Bolivia's Path to Economic Resilience: IWRM as Key Contributor for Sustainable Development
by Ana Cecilia Escalera
This case study is drawn from the larger report Managing Water for Economic Resilience: De-risking Is Not Enough, published April 2024.
Key Messages
Bolivia faces a looming water crisis with demand projected to rise by 15–36% by 2036, largely driven by agriculture, which accounts for 92% of freshwater withdrawals. This increasing demand is exacerbated by underestimations in water usage calculations and ambitious plans to double irrigated land, putting additional strain on already limited water resources.
Climate change is intensifying Bolivia's water vulnerabilities, causing alarming glacier retreats that impact critical water supplies for cities, while also increasing the frequency and severity of droughts and floods.
Bolivia is shifting its economic focus towards becoming a major energy player in South America, with significant investments in hydropower and lithium. These shifts disrupt local hydrological patterns but also have the potential to exacerbate water scarcity, particularly in regions already vulnerable to climate change. This could lead to a range of socio-economic consequences.
IDB studies indicate that water-related events could significantly impact Bolivia's GDP, necessitating increased investment in water infrastructure and management.
As a tool to achieve water sector goals, the National Watershed Plan (Plan Nacional de Cuencas (PNC)) emerged. One of the main reasons for creating the PNC is the absence of a clear and strong water policy. This has led to fragmented management of water resources and scattered regulations with a lack of coordination between drinking water and other sectors, which made it difficult to manage water resources effectively and plan for the long term.
Bolivia's PNC has made strides in addressing hydro-social conflicts and enhancing investment efficiency in watershed management, but faces challenges in subnational and intersectoral coordination as well as limited active involvement from the private sector and civil society. These gaps hinder the policy's effectiveness in building water resilience and adapting to climate change challenges.
Introduction
Despite the progress in reducing poverty levels over the past several decades according to World Bank data, Bolivia remains one of the most economically challenged nations in Latin America. Historically, its economy has been heavily reliant on the extraction and exportation of natural resources, particularly in the fields of gas, mining, petroleum, and agriculture (WFP, 2023). As of 2022, the composition of the country's GDP is distributed as follows: Services sector accounts for the largest share at 52.4%, followed by Manufacturing at 16.3%, Agriculture at 13.9%, Mining at 8.5%, and Commerce at 8.1% (SIP, 2023). In recent years, there has been a notable shift towards the energy sector, driven by a government-backed initiative to advance an extensive agenda focused on the creation and export of electricity, which includes the construction of hydroelectric plants for raising the contribution of hydropower in the national energy mix from 15% in 2019 to a remarkable 70% by 2025 (CIF, 2023). As a result, Bolivia aims to emerge as both a dominant energy player in South America and a key energy exporter within the region. Moreover, due to Bolivia's significant lithium reserves, the extraction of this mineral is poised to assume a pivotal role in the country's economic strategy, particularly with the government's efforts to enhance its standing in the global lithium market (AP News, 2023).
Bolivia holds remarkable topographical and climatic diversity, spanning from the lofty heights of the Andes Mountains at 6,500 m above sea level, to the Inter-Andean Valleys, and further descending to the lowlands of the Amazonian and Chaco regions, resting at an altitude of less than 500 m above sea level. This geographical variation categorizes Bolivia into three distinct topographical and climatic zones: the arid highlands and Andean region to the west, the semi-tropical valleys in the middle, and the lush tropical lowlands to the east (World Bank, n.d.). These distinct zones give rise to a mosaic of intricate ecosystems and habitats, fostering rich biodiversity (LACGEO, 2023).
Bolivia's strategic location and susceptibility to dramatic climate fluctuations driven by the El Niño-Southern Oscillation (ENSO), which have been exacerbated by the effects of climate change, generate severe natural challenges including heavy rainfall, floods, and droughts. Compounding these issues, the nation faces rapid population growth, inadequate urban planning, and insufficient control measures. Consequently, this has led to haphazard urban development, characterized by high levels of physical and social vulnerability. These circumstances have precipitated significant degradation of urban living conditions, further exacerbating the ongoing economic, social, and environmental crises. The combination of substantial threats and vulnerabilities has created a high-risk scenario, fraught with the potential for substantial economic losses and far-reaching impacts on the population in the face of natural disasters.
