In the southeastern portion of the country — including in the Balsas, Southern Pacific and Lerma-Santiago-Pacific hydrological administrative regions — agriculture is the primary industry. The Lerma and the Balsas regions in Mexico's southwest are both classified as high water-stress areas, and threats to the water supply could lead to social unrest as local populations protest actions perceived to threaten the water supply. A social organization in Cacahuatepec has already emerged to oppose a dam on the Papagayo River, and additional social instability could result if water availability decreases to the point where current farming practices are no longer profitable. Moreover, a loss in profitability could push agricultural communities to become more economically reliant on criminal activity.

More Manufacturing, Less Water

Water stress is a limitation that Mexico will be forced to overcome to reach its full economic potential. Still, Mexico is on the verge of economic growth in the manufacturing and energy sectors in the coming years. Mexico's increasing population and proximity to a large consumer base in the United States leave it poised for success as a manufacturing base. However, the growing population is a double-edged sword when it comes to water. Mexico's capital, with a population of more than 21 million people in the greater metropolitan area, is representative of the effects of water scarcity and stress because of overuse in the nation. Mexico City's water supply is insufficient. The water stress index there is high at 132 percent, and other studies indicate that extraction rates are even higher at about 182 percent of the supply, meaning that each year more water is used than is replenished by nature. Inadequate infrastructure and lack of wastewater treatment add to the pollution. The city requires water to be pumped in over large changes in altitude to meet demand — an expensive solution to what will only be a growing problem as the population increases.

The oil and natural gas industry will soon begin seeing the benefits of a recent constitutional change that allows foreign investment into the country, a necessary step given the lack of technological know-how within and the mounting financial pressure on state-owned energy company Petroleos Mexicanos, or Pemex. The real prize from energy reform will be offshore deep-water targets that use treated seawater. Still, water competition could play a role if or when unconventional fields are developed in the northern and central parts of the country. While some of these contracts are currently up for bidding, larger levels of exploration and production will not occur for several years, by which point waterless fracking (or other water-efficient techniques) already utilized in the United States will likely become more prevalent. Moreover, low oil prices could delay bidding on some unconventional projects. In the short term, it will be the manufacturing, municipal and agricultural sectors that will compete the most for Mexico's limited water resources.

The inception of the "maquiladora" program in 1965, bolstered by the North American Free Trade Agreement in 1994, has made manufacturing a key part of Mexico's economy. The maquiladoras are manufacturing operations set up in free trade zones with tax benefits that import raw materials for assembly and then export to the large U.S. market. But these operations have worsened water stress as competition, especially along the border, has significantly increased water pollution. Industry consumes more than 3 billion cubic meters of water per year, and the increase in pollution decreases the usable supply, though it is difficult to determine to what extent. Pollution from industrial activity, stemming from things such as the solvents used in the manufacturing process, can threaten surface water sources by lowering the purity of the water.

Mexico's industrial sector is already showing signs of its potential by shifting toward higher-end products such as electronics and automobile assembly. In Monterrey, electronics manufacturing is the largest industrial sector, but the San Juan Basin, in which the city is located, has less than 500 cubic meters of water per person per year. Groundwater sources in the basin are also showing signs of overuse. Still, manufacturing is expected to remain an integral part of the Mexican economy, and the industry will continue to compete for the limited water resources in the north.

Considering Solutions

There is a substantial framework in place to ensure the improved and appropriate use of water: the National Water Commission (Comision Nacional del Agua, or Conagua), a large agency that is the sole federal authority on water. The Law of National Water in 1994 sought to modernize the sector and decentralized management responsibilities. However, more than 20 years later, the implementation of efficient management is still a problem. Permits and other regulations are not readily enforced, overlaps in concessions and overexploitation remain and infrastructure is in disrepair or is inadequate in many areas. Furthermore, the federal water management budget is inadequate to fund the necessary modernization.

Much of the water in northern Mexico is subjected to water sharing agreements with the United States. Mexico is in a stronger position in terms of the flow of the Rio Grande than it is for its other major shared river with the United States, the Colorado River. However, the 1944 treaty, which governs shared surface water distribution between the United States and Mexico, decreases the amount of water available from the Rio Grande for use in Mexico, increasing competition along parts of the border. To better utilize the limited water resources and to mitigate future constraints because of water scarcity, Mexico City will likely need to adjust the water sector policy to increase investment, as it has done with energy and electricity. Investments into desalination plants could benefit coastal populations but are an expensive option, at least in the near term.

As for long-term solutions, there likely will not be a complete renegotiation of the 1944 treaty, which has only been modified through minutes to make relatively minor adjustments or clarifications. Without some sort of change, Mexico's water stress levels will only continue to grow, and competition for water — though only one of many obstacles facing Mexico — could limit the country's future growth.