OLMOS, Peru (Reuters) - Peru's Olmos Valley might be a desert now, with rare rains and rivers that trickle to life for just a few months a year, but a radical engineering solution for water scarcity could soon create an agricultural bonanza here.
Fresh water that now tumbles down the eastern flank of the Andes mountains to the Amazon basin and eventually the Atlantic Ocean will instead move west through the mountains to irrigate this patch of desert on Peru's coast. It will then drain into the Pacific Ocean.
The Herculean project to reverse the flow of water and realize a century-old dream is in many ways the most important water work ever in Peru. It could serve as a blueprint for the kind of construction projects needed to tackle worsening water scarcity.
Call it extreme engineering in the age of global warming.
"All of this will be green," said engineer Giovanni Palacios, looking out over miles of brown shrubbery at a construction site he oversees for the Brazilian firm Odebrecht.
Palacios is the director of the Olmos Irrigation Project, an ambitious and - until it starts in 2014 - unproven vision with a $500 million (329 million pounds) price tag.
It has included drilling a 12-mile (20 km) tunnel through the formidable Andes to capture abundant water flows on the other side. That feat required a drill 1,000 feet long (305 meters).
It aims to fix Peru's most emblematic water problem. Rainfall on the coast averages six inches (150 mm) per year and the project is coming online as Peru's tropical glaciers, a source of fresh water for millions, melt away with rising global temperatures.
"This will all be sugar cane, avocado, passion fruit, and people everywhere will be working, planting, harvesting, packaging," Palacios said, perched on a heap of sand - some of the 2.5 million cubic meters (808 million cubic feet) of earth that have been moved so far to make way for the water.
The Olmos project, which critics say benefits mostly big agricultural companies rather than small farmers, is the most ambitious of seven massive irrigation works that are turning swaths of desert valleys near Peru's coast into profitable, producing fields.
Together they will greenfield some 900 square miles, or about 233,000 hectares (576,000 acres), of desert over the next decade.
Most of the projects tap a few glacier-fed rivers along the Pacific coast. The Olmos irrigation project, however, is the first of at least two that will pull water destined for the Amazon to the coast to feed crops.
It shares some similarities with works that have drawn drinking water across the mountains to the capital, Lima, for years.
Peru is one of the countries most exposed to climate change, according to the United Nations, and Lima is about as dry as Baghdad.
Test flows of water on the tunnel for the Olmos Valley were conducted last year.
Next year, Odebrecht will start pumping billions of gallons of water into fields leased by agricultural companies over a 170-square mile (440-square km) patch of desert in the northern Lambayeque region, known for its algorrobo trees with roots that stretch up to 164 feet (50 meters) underground to find water.
Peru has long struggled to manage a natural water imbalance that climate change could soon visit on other nations: too much water in some places and not enough in others.
The coastal region west of the Andes range, home to two-thirds of Peru's population and 80 percent of economic activity, receives just 2 percent of the country's fresh water.
That is because the towering Andes catch rising warm air in chilly mountain peaks - forcing moisture to condense and drain into the jungle, and casting a long, dry "rain shadow" over coastal regions to the west.
The lack of water in regions along the coast already places a "totally crushing" burden on Peru - South America's fastest-growing economy, said Jorge Benites, the conservation director for the national water agency.
"With climate change and rapid population and economic growth, trans-Andean projects like Olmos will surely multiply," Benites said.
Water has defined life on Peru's coast since pre-Incan times, with power accompanying those who control it.
Before extreme weather and droughts marked its collapse in 800 AD, the ancient pyramid-building Moche civilization thrived along the northern coast of Peru for some 700 years, thanks to a surface irrigation system that used seasonal rivers to soak fields of corn, bean and peanut crops.
Irrigation in Olmos hasn't changed much since the time of the Moche for many local farmers. While some can afford to pump groundwater to their fields in the long dry season, others wait for the Olmos River to swell after brief downpours during the rainy months before rushing to dig out irrigation paths with shovels.
