The irrigation subsidy policy in Chile: Lessons from the allocation, uneven distribution, and water resources implications

Abstract

Globally irrigation subsidies are utilized to boost modernization and to increase irrigation efficiency. This paper examines the effects of the irrigation subsidy program in Chile by reviewing 32 years of allocations and exploring drivers and consequences of the subsidy program with a clear market approach, based on competition and a state risk-free strategy. Our analysis reveals that, despite the flexibility in targeting, results indicate an uneven allocation to smallholders' detriment, a state inability to identify farmers' needs, market concentration, and a bias towards agricultural expansion. As long as the program remains unaltered, it will threaten agriculture and water resources' sustainability.

Full text

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The irrigation subsidy policy in Chile: Lessons from the allocation, uneven distribution, and water
resources implications
Cristian Jordan1, Guillermo Donoso2, & Stijn Speelman1
1 Department of Agricultural Economics, Ghent University, Belgium
2 Departamento de Economía Agraria y Centro de Derecho y Gestión de Aguas, Pontificia Universidad
Católica de Chile, Santiago, Chile

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Abstract
Globally irrigation subsidies are utilized to boost modernization and to increase irrigation efficiency.
This paper examines the effects of the irrigation subsidy program in Chile by reviewing 32 years of
allocations and exploring drivers and consequences of the subsidy program with a clear market
approach based on competition and a state risk-free strategy. Our analysis reveals that, despite the
flexibility in targeting, results indicate an uneven allocation to smallholders' detriment, a state inability
to identify farmers' needs, market concentration, and a bias towards agricultural expansion. As long
as the program remains unaltered, it will threaten agriculture and water resources' sustainability.
Key words: Public subsidies, irrigation modernization, agricultural expansion, smallholders limited
access, Chile.

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1. Introduction
With irrigated agriculture as the largest user of water globally (Siebert et al., 2010; Wheeler, Carmody,
Grafton, Kingsford, & Zuo, 2020), water scarcity is setting substantial challenges for irrigation water
management in the world, both at the farm and basin level. To deal with increasing water scarcity,
more recurrent droughts, and improving its use, countries have looked for opportunities to increase
water savings and productivity (Malik, Giordano, & Rathore, 2018). Irrigation modernization has been
promoted in increasing regions to enhance technical irrigation efficiency at the field level, especially in
countries where the resource is becoming scarce (Perry, Steduto, & Karajeh, 2017). The rationale
behind higher technical irrigation efficiency is that it allows reducing water demand while conserving
water and enhancing (maintaining) agricultural productivity and farm income (Pérez-Blanco, Hrast-
Essenfelder, & Perry, 2020; Scheierling, Young, & Cardon, 2006).
Despite the optimistic promises, the adoption of this type of technology has not been so immediate,
showing that investment costs and energy costs can delay the implementation decision (Berbel,
Expósito, Gutiérrez-Martín, & Mateos, 2019). To stimulate and increase the adoption speed of such
technologies, the use of economic instruments, such as water pricing or subsidies, have been
promoted (Scheierling et al., 2006). From the pool of instruments, subsidies have been a popular
economic instrument employed by governments to engage farmers in modernization programs (Rey,
Pérez-Blanco, Escriva-Bou, Girard, & Veldkamp, 2019). As a result, efficient irrigation technologies are
subject to subsidization in several countries, such as Australia, Spain, Morocco, India, China, and Chile,
among others (Malik et al., 2018; Sanchis-Ibor, García-Mollá, & Avellà-Reus, 2016; Scheierling et al.,
2006; Wheeler et al., 2020).
Several papers have analyzed the outcomes of irrigation modernization. Recent literature has
illustrated the consequences of the application of technological adoption promotion programs.
Research has shown that subsidy programs are often designed to pursue a dual purpose: increase
agricultural production and water savings (Grafton et al., 2018). However, as a consequence of weak
policy design, programs mostly tend to favor production or economic outcomes and increase water
consumption, reducing return flows for downstream users, displaying the incompatibility between
both goals (Birkenholtz, 2017; Grafton et al., 2018; Pérez-Blanco et al., 2020). A recent study carried
out by Perry et al. (2017) analyzed more than 100 studies worldwide, concluding that despite the water
savings assumption, programs had increased consumption when irrigation systems were modernized,
while productivity remained more or less constant.

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Subsidy programs are context-specific, and the way how grants are allocated might lead to different
outcomes. Despite this, less interest has been devoted to analyzing intrinsic issues or foundations of
such programs, such as the subsidy allocation mechanism, the program functioning or targeting
purposes. For instance, (Malik et al., 2018) states that in India, the process of applying for the subsidies,
more than facilitating access to the technology, restrains the adoption due to its technical
requirements, bureaucratic procedures, and pricing incentives turn providers into rent-seeking agents.
Besides, the system favors larger farmers, not necessarily the main targets of the program. Similarly,
Wheeler et al. (2020) show that benefits are not evenly distributed in Australia, with corporate entities
(representing 2%) receiving 30% of total funding.
Acknowledging the importance for supporting irrigation modernization, this research aims to
contribute to the recent literature and debate on the effects of public subsidies encouraging on-farm
adoption of irrigation technologies. We do this by analyzing the subsidy policy of the Chilean
government. The political and economic paradigm shift carried out in the '70s by the ruling military
regime resulted in structural macroeconomic reforms and an export-oriented strategy in the '80s
(Anríquez & Melo, 2018). Under this new context, the country set up a subsidy program for irrigation
modernization in 1985 through the Irrigation Law 18.450 enactment. Although irrigation
modernization implies introducing both technologies and institutional reforms, the Chilean has
primarily centered on infrastructure and technology upgrades targeting efficiency enhancements. The
subsidy program reflects the new market-oriented political-economic paradigm of that period,
founded on minimizing the state risk, a demand and competitive nature, focusing on economic
efficiency, and giving a significant role to private consultants. Hence, the article aims to examine the
results of such market approach subsidy allocation induced by Law 18.450. To do so, we delve into the
program design and functioning and the consultants' role, exploring the consequences on resource
allocation, beneficiary targeting, funds concentration, and water resources sustainability. The analysis
and the results of our research are expected to be of great interest to researchers, particularly policy
makers who design irrigation modernization support policies, especially in areas like the Chilean case,
where heterogeneity of farms -smallholders and capital-intensive coexist (OECD, 2018).
The article is organized as follows. The following section provides a brief outline of the country's
irrigation development, describing institutions, scope, and on-farm development. Section 3 describes
the policy instrument, Law 18.450, in terms of scope, targeting, and functioning rationale. In part 4,
the paper analyses and discusses the results of 3 decades of subsidies, exploring the potential
consequences of such actions. Finally, the last section summarizes the article, stating the article's
conclusions and some challenges and opportunities for future developments in the irrigation sector.

