Irrigated land in the Chilean zone of Combarbalá is set to rise by around 1,400ha once the Valle Hermoso reservoir is built, according to the country's Ministry of Agriculture (MINAG).

The government ministers of agriculture and public works have signed a protocol agreement with the Pama River Supervisory Board to build the CLP35 billion (US$69 million) project, which will be 75% funded by the state with the remainder paid by the irrigators and communities of the area.

A MINAGRI release said Combarbalá, Coquimbo - south of grape and blueberry hub Ovalle - currently has 110ha of irrigated land, but this would rise to 1,500ha when the dam is finished in 2017.

Agricultural minister Luis Mayol highlighted the project was very important for the community as it has high rates of poverty, with better irrigation leading to improved farming opportunities.

"This project will help empower agriculture in Combarbalá, an area that has suitable weather and soil for achieving optimal results, which will deliver new jobs and allow for an exit from these high rates of poverty," he said.

The reservoir will be built in the upper Pama River Valley with the Combarbalá River watershed, around 35km (22 miles) upstream from the Cogotí reservoir. Its main objective will be to regulate the river's water resources to increase irrigation security in the valley, and in conjunction with other reservoirs it will also help the inland zones of the Limarí Valley, which frequently faces water scarcity problems.

The project will also involve two small hydroelectric plants that will generate 0.33MW and 0.64MW respectively.

Public works minister Laurence Golborne said it was important the agreement included a funding component frm the community itself with "reasonable terms" over the next 25 years.

"We don't want to generate a financial burden that is too heavy. But in this way it means that everyone contributes, both those that will be directly benefited from the use of the water, and the state through a direct subsidy that is delivered so that this project can be carried forward," he said.

Pama River Supervisory Board secretary Gustavo Hernández said citizens of the area had longed for a reservoir for more than a century.

"This is the dream of many generations, not just a dream of those who are reaching this agreement," he said.

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