for circular economy transitions.

"Through this operation, Uruguay is demonstrating how environmental policy can be both ambitious and practical," said an IDB official. "The focus on water resilience and waste circularity shows that economic growth and sustainability can go hand in hand."

As climate pressures intensify globally, Uruguay's experience could serve as an example for other countries in Latin America seeking to balance economic development with environmental stewardship.