Introduction
In October, Mexico’s President Claudia Sheinbaum introduced a water reform initiative aiming to end the commodification of water and restore state authority. The narrative seeks to balance the human right to water with a shift in resource usage order. However, the text of the initiative—which establishes a new General Water Law and reforms the National Water Law—has unexpectedly garnered little satisfaction. Businesses, farmers, municipalities, and social organizations view it as a costly change with unclear economic incentives.
The Two Main Axes of the Reform
The reform consists of two main axes. The first is the General Water Law, which regulates Article 4 of the Constitution and defines water as a human right, promoting equitable access. The second is the reform of the National Water Law, which maintains its basis in Article 27, considering water as national property but incorporating provisions that eliminate the transfer, sale, or inheritance of concessions, restrict extensions, and create new criminal and administrative penalties.
Impact on Water as a Commodity
The official discourse asserts that water will no longer be treated as merchandise. In practice, though, the initiative will directly impact water pricing systems, land valuation, and agricultural and industrial production costs.
Consequences for Agriculture
Eliminating concession transfers will make the water rights market disappear, along with the associated property value tied to a plot’s water availability. In Mexico, where much agricultural land value depends on access to concessioned water, this measure will reduce the added value of these assets and, consequently, producers’ capacity to offer credit guarantees in rural lending. Macroeconomically, this would result in reduced agricultural investment and increased financial risk in rural areas.
Distorted Water Allocation
The prohibition of transferring rights between private parties may distort efficient water allocation. Highly productive water sectors, such as technologically advanced agroexporters or the food industry, would be limited by the lack of flexibility to acquire additional volumes. Meanwhile, low-return regions would retain underutilized concessions. Such rigidity has already proven inefficient in countries like South Africa, where eliminating water markets reduced private investment and increased food prices without improving community access.
Impact on Urban and Industrial Markets
The reform’s effects extend beyond agriculture to urban and industrial markets. Concession restrictions will affect water availability for manufacturing, construction, and energy—three sectors accounting for one-third of the GDP. Reduced flexibility in the production system means a company planning to expand a plant or build a new industrial park cannot acquire additional rights through the market but must rely on direct state allocation. This process not only slows investment decisions but introduces a layer of discretion that increases regulatory risk.
Financial Fragility and Regional Disparities
The reform is ambitious and appealing to the population but financially fragile to ensure water as a human right. Less than 60% of households receive continuous water supply, and the National Water Commission (CONAGUA) faces decreasing budgets: 68 billion pesos in 2023, 37 billion in 2025, and 36 billion for 2026. Attempting to centralize supervision, reassignment of rights, and oversight without significantly increasing these resources is a risky bet.
Increased Responsibilities, Insufficient Resources
The new General Water Law imposes greater responsibilities on states and municipalities without providing proportional resources. They are required to ensure continuous supply, treatment, monitoring, and citizen participation but face limited public finances dependent on federal transfers. The federal government maintains the power to allocate and reassign volumes through CONAGUA, while local governments bear political pressure for compliance. This imbalance could create an operational vacuum, with the federal government concentrating decision-making and regulatory control while shifting financial costs to local authorities lacking technical and budgetary capabilities.
Threats to Fiscal Viability of Water Governance
This architecture jeopardizes the fiscal sustainability of federal water governance. Without a compensatory fund or coordination mechanism, municipalities would need to increase tariffs or incur debt to meet service standards, a risk exacerbated in rural or low-revenue areas. Federal control over concessions and reassignments turns water into a political power tool rather than an efficient public good. Ultimately, centralized decision-making and decentralized responsibilities could result in increased litigation, greater inefficiency in water management, and loss of institutional trust in managing the resource.
Diverse Perspectives on the Reform
Some business sector members acknowledge the need for a new water law but are concerned about creating a National Water Reserve Fund and eliminating the transmission and sale of concessions, replacing a regulated water market with discretionary reassignment by CONAGUA. Meanwhile, social movements like Agua para Tod@s and the Mexican Institute for Community Development view the reform as a sham, maintaining concession models under new names. They warn that water basin councils might still be dominated by large corporations and demand a “Citizen Water Law” ensuring effective voice and vote for indigenous peoples and community systems. They also criticize the preservation of pollution permissiveness through payment schemes for polluting.
International Best Practices
Best international practices suggest that the solution lies in regulating market mechanisms with sustainability and equity criteria rather than suppressing them. The Organisation for Economic Co-operation and Development (OECD) recommends “basin governance” models with transferable rights under ecological limits, public registration of transactions, and independent oversight. The World Bank promotes water markets subject to audits, reliable measurement systems, and tariffs reflecting environmental and social costs. Australia and Spain exemplify how private participation can coexist with public authority when transparent rules and effective sanctions are in place.
Conclusion
Mexico seems to be moving toward a more centralized model from the federal level without securing local financial and institutional capacity. The risk is that eliminating the market won’t eradicate speculation but merely shift it to the political realm, where negotiations would occur outside public scrutiny.
*The author is the Director of Inteligencia Más and a master’s degree holder in Public Governance and Policy at the Panamerican University.