Climate Change and Water in Bolivia
The climate crisis in Bolivia presents significant dangers to human well-being, economic stability, social cohesion, productivity, and the environment. Based on an analysis of the consequences of extreme climatic occurrences and their interconnected socio-economic factors, the 2021 Global Climate Risk Index (CRI) ranks Bolivia in the tenth position among the most susceptible nations globally. Oxfam (2009) provided a fair description of the key aspects that explain this high vulnerability:
It is one of the poorest countries in Latin America and suffers from one of the worst patterns of inequality. The national poverty rate is 37.5%, positioning the country as the second poorest country in the South American region, just below Venezuela. Low-income groups in developing countries are the most exposed to climate change impacts.
Located in a climatically volatile region, it is one of the countries in the world most affected by natural disasters in recent years.
More than half of the country is Amazonian, with high levels of deforestation which adds to the vulnerability to flooding. From 1985–2022, the Amazonian Forest in Bolivia was reduced by 7.4%, equivalent to 1.5 million hectares (Mongabay, 2023a).
It is home to about 20% of the world’s tropical glaciers, which are retreating more quickly than predicted by many experts.
It is one of the most bio-diverse countries in the world, with a wide variety of ecosystems that are vulnerable to different impacts from climate change.
The water challenges confronting Bolivia have been significantly exacerbated by the far-reaching impacts of climate change. Over the span of more than eight decades, Bolivia has experienced a concerning increase in its average annual temperature, with a rise of 0.1 °C per decade. This trend has resulted in an alarming retreat of glaciers (CIF, 2023), with a particularly bitter instance being the vanishing of the iconic Chacaltaya glacier near La Paz in 2009. This retreat holds profound implications, especially for the approximately 230,000 Bolivians residing in high-altitude regions, whether in urban or rural settings, who rely on the meltwater from these glaciers for more than a quarter of their monthly domestic water requirements. This number increases to approximately 1.5 million people during the peak of the melting season. Consequently, the receding glaciers introduce a notable risk to urban centers such as La Paz and El Alto, as these glaciers constitute a substantial source of their potable water supply (Oxfam, 2019).
Droughts and floods have escalated in both frequency and intensity over recent years, relentlessly impacting the nation. According to the National Meteorological and Hydrological Service of Bolivia (SENAMHI), national registers indicate that instances of flooding and drought have become increasingly frequent and severe in the past decade (Mongabay, 2023b), associated with the shifting climate patterns that are leading to notable alterations in precipitation dynamics. This is consistent with data from databases such as DesInventar (2023), which shows evidence of an increased number of drought and flood declarations at the municipal level in Bolivia. Projections outlined in the 2015 Bolivian Nationally Determined Contributions (NDCs) foresee a worrisome future by 2030, with up to 24% of Bolivia's landmass susceptible to recurrent flooding and another 27% grappling with prolonged periods of drought.
Ravaging Economies: The Impact of Floods and Droughts
Flooding has notably intensified in the lowlands of northeastern Bolivia due to the extensive river systems and flat terrain, making this region particularly vulnerable. Urban areas like Trinidad and Cobija have borne the brunt of significant flooding, causing disruptions in infrastructure, homes, and people's lives. Around 43% of the population resides in flood-prone areas, according to estimates from the Ministry of Development Planning. In 2015, one of the most impactful flood events in the past decade occurred, resulting in an estimated loss of US$ 450 million and affecting over 300,000 individuals. The consequences of this event were far-reaching: nearly 18.6% of national roadways were forced to close, water and sanitation systems in the Bolivian Amazon were compromised, leaving many without essential services, and the destruction of 120,000 hectares of crops led to an approximate loss of 445 metric tons of production (UDAPE, 2015). Between 1990 and 2014, floods accounted for 37.3% of deaths and 17.5% of economic damages caused by natural disasters (Nunez and Verbist, 2018). Research suggests that climate change related flooding could incur a US$ 93 billion toll on public infrastructure, with yearly costs averaging US$ 3.113 billion. Furthermore, agricultural and livestock losses might amount to US$ 82 billion, averaging around US$ 2.726 billion annually (Ishizawa et al., 2017).
The ThinkHazard! Platform from the World Bank designates Bolivia as notably susceptible to droughts, with a recurring pattern expected every five years on average, particularly concentrated in the Andean regions. This concern is magnified by Bolivia's past experiences of significant socio-economic losses from drought events. Should the frequency and intensity of these events increase, the resulting losses could be even more severe. According to the Drought Atlas in Latin America and the Caribbean (Nunez and Verbist, 2018), between 1990 and 2014, droughts were responsible for 5.7% of deaths and 15.8% of economic damages from natural disasters. During the same period, approximately 773,000 hectares of agricultural production were affected by droughts. The country faced its most severe drought in 25 years between November 2016 and February 2017, impacting 177,000 families, devastating over 624,000 hectares of crops, and leading to a state of emergency in seven out of the nine country regions (UNTC, 2016). In addition to climate change, inadequate water management, rapid urban growth, and contamination of water sources from extensive agricultural and mining activities in drought-prone areas have all contributed to exacerbating the impacts of droughts (SEI, 2018).
Studies conducted by the IDB estimate that losses could amount to at least 4$ of the GDP for events that are highly probable and moderately extreme; these losses undoubtedly correspond primarily to extreme phenomena. Losses would constitute 2.5% of the GDP for extremely dry events with a medium probability. The most pronounced impacts on the GDP would occur with the incidence of extreme floods with varying probabilities, ranging from 2.76–3.08% of the GDP. The lower limit of a 2.76% GDP impact is comparable to the public sector deficit, while the upper limit of a 3.08% GDP impact is akin to the external current account deficit and the country's fiscal deficit, prior to the COVID-19 contingency.
A straight-forward conclusion can be obtained from this: stimulation of investments and public expenditure stimulation in the water sector will need to be scaled up to reduce the burdens of water-related shocks on economic development. This could involve establishing dedicated funds for water infrastructure development, maintenance, and resilience enhancement. Furthermore, encouraging private sector involvement through partnerships and incentives can unlock additional funding and expertise. By fostering public-private partnerships, the private sector can contribute innovative solutions, advanced technologies, and efficient management practices that amplify the effectiveness of water-related initiatives. Such collaborative efforts hold the potential to not only fortify economic development against water-related challenges, but also to ensure sustainable access to water resources for communities and industries alike. Additionally, comprehensive policies should be designed to attract investments and ensure their efficient utilization, fostering innovation in water management technologies and practices.
The Other Side of the Coin: Socio-economic Development Exacerbating Water Challenges
Research indicates that the demand for water in Bolivia is projected to be 15–36% higher in 2036 compared to 2011. This rise is already noticeable, causing supply to fall short in certain areas such as El Alto (SEI, 2018). At the same time, various economic sectors are escalating their water needs.
Agriculture stands as the predominant consumer of water, accounting for a significant 92% of total freshwater withdrawals. This is trailed by water supply at 6.5% and the industrial sector at 1.5% (World Bank, n.d.). Agricultural water withdrawal shares are set to rise with a projected doubling of irrigated land outlined in National development plans (MMAyA, 2022). It is crucial to recognize that the availability of water for agricultural needs isn't solely tied to cultivated surface area. Around 33% of Bolivia's total land area, including grasslands for livestock use, permanent pastures, and rain-fed crops, uses water not officially classified as agricultural use in Bolivia. This underestimation in sector-specific usage calculations highlights the potential strain on water supply for other sectors (FAO-AQUASTAT, 2023).
Water plays a pivotal role in Bolivia's energy sector. As of 2019, the country possessed an installed hydropower capacity of 725 MW. The National Electricity Plan 2025 aspires to elevate the hydroelectric share in the energy mix from 29% to 70%, supplanting natural gas (IHA, 2019). As this sectoral water consumption grows, the risk of demand surpassing supply intensifies, rendering Bolivia more susceptible to severe water crises. Within this context, initiatives geared toward climate change mitigation, like replacing gas with hydropower, could jeopardize climate resilience efforts if not well planned. The implementation of hydropower projects has the capacity to reshape local hydrological patterns to harness clean energy, disrupting downstream water availability and impacting not only communities and urban areas but also agriculture. This risk is particularly pertinent in regions already dealing with water scarcity due to the changing climate. Furthermore, inadequately planned hydropower developments could heighten the susceptibility to specific climate-related events. For instance, mismanaged dams might exacerbate flooding during episodes of intense rainfall or even precipitate dam failures, leading to considerable destruction downstream. This concern is particularly critical in regions where the changing climate has amplified the intensity of rainfall patterns.
