Message in Fox’s tax plan: no more free water


In what would be a major shift in water-resource policy, Mexico’s new government is hoping to raise $4.8 billion annually in taxes on industry and agriculture to reinvest in the country’s ailing water infrastructure.

Green clauses in a sweeping new tax bill, a central plank of President Vicente Fox’s economic reforms, would end partial exemptions on water tariffs for mining and paper companies and a total exemption for cