The Contradictions of Water Management in Mexico
By David Barkin and Daniel Klooster
Published: Wednesday, July 27, 2005
Mexico recently created yet another defining moment in its long history to assure adequate water and sewage services for its people. In April 2004, amendments to the Law of National Waters (LAN) modified the system of water management in Mexico. They confirmed the National Water Commission (CNA) as a powerful semi-autonomous organization charged with the oversight of the sector;  although the law mandated a decentralization process that is supposed to generate significant changes in the control of important parts of the system, it also increases the Commission’s ability to shape the modernization process in urban areas throughout the country. As a result, local urban water administrations are under intense pressure to change their management structures to meet the hydraulic, sanitary, economic and social standards for adequate service, a demand that federal authorities believe can only be met with extensive private sector participation. Rural watershed management is being delegated to local water basin management councils (Consejos de Cuenca), one of the more innovative structures that place control of irrigation systems in the hands of the water users, charging them not only with the technical responsibility for management and allocation, but also with the burden of financing their operation and maintenance. 
Since the promulgation of a constitutional reform in 1982, drinking water and sewage have been the responsibility of municipal governments, of which there are about 2,500 in the country. Most are small improvised administrative organizations, in which water management is housed in a department staffed by political appointees with little expertise; local politicians are limited to a single three-year term and there is almost a complete change in the administrative leadership with the turnover in top leadership, even when the same party wins local elections. The director of the local water system is frequently viewed as a position from which to dole out political patronage or as a stepping stone from which to aspire to more important positions in future administrations or at other levels of government; the mayor also views condoning arrears on water bills as a facile way of currying favor with local pressure groups.
There are about 435 semi-autonomous water systems operated as quasi-independent agencies, either as part of municipal government or as concessions.  Less than a dozen are either wholly owned by private companies or are joint ventures between public and private parties; all of the major international water companies – Suez (Ondeo), RWE, Aguas de Barcelona, Vivendi (Veolia) – along with many smaller international firms, participate in the management of one or more local water or sewage systems.  A recent development is the separate concession of sewage systems as an independent enterprise, let out to a private company for a fixed period, often under a BOT (build, operate and transfer) scheme, with costs being transferred to the rate payers. At present, less than one-quarter of the water systems have sewage treatment plants, and only about 22% of these plants are actually functional.
Today, local governments in Mexico face a seemingly insurmountable challenge to assure universal drinking water service and adequate facilities for treating sewage water in an efficient financially viable manner that is also socially and ecologically responsible. At present, virtually no water system can be financially self-sufficient, even if they were able to achieve consensus among the customers to pay their bills, and almost all are plagued by huge problems of water loss through their distribution systems, which are old, often poorly designed, installed with inappropriate materials and workmanship, and suffer from decades of neglect.  Just as serious is the absence of any systematic ecosystem management of either areas that supply water to the urban areas or, more ominously, areas where waste water is discharged; as part of the problem, this “residual” (or sewage) water is still frequently channelled into the irrigation systems designed for fruit and vegetables cultivation destined for local markets.
A serious related problem facing authorities is their inability to regulate the large water users on the one hand, and the “culture” of irresponsibility among consumers to pay for water use, on the other.  These problems are exacerbated by unattended technical and political features of the Mexican system: constitutionally, water is a resource owned by the nation and subject to political control; long-term concessions for drilling and using wells have been let to private parties, primarily for agricultural use since the beginning of the 20th century. With urban expansion and industrial growth, new demands for water have led to the emergence of a lucrative “parallel” market that has led to the transfer of some of these water rights for commercial and industrial purposes; the permit holders pay fixed fees to federal authorities and, although they draw water from the same aquifers on which urban water supplies depend, these users remain outside the control of the local water agencies, both in terms of quantity and financial responsibility. Throughout the country, water use is not measured for most consumers and even when calculated, many meters do not work correctly and others record air running through the pipes during the frequent periods when water is not available. Exacerbating the problem is the large number of unregistered consumers – often medium-sized commercial and industrial enterprises – who have connected themselves to the system without informing the water agencies. Finally, very little attention has been devoted to the problem of the “culture of water”, which would require an educational campaign among users about their water-use patterns, controlling leaks and the possibility of reusing water within the household. In contrast, many large industrial users are installing treatment and recycling facilities because the CNA has implemented an effluent fee for discharges of polluted water. This combination of factores dominates the whole Mexican urban water system, leading to an overall efficiency coefficient of less than 30%, based on a loss of more than one-half of the water distributed through the infrastructure and a fee collection rate of less than 60% of the water actually invoiced.