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2. Irrigation Development in Chile
2.1. Irrigation institutions and water policy framework
Historically, the provision of irrigation infrastructure comprises a set of institutions according to the
magnitude of their investments. Large works such as dams and rural drinking water facilities are
responsible for the Hydraulic Works Directorate (DOH). On the other hand, median and minor works
are under the National Irrigation Commission's umbrella (CNR) and the National Institute of
Agricultural and Livestock Development (INDAP).
DOH is part of the Public Works Ministry (MOP), responsible for providing large hydraulic
infrastructure. This institution is tasked with designing, building, maintaining, repairing, and operating
large irrigation infrastructure using public funds (Martin & Saavedra, 2018). CNR is an inter-ministry
body created in 1975 to serve as the public agency responsible for coordinating efforts and supervising
investments in agriculture (Martin & Saavedra, 2018). CNR's board comprises the Ministries of
Agriculture, Economics, Treasury, Public Works, and Social Development. The CNR acts as an executive
secretary, responsible for implementing the Board agreements. CNR is the leading public institution
governing irrigation water use, with duties encompassing planning and studying integrated irrigation
projects, supervising and coordinating public and private bodies involved in irrigation management,
and administering public subsidies. Finally, INDAP is part of the Ministry of Agriculture and focuses on
small-scale farmers' by providing access to credits, infrastructure, and extension programs (Valdes &
Foster, 2017). Within its range of tasks, INDAP also boosts the modernization of irrigation technologies.
In terms of the water policy framework, the Water Code of 1981 (WC81) rules the water sector
(Donoso, 2018). The code, written under a neoliberal paradigm (Hearne, 2018), has a clear market
orientation, declaring water as an economic good with complete separation of water rights (WR) from
land and open transferability of WR (sales or temporal water leases). In the WC81, water rights (WR)
are granted free of charge and ad finitum to any agent requesting and complying with the established
procedure and requisites while water is available (Rinaudo & Donoso, 2019). The market framework
allows for reallocation and trade of WR among inter and intrasectoral agents without any justification
of future use.
A critical and evident feature of WC81 is its orientation towards private management, reducing the
state's intervention and regulation capacity. Thus, the state is restricted basically to resource

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measurement and data generation of water availability, granting WR, regulating water use, avoiding
third-party effects, and conserving and protecting water resources (Vergara & Rivera, 2018). Besides,
it states that the owners of WR, organized in water user associations (WUA), are responsible for its
management, setting a strong private-oriented administration dating from colonial times (Meza, Wilks,
Gurovich, & Bambach, 2012). Since then, local irrigation water management is the responsibility of
private WR owners. The WC81 defines 3 WUA categories, with no state participation, according to the
type of source that provides the water. There are the Surveillance Boards at the natural (river) source
level. For artificial sources, WR owners gather in Water Communities, in charge of secondary
infrastructure, or Canal Associations responsible for central infrastructure' administration such as
dams, reservoirs, and irrigation canals (Martin & Saavedra, 2018). These WUA share some
responsibilities, such as conveying and distributing water resources according to WR ownership,
monitoring and enforcement, conflict resolution, and collecting and managing water fees (Vergara &
Rivera, 2018). Although many WUAs have implemented collective water management, a significant
proportion of these have not met current water management challenges (Rinaudo & Donoso, 2019).
Finally, for groundwater, WR holders gather in Groundwater User Associations (GUA). However,
groundwater management is recent in Chile, formally set in 2013 (Vergara & Rivera, 2018).
2.2. On-farm irrigation development in Chile: Shifting towards the private initiative
Until the '70s, the state had an active role centered around the provision of irrigation works to regulate
water resources for irrigation use (Peña, 2018). The role of taking over the lead for the irrigation
infrastructure provision began in 1929, with the General Irrigation Law enactment, which created the
Irrigation Department embedded in the Public Works Ministry (Donoso, 2017). This state-driven
infrastructure provision was truncated by the democratic collapse in 1973, shifting the economic
paradigm towards a neoliberal one, in which the state action is significantly reduced, with private
forces (markets) taking on a preponderant role (Pereira & Gross, 2004).
This economic turn had implications on water resources and irrigated agriculture. At the farmers' level,
the main consequence is that private agents (individual and collective boards) are now responsible for
improving and maintaining irrigation systems. On the other hand, at the state level, there were 3
consequences. First, there was a complete transfer on the property of WR to private agents (e.g.,
farmers) under the WC81. Secondly, there was a stagnation of the water storage capacity, where the
infrastructure begins a deterioration process. Of the total storage capacity for multiple purposes (13
m3mills.), 62% of this storage capacity is used exclusively for irrigation (Dirección General de Aguas,
2020). As stated above, the storage capacity standstills from the '70s onwards. Figure 1A in

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supplemental data shows the development of storage infrastructure and irrigated areas, depicting that
Chile has not developed a policy focused on water storage except in some exceptional periods, as in
other similar regions like Spain and California (Berbel & Esteban, 2019).
The third effect comes as a response to the worsening of irrigation infrastructure and the scanty
adoption of efficient technologies, by settling first the CNR in 1975, and, next, with the enactment of
the Law 18.450 of "Promotion of Private Investment in Irrigation and Drainage Works" in 1985
(Ministerio de Agricultura, 1985). With the Law, the Chilean state introduced a subsidy program for
private investments to facilitate the adoption of irrigation technologies, where farmers co-finance the
investment (Donoso, 2017). The irrigation program was part of a series of economic policy adjustments
made by Chile during the military regime, which for the agricultural sector focused on the
transformation of extensive to intensive agriculture to increase exports (Valdes & Foster, 2017).
3. The Chilean Irrigation program: The Law 18.450 of Irrigation and Drainage
The primary policy instrument meant to foster irrigation development is Law 18.450. Regardless of
other institutions involved in irrigation development, such as INDAP and DOH, the Law managed by
CNR is the customized policy instrument to facilitate private investments in irrigation and drainage,
devoted to the entire array of farmers. Formally, the Law aims "To increase the irrigated land, the
reliability, and efficiency of water resources use for irrigation through the construction of medium and
minor irrigation works, submitted to the Law 18.450." The state subsidizes project design and building
costs through the Law and the required investments (equipment) for operation (Pereira & Gross,
2004). The initial span was 8 years (1986-1994); however, several modifications extend the current
validity until 2022. Adjustments were made to the objectives, the target population, the percentage of
subsidy, or cap amounts of financed investments (historical modifications are in Table 1B in
Supplemental Data). Such adjustments primarily aimed to improve and increase the access to subsidies
by small farmers (Dirección de Presupuesto, 2006).
The program consists primarily of 2 components. The first focuses on off-farm modernization and
repairs, targeting the WUA (collective works like canal lining, metering). With the last modification of
2013, this component experienced an increment of the financeable sum up to 250.000 UF allowing
multipurpose projects, namely reservoirs for irrigation and hydropower generation. The second
component focuses on on-farm modernization. Modernization of irrigation systems, such as the
adoption of drip or sprinklers, falls into this component. Specifically, this component subsidizes minor

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works with an installation cost not exceeding UF 15.000 (Art. 1) (UF is the Chilean inflation-indexed
unit. 1 UF= 41,2 $USD in March 2021). Table 1 depicts the range of infrastructure and technologies
currently subsidized.
Table 1. Technology alternatives currently subsidized by Law 18.450
Typology of Works Projects examples
Storage
Dams and regulation ponds
Conveyance
Canals, lining, pipes
Water management improvements
Water quality, metering, sensors
Drainage
Drainage works
Injection
Aquifers
Non-conventional Renewable Energy
Water, solar, and wind energy generation
Source: Own elaboration based on (Ministerio de Agricultura, 1985) and Martin and Saavedra (2018).
From the set of reforms, the most relevant was the 2009 reform, which explicitly defined farmers and
WUA categories and cap subsidies for each type (Table 2). The off-farm component comprises 2 WUA
types, while for the on-farm component, the spectrum of farms is divided into 4 categories, depending
mainly on land size, namely smallholders, small agricultural entrepreneurs (SAE), mid-size, and large-
size farmers.
Table 2. Beneficiaries breakdown by land size and maximum applicable subsidy*
Component Type of Beneficiary
Number of
farms
Land size
(ha)
Maximum
subsidy (%)
Off-farm
WUA (small-mid size farmers > 70%)
Other WUA
-
-
-
-
90
80
On-farm
Smallholders
251.988
12
90
Small Agricultural Entrepreneur (SAE)
13.048
< 40
80
Medium-size producer
1.044
>40 and <200
70
Large-size producer
174
>200
70
*Table 1A in Supplemental data depicts a detailed classification for each type of on-farm beneficiary.
Source: Ministerio de Agricultura (1985) and Dirección de Presupuesto (2019).
3.1. Formal functioning aspects of the modernization program
This section summarizes the grant allocation process. To allocate the available funds, every year, the
CNR plans and publishes a calls Calendar. This calendar is based on the demand of Regional Irrigation
Commissions, entities responsible for canalizing the public and private organizations (WUA) demands
(Donoso, 2017). With those inputs, CNR organizes and assigns funds to each region by configuring the

