TEPIC, Mexico – High on Ecuador's Andean plains, the Comuna Espejo co-operative is counting on a recent delivery of 20 woolly alpacas to keep its moist grasslands in better shape than the sheep that normally graze there – and in turn help secure water supplies to the nearby capital city of Quito.

"Little by little, we're going to see the impact the alpacas have, but they're easier to manage than sheep and the degradation is less," said Henry Carrera, vice president of Comuna Espejo, now home to 18 female and two male alpacas.

Besides selling wool, and eventually meat from the camelids, Comuna Espejo hopes to attract tourists with the alpaca project, which forms part of the Quito Water Fund's plans to conserve the watersheds around the city some 30 km (19 miles) away.

Quito's fund, the first to be set up under the auspices of U.S.-based environmental group The Nature Conservancy (TNC) in 2000, has provided a model for nearly 60 cities around the world to boost water security from the source to the sink.

The funds combine scientific expertise with public and private-sector investment from water authorities, banks and large water users such as bottlers and brewers.

Now TNC has 20 funds active in Latin America. It plans to double these by 2020 in the region where 80 percent of the population lives in cities, putting huge pressure on water supplies.

"Being able to protect the water sources for the cities is very important for the population, to reduce risks for water quality and quantity," said Silvia Benitez, TNC's Quito-based fresh water manager for Latin America.

The problem cannot be solved by any one organisation, but must be addressed through collective action involving different water users, she added.

Each city's water fund has to be tailored to suit the specific issues facing residents and watersheds.

In the industrial Mexican city of Monterrey, which is susceptible to both droughts and floods, the city's water fund is working to reduce water stress and increase the amount of water sucked up by watersheds in the surrounding areas.

In São Paulo, whose population of over 20 million already consumes 4 percent more water than comes from its rivers, forest restoration and sediment reduction in waterways around the megacity are part of its fund's plan to boost water security, together with efforts to cut water use and invest in critical infrastructure.