Odebrecht estimates the Olmos irrigation project will create about 40,000 direct jobs and another 120,000 indirect jobs - so many that a team of Peruvian architects from different firms designed a new city to house the newcomers.
Inspired by the Moche, it would rely on adobe structures that would create shade and harness winds to cool residents.
"This whole Olmos experiment is like what the Moche did thousands of years ago. They conquered the desert through irrigation and built urban centres," said Jose Orrego, an architect with the firm Metropolis in Lima. "The idea is very seductive."
Engineers say Olmos is the most complex and risky project they have ever worked on, with hot and stuffy conditions inside the mountain requiring air conditioning and unstable geology outside that has caused at least two slides.
Construction on the tunnel was finished in late 2011 and by 2015 enough water to fill 160,000 Olympic-sized swimming pools (400 million cubic meters) can start moving annually through the mountain, powering a small hydroelectric plant in the process.
The project has been a dream of engineers and politicians since the late 19th century, well before worries arose over global warming. It languished over funding issues until 2003, when a decentralization push moved it to the regional government in Lambayeque to work it out with the private sector.
Odebrecht eventually won the right to build the project, which has arguably taken on added importance as scientists warn that many of Peru's glaciers could disappear.
"Lambayeque has a bright future but to get there we need more investment, and what will bring that investment is water," said Humberto Acuna, the president of the regional government.
Odebrecht, the Brazilian company, plays a supersized role in Peru, building everything from highways to mining facilities, and even putting up a smaller version of Rio de Janeiro's famous Christ the Redeemer statue over Lima's coastal skyline.
To pay for construction of the Olmos project without government funds, Odebrecht said it asked investors to bet on the future flow of water that would feed crops. It auctioned off idle public land to agricultural companies for half of the financing and sold debt based on future water sales to those companies for the rest.
"For this to go forward, the stars had to be aligned," said Jorge Barata, the director of Odebrecht in Peru. "The novelty of the financial structure created some doubts in the beginning."
DOES TURNING DESERT INTO GARDEN WORK?
While the plan is to keep moving water from east of the Andes to the coast, the Peruvian government's appetite to do so with business models like Olmos may be waning.
President Ollanta Humala has touted irrigation works for small farmers instead of industrial projects like Olmos, which was under way before he assumed power, that are financed in part through higher water prices.
Critics say the Olmos project sidelined family farms and gave public resources - land and water - to big export-oriented companies for little in return.
The smallest plot of the 38,000 hectares (94,000 acres) auctioned off was 250 hectares (618 acres), requiring a minimum investment of about $1 million.
"It was a good idea, but in reality the project has favoured agroindustry over the farmers in the region who dreamed of it for 100 years," said Fernando Eguren of Cepes, a group that advocates for small farmers.
Odebrecht said it had agreed to make water available for 5,500 hectares (13,590 acres) of community parcels and will offer it at a rate below what farmers now pay to pump groundwater.
However, Juan Rodolfo Soto, the president of the local farmers group in Olmos, said Odebrecht should build the same irrigation infrastructure on community parcels that the companies will get.
He and other farmers have long dreamed of gaining access to stable water supplies.
"After so many years, so much of our hope has turned into disappointment," said Soto. "But I think we will still benefit indirectly, with jobs in hotels or working for big companies."
An important global miner, Peru has more than tripled its agricultural exports over the past decade, according to the Agriculture Ministry, using its year-round good climate and around 19 free trade agreements to meet global demand for high-priced crops like asparagus.
Still, watering Peru's coastal regions to keep growing agricultural exports has its own risks. The El Nino phenomena that periodically warms the Pacific and stirs up destructive rains has the potential to wreak havoc.
Also, access to water that is too easy can result in stalinisation, as water-logged fields build up salt in soil at levels toxic to crops.
"Turning Peru's desert into a garden sounds really nice, but how well does it really work?," said Jeffrey Bury, a geographer at the University of California Santa Cruz who studies water issues in Peru.
(Editing by Kieran Murray and Christopher Wilson)
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