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annual calendar for both components. As a result, in a year, CNR hosts many different calls. For
instance, 2019's calendar comprises 42 calls (Annex 2 depicts the 2019 calendar).
In general, the Law works in a standard fashion for both components, in which CNR is responsible for
the whole process of subsidies assignment, with the only difference in ranking and selecting projects.
Overall, the process involves 4 main phases, namely 1) the call, 2) the evaluation, selection, and subsidy
assignment, 3) project construction, and finally, 4) subsidy payment. Each call refers to a specific
"target population" of applicants.
Regardless of the type of call, any on-farm project must meet 3 core requirements (Arts. 8 and 9 of
Law 18.450 Regulations (Ministerio de Agricultura, 2015)). These are 1) land tenure certification
(ownership, usage, tenancy, leasing or in the process of ownership regularization); 2) WR ownership
and availability, where the registration in the Real State Register gives proof of this; and 3.) the project
must be postulated by a consultant registered in the Public National Registrar of Consultants of CNR
(Art. 5, Law Reg. (Ministerio de Agricultura, 2015)).
Formally, when CNR launches a call (step 1), farmers, through consultants, present their irrigation
projects for evaluation. Then, following a market approach, the applicants compete for funds (and the
subsidy), by which CNR selects the best projects until the available funds are fully assigned (step 2).
The selection bases on a ranking of project scores obtained from the sum of sub-scores of the 3 call
variables: Farmer Financial Contribution (FC, $CLP), Farm size (FS, ha), and Cost (C, CLP*ha-1) (Art. 18,
Law Reg.). Thus, each project obtains a score by:
= ∑
3
=1 (1)
The score variable is the total points for project i, ranging between 0 (worst) and 1000 (best). Pij is the
sub-score for the call variable j. FC and FS range from 0 to 300 points, while C ranges between 0 and
400. As the projects are sorted and ranked according to the variable j in evaluation;  represents the
score of project i for each call variable after the ranking. For FC and FS, projects are sorted following
the maximum-minimum criteria and conversely for the C variable (step 2) (A detailed description for
the call variables and ranking is in Annex 1 in supplemental data).

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The CNR issues a resolution of subsidized projects, allowing an appeal period from the applicants,
which may modify the score or the ranking of projects. Once the appeal period is completed, the CNR
issues a final resolution of the subsidized projects, issuing bonus certificates.
However, to obtain the subsidy, CNR must verify that the works are built (step 3). Then, only after
verification can CNR approve and emit an administrative resolution (certificate cashing) authorizing
and enabling farmers (consultant) to obtain the reimbursement for the spent resources (step 4)
cashing the Bonus Certificate at the General Treasury of the Republic.
3.2. Characteristics of the functioning of the irrigation program
Besides the formal and proper functioning and application requirements, some issues detach from the
Law. First, there is no interaction between the agency and the subject of subsidy, the irrigator. The Law
states the consultant's figure as a core part of the process (Art. 4). The consultant can be a natural
(individual) or legal entity meeting 2 requirements: education (civil engineering and agronomy
backgrounds) and demonstrable knowledge regarding the design, construction, and management of
irrigation infrastructure. Furthermore, they must be enrolled in the National Registrar of Consultants
of CNR. Consultants are not just intermediaries between CNR and the irrigator but are critical for the
entire process. Even though farmers are the applicants for the subsidy, they do not participate in the
process. Consultants are responsible for searching and leveraging the demand for public funds,
developing and submitting a project, following up the administrative processes from application to
subsidy disbursement, and the applicant's interlocutor before the CNR. In practice, consultants make
profits once projects are selected. Such earnings are part of the costs incurred for planning any project
not exceeding 15% of the total cost for on-farm initiatives (Art. 1, Law Reg.).
Secondly, a selected project does not mean a finally subsidized one. Selected projects receive a "Bonus
Certificate," which only can be collected at the General Treasury once the works are executed and
evaluated satisfactorily by CNR. Between the certificate's emission and the actual payment (Bonus),
two and three years elapse (Dirección de Presupuesto, 2019). The certificate does not constitute a
legal guarantee or collateral in practice, limiting access to resources. As a result, a percentage of
projects with certificates do not finally materialize. From here, two conditions come out. First, it is the
demand-driven condition, where private agents are responsible for the irrigation improvements
without state intervention, and CNR allocates resources based on consultants' (historical)
requirements, assuring the expenditure of the annual public funds budget. Second, and more
importantly, the Law's design determines a "risk-free" condition for the state since the disbursement

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(subsidy) is effectively granted after verification, avoiding the misuse of public resources (Donoso,
2017).
The last issue is targeting. The range of potential beneficiaries (around 300.000 farms) presents
different socio-economic statuses and evident land size differences. The instrument's flexibility
enables CNR to tailor public calls for each type of beneficiary defined in Table 1. Moreover, such
flexibility gives the possibility to assign resources by administrative regions, prioritize technologies, or
use them as a tool to deal with the adverse effects of periods of drought in specific territories.
4. Analysis of the on-farm modernization process
Our analysis is based on primary historical data of on-farm subsidies granted by CNR, acquired through
a public request through the online Transparency system, as this information is not of public access.
The information on irrigation subsidies comprises individual project data for every public call between
1986-2019. The database contains both selected and non-selected projects, including information
referring to the call, namely the application code, the call name, geographical administrative location,
and the type of beneficiary. Besides, the database allows identifying some characteristics for the
project and the farmer itself. For a specific project, the database contains the result for each call
application, the type of beneficiary, the land, the new land under irrigation, and the crops.
It is noteworthy to point out that we use information up to 2018 because the subsidies allocation is
not immediate to selected projects, taking up to 3 years to materialize. Besides, we complement the
CNR database with data on subsidies from INDAP, also requested via the Transparency system.
Unfortunately, the INDAP database is more restricted in both time and type of farmer, spanning a
shorter period 2005-2019, since projects recording begun, and the farmers' information contained is
limited to administrative data, limiting the analysis. Nonetheless, we use the INDAP dataset to
complement our analysis when possible. Finally, to better understand the subsidy program, such as
farmers' prioritization, historical allocation, the process, and the reforms, we held interviews with staff,
the Chief of the subsidy program, and the Executive Secretary of CNR.
We first analyze the program's achievements regarding the primary outcomes such as subsidies
allocation, average costs, and agricultural expansion. Then we explore some potential consequences
of the program design and functioning, namely the selection mechanism and flexibility, resource
allocation and farmer targeting, and water resources sustainability.

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4.1. Overview of the on-farm modernization process
We begin by presenting the historical distribution of public funds to each component. Figure 1 depicts
the sustained growth of subsidies allocated for the off and on-farm modernization works. The third
component, drainage, covers on average only 3% of the annual budget but in recent years reaches less
than 1% of the allocated funds, whereas the first two account for 54 % and 42%, respectively.
Specifically, for the on-farm component, we observe that, excepting the 2002-2011 period,
consistently fewer subsidies were allocated compared to its off-farm counterpart. Furthermore, a
relative decline is observable since 2010, reaching 36%. Such a decrease might be a consequence of
the latest reform of 2013, by which off-farm works (storage and conveyance) gained a more significant
role by increasing the maximum to 250.000 UF.
In monetary terms, the Chilean state has transferred and distributed around 16 UF millions (roughly
65 USD millions) among the different farmers' categories targeting on-farm modernization. The
positive trend of resources for on-farm technologies has benefited an increasing number of projects
and fund the increasing cost of such projects. Figure 2 reports the average costs trend, showing a
historical decrease for this item until 2012, with a cost rounding 40 UF*ha-1 indicating efficiency gains.
However, a slight increase in the average cost from 2012 onwards is also noticeable, reaching 56,5 UF
per hectare in the last 5 years (2014-2018). One potential explanation of this increased cost is the
additional -non-mandatory- requirement for sustainability components, such as non-conventional
renewable energy (NCRE) either in general calls submission or in specific ad-hoc calls.