The implications of transitioning to a lithium-based economy also pose a significant threat to Bolivia's water resources. While the government's endeavors to position Bolivia at the forefront of the lithium market hold promising economic prospects, they also raise concerns. This is particularly true given that the extraction of lithium demands approximately 2.2 million liters of water per ton. On top of the water crisis that the region is already suffering as a consequence of increased frequency of droughts and glacier retreat, such extensive water usage within the extractive industry has the potential to further exacerbate the already limited water resources in the entire region and jeopardize the prospects of a viable future for local communities.
In essence, the interaction between climate change and socio-economic development strains water availability in Bolivia. Updated NDCs indicate increased sectoral water use due to climate actions, despite efforts to enhance water efficiency. Water scarcity in Bolivia results in food insecurity and substantial socio-economic consequences. Highland communities (more than 1.25 million people, approximately 46% of Bolivia’s rural population, according to the latest National Census (2001)) often consume less than half of WHO's recommended water intake, leading to increased illness. Changing seasons disrupt traditional crop planting, livestock management, and decision-making. Droughts in the Bolivian Altiplano are damaging farmlands, impacting farmers' livelihoods and food access (Escobar & Purkey, 2013). This has triggered hunger, malnutrition, migration, and local conflicts (Canedo Rosso, 2019). Furthermore, water insecurity, particularly affecting households led by women, induces emotional distress. As Bolivia's vulnerability to water crises intensifies, these impacts could escalate in both frequency and severity.
Water Resilience for Economic Resilience: IWRM Leading the Way
Climate change and socio-economic development have increasingly strained water systems across the country. Recognizing the importance of proper water resources management and the need of proactive actions to mitigate the effects of climate change in order to protect livelihoods and socio-economic conditions, significant changes have been made to Bolivia’s legal and institutional water framework in the past two decades. Several policies, plans, and programs have emerged in Bolivia in recent years. In 2013, the Bolivian government introduced the Patriotic Agenda 2025, outlining 13 key pillars for the country's development over the next 12 years (Vargas et al., 2013). Building on this, the Economic and Social Development Plan within the framework of Integral Development for Well-Being (PDES) was established by the Plurinational State of Bolivia. The PDES methodically aligns goals with each pillar of the Patriotic Agenda and is consistent with the Sustainable Development Goals (Benavides et al., 2019).
Several PDES objectives pertain to the integrated management of water resources in basins and include actions across various sectors influencing the hydrological cycle. This necessitates a coordinated approach to water resource planning and (hydrological) disaster risk management at the basin level. The most relevant goals for the water sector include:
Ensuring universal access to clean water and sanitation services for Bolivians. Given increasing pressures on water sources, it is recognized that protecting this right requires comprehensive planning for usage, source safeguarding, and watershed conservation.
Enhancing agricultural and livestock production systems. This involves expanding irrigation, underpinned by basin-level water availability assessments to accommodate sector needs and other uses while preventing source depletion during droughts.
Developing hydroelectric power projects. Emphasis is placed on comprehensive internal planning and basin management to sustain investments and enable the versatile use of regulation structures.
Integrated water and climate change risk management. Strategic guidelines are set for implementing plans and actions in prioritized basins to coordinate and balance water use among different sectors.
Managing hydrological risks. The objective is to reduce municipal vulnerability to adverse hydrometeorological and climatic events through risk management and climate adaptation actions, including the implementation of integrated early warning systems.
As a tool to achieve the water sector goals within the PDES, the National Watershed Plan (Plan Nacional de Cuencas (PNC) emerges. The PNC is conceived as a policy for the implementation of Integrated Water Resources Management (IWRM), a widely employed decision-making approach that facilitates coordinated development and stewardship of water, land, and associated resources across entire watersheds or river basins. Additionally, Bolivia has adopted a complementary strategy known as Integrated River Basin Management (IRBM), which places emphasis on the sustainable utilization of land and other natural assets within a watershed. Within the existing policy framework, both IWRM and IRBM stand as pivotal components in attaining water security.
