Paraguay's aguateros-small privatewater companies-form an important part of the water sector,serving about 9 percent of the total population (or about 17percent of those with piped water supply). But untilrecently they operated only in urban areas, where waterresources are abundant and they could choose customers basedon their ability to pay the full costs of providing service.A new World Bank-funded initiative seeks to attractaguateros and construction firms active in the water sectorto unserved rural areas and small towns by providing anoutputbased aid subsidy, awarded through competitivebidding. The initiative is the first attempt anywhere toapply this approach to rural and smalltown water sectorinvestment. This Note reviews the early lessons.
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