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Figure 1. Historical subsidy allocation for the components for the Chilean modernization program.
When analyzing the Law's primary objective, increases in the irrigated land, Figure 2 depicts that the
subsidy program has supported the modernization of roughly 355.000 ha nationwide, from which
161.183 ha (45%) are newly irrigated lands (Figures 1B and in Supplemental data show the
geographical distribution for the total modernization and agricultural expansion). On average, this
indicates a growth of 4.770 ha*year-1 of new lands and a modernization rate of 10.300 ha*year-1. From
this, medium-sized and SAE are the categories with the primary contribution to modernization and
agricultural expansion, jointly entering 83% and 84%, respectively. Table 3 depicts that medium-sized
farmers are responsible for 60% of the total modernization systems and 54% of agricultural expansion.
SAE is the second contributing group with 23% (83.000 ha) and 30% (48.728 ha), and with small farms
providing the lesser areas for Law's objective.

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Figure 2. Historical national evolution of the modernized area and the cost per unit of land
Unfortunately, the last Agricultural Census information dates from 2007. At that moment, irrigated
lands reached 1,1 million hectares, representing 27% of the total agricultural area (rainfed and
irrigated agriculture) and 42% of all cultivated land. From this, roughly 28% (308.000 ha) was equipped
with efficient irrigation systems, basically drip and sprinklers. Departing from these figures and
intending to illustrate the subsidy program's potential contribution, we split the database into two
periods, before/after 2007. Up to 2007, the program subsided 127.000 ha, 40% of the total area.
However, the period 2007-2018 depicts 228.270, an 80% increase from the 1986-2007 period, with an
annual rate of 17.000 ha (vs. 6.040 ha of 1986-2007). However, Figure 2 also describes a decline in the
modernization rate since 2012 (16.000 ha); but it is still higher than the 1986-2007 rate. Despite this
decline, these figures allow hypothesizing a higher contribution to modernization by the subsidy
program.
Table 3. Modernization and agricultural expansion by type of program beneficiary, 1986-2018
Category
Total irrigated land
New irrigated land
hectares
%
hectares
%
Large-size
39.780,5
11,2
15.980
9,9
Mid-size
213.800
60,2
86.563
53,7
SAE
83.074,2
23,4
48.728
30,3
Smallholders
18.231,2
5,1
9.718
6
Source: Own calculations based on CNR subsidies database

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4.2. Subsidy allocation by type of farmer
Focusing on the different farm categories, we observe that, over the years, mid-size and SAE have
benefited the most, with 56% and 23%, respectively. Thus, both categories totalize roughly 80%. On
the other hand, smallholders only obtained around 10 %, and large farms have received nearly 11 %.
Figure 3. National distribution of type of farms and subsidies granted subsidies
The data shows a clear overall unbalance among categories when comparing the number of total farms
by category and the subsidy allocation. A vast majority of farms (smallholders, 95%) receive only 14%
of the allocated budget, whereas the remainder 5% have received 85% (grey bars in Figure 3). There
are 2 possible explanations for this disparity. The first is the Law's primary objective of increasing the
irrigated area, targeting economic efficiency. Thus, given the Chilean farms' stratification, it is evident
that the medium and large farms (1% of farms) are the main contributors to the goal to the detriment
of the rest of the farms (98%). Large and mid-size expand on average agricultural area by 40 and 20 ha
respectively, whereas smallholders increase only 2 ha. A second reason, and a recurrent authority
explanation, is that smallholders also have access to irrigation subsidies from INDAP. However, this
subsidy is smaller than CNR's, with a maximum of 274 UF on-farm projects. After including the data of
INDAP (dark-blue bars in Figure 3), the uneven distribution reduces 18%, reaching a more smoothed
subsidy distribution of 68-32%.

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Notwithstanding a significant gap still holds, the unequal access has shrunk given the rise in resources,
thanks to the Law reform of 2009 (Figure 4). Although it is not mandatory to stress on smallholders',
when considering the distribution from 2010 onwards, the share of subsidies allocated towards
smallholders rises 18,5%, a 4,2% increase, respecting 1986-2018, given the substantial increase in
allocated resources last 4 years. Finally, when including INDAP data, the distribution is 66-34%, with a
14% difference reduction.
As stated before, the Law is a policy instrument that, by design, does not consider a predetermined
focus towards any specific irrigator type. Furthermore, the Law owns enough flexibility for farmers'
prioritization. As a result, it has become an ad hoc policy instrument, favoring or targeting particular
territories, technologies, or beneficiaries according to each administration's priorities and political
tendency. To explore the latter, Figure 4 shows the historical share distribution of subsidies granted
by type of beneficiary for the period 1986-2018. First, we observe differences between the democratic
and non-democratic administrations 1986-1989, and second, within the democratic period (1990-
onwards). For the first 4 years, there is an evident prevalence of subsidies allocation to the largest
landholder group, representing less than 1% of the total farms nationwide but holding the largest
farms but the wealthiest group with better access to credits. When adding the grants allocated to mid-
sized farms, we find that these 2 categories attained over 90% of funds.
Figure 4. Historical subsidy distribution by farmer typology
When entering the democratic period, we observe the share allocated to this group declines, with mid-
size and SAE groups capturing most subsidies. Before 1990 large farms collected 65% of allocations,

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which diminishes to 25% and then to 6% in the first 2 decades, representing roughly 3% for the 2010-
2017 period. Formally, this disappearance responds to the Law's modifications in 2009, stating that
this group can now only access 2% of the annual resources. The restrictions imposed on large farms
shifted the allocation towards mid-sized and SAE. Since the '90s both categories have received roughly
80% of funds, 52%, and 28%, respectively, being the most benefited groups. As stated before, they
represent roughly 5% of the total. Overall, we also see that the smallholders' group has not been a
priority of the irrigation policy despite a slight rise in 1994-1999 (18%) and since 2015. In general,
Figures 3 and 4 reflect the subsidy program's coupling into the public agricultural policy favoring
exports set up in the '80s. Finally, this smallholders' historical marginalization has been offset in the
last 6 years due to the activation of the "Smallholders special program," targeting the more needed
portion of small farms with projects topping 400 UF. Although this program exists since the Law
modification in 2009 (Art. 3 of Law, Table 3B in Supplemental data), it was only activated since 2014
as a part of the presidential commitment of the center-left coalition targeting inequality reduction.
4.3. Consultants and Subsidies
As aforementioned, consultants are one key pillar of the subsidy program, as they by Law are
responsible for the search, leverage, and submission of the irrigation demand to the CNR. We describe
and analyze the market competition for subsidy acquisition by the pool of consultants, exploring the
extent of such competition (or concentration) for subsidy funds. For doing so, we employ 2 market
concentration indexes, the k-firm concentration ratio (Ck) and the Herfindahl–Hirschman Index (HHI)
(McAdam et al., 2019; Rhoades, 1993), for the subset of data 2010-2019. Ck bases on the addition of
market shares (subsidies acquisition) for a k number of firms (consultants), ranging from 0 to 1,
representing no and full market concentration. We use C4, and C8, the market share for the 4 and 8
firms capturing the most subsidies.
We estimated concentration indexes for each category subject of on-farm calls. The HHI is a measure
of firms' size, an indicator of competition, calculated by adding the squares of every firm's share. As a
result, the index ranges from 0 to 10.000. An HHI lower than 1000 suggests a low concentration level,
whereas over 1800 indicates a highly concentrated market (McAdam et al., 2019). Complementing the
indexes, we determined the principal consultants' market share, the total number of consultants, and
the number of consultants comprising the bottom 10 and 20% of granted subsidies.