One of the main reasons for creating the PNC is the absence of a clear and strong water policy. This has led to fragmented management of water resources and scattered regulations with a lack of coordination between drinking water and other sectors, which made it difficult to manage water resources effectively and plan for the long term (Llanova, 2020). The PNC has developed through Quinquennial Multi-Year Programs, which allow for evaluating past program results and learning from them to improve future plans. One key advantage of this cyclical policy approach is that it enables flexibility and the ability to adapt to current needs (Llanova, 2020).
The PNC comprises strategic components for its implementation. Those that have notable socio-economic implications are: 1) Strategic Basin Management and Basin Master Plans involving intergovernmental and interinstitutional coordination for natural resource governance, 2) Investments in IWRM for irrigation, water storage, and micro-watershed management, and 3) Hydrological Risk and Climate Change Management focused on preventive measures, watershed management, early warning systems, and cultivating prevention-oriented attitudes among authorities and the population.
The Good and Bad of Water Governance and Management: A Brief Review
The Good
The PNC addresses a crucial issue for the future of Bolivian society: it aims to resolve growing hydro-social conflicts arising from urbanization and activities in key sectors pressuring watersheds, essential for the country's sustainability and economic growth. The policy's adaptable formulation system, informed by its own implementation and changing social needs, ensures flexibility to address emerging challenges.
Progress in implementing the components until 2020 has varied, but overall, objectives have been met (Llanova, 2020). Challenges like funding gaps, conflicts in certain areas, weak institutions, and limited local awareness have hindered some policy components. On the other hand, factors such as the need for water policy, international cooperation, and viewing the policy as a learning cycle have contributed to its successful implementation (Llanova, 2020).
There is significant variation in the allocation of resources across different regions of the country, tied to a prioritization strategy for watersheds that enhances investment efficiency. Concerning the implementation components, investment in each of them amplifies the execution of the others due to their interconnectedness. An example of this is how investment in information improvement bolsters the establishment of River Basin Master Plans and enhances the capacities of various stakeholders. Quantitative evaluation of policy implementation benefits is difficult, especially considering that results are expected over the long term. Nonetheless, specific examples give an idea of the magnitude of these benefits.
For instance, through the implementation of hydrological risk management, defensive structures were constructed to safeguard agricultural lands and vital social and productive infrastructure. Moreover, this component facilitated a shift from reactive to proactive measures in disaster risk management, evident in the establishment of a national flood forecasting and early warning system, as well as a national drought monitor. Both systems have emerged as critical information providers for decision-makers across sectors, advancing the water sector's resilience and socio-economic development in the face of climate change challenges. This is especially important given that floods and droughts lead to significant economic losses, primarily affecting infrastructure and agricultural production, and therefore the economic impact of these initiatives could be highly positive. This is particularly relevant in the context of the agriculture sector's vulnerability to drought impacts. In this scenario, the insights provided by a drought monitor are indispensable for farmers and policy-makers. They enable anticipation of drought conditions, facilitating adjustments to planting schedules, implementation of irrigation strategies, and optimal resource allocation. This proactive approach can effectively avert substantial declines in agricultural output and stabilize food prices. The different phases of policy development are logically connected. As a result, policy formulation addresses the identified issues in the diagnosis and serves as a starting point for defining components that guide actions. The policy recognizes and emphasizes the importance of coordination between sectors and institutions, enhancing the link between watershed management programs and projects in various areas like sanitation, irrigation, and hydro energy.
The Bad
The sectoral policies for water resource management and disaster risk management have not been adequately embraced by subnational governments as part of their policy and vision for resilient territorial development. Despite the PNC granting leadership to departmental governments for its overall implementation, the lack of subnational involvement in policy design results in a lack of ownership for its execution. This highlights insufficient progress in decentralizing water and environmental management at the subnational level (Saaverda, 2021).
There are significant weaknesses in how water resource management instruments address intersectoral coordination. Intersectoral collaboration has been incipient within sectors (e.g., irrigation, drinking water, and sanitation). Mechanisms, instruments, and multisectoral investment regulations are needed to enable effective coordination between ministries for interventions in strategic watersheds. Adopting a watershed nexus approach could be highly relevant in this context (Llanova, 2020).