The most far reaching aspect of the reformed water law in Mexico is likely to be the emphasis on moving towards the private management of urban systems and water infrastructure during the coming years. As in most of the world at present, private companies control less than 5% of consumption, but, following the lead of the World Bank, the government (CNA) argues that the public sector lacks the administrative, technical and financial capacity to meet the challenges of assuring adequate supplies of high quality water and treat sewage effluents to meet the country’s needs during the coming period.
In this article, we examine some of the general problems and the specific details of urban water management in Mexico. From this analysis, it is clear that Mexico is at a crucial crossroad: its ecosystems are endangered as watersheds are denuded, aquifers decline and waters contaminated. To face these challenges, a diagnosis of the operation of the nation’s water companies and their social, economic and environmental impacts will contribute to an understanding of the obstacles facing Mexican institutions, its politicians, and, most notably, its citizenry, as the nation searches for solutions to the unresolved problems confronting water management today.
The regulatory framework
There is broad international agreement that if public services are to respond to social needs and respect the environment, administrative, technical, and financial standards have to be carefully defined and enforced. This task requires a regulatory agency that has authority, expertise and operates impartially to enforce the terms of contractual commitments by operating agencies that guarantee adequate levels of service to their customers and protection of the ecosystems on which they depend. There is an abundant technical literature on the regulatory process that specifies the nature of the processes and the tasks and responsibilities of the agencies (Ugaz and Prince 2003).
In Mexico, the conditions for establishing this regulatory framework are virtually non-existent. Perhaps the most serious problem is the absence of an “arm’s length” relationship between the regulators, the executing agencies and the consumers, whether they are individuals, businesses, or the public sector. In fact, in the light of international criteria, the local scene seems oddly incongruous: at the national level, the CNA, and its affiliated research institution, the Mexican Institute of Water Technology (IMTA, its Spanish acronym), are responsible for administering the amended LAN, which makes the local agencies more dependent than ever on federal approval, financing, and structural performance guidelines, without improving their ability to identify and resolve local problems. Formally, the CNA limits itself to collecting information about the state of operations of local water agencies; it publishes some of these data without seriously revising them, although it is generally accepted that most systems do not report accurately such basic information as production and distribution of water or financial information on costs and revenues; more troubling yet, many local agencies do not systematic data collection, reporting and analysis procedures that would permit them respond to such requirements knowledgeably.
There is no effective oversight at the federal or state levels of public water agencies, and the individual consumer has virtually no formal recourse in the case of unusual charges or service suspensions.  Aggravating the problem, most consumers are resigned to the fact that water quality is unacceptable for safe consumption, and that service is delivered sporadically while pressure in the water lines in insufficient to assure direct delivery to rooftop tanks. Local water agencies are often solely responsible to the town mayor, escaping whatever meager oversight the auditing agencies of state government might exercise in the case of state-level agencies; perhaps the only exception to this pattern of lack of accountability is with reference to those programs that might have received financial assistance from some earmarked federal funds or from an international financial or development agency.
Private water service provision in Mexico 
The privatization of the management water service in Mexico is still relatively marginal. There are only four metropolitan areas where the major international players in the sector are participating. Rather surprisingly, even the few systems that are managed by private companies are not subject to effective oversight.
Aguascalientes, a burgeoning industrial center in the semi-arid north-central part of Mexico, was the first system to be privatized in 1984, in the spirit of the neo-liberal reorganization of public policy that was being initiated at the federal level. Ironically, the institutional change was opposed by the right-wing business oriented party (PAN), in the face of a successful campaign by the ruling party (PRI); although the state authorities have formal powers to regulate tariffs and establish operational conditions, the concession, has, in fact, been able to dictate its terms and lighten its financial burden by shedding responsibilities for infrastructure and service to “marginal” communities off onto state and municipal authorities. The company’s foreign operating partner is Veolia, a part of the French conglomerate Vivendi. There are widespread complaints that the quality of water service has deteriorated as traditional water sources have literally “dried up,” causing sinking of the soil and cracks that have compromised the structural integrity of homes in poorer communities on the city’s periphery. Rates are among the highest in Mexico and the aquifer on which the city depends is being dangerously depleted with no effective measures to either reduce consumption or change watershed management practices. Local regulatory institutions have proved relatively unresponsive to local protests and are generally considered to have been “captured” by the private company. Although not accepted by local authorities, knowledgeable experts generally anticipate this region will be one of the first to suffer a water crisis that will force a dramatic curtailment in plans for economic expansion.
