Water sector opportunities in Mexico

1. Water sector opportunities in Mexico Heidi Virta Finpro Mexico February 2010

2. Index • Mexican Economy at a glance • Background of the water sector in Mexico • Hydraulic infrastructure in Mexico • Water management • Drinking water • Irrigation • Flood control • Waste water and sewage lines • National Water Program • Future scenarios • Opportunities for Finnish companies • Success factors for the Mexican market

3. Mexican economy at a glance Source: CIA – World Factbook

4. Background • In Mexico water issues receive more and more attention from public and private parties. Water is getting scarcer given the steady growth of the population and the increasing needs of industry and agriculture. At the same time, further economic growth is dependent on a sound water policy. • In Mexico most of the people live where there is little water and most of the water is where few people live. • Mexico City, where one-fifth of the national population is concentrated, has its own problems, since it was built in a former lake in the mountains, where water cannot flow away. • In 1989 the Mexican government created the ComisionNacional de Agua (CONAGUA), as the responsible federal authority for water management. • In 1992 the National Water Law came into force. It provides a modern regulatory framework to the changing conditions in the water sector. It regulates and encourages private investment in water infrastructure, including water treatment plants and works for water supply. In 2004 the law was reformulated, introducing decentralization of the implementation of water policy to states and municipalities. • Mexico consumes approximately 79 km³ of water, of which 61.6 km³ are used in agriculture (irrigation), 11.1 km³ are used for public supply and 7.2 km³ are consumed by industry and thermoelectric plants. (2008) • Annual investment in the water sector in Mexico is around 3 billion USD. More than 70% comes from the government, the rest from the private sector. Source: Statistics on Water in Mexico 2008, CONAGUA

5. Hydraulic infrastructure in Mexico The country’s hydraulic infrastructure is made up of the following: • 4 000 storage dams • 6.46 million hectares with irrigation. • 2.74 million hectares with Technified Rainfed • infrastructure • 541 drinking water treatment plants in operation. • 1 710 municipal wastewater treatment plants in • operation • 2 021 industrial wastewater treatment plants in • operation • 3 000 km of aqueducts Source: Statistics on Water in Mexico 2008, CONAGUA

6. Hydraulic infrastructure in Mexico • Main dams: • There are around 4000 storage dams in Mexico. 667 of them are classified as large dams according to the International Commission On Large Dams (ICOLD). • The storage capacity of Mexico's dams is 150 km³ of water and 52 dams represent almost 70% of the total storage capacity. • Aqueducts: • There are more than 3000 km of aqueducts that transport water to various cities of rural communities in the country, with a total capacity of more than 112 m³/s. • Agriculture Infrastructure (irrigation): • Mexico is in sixth place worldwide in terms of the area with irrigation infrastructure with 6.46 million hectares. 54% of the surface under irrigation corresponds to 85 Irrigation Districts and the remaining 46% to more than 39 000 Irrigation Units. • The efficiency of piping in the Irrigation Districts in the period from 1990-2005 is in a range between 61%(1990) and 65.5%(2005). • In Mexico’s tropical and sub-tropical plains, where there is an excess of humidity and constant flooding, TechnifiedRainfed Districts have been set up, in which hydraulic works were built for the removal of the excess water. Source: Statistics on Water in Mexico 2008, CONAGUA

7. Hydraulic infrastructure in Mexico • Water disinfection • In order to avoid contagious diseases transmitted by the water supplied to the population, chlorination is used. The national average in terms of chlorination efficiency is 86%. • Water purification plants for drinking water • There are 488 drinking water purification plants in Mexico. In 2005 these purified 87.1 m³/s. • Cutzamala system • The Cutzamala System, which supplies 11 delegations of the Federal District and 11 municipalities of the State of Mexico, is one of the biggest drinking water supply systems in the world, not only for the quantity of water that it transports (approximately 480 million cubic meters every year), but also because of the difference in elevation (1 100 m). • The system is made up of 7 weirs and storage dams, 6 pumping stations and one water treatment plant. Source: Statistics on Water in Mexico 2008, CONAGUA