Moreover, there is a notable lack of active involvement from the private sector, universities, and civil society in the implementation of actions aimed at enhancing water resilience. Their role within platforms is primarily confined to advisory capacities, offering limited influence in the decision-making process. It is imperative to restructure the decision-making mechanisms within the platform, allocating a more prominent position to both civil society and the private sector in shaping water management decisions. Such a shift would enable the effective utilization of their expertise, innovative problem-solving approaches, practical execution capabilities, enhanced accountability, garnering of public support, consideration of long-term perspectives, and facilitation of transparent governance. Elevating their involvement in decision-making would facilitate the leverage of their insights and resources, consequently leading to the development of more impactful and sustainable water management strategies, aligned cohesively with overarching societal requirements.
Looking Forward: What Has Been and What Can Be Done to Increase Resilience for an Uncertain Future
Water is a crucial input for socio-economic development, making its proper management and preservation critical for the resilience of countries. Responsible water management not only ensures a continuous supply for productive activities like agriculture and industry but also helps mitigate the impacts of extreme climate events, thereby promoting stability and sustainable growth for communities and the economy as a whole.
A closer look at water resource management and usage in Bolivia highlights significant challenges. Precipitation varies greatly from year to year and season to season due to climate variations like El Niño and La Niña. Climate change is intensifying these irregularities, resulting in more frequent and stronger floods and droughts. The disparity between water availability and demand is growing, exacerbating water insecurity in Bolivia. This imbalance serves as a clear warning sign of water insecurity, which, if unaddressed, could impact economic stability and development.
Recognizing the need to enhance water resilience for ongoing national development and to protect previous achievements, the focus on water resilience has become a key priority on Bolivia's political and national agenda. This commitment aligns with strategies outlined in PDES aimed at guiding the country's economic priorities. In this context, Bolivia has seen the emergence of several policies, plans, and programs, with the PNC standing out as one of the most significant. Framed as a critical enabler of IWRM, the PNC assumes a central role in the pursuit of water security. It includes strategically designed implementation components with notable socio-economic implications.
Multiple studies have deeply analyzed the water governance contexts in Bolivia (Llanova, 2020; Saavedra, 2021; CIF, 2023), and came up with very important and spot-on recommendations for improvement. The following lines present a compilation of some of the most relevant in the context of enhancing water resilience for economic resilience:
Adaptation and mitigation trade-offs: A skillful assessment of the risks and opportunities for adaptation related to domestic/foreign mitigation strategies is required to fairly distribute associated costs and benefits. This includes those associated with the anticipated increase in demand for minerals and other natural resources, including lithium and biofuels, which could add significant pressure on water systems as the low-carbon transition accelerates globally.
Data: Improving access to hydrometeorological data and climate information systems, extending from national to local levels, is crucial for informed water resource allocation and community engagement in water governance. High-quality data access is central to effective water resource management, as the information gap hinders management. While water governance initiatives enhance data collection and interpretation at higher levels, including national and departmental, there is room to expand such efforts to municipal levels. A beneficial next step involves supporting the creation of climate services that make hydrometeorological data more accessible and practical for community members. This approach would also focus on capacity building at the municipal and community tiers, fostering comprehensive understanding and sustainable water management.
Intersectoral collaboration: In water project implementation, the primary partners are typically water and environmental policy institutions at national and subnational levels. However, involvement from other sectoral ministries and agencies is common to facilitate agreements among different water users. Establishing inter-ministerial coordination could improve project efficiency. This emphasizes the requirement for broader intersectoral collaboration beyond water and the environment, essential for effective IWRM as well as planning and execution of just transition measures.
Political economy: Addressing the intricate political dynamics of water governance, such as tensions between upstream and downstream users, is key for initiative feasibility and sustainability. Projects should recognize diverse decision-making influences and include both influential and disadvantaged groups as direct beneficiaries. Ensuring effective participation of disadvantaged groups in planning and decision-making, rather than just as recipients of compensation, is essential. Attention is also needed on potential conflicts between global decarbonization driving mining growth and communities' climate resilience needs in Bolivia.
Circular economy: Incorporating circular economy principles into the water and environmental policy and related sectors is vital. This involves promoting these principles in public services and water initiatives through clear policies, financial incentives, technical support, and public awareness. Moreover, revisiting the existing regulations is necessary to facilitate circular economy projects. This review should address wastewater reuse, biosolid generation, and energy recovery from transformed methane to biogas or its use as an energy source. Importantly, this regulatory assessment should extend beyond water, considering its impact on energy, healthcare, and the environment.
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