In 1993, a private consortium won a 20 year concession to manage Cancun’s water system; headed by the Mexican construction conglomerate GMD, it partnered with the Mexican mining company, Peñoles and the water division (Azurix) of the aggressive US giant, Enron. When their foreign partner was forced to sell is water assets, it brokered a deal in 2001 with the water subsidiary (Ondeo) of one the international giants, Suez des Eaux, which, in turn, was able to obtain financing from the Mexican public works bank (Banobras) to pay for its share and extend the concession for an additional ten years. The local water company, AguaKan, is accountable to the state water agency in Quintana Roo, which is attempting to learn how to oversee a private company in addition to its administrative responsibilities for providing water and sewage services to the rapidly growing tourist areas on the Riviera Maya; its local staff is headed by the previous director of the local system, an hydraulic engineer, with a good knowledge of local operating and social conditions; he lacks the accounting and administrative expertise as well as the authority to delve into the workings of the firm adequately. Local observers stress the lack of coverage on the rapidly growing fringes of the urban area, where people must resort to expensive tank-trucks for their supplies.  Water rates are set by state government; commercial users (some 65% of the billed volume) complain that they are very high and mention that private desalinization is an alternative; individual consumers enjoy relatively inexpensive service, a result of cross subsidies mandated by the official tariff structure.
A joint stock company manages the Saltillo water company, an industrial town in the northern desert. Created in 2001, it is controlled (51%) by the municipal water company and Aguas de Barcelona (49%) through a Mexican affiliate, InterAgBar. Although the Board of Directors is comprised mostly of leading representatives of the local business community, they lack an independent investigative capability, the technical expertise, or even their own source of information; in one notable case when they commissioned an outside evaluation of the first two years’ experience, the quality of the report was judged to be inadequate by all concerned. Of all the privatizing experiences in Mexico, this is, by far, the most controversial; during its first two years, water rates rose between 32 and 68%, in contravention of the terms of the concession, which stipulated that rates be limited to the rate of inflation, about 11%. A local congressional investigation revealed substantial irregularities in financial transactions, including unauthorized tariff increases and service changes, as well as improper procurement procedures and worker-management disputes. In spite of these problems, the company boasts its significant achievements in improving collections, the quality of service and the proportion of the population served. However, its flagrant violation of the terms of its concession has provoked energetic protest that is still playing itself out at the time of writing.
The largest of the private sector experiences in water management is the series of four water service management contracts in Mexico City. In 1994, the city was divided into quadrants for purposes of a public call for bids to manage the perfection of the rolls of water users, the installation of meters and the creation of a more effective collection process; the winners were also be responsible for some maintenance chores on the secondary network of water lines delivering service to users. Four different ten-year contracts were awarded to new firms created in each quadrant for the purpose, each with a majority holding of a Mexican construction company and a foreign partner with experience in the water sector. In the ensuing decade, three of the companies have been thoroughly reorganized, as the original partners realized the complexity of the tasks and some of the shares have been sold to others. Although there has been a dramatic change in governance in Mexico City during the period, with the left-leading Partido de la Revolución Democrática (PRD) winning control in the first local elections after a long history of PRI leadership responsible directly to the President, it is striking that the population still remains generally unaware of this dramatic change in the administrative structures of the only part of the water sector with which they come into direct contact; furthermore, the renewal of the contracts (with relative minor changes in conditions and shortening of their terms) was negotiated (in 2003-2004) very discretely. Contract terms and oversight is the responsibility of the semi-autonomous Mexico City Water Commission which has exercised minimum pressures on the operating companies, while water tariffs and fees for services and connections are fixed by the local legislature; technical efficiency has increased and collection rates improved markedly, as meter readings and analysis were computerized, allowing for more effective billing procedures and collection practices, and electronic identification of leaks initiated in the secondary distribution system.
Public provision of urban water service in Mexico
Water services in many of Mexico’s most populous urban areas are provided by decentralized public agencies. These para-municipal organizations are a quite diverse group, with widely varying technical, commercial, financial and administrative competencies. In this initial survey of the situation, we will mention three that offer outstanding examples of public sector management. The title of best-managed public system in Mexico is generally awarded to the public agency in Monterrey, Mexico’s second largest city. Other agencies vying for the title are water companies in the northern border region; Tijuana, Baja California, a center of the export platform (maquiladora) industry, is generally acknowledged to be an outstanding example, as is the one in Cd. Acuña, Coahuila. León, Guanajuato, an industrial center for leather tanning and shoe manufacture, was the first large municipal water system whose system was decentralized without being privatized during the height of the neo-liberal reorganization in the 1980s; again, the initiative came from a local PAN administration promoting a policy at odds with the prevailing privatization trends being implemented by the federal (PRI-controlled) administration. These organizations have succeeded in assuring widely available service and improving water quality while reducing water loss through their networks and increasing fee collections from their customers. Unlike most public systems, however, water costs in these areas are substantially higher than those prevailing in the rest of the country, and the autonomy that the water companies enjoy enables them to be more effective in collection; as a result, these systems enjoy the enviable reputation of operating without subsidies, although public monies are still available for expanding services for marginal communities.