18
Table 4. Market concentration by type of beneficiary period 2010-2019
Index Overall
Large
farms
Mid-size
farms
SAE
Small
holders
Mid size+
SAE
N consultants participating
277
17
95
125
190
175
Leading consultant
28,8%
65,5%
38%
27%
8,4%
31,1%
C4
51,6%
83,1%
63,1%
48,3%
32,6%
54,6%
C8
61,0%
92,3%
74,0%
59,4%
44,3%
63,6%
N consultants lower 10%
205
10
68
108
101
135
N consultants lower 20%
242
14
81
126
134
153
HHIndex
1.192
4.450
1.739
1.028
239
1.217
Source: Own calculations based on CNR subsidies database
Table 4 depicts the estimations of the set of indexes for the pooled data (overall) and each farmer
category. Firstly from the CNR records emerges an extensive list of 277 consultants with successful
applications. Further, the lead-consultant reaches 29% of the historical subsidization, with the same
company capturing the lead-consultant position for each category, even for the smallholders. The
concentration indexes show that 4 and 8 firms take 52% and 61% of the grants, with the HHI suggesting
an overall low concentrated market. Despite this, it is also observable that 87% and 72% of consultants
are part of the lowest 20 and 10 market share deciles.
Deepening by category, we find similar but even more concentrated results for the large and mid-sized
types. Large-sized is the narrowest niche by far, with 17 (6%) participants from which the leading
consultant gets 66% of public funds. According to the HHI and the C's indexes, this category denotes a
very high concentration, despite only 2% of annual funds. The mid-size presents a more diversified
market, with the lead-consultant obtaining 38% of subsidies, but still over the overall results. Although
there are significantly more participants, the Ck and HHI indicate a high level of concentration.
On the contrary, we find more consultants participating for the 2 smallest categories, SAE and
smallholders, with lower concentration indexes. The smallholder's category is the most competitive,
with almost 200 consultants trying to capture 14% of available funds. It is the only category in which C
indexes are below 50%. Finally, when we aggregate the mid-size and the SEA groups, representing
roughly 80% of the historical expenditures, the market concentration follows the high concentration
pattern, with 4 and 8 consultants capturing 64% and 73% of subsidies HHI over the threshold of 1800.
As aforementioned, the subsidy strategy distributes resources throughout the different regions.
Hence, we explore the capture of funds by dividing the data into the different macro-regions as CNR
does in the different calls. Macro-regions correspond to a simplified subdivision of the national

19
territory into groups of 3 regions each, in which consultants compete for funds. Table 5 depicts the
indexes for the 3 macro-regions where subsidies are mostly allocated (roughly 70%). From Table 5 it is
observable the same trends in terms of concentration but is even more pronounced, with higher Ck
and HHI indexes, with the same leading consultant taking the more significant share and the leading
position. Concentration is particularly more accentuated in regions where irrigated agriculture
primarily develops.
Table 5. Market concentration by type of beneficiary period 2010-2019, by macro-region.
A: Regions of Atacama and Coquimbo. B: Region of Valparaiso, Metropolitana and O”Higgins. C: Maule, Nuble
and Biobio (Figure 1D in the Supplemental data shows the spatial distribution of subsidies)
Source: Own calculations based on CNR subsidies database
The role of private agents is not a novelty but also not well-known, being reported in the literature, for
instance, by Molle and Tanouti (2017) for Morocco and Malik et al. (2018) for India. In both cases, in
the form of dealers, design or equipment sales companies, consultants have entered the process by
searching farmers, offering support to obtain the subsidy, or the project itself. However, there is little
evidence regarding market performance. The market approach presented here, leaving (almost)
everything in consultants-hands, has some negative consequences. Our findings shed light on an
intense concentration of subsidies with a handful of consultants, regardless of category or territory.
Concentration is sharper in the central region, with the leading consultant market position as a
remarkable example, especially for those competition categories and regions with more available
funds. Companies try to maximize their profits, looking for the most profitable projects (more
agricultural expansion), taking the economic benefit of irrigators for granted. Although by design,
market concentration is not detrimental to the program's objective and the role given to consultants,
Category Index
Macro-region
A
B
C
Mid-size
Total
28
32
43
N low10
11
24
34
N low20
17
27
39
Leader Consultant
20,7
38,3
45,2
C4
55,1
74,3
77,6
C8
69,7
90
88
HHI
976
2.034
2.549
SAE
Total
41
45
77
N low10
19
34
60
N low20
26
38
67
Leader Consultant
25,73
29,5
40,12
C4
49,4
65,6
67
C8
64,2
81,5
75,3
HHI
963
1.613
2.008

20
it calls for a further reflection in terms of the desirability to allow such concentration of public funds
and the lack of participation and information farmers and their real needs.
4.4. The rationale behind irrigation technologies subsidies
The paradigm shift in the '70s, with the establishment of a neoliberal regime, drastically modified the
macroeconomic environment, introducing a series of pro-market policies (Anríquez & Melo, 2018).
Since then, for the agricultural sector, productivity increases and international trade have driven the
agricultural political economy, where subsidies have concentrated on smallholder farmers in the form
of credits and extension subsidies (Valdes & Foster, 2017). Besides, a large body of literature display
evidence and support the claim of subsidies as an instrument to boost the adoption of efficient
technologies, especially targeting those farmers with limitations on access to credits, lack of initial
capital or information (Alcon, de Miguel, & Burton, 2011; Zhang, Fu, Wang, & Zhang, 2019). In addition
to being an economic instrument aiming to increase or accelerate the adoption of technologies,
subsidies may play a redistributive role, with an equity purpose (Rey et al., 2019).
However, from the data, we observe that irrigation subsidies divert from the Chilean agricultural policy
targeting and what technology adoption scholars suggest. Subsidies cover the whole range of farms,
favoring types that, in theory, face lesser affordability problems. Preference towards the largest farms
has also been reported by (Malik et al., 2018) and (Wheeler et al., 2020). The latter states that the
largest top 2% of farms have received roughly 30% of available funds in Australia. This uneven
distribution has been indicated as an argument against subsidies. Our findings show an even more
biased distribution for Chile, with 1% of farms receiving 56%, and 5% obtaining 85% of allocated
subsidies.
Another issue is competition within each category. Figure 3 and Table 2 reveal an inverse relationship
between farm's size and the number of farms comprising each group, yielding cases on repeated
beneficiaries, especially for the upper categories. 1-time receiving subsidization is 80% for large and
70% for mid-sized, whereas 85% for SAE, with smallholders comprising 95%. Conversely, 8% of large
farms have obtained more than 3 subsidies, with one exceptionally receiving it 40 times. Duplication
reduces to 10 fold for mid-sized, but the share of subjects receiving 3 times is 12%. For SAE, the top is
6, and for smallholders, 4 times.
Nonetheless, even with adequate resources and correct targeting, the risk-free strategy may also
discourage adoption. Firstly, it constitutes an entry-barrier, and secondly, the -selected condition is