8. Infrastructure for wastewater treatment • Municipal wastewater treatment plants: • In 2007 the 1 710 plants in operation in Mexico treated 79.3 m³/s. • This represents 38.3% of the 207 m³/s collected in sewerage systems. • Industrial wastewater treatment plants • In 2007 industry treated 29.9 m³/s of wastewater in 2 021 plants in operation nationwide. Source: Statistics on Water in Mexico 2008, CONAGUA

9. Water Management • The National Water Commission (CONAGUA) is a decentralized administrative agency of the Ministry of Environmental and Natural Resources (SEMARNAT). It manages and preserves national waters. • The National Water Law establishes that a) a concession or an allocation has to be granted in order to use national waters and b) in order to discharge wastewater, a discharge permit is required - both issued by the CONAGUA. • The budget authorized to the CONAGUA by the Chamber of Deputies for 2008 was about USD 2.3 billion. • USD 0.3 billion corresponds to staff services. • USD 2 billion corresponds to the concepts of material and supplies, services, real estate, compensation, public works and related services. • Almost 80% of CONAGUA’s revenues come from the rates of the use of national waters. • From the 1970s onwards, the number of overexploited aquifers has been growing steadily. In 2007 this number was reduced to 101. In addition, 34 aquifers have salt intrusion or their water is of bad quality. Approximately 60% of the volume of underground water used in Mexico comes from overexploited aquifers. This situation is one of the main drivers behind Mexico’s interest in promoting wastewater treatment and reuse, and for minimizing water losses in municipal systems. Source: Statistics on Water in Mexico 2008, CONAGUA

10. Drinking water • In 2004 89% of the Mexican population had access to drinking water. • Drinking water is provided by the water companies of the municipalities. • Water prices do not reflect scarcity and do not cover costs made. Investments are normally financed out of loans or grants from public development banks or the federal government. • Water consumption in Mexico is high due to low water prices, non-enforcement of water bills and absence of water meters. • The water normally comes from the rivers and from aquifers. The quality of the water is often a problem. Richer Mexicans have turned to bottled water. • The goal of the government is to increase drinking water supply to Mexicans, consider water as an economic asset, which has to be paid for, and to reduce leakage. • Large investments are made in various states of Mexico in the construction of new water treatment plants, upgrading of existing ones and construction of water distribution systems. • Opportunities for Finnish companies: • Selling advanced water purification equipment to drinking water companies at state and municipal level. • Introducing new techniques of water purification, to poorer communities and obtaining contracts for pilot projects with CONAGUA. • Providing technology to improve and structure a sound fee collection system.

11. Irrigation • Mexico is the 6th most irrigated country in the world. • There are three types of water users that receive concessions from the CONAGUA to use water for irrigation purposes: • ‘ejidatarios’(small landowners) • irrigation units and • irrigation districts • The largest irrigation districts cover more than half a million acres. • About half of all irrigation in Mexico is done via gravity irrigation. More modern methods used are sprinkling, micro spray and drip irrigation. The CONAGUA, together with the National Association of Irrigation Users, aims at expanding the area of irrigation by about 1% per year and introducing new technologies. • Annual turnover in the irrigation market was USD 72 million in 2004. • Largest exporters to Mexico are the US, Israel, Spain, Greece, France and Netherlands. Distribution takes places via exclusive distributors, which often offer turnkey packages, or distributors of components (about 350 in number). • Opportunities for Finnish companies: • Modern irrigation technologies and equipment: micro sprays, drips and others. • Participation in research projects of CONAGUA.