In much of the rest of the country, water services are deficient, unequally distributed and grossly inefficient. Political patronage, obsolete administrative procedures, poorly trained personnel, aging and poorly designed infrastructures, and lack of resources have created a virtually impenetrable web of secrecy and lack of information that makes it impossible to undertake effective diagnoses.  This complex set of obstacles also shields the local departments from the possibility of meaningful audits, either technical or financial, while the leadership generally remains haughtily aloof from the pressures for greater transparency or responsiveness by claiming the need for independence in order to provide an essential public service. Unfortunately, in many jurisdictions, the problem is not one of hiding or distorting information, but rather the lack of information systems and in adequate knowledge about fundamental operating questions that would facilitate evaluation and planning, be it internal or from the outside.
As a result, the overall efficiency of urban water service nationally is generally estimated to be about 30%. This figure is combined measure of the estimate of physical efficiency – the proportion of water that is actually billed to the customers compared to the water “produced” by treatment plants – of about 60%, and the determination of commercial efficiency – a relation between water actually paid for and the volume billed to the customers – which is acknowledged to be less than 50%. 
From a social perspective, the situation is further exacerbated by a series of inequities that result in the poor paying more (per cubic meter) for their water and receiving poorer quality service than other social groups. In distinction to the discriminatory patterns that these groups face in the privatized systems, where service is provided by tank trucks or from neighborhood hydrants, in many other parts of the country –managed by public sector companies–, their peers must resort to obtaining supplies from irrigation or sewage canals or purchasing it from private suppliers of water who purvey their wares from their own tankers at prices as high “as the market will bear.” But some marginal peri-urban communities do not even have the fortune to choose from among these water “pirates” as they are not so affectionately labeled by their clients, who frequently denounce their collusion with local officials in the water sector; they must fetch water from nearby streams, forcing women – who are generally responsible for water management in the household – to spend up to one-third of their work day on water management chores.
Another source of inequity is the result of the unconscionable management of access to underground water supplies by public authorities. Historically, concession to drill wells for individual and collective benefit were distributed by the federal water authorities on the basis of applications related to specified end uses, for a lengthy period, often more than one-half century. Today, all water users, including the local urban water management agencies, must pay the CNA for its use, since it is constitutionally considered to be the collective property of the nation; the agencies pay a fee for the large-scale water supplies they receive while well owners pay a flat fee for use rights, specified in their concessions. As a result of the changing relative value of water among potential uses, an “Informal” market has emerged for the (legal or illegal) transfer of these concessions among potential users, with the original owners extracting a “rent” from their lease or sale, and the new owners enjoying a right to use the water for their private profit. 
In general, then, public water management in Mexico is inadequate. Water is distributed inequitably, with great inefficiencies and without effective mechanisms for involving the users in the process. The financial burden for the operation of the system at virtually every level of government systematically transfers costs to the public sector –where the highly regressive tax structure places a disproportionate burden on the poor and the working classes– while the benefits are captured by the largest water users. Compounding the problem are the public health issues raised by an inability to assure adequate supplies of quality water to most of the population.
Environmental management and wastewater treatment
Another serious problem haunting the water sector is the lack of knowledge and concern about environmental and wastewater management. Although the CNA has a dedicated corps of specialists who have carefully identified the process of environmental degradation suffered in most Mexican watersheds, they have been unsuccessful in communicating a sense of concern and urgency to water management authorities at the local level. Our study is documenting the lack of systematic evaluations of the impact of present trends in water use for ecosystems and the absence of environmentally sound contingency plans; most proposals call for inter-basin transfers of water and large scale dam construction, strategies that have historically proven to be quite damaging and economically unjustifiable (McCully, 2001). Local water authorities generally lack the financial and technical ability to undertake the required surveys, although they should be an essential part of effective long-term planning.  On the demand side there is a widespread use of the rhetorical plea for a “New Culture of Water”, but there are no effective campaigns to redesign architectural programs to incorporate use reduction strategies in professional training or building codes; water harvesting and recycling strategies are virtually unknown in the public sector, even in Mexico’s driest regions, and public service campaigns are especially maladroit. Similarly, there is virtually no real concern or systematic long-term evaluation of the environmental and social impacts of discharges of untreated wastewater into surface water sources; one notable exception is the plan to exchange treated residual waters from San Luis Potosí for irrigation water from neighboring areas as part of the solution to regional water supply problems.
