DIE 03 - 24 Crisis Hídrica 2023: Una Mirada desde los Gastos Defensivos

The water crisis in Uruguay in 2023 has raised the crucial question of how it has impacted the demand for bottled water. This analysis aims to provide a comprehensive answer, along with an estimate of the defensive spending incurred by the population, as a reflection of the citizen’s value improvements in water quality.

A model of bottled water demand is developed using pre-crisis data. It shows the essential nature of water, although juices and soft drinks behave as substitutes. The analysis shows that demand is inelastic with respect to both price and household income, indicating that the most vulnerable populations must redirect resources towards unexpected defensive consumption. It is also evident that informing the public is crucial, as media coverage significantly influences consumption and spending decisions.

The actual consumption is compared with the model's projection as a counterfactual scenario without the crisis. The difference infers the demand for bottled water due to defensive spending during the water crisis, estimated at approximately 112 million liters, implying an average expenditure of 6,200 pesos per household.

Keywords: Water crisis, drought, scarcity, demand, bottled water, defensive spending, willingness to pay.