21
necessary but not sufficient to obtain the subsidy. This is because the investment costs are reimbursed
after the verification of the works, and the endorsed "Bonus Certificate" does not constitute, in
practice, a valid warranty for the credit market. The problematic access to credits generated by the
risk-free strategy has been informed by former public evaluations of the Law (Dirección de
Presupuesto, 2006; Dirección de Presupuesto, 2019) and acknowledged by CNR, but not rectified or
modified. Transforming the Bonus in a real warranty or, as CNR proposes, delivering partial payments
during construction works seem to be alternatives to amend this situation. Either way, the risk-free
strategy will become a risk-sharing one.
On the other hand, in our view, the most critical issue is the selection method. Regarding the variable
FC, we observe from Table 5 that such contribution is over the minimum required. Large and mid-size
farmers have a 70% subsidy ceiling, but on average, the subsidy request is around 26 and 20% below
the maximum, respectively. SAE, with a ceiling of 80%, on average asks for a half (40%). Only
smallholders apply for the maximum subsidy, 90%. Table 5 also shows that consistently non-selected
farmers present a larger contribution (30% of total score), but this is not sufficient to be selected. This
situation is due to the ranking that builds on 2 concepts: maximization of agricultural expansion and
cost minimization. Both concepts are the basis for 2 of the 3 variables of the score equation: the cost
per new land unit (UF*ha-1) and land per total cost (ha-1* UF). From Table 5 it is noticeable that the
average agricultural expansion is higher in 3 of 4 categories for selected farmers. However, what is
critical for selection is the ratio between the cost and expansion (Avg. cost in Table 5) because this
quotient and its inverted form, accounting for 70% of the score (Eq. 1). This selection yields biased
subsidization within categories and creates incentives for consultants to focus only on "selectable"
projects.
Table 6. Selected vs. non-selected project characteristics
Type of
Beneficiary
Non-selected Project
Selected Project
Avg. Irrig.
land
Avg. Agr.
Expansion
Farmer
Contrib.
Avg.
Cost
Avg. Irrig.
land
Avg. Agr.
Expansion
Farmer
Contrib.
Avg.
Cost
Large-size
38,7
17,3
61,2
145
64,6
39,9
56,4
80
Mid-size
31,5
13,4
53,7
185
38,4
19,5
50
130
SAE
19,7
11,5
43,7
156
22,2
13,8
41
123
Smallholders
5,8
2,4
16,3
424
2,9
1,8
12
286
Avg. Irrig. land and Avr. Agr. Expansion in hectares. Avg. Cost in UF*ha-1. Farmers contribution in percentage
The risk-free strategy, the targeting, and the selection method discussed above open the door for a
further discussion on the current functioning of the instrument. The "demand-driven approach" does
not allow to identify the need for subsidy for the upper categories. The 20% and 30% of repetition for

22
larger farms suggest an internalization of the economic benefits of such technologies, casting doubts
on further subsidizations. The risk-free strategy represents a burden on farmers and discloses the need
to identify projects that could materialize but are not executed given the current conditions. Moreover,
it seems required to stress the action on smallholders as other national programs have done by
focusing only on smallholders like the afforestation program (Bopp, Engler, Jara-Rojas, & Arriagada,
2020) or explicitly stating in the Law that a majority of resources must go to this type of farms as the
soil enhancement program (Ministerio de Agricultura, 2010). Finally, we believe that the selection
method is the critical factor. Although the ranking is functional to the Law objective, in our view,
selection yields biased subsidization within categories and creates incentives for consultants to focus
only on "selectable" projects. By explicitly favoring agricultural expansion, the Law increases the socio-
economic gap among and within farmers' categories, forming a win-win tandem with the consultant
by reducing installation costs (farmers) and increasing profits because of the land size (consultant).
4.5. Subsidies and irrigation water management
Lastly, we explore the potential unintended effects of subsidies on irrigation water management.
Efficient technologies are promoted because of a myriad of economic and environmental benefits
(water savings), being the foundations of many subsidy programs, for example, in Australia (Wheeler
et al., 2020), Spain (Berbel et al., 2019), India (Malik et al., 2018), or China (Wang et al., 2020).
However, the Chilean program lacks water conservation goals. We argue that the current design
threatens water resources' sustainability in several ways. Although there are specific calls for regions
or macro-regions, CNR applies the same method to select projects regardless of the current scarcity
extent or basins water availability capacities, despite the availability of such information (Aitken,
Rivera, Godoy-Faúndez, & Holzapfel, 2016; Valdés-Pineda et al., 2014). Furthermore, projects are
evaluated individually without any third users or basin-scale considerations. Second, the selection
method (explicitly favoring agricultural expansion, with 70% of the total score related to this) produces
direct subsidization to increases in water demand consumption. Further, subsidies have been applied
as an instrument to deal with droughts periods but applying the exact selection mechanism. Thirdly,
and worsening the picture, CNR finances non-conventional renewable energy components (Table 1),
following sustainability purposes. Although from a profit maximization perspective, it makes sense;
the search for agricultural expansion plus NCRE might result in an unsustainable "combo," given that
efficiency improvements tend to end up in more energy and water consumption (Borrego-Marín &
Berbel, 2019; Perry et al., 2017).

23
Given the lack of irrigation management and accounting data, it is impossible to do an empirical
evaluation of the consequences of this modernization process. However, recent and significant
literature argues that subsidy programs have yielded opposite outcomes to those in principle targeted,
showing no water use reductions, leading to the so-called efficiency paradox (Grafton et al., 2018;
Pérez-Blanco et al., 2020; Perry et al., 2017). Moreover, research states that water conservation targets
can be achieved by setting caps on water extractions (Grafton et al., 2018) or basins where expansion
is no longer possible (Berbel & Mateos, 2014; Sanchis-Ibor et al., 2016). A third way, not yet described
in the literature, is designing a program in which agricultural expansion is explicitly not subsidized. This
is the case of the State Water Efficiency and Enhancement Program (SWEEP) in California, U.S. Set in
2014 under emergency drought, the program set that projects must save water, where additional land
cannot be converted to farmland (California Department of Food and Agriculture, 2021).
Specifically, some scholars have already warned about the adverse effects of such efficiency
improvements on Chile's agricultural systems. Rinaudo and Donoso (2019), working on groundwater
in the Copiapó aquifer, Northern Chile, state that heavily subsidized irrigation systems hindered the
aquifer's artificial recharge. Likewise, in the Limari basin, where according to Scott, Vicuña, Blanco-
Gutiérrez, Meza, and Varela-Ortega (2014), the current WR system "fosters" agricultural expansion,
particularly with permanent crops, being enhanced by the subsidies granted by Law 18.450, leading to
the efficiency paradox.
Modern irrigation is a measure to deal with droughts, enabling further adaptation to climate change
(Alcon, Navarro, de-Miguel, & Balbo, 2019; Berbel et al., 2019; Borrego-Marín & Berbel, 2019; Roco,
Poblete, Meza, & Kerrigan, 2016). The 10 years of drought in Central Chile (Garreaud et al., 2019), plus
the climate change projections -reductions in rainfall, water availability, and rising temperatures-
(Vicuña et al., 2021) have stressed the claims of private and public actors for increasing resources for
irrigation modernization. However, if the modernization continues based on the expansion instead of
water savings, it will undoubtedly negatively affect agriculture and water resources' sustainability.
5. Conclusions
The modernization of irrigation systems through subsidies on efficient technologies is part of the
agricultural and water resources conservation policies in several countries, especially those facing
scarce and high water supply variability. Chile meets these conditions, and aiming to boost a low
adoption rate of technologies and support market export-oriented reforms, launched a subsidy

24
program for the modernization of irrigation systems in 1985. Thus, the article examines the historical
subsidy allocation, analyzes the rationale behind subsidies functioning, and explores the possible
consequences of both the allocation policy regime and the productive-based objectives. Although this
instrument has indeed enabled the modernization and addition of roughly 350.000 ha of irrigated land,
marking the policy's success and accomplishment of its objective, the allocation mechanism brings
several challenges and significant and urgent policy implications.
Although our analysis does not allow us to make causality claims, it is clear that the preferential
allocation towards a reduced proportion of farms, 5%, has somewhat contributed to increasing the
socio-economic gap among them instead of diminishing it, by historically favoring groups that present
no apparent affordability problems and have internalized the benefits of such technologies. Although
the allocation pattern has changed in the last years, efforts are still insufficient since this small group
still obtains more than 60% of the subsidies. Thus, redistributing funds targeting equity and facilitating
the adoption to credit and capital-constrained farmers needs to be addressed.
Moreover, the demand-driven and risk-free approach hinders the capacity of CNR to identify farmers'
real needs for a subsidy, with no information regarding the program works as a subsidy program or
not, and to understand farmers' behavior in response to such efficiency improvements. Furthermore,
the selection method incentives consultants to search for only potentially successful projects, resulting
in a win-win relationship between consultants and farmers without any sign of a subsidy need. In this
regard, program evaluation methods might help shed light on the justification of granting subsidies to
some farmers' spectrum. Besides, even straightforward actions (with no extra costs) such as limiting
repetition or rewarding first-timers can help avoid repetition and focus on those who need it. If
broadening adoption becomes a priority, the risk-free approach needs to be revised and modified.
Making solutions effective, such as constituting the Bonus as a real warranty by credit institutions or
allowing farmers to receive partial payments, go in the right direction, mutating the strategy towards
a sharing-risk one.
Nonetheless, despite the Law's flexibility and authorities' capability and will to allocate resources on a
specific beneficiary or technology, what is crucial to revise is the selection mechanism, unaltered
despite several Law modifications. As long as the method remains the same, the subsidy program will
continue favoring agricultural expansion, threatening water resources' sustainability. Considering the
alternatives described internationally -caps on withdrawals, basin agreements, or policy design- and
the particularities of the Chilean water policy framework - based on private ownership of water rights
and private water management- policy design by modifying the selection method should be

25
conducted. Allowing for the geographical diversity and water availability or explicitly avoiding
agricultural expansion on water deficit territories in the selection mechanism will help to reduce the
pressure on water resources. Moreover, the promotion of agreements within WUA or at the basin
level, targeting management modernization, reducing water extractions, and water accounting, seems
a complementary pathway to follow.
Finally, the subsidy program expires in 2022, requiring political discussion to prolong its continuity. We
believe that the debate concerning the subsidy program needs to know both the impacts and potential
consequences under the current scenario, which we have described here. Program redesign will
contribute to better water management in agriculture, allowing modernization and ensuring
sustainable irrigation, placing it a suitable instrument to deal with droughts and climate change.

26
6. Acknowledgments
The authors would like to thank Irrigation National Commission (CNR) and the National Agricultural
and Livestock Development Institute (INDAP) for facilitating the historical databases. Furthermore, the
authors want to thank the Executive Secretary, the chief of the Department of Irrigation Promotion,
and staff members of CNR for acceding to share their valuable time and expertise on the functioning
of the subsidies framework and their perspectives of the future of such an instrument.
7. Funding
This work is supported by the Chilean National Agency for Research and Development through the
"Programa de Formación de Capital Humano Avanzado, Becas Chile" Grant No: 72180081.
8. Disclosure statement
No potential conflict of interest are reported by the authors.
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30
Supplemental Data
Contents
Figures ................................................................................................................................................... 30
Tables .................................................................................................................................................... 32
Annex 1. The polynomial of scoring and ranking .................................................................................. 34
Figures
Figure 1A. Storage infrastructure development and agricultural irrigated area

31
Figure 1B. Total irrigated land by region, period 1986-2018
Figure 1C. Total Agricultural expansion by region, period 1986-2018

32
Figure 1D. Percentual distribution of subsidies, period 1986-2018
Tables
Table 1A. Estimation of the number of farms belonging to different farming categories in Chile
Type
Strata sales
(U.F.)
<12 HRB
> 12 HRB
Total
Farms
%
Small multiactivity farmers
0-100
153.774
753
154.527
Small comercial farmers
100-600
72.260
567
74.279
94,7%
Smallholders
600-2.400
18.282
3.243
23.192
Total Smallholders
244.316
7.682
251.988
Small Agricultural Entrepeneur farms
2.400-25.000
3.223
9.825
13.048
5%
Mid sized farms
25.100.000
39
1.005
1.044
0,4%
Large farms
>100.000
7
167
174
0,006%
Total
247.585
18.679
266.264
Source: Dirección de Presupuesto (2019)

33
Table 1B. Summary of historical reforms and modifications to Law 18.450
Source: Ministerio de Agricultura (1985), Dirección de Presupuesto (2019)
Table 1C. Market concentration by type of beneficiary period 2010-2019, by macro-region.
A: Arica, Tarapaca and Antofagasta. B;Atacama and Coquimbo. C: Valparaiso, Metropolitana and O’higgnis. D:
Maule, Nuble and Biobio, E: Araucania, Los Rios and Los Lagos. F:Aysen and Magallanes
Investments
<12.000 U.F.
Individual < 12.000
UF.
WUA < 24.000
Off-farm (wua) < 30.000 U.F.
Individual (onfarm) <12.000
U.F.
Special programs for
smallholders < 400 U.F.
On-farm proyects < 50.000
U.F.
If project cost < 30.000 UF
are subject to subsidy set in
Articles artículos 1º and 3º.
Off farm proyects (WUA) <
250.000 U.F.
Subsidy
Maximum of 75% of
construction an
repairs
La suma de las
bonificaciones no
podrá ser > 85%
Suma de las
bonificaciones no
podrá ser > 95%
The bonus will be paid
once the works are fully
executed and received.
Off-farm
WUA with at least 70 % of small
and/or median size farmers <
90%; Otherwise
80%
On-farm
Small farms < 90%; SE < 80%;
Median and Large farms < 70%
Target
population
Natural or legal
figures, or
usufructuaries of
agricultural
Small farms INDAP <12 HRB
SAE >12 to <40 ha
Median size >40 to <200 ha
Large size >200 ha
Item subject
of subsidy
Irrigation Equiment
and accesories
Irrigation and
drainage works
The former plus
investments preventin g
soil degradation,
biodiversity, or any type
of environmental damage
CNR is
created
Law 18.450 enacted
1975
1986
1994-2007
2007-2008
2009
2013-2022
Dictatorial period
Democratic Period
Category
Index
Macro-region
A
B
C
D
E
F
Mid-size
Total
2
28
32
43
31
s/i
N low10
2
11
24
34
17
s/i
N low20
2
17
27
39
21
s/i
Leader Consultant
88
20,7
38,3
45,2
17,2
s/i
C4
100
55,1
74,3
77,6
51,2
s/i
C8
100
69,7
90
88
72,7
s/i
HHI
7881
976
2034
2549
877
s/i
SAE
Total
12
41
45
77
36
13
N low10
5
19
34
60
24
6
N low20
7
26
38
67
28
8
Leader Consultant
34,2
25,73
29,5
40,12
28,9
36,9
C4
72,3
49,4
65,6
67
61,42
71,9
C8
91,4
64,2
81,5
75,3
80,9
92,2
HHI
2122
963
1613
2008
1409
1930

34
Annex 1. The polynomial of scoring and ranking
1. Farmer contribution. Percentage of the Project total cost % del assumed by the farmer
= 300 ∗( − ) − 1
⁄
Where  is the scored obtained by an irrigation project (ranging between 0 and 300), N is the total
number of projects participating and J is the project's position relative to the total projects
participating in a callij regarding farmer contribution and ordered in decreasing terms.
2. Land size. It is the totality of new irrigated lands or expansion, divided by the Project cost (ha/$)
= 300 ∗( − ) − 1
⁄
Where  is the score obtained by an irrigation project (ranging between 0 and 300), N is the total
number of projects participating, and J is the project's position relative to the total projects
participating in a callij regarding land size and ordered in decreasing terms.
3. Cost ($/ha)
= 400 ∗( − ) − 1
⁄
Where  is the score obtained by an irrigation project (ranging between 0 and 400), N is the total
number of projects participating, and J is the project's position relative to the total projects
participating in a callij regarding and ordered in decreasing terms.