Mexico faces a serious threat from inherited dangers resulting from natural and historical forces that have deposited important quantities of potentially hazardous substances in its watersheds. Centuries of mining and decades of modern (sic.) industrial and commercial agricultural production have resulted in large volumes of poisonous substances seeping into the aquifers through lixiviation or sedimentation. There is ample evidence of the dangers that these substances present to society, but the government has steadfastly resisted concerted attempts to legislate against their continued use, to enforce existing restrictions about their discharge, or to restrict their consumption. Two examples might suffice to illustrate the problems:
1) The presence of excessive volumes of naturally occurring arsenic in large aquifers as a result of their severe depletion in several parts of central Mexico is leading to serious problems of contamination in Guanajuato and to the presence of trace amounts of the mineral in 20% of the nation’s milk supplies that originate in the irrigation district of La Laguna, Coahuila;
2) In spite of an exemplar international program to encourage the implementation of a cost-effective technology to eliminate discharges of damaging chemicals from the leather tanning industry in León, the city is still plagued by the problem ten years later. Its water treatment plants are not adequate for the task of adequately treating discharges, and yet even its well managed water company, which enjoys strong support from other local and regional authorities, is incapable of implementing a source reduction program that would offer a favorable solution for all concerned; it has proved incapable of breaking free from the strangle hold that the powerful economic interests that control local politics exert on local politics. As a result, it is obliged to continue bearing the burden of an ineffective and costly treatment approach that is depositing a deadly residue in the ecosystem and most especially in its aquifers.
On a national scale, less than one-quarter of all urban consumption passes through a water treatment plant, and a substantial proportion of these are reported to be inoperative by the CNA. Numerous studies report that local agencies cannot assure the required operational and maintenance skills; nor can they bear the energy and other operating costs that often exceed municipal budgets because of inappropriate technological choices and inadequate maintenance and modernization programs.
Wastewater treatment is now required by law. Large industrial users are charged effluent fees based on the quality of their water discharges and, as a result, they have made a concerted effort to install recycling and treatment plants.  Municipalities are also being forced to search for suitable solutions to their problems in the context of a crisis in municipal finance and a “culture of non-collection” that prevails in most parts of the country. One consequence is the virtual invasion by corporate purveyors of such technologies, offering seemingly magical solutions to local water managers who are unable to make optimal decisions because they are tightly constrained by financial and administrative considerations, inadequate technological knowledge and the lack of an ecological culture.  Political struggles over the value and appropriation of the benefits of untreated sewage water also impede the search for solutions.  As a result, the application of appropriate and innovative technologies for environmentally and economically sound solutions to water management encounters numerous obstacles in Mexico; an exceptional case, is the large plant constructed by a local company near Villahermosa, Tabasco using passive biological processing in an artificial wetlands to treat municipal wastewater which was quite surprisingly approved by local authorities.
Throughout Mexico, urban water use and abuse is leading to environmental destruction with dramatic consequences for public and ecosystem health. Rather than emphasize the version of the “New Culture of Water” that was awarded the Goldman Environmental Prize in 2003 (Pedro Arrojo, Spain), that focuses on demand management and environmental integrity, the Mexican government continues haphazardly to cater to the international banking community and construction companies by focusing on inter-basin transfers and the building of large-scale infrastructure to increase supplies. It continues to disregard the public health consequences of the plethora of sources of contamination by encouraging new industrial and agricultural projects that will only intensify the problems, while it actively discourages initiatives to implement new technologies that might reverse present trends.
And the people?
Public participation in discussions about water management and the environmental impact of present institutional trends is energetically discouraged. Although centralized in the National Water Commission (CNA), important decisions about water management are in fact made by other groups: the Federal Electricity Commission (CFE) has a great deal of autonomy in determining the fate of those waterways susceptible to being harnessed for hydroelectricity generation; the Secretary of Agriculture (SAGARPA) plays a dominant role in designing policies shaping individual decisions about the use of the largest volumes of Mexico’s fresh water for irrigating crops; local water agencies attempt to operate as if they were sovereign with regard to commandeering water for urban-industrial users; finally, corporate owners of the rights to exploit “private” wells often flaunt governmental regulations designed to stabilize aquifers. Each of these agencies, in its own way actively excludes the affected local groups from participation in the major decisions that will affect local water allocation and management, and therefore social welfare, in their regions.
Unfortunately, local questions about public policy and new projects have generally been met with official hermetism and rapid mobilizations of the State’s police powers to demobilize collective action. In more recent confrontations, the government agencies frequently make unfounded promises of compensation, exaggerated claims of benefits, and assurances of high standards of responsibility, should there be any damages. In many parts of the country, when effective leaders insist in their demands, local political leaders are jailed, tortured, or assassinated; occasionally, international expressions of international solidarity are effective in securing their release and a measure of individual security, as was the case of Rodolfo Montiel, whose effective leadership made it difficult for the Boise Cascade company to continue logging in the mountains of Guerrero; he was freed after several years of international protests moved national authorities to commute his sentence to time served, but still suffers medical problems as a result of mistreatment from police aand prison authorities. Similarly, effective national reaction to the arrest of Aracely Dominguez for raising the question of the destructive environmental impacts of tourist developments in the Riviera Maya led to the dropping of all charges.
Public officials have attempted to relegate water management in Mexico to a seemingly technical level where public opinion continues to be excluded. The crucial decisions in this area of social existence are thought to be too complex for ordinary citizens to participate. Even when public debates and legislative hearings are convened, only academic experts and authorities with ample administrative experience are called to testify; ordinary citizens can only be expected to voice their complaints about the inevitable minor failures in the quality of service or administrative errors. Important decisions about the design of a water system, the approach to handling effluents, and tariff structures should be entrusted to trustworthy experts who can be expected to represent the public interest in their exercise of power; any intimation of bias or private interests over-riding their sacred respect for the public trust is greeted with cries of disdain or “populism” by the power elite.
Informed opposition and alternative paradigms are inconceivable in Mexico. Alternative interpretations of public policy or priorities are unacceptable, and the “collective” interests of the nation, as defined by the technocratic elite at the service of capital, are always more important than the directly violated interests of the losers in the economic power equation. Regardless of where “correctness” lies, present practice in Mexico has led to the careful construction of a national water management and use system that is destroying our ecosystems, poisoning its people, and leaving the country ill-prepared to face the challenges of sustainable and equitable development in the coming years. Decisions are made in an ad hoc and uninformed manner on the basis unequal confrontations; resources are wasted, people expendable, and we are all the worse for the experience, although some opportunists become short-term beneficiaries.
Here again, two examples may illustrate the problems Mexico faces in the area of water management:
1) The CFE has proposed to build the nation’s second largest hydroelectric project, La Parota, a short distance of the beach resort of Acapulco. A billion dollar project, the projected lake behind the 165 meter high wall would flood 14,000 hectares and displace upwards of 25,000 people. Instead of trying to negotiate credible terms of compensation, or consider alternative models of ecosystem management and community based energy generation, governmental forces immediately tried to bribe some local leaders while arresting the more intransigent opposition. International solidarity rapidly mobilized to support the coalition of domestic forces, raising the stakes and forcing costly delays in the project. At this writing, it looks as if the CFE will be forced to cancel the project and the local communities will become even more isolated than ever.
2) The creation of a joint stock company to manage water service in Saltillo seemed like a winning proposition when the call for bids was issued in 2001. Potential candidates were screened by an independent agent –the now infamous accounting firm of Arthur Anderson, one of whose clients would eventually win the contract. The new management company moved rapidly to implement new systems, raising questions with controversial interpretations of a number of key decision variables that allowed it to gain acquiescence to tariff increases that would prove to be irregular, at best. Instead of creating fora for public discussions of major developments, the new management isolated itself and even instilled a troublesome sense of foreboding in its senior partner, the local mayor. Questions about technical matters and expressions social discontent were dismissed as inconsequential in view of the substantial advances in service improvements and high ratings in public opinion polls. A congressional audit and the perseverance of a small committee of concerned citizens continues to keep the debate alive, while international forces assess the correlation of forces. In a setting in which there are no impartial mediators, no expert bodies to resolve the profound differences of opinion, and a highly volatile political atmosphere, fueled by an important and contentious election, grassroots concerns are taking advantage of a ripe opportunity to continue eroding the firm’s security, in spite of the apparent progress in improving service and consolidating its economic stability.
An important challenge facing Mexico at the present time is assuring adequate and affordable water service to its urban population while improving its ability to protect the ecosystems on which it depends. Perhaps the greatest obstacle facing the country in attempting to achieve this objective is the government’s reluctance to encourage or even permit public participation in the discussion of management, oversight or management of public services. The multiple problems of financial solvency, regulatory capacity, and expertise to assure substantial improvements in administration as well as in the quality and efficiency of service are important hurdles that will be more manageable if local resources can be mobilized to confront problems as they arise.
Mexico’s experience with foreign participation in the management of local water service companies offers little solace for advocates of privatization. While it is certainly true that they have achieved important improvements in decisive service indicators, such as areas served and proportion of clients paying their bills, serious questions arise about the way in which they have manipulated incentives to assure high financial returns; in the case of Cancun, people continue to ask how Ondeo was able to avoid injecting any of its own capital into the business, while the accusations of financial malfeasance in Saltillo confirm the darkest fears of the way in which international capital operates. The example of Aguascalientes further confirms the need for a strict independent regulatory body capable of exercising its power to protect the public interest. Finally, the experience in the nation’s capital is hardly typical, as there is little scope for excessive profits and a good oversight and management scheme has assured that the firms remain on the straight and narrow path that the service contracts defined.
On the other hand, the exceptional examples of independent public sector agencies operating efficient service organizations are heartening evidence that government can be reorganized productively. In their own ways, each of these agencies has established a credible record of improving services and instilling public confidence so that users are willing to pay their bills regularly. Unfortunately, the unresolved environmental problems, highlighted in the case of León, are only a small part of the ecosystem management problems facing every one of the agencies, to one degree or another. This is a challenge that Mexico as a whole is still unprepared to meet; it has neither the political will nor the technical and financial capabilities to even define a realistic and effective agenda in this area.
Unfortunately, most of the public sector water service companies are dreadfully unprepared to meet the present demands of their customers or plan for future needs. The highly decentralized scheme designed for service provision is inappropriate in a country where technical expertise and financial resources are scarce and administrative skills underdeveloped. It offers a ripe incubator in which ambitious politicians can seize control of large parts of the system for their personal enrichment, without any effective mechanism to assure benefits for the people.
In contrast, there are a few exceptional examples where local initiatives have promoted highly original and effective mechanisms for resolving local problems. None of the examples we know about have been implemented by the water agencies that are the subjects of this study. Some have been documented in other studies (Barkin 2001), while others will be included in a second, expanded edition of that publication to be completed later this year. Evidence from other countries also suggests the importance and effectiveness of stimulating local initiatives as a complement to and control over public administrations; not only do they encourage the development of an oversight capacity and a problem-solving dynamic, but they often implement water service projects more efficiently and in a less costly manner than do government agencies or private corporations (Satterthwaite, Mc Granahan, and Mitlin, 2005). In a proper setting, they also assure a more equitable distribution of the benefits. Perhaps one of our most important chores is to explore the viability of new models for water service delivery in Mexico.
* Professor of Economics, Universidad Autónoma Metropolitana, Xochimilco Campus, Mexico City, and Assistant Professor of Geography, Florida State University, Tallahassee. They are currently co-directors of a national diagnostic study of urban water management in Mexico, sponsored by the Global Research Center at the University of Southern Florida; this paper is a first product of this project. Comments should be directed to: email@example.com
 The CNA was created in 1989 to oversee management of water resources in Mexico. In previous decades, responsibility was vested variously in the agriculture ministries or in a special ministry for water resources.
 Unfortunately, these councils have been conceived without the participation of small (peasant) users and other water basin groups whose conservation efforts are frequently crucial for the maintenance and recharge of the aquifers upon which (urban/industrial) consumers frequently depend. This devolution is also being accompanied by the participation of the private sector in service provision in some important segments of the production process.
 Most of them belong to the Mexican Association of Potable Water and Sewage Enterprises (ANEAS) that has generously supported this study by assuring the broadest possible distribution of the survey instrument on which the analysis of the national system will be based; we expect this analysis to be included in the book form of this study.
 A unique service contract was negotiated with joint ventures between foreign and Mexican capital for the administration of billing, rate collection and some minor maintenance tasks in each of four sections of Mexico City. The companies are also responsible for maintenance of the secondary distribution network in their areas. In this case, all policy matters and the tariff structure are decided by the local legislature and companies are compensated in accordance with their original bids for the contracts; since initiated in 1994, one foreign partner has withdrawn and the quadrant is managed by a wholly owned Mexican enterprise.
 There are some notable exceptions to these generalizations that are discussed below.
 One official of a leading international private water challenges this dominant complaint by the CNA, characterizing itself instead as a “culture of non-collection” in response to political pressures or as a program of political largesse.
 As suggested earlier, it is quite common for groups of consumers or influential citizens to seek forgiveness for accumulated unpaid water bills and for politicians to accede to their demands.
 We have deliberately refrained from analyses of each individual system in this paper; these details, along with quantitative indices of productivity and efficiency of the six case studies will be included in the final report of this project, and a comparison with national data and those reflecting the full range of other management systems and institutional structures in Mexico, will be available in the book being prepared for publication at the end of 2005.
 In its defense, the company commented that the land tenure situation in these “irregular” settlements complicates its efforts to provide service. They may not invoice water service to people who do not have a valid title to the land on which their homes are constructed, since historically such documents have been used as proof to establish residence and ownership, a move that public authorities do not sanction, although in other areas water agencies are often party to this informal process of land “regularization.”
 An anecdote illustrating the problem of secrecy occurred during this study: in early 2005, the Mexico City water system authorities decided to classify virtually all of the technical and financial information on its operation, under the terms of the recently promulgated laws of transparency (sic.) for the public sector on the grounds that the information was essential for the operation of the system, and therefore very sensitive. It was only after this was brought into the spotlight by a local newspaper (Reforma) and researchers joined in the public uproar at open conferences on water issues that the Mayor ordered the designation reversed.
 Ironically, although many urban areas chlorinate their water before distribution, water borne diseases, bacteria, and other contaminants constitute serious public health problems. The imperfections in the distribution system, poor training of people charged with operating public and private facilities, the lack of information about the proper maintenance of storage facilities, and the absence of a culture of concern about water quality are common problems. These are exacerbated by geological and historical patterns that have often contaminated water supplies, sometimes beyond the point of being reparable, either because of deposits of contaminants like mercury from centuries of mining operations, or from naturally occurring deposits of arsenic that are now found in extraordinary concentrations as water tables decline and extractions require the pumping of supplies of fossil water more than ten thousand years old. On-going contamination of water supplies from contemporary sources is examined in the next section of this paper.
 There is a large literature documenting these transfers; journalistic accounts denouncing the abusive ways in which the concessions are acquired and exploited point to a weak legal system and to a corrupt administrative structure that permit these informal markets to function with tremendous social and environmental costs. Of course, the abuses are greatest in the urban areas where competition for water is most intense or in the semi-arid deserts where access to water can mean the difference between poverty and great wealth. For an example of detailed reporting on this problem, see the articles denouncing the situation in one municipality in the Mexico City metropolitan area in El Universal, 9 May 2005.
 Aguas de Saltillo undertook a large scale geohydrological survey of its supply areas with support from a team of experts from the home office of the international partner. The company reports that with appropriate conservation and management measures, it will be able to avoid the need for expensive infrastructure to bring waters in from afar for the foreseeable future; unfortunately, management has declared the study to be confidential, and in the process has generate suspicion about the results in knowledgeable Mexican circles.
 General Motors was awarded the Stockholm Water Prize in 2001 for its successful efforts to reduce consumption at its plant in Ramos Arizpe in Mexico; similar examples abound throughout the country, and some actually boast about their achievements in corporate advertising.
 An example of the complexity of the challenges facing local managers is the variety of available technologies for wastewater treatment. Many conventional technologies, using energy intensive systems that generate considerable volumes of (sometimes toxic) wastes, are favored by the large construction firms which can deliver these as “turnkey” or BOT (build, operate, transfer) systems that require few innovative skills or personnel training; these systems are also supported by the financiers because of the experience accumulated by the dominant engineering and construction firms in the advanced countries. In contrast, passive plants, using anaerobic and aerobic biological processes, are generally less costly to build and operate, but require training in local communities to assure adequate operational results; although oftentimes offering superior environmental, social, and even financial benefits, the corporate community and bureaucracy generally oppose them because they require site-specific designs and are less profitable.
A recent decision about the design of a water treatment plant in Morelia, Michoacan, illustrates another facet of the problem. In spite of informed citizen demands for a design that would produce effluents suitable for reuse in the neighboring irrigation district, where the untreated waters are currently used, the new plant will generate discharges that meet national norms but are unacceptable for safe application on crops destined for direct human consumption. Although the farmers will be formally prohibited from planting such crops, they operate in a region without the enforcement capability to ensure compliance; therefore, the consumers will be confronted by predictable and avoidable epidemiological hazards.
 In Zamora, Michoacan, the local strawberry growers actually offered to finance the construction of the sewage system for the city in the 1980s, if it discharged the effluents into their fields. As a result, they were able to reduce production costs considerably by taking advantage of the nutrient values in the irrigation water they applied to their crop. Further aggravating the “crime,” many of the people employed as farm hands in these fields were allowed to settle along the sewage canals, again with predictable results in terms of public health. Similarly, peasants in the state of Hidalgo, have joined other groups to effectively oppose attempts by federal authorities and Mexico City to build treatment plants that would reduce the flow of effluents to their fields, where their value as fertilizer for the garden crops exported to Mexico City is highly cherished (This use of water is explicitly prohibited in Mexican legislation, but the enforcement capabilities are inadequate). (Restrepo, 1995)
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