12. Flood Control • Due to heavy seasonal rainfall and regular hurricanes and storms there are often floods in Mexico both in cities and in rural areas as along side the coast. Deforestation and erosion have contributed to this problem. • The government wishes to deal with all affected regions, but due to budgetary limitations concentrates only on the most urgent areas, especially cities bordering water bodies. • Investments financed by CONAGUA were USD 60 million in 2005 and USD 30 million in 2006. These amounts do not include investments made by larger cities, such as Mexico City and Monterrey, nor states. • Opportunities for Finnish companies: • Water pumps and flood protection solutions such as materials for piling, and reconstruction and maintenance of structural walls. • Related hard-and software for water level management (i.e. dams). States that are of particular interest are Quintana Roo (after the Wilma hurricane), Tabasco, Puebla, Veracruz and Mexico City. Municipalities like Monterrey (long known for the yearly heavy rain and deadly floods) have funds to invest in additional infrastructure in the next years.

13. Wastewater and sewage lines • Handling wastewater is at the governmental level the responsibility of municipalities and states. All municipalities with more than 50.000 inhabitants are by law compelled to treat their wastewater. • The law indicates clearly which requirements wastewater has to meet. 37% of the water treated gets a primary treatment, 59% a secondary treatment and 4% a tertiary treatment. • In the rivers and ponds the water is very contaminated. CONAGUA has developed plans with the states to clean these ponds and rivers by constructing water treatment plans alongside the rivers and ponds. • Companies in industry, agriculture and services are also required by law to treat their wastewater. • Mexico’s manufacturing sector (including the maquiladora firms) consumes annually between 10 and 12 percent of the total available potable water (treated-surface water provided by the municipal water authorities and groundwater obtained by companies with authorization granted by the water authorities). • Mexico is investing a lot in order to expand wastewater treatment facility network, both in the government and private sector. • Investments in 2006 were USD 638 million.

14. Wastewater and sewage lines • An important issue is the treatment of the wastewater generated and the promotion of the reuse and exchange of this wastewater: • The level was 38.3 % in 2007 • The targets are 60 % in 2012 and 100 % by 2030 • Before year 2012 an additional 53 m³ of waste water will be treated in the surroundings of Mexico City. • Opportunities for Finnish companies: • All waste water treatment technology to state and municipal level and private industries. Example s of products needed: activated sludge and trickling filters, instruments, appliances and machines, gears, ball bearings, water filters, centrifuges for filtering or purifying water, pumps, instruments and apparatus for measuring or checking pressure, flow meters, manometers, pipe, etc. • Small water treatment plants to smaller municipalities. • Introducing new techniques of water treatment to Mexico, cleaning lakes and rivers and obtaining contracts for pilot projects with CONAGUA.

15. National Water Program • There is a National Water Program (NWP) 2007-2012 which is a part of National Development Plan • The NWP basically seeks to: • Improve the conditions of social wellbeing of all Mexicans • Economic development • Preservation of the environment in the country • The goals established in the NWP are the following: • To improve water productivity in the agricultural sector • To increase access to and quality of drinking water, sewerage and sanitation services • To promote integrated, sustainable water management in river basins and aquifers • To enhance the technical, administrative and financial development of the water sector • To consolidate the participation of users and organized society in water management and to promote a culture for the proper use of this resource • To prevent risks from meteorological and hydrometeorological events and attend to their effects • To assess the effects of climate change on the hydrologic cycle • To create a culture for paying duties and complying with the National Water Law in its administrative aspects

16. Targets of the NWP Source: Statistics on Water in Mexico 2008, CONAGUA

17. Future Scenarios • According to the estimates, between 2007 and 2030 the population of Mexico will increase by almost 14.9 million people. Furthermore, approximately 82% of the total population will be based in urban localities. • Due to the population growth will cause the natural per capita water availability nationwide to drop from 4312 m³/inhabitant/year in 2007 to 3783 in 2030. • Mexico City is built on top of a big lake. The use of the subsoil water causes the sinking of Mexico City. • Mexico needs a more efficient waste water management. There is a need for the following projects: • Reuse of the treated waste water • Irrigation (there are already existing projects) • Industrial processes (there are already existing projects) • Injecting the treated water in the subsoil, in order for Mexico City not to sink (Planning phase) • Convert treated waste water into drinkable water in Mexico City (This is a future prospective, but there are no concrete plans yet)