35
Annex 2. Calls calendar year 2019
CALENDARIO DE CONCURSOS LEY N°
18.450
AÑO 2019
Actualizado 27‐12‐
2019
Concur
so Nº
PROGRAMA OBRAS MENORES
Monto M$
Llamad
o
Publicación
de
bases
Fin de
postulaci
ón
01‐2019
Concurso nacional de proyectos no seleccionados tecnificación y obras civiles (1)
2.400
03‐01‐
2019
04‐01‐2019
17‐01‐
2019
02‐2019
Concurso Nacional de Proyectos No Seleccionados INDAP
2.000
03‐01‐
2019
04‐01‐2019
31‐01‐
2019
03‐2019
Concurso de tecnificación para las regiones del Maule, Ñuble y Biobío
2.000
03‐01‐
2019
09‐01‐2019
07‐02‐
2019
04‐2019
Concurso de obras civiles para las regiones Atacama, Coquimbo y Araucanía
1.200
03‐01‐
2019
09‐01‐2019
19‐02‐
2019
05‐2019
Concurso de tecnificación para las regiones de Valparaíso, Metropolitana y O’Higgins
2.000
03‐01‐
2019
11‐01‐2019
26‐02‐
2019
06‐2019 Concurso nacional de obras de acumulación e infiltración (1) 2.000 03‐01‐
2019
15‐02‐2019 11‐04‐
2019
07‐2019 Concurso de tecnificación y obras civiles “Plan impulso Araucanía” (1) 1.500 03‐01‐
2019
15‐02‐2019 04‐04‐
2019
08‐2019 Concurso nacional de sistemas de gestión de aguas: Telemetría y automatización 2.500 03‐01‐
2019
15‐02‐2019 09‐04‐
2019
09‐2019
Concurso nacional de tecnificación empresarial
638
05‐03‐
2019
22‐03‐2019
15‐05‐
2019
10‐2019
Concurso de tecnificación para las regiones de Atacama, Coquimbo, Araucanía, Los Lagos y Los
Ríos 2.000 05‐03‐
2019
05‐03‐2019 15‐05‐
2019
11‐2019 Concurso de obras civiles y tecnificación para las regiones de Arica y Parinacota (Plan
Parinacota), Tarapacá, Antofagasta, Aysén y Magallanes
897
05‐03‐
2019
08‐03‐2019
15‐05‐
2019
12‐2019 Concurso de obras civiles para las regiones de Valparaíso, Metropolitana y O’Higgins 1.915 05‐03‐
2019
05‐03‐2019 02‐05‐
2019
13‐2019 Concurso de tecnificación y obras civiles “Plan impulso Araucanía" (2) 1.500 05‐03‐
2019
05‐04‐2019 18‐06‐
2019
14‐2019 Concurso nacional de tecnificación y obras civiles para los pueblos originarios 444 05‐03‐
2019
12‐04‐2019 19‐06‐
2019
15‐2019 Concurso de obras civiles para las regiones del Maule, Biobío y Ñuble 3.438 05‐03‐
2019
18‐04‐2019 04‐07‐
2019
16‐2019 Concurso nacional de calidad de aguas 1.710 05‐03‐
2019
03‐05‐2019 11‐07‐
2019
17‐2019 Concurso nacional obras civiles de distribución y minihidro 1.100 05‐03‐
2019
10‐05‐2019 23‐07‐
2019
18‐2019 Concurso de tecnificación para las regiones de Valparaíso, Metropolitana y O’Higgins 1.780 05‐03‐
2019
24‐05‐2019 23‐07‐
2019
19‐2019
Concurso de obras civiles para las regiones Atacama, Coquimbo y Araucanía
2.462
05‐06‐
2019
14‐06‐2019
20‐08‐
2019
20‐2019 Concurso proyectos No Seleccionados de tecnificación para las regiones del Maule, Ñuble y
Biobío 3.027 05‐06‐
2019
21‐06‐2019 04‐09‐
2019
21‐2019 Concurso de obras civiles para las regiones de Valparaíso, Metropolitana y O’Higgins 1.000 05‐06‐
2019
14‐06‐2019 01‐08‐
2019
22‐2019
Concurso Emergencia Agrícola proyectos No Seleccionados de tecnificación para las regiones
de Coquimbo, Metropolitana, Valparaíso y O’Higgins 4.000 14‐08‐
2019
19‐08‐2019 26‐09‐
2019
23‐2019
Concurso nacional de obras de drenaje
600
05‐06‐
2019
26‐07‐2019
02‐10‐
2019
24‐2019
Concurso nacional de tecnificación y obras civiles INDAP
1.500
05‐06‐
2019
09‐08‐2019
09‐10‐
2019
25‐2019 Concurso de tecnificación y obras civiles para las regiones de Arica y Parinacota, Tarapacá,
Antofagasta, Aysén y Magallanes
1.350
05‐06‐
2019
23‐08‐2019
17‐10‐
2019
26‐2019 Concurso de tecnificación para las regiones de Atacama, Coquimbo, Araucanía, Los Lagos y Los Ríos
1.150
05‐06‐
2019
20‐08‐2019
24‐10‐
2019
27‐2019 Concurso de obras civiles para las regiones de Ñuble y Biobío y para las regiones con
Emergencia Agrícola, incluye profundización de pozos
3.490
21‐08‐
2019
13‐09‐2019
14‐11‐
2019
28‐2019 Concurso de tecnificación para las regiones de Ñuble y Biobío, y para la región con Emergencia
Agrícola en Maule
3.200
21‐08‐
2019
30‐08‐2019
14‐11‐
2019
29‐2019
Concurso nacional de obras de acumulación e infiltración (2)
1.000
21‐08‐
2019
27‐09‐2019
12‐12‐
2019
30‐2019
Concurso especial recuperación de obras de riego zona norte
1.500
15‐02‐
2019
15‐02‐2019
04‐04‐
2019
31‐2019
Concurso obras civiles proyectos No Seleccionados para la región de Atacama y las regiones
afectadas por la Emergencia Agrícola Coquimbo, Valparaíso, Metropolitana, O´Higgins y Maule
y proyectos Nuevos región del Biobío
5.730
10‐09‐
2019
27‐09‐2019
14‐11‐
2019
Total Concursos Obras
Menores
61.
031

36
Agricultura, M. d. (1985). Normas para el fomento de la inversion privada en obras de riego y drenaje.
Ley 18.450 [Norms for promotion of private investments in irrigation and drainage. Law
18.450]. Santiago.: Ministerio de Agricultura Retrieved from
https://www.bcn.cl/leychile/navegar?idNorma=29855
Dirección de Presupuesto, D. (2019). Informe Final de Evaluación. Programas Obras Riego Menores y
Medianas Ley 18.450 y Fomento Al Riego [Final Evaluation Report. Minor and Median Works
Program Law 18.450 and Irrigation Promotion] Santiago, Chile Retrieved from
https://www.dipres.gob.cl/597/articles-189315_informe_final.pdf
Concurso
Nº
PROGRAMA OBRAS MENORES PEQUEÑA AGRICULTURA
Monto
M$
Llamad
o
Publicación
de
bases
Fin de
postulaci
ón
201‐2019
Programa Especial de Pequeña Agricultura
268
03‐01‐
2019
11‐01‐2019
19‐02‐
2019
202‐2019
Programa Especial de Pequeña Agricultura
537
03‐01‐
2019
25‐01‐2019
21‐03‐
2019
203‐2019
Programa Especial de Pequeña Agricultura
246
05‐03‐
2019
08‐03‐2019
02‐05‐
2019
204‐2019
Programa Especial de Pequeña Agricultura "Plan impulso Araucanía" 436 05‐03‐
2019
26‐04‐2019 20‐06‐
2019
205‐2019
Programa Especial de Pequeña Agricultura
1.100
05‐03‐
2019
30‐08‐2019
14‐11‐
2019
Total Sub Programa Pequeña Agricultura 2.587