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Mexico: Progress in implementing Regulatory Reform
OECD Observer

In Mexico, 80% of the population lives in relatively dry and hot areas and subterranean resources are being slowly exhausted. Access to water is increasingly becoming an issue in some of the most active and industrialised parts of the country. Yet, says the OECD’s 2004 review of regulatory reform in Mexico, rapid demographic growth and industrial development have increased the overall demand for water.

Mexico, which joined the OECD in 1994, has made progress towards the targets set in the 1995-2000 plan to improve supply, sanitation and wastewater management. Still, the current level of investment stands at half of that required to achieve a sustainable supply. Water losses, mainly from irrigation and drinking water supply systems, remain high and over-exploitation of groundwater resources continues.

With rapid urbanisation, population growth has been greater in the semi-arid and arid north, northwest and central regions. These regions account for three-quarters of the population, but provide only 28% of the water resources.

Furthermore, water consumption in Mexico is relatively high, at around 730 m3 per capita, slightly lower than the OECD average of 920 m3, but higher than the European or Japanese averages.

Who is using all that water? The report casts the light on farmers. Mexico is among the world’s largest irrigation countries, with almost a third of the country’s cropland under irrigation. As a result, 80% of water use is for agriculture, including livestock, which represented only 5.5% of GDP in 2004.

The National Water Commission (CNA) is the major player in regulating water supplies, and therein lies the challenge. In theory, the purpose of a water regulatory authority nowadays, in a country such as Mexico facing acute shortages of water, should be to act as a national water watchdog, safeguarding the future of the country. In practice, the CNA is caught between that aim and the original mission of its predecessors, which was to provide water for free to poor farmers in order to foster the agricultural development of the country. These two objectives now appear to be in conflict, the report suggests, particularly as the CNA should also oversee urban needs.

As in other OECD countries, most of Mexico’s wealth now comes from services and industry, which pay a larger share of the water fees than farming, while consuming a far smaller share of the water.

Supporting farmers via cheaper water is by no means unique to Mexico, and even if water for farms tends to be of a lesser quality than for drinking, with lower infrastructural costs, the low price does not provide an incentive to farmers to become more efficient (see also article by Messrs Legg and Parris). Many wells are being exhausted, and the major urban centres and developed regions of the country face a long-term risk of water shortages.

The report urges Mexico to establish a clear focus for the CNA’s mission, as a federal watchdog for national waters, in charge of environmental and safety matters, with a strong scientific and technical base. It says the CNA should be given clear leadership at the national level, while forging partnerships with the water commissions established at the level of the various states.

ISBN 9264017526. See the New Publications pages or www.oecdbookshop.orgfor ordering details.

©OECD Observer No 254, March 2006

Economic data

GDP growth: +0.6% Q1 2019 year-on-year
Consumer price inflation: 2.3% May 2019 annual
Trade: +0.4% exp, -1.2% imp, Q1 2019
Unemployment: 5.2% July 2019
Last update: 8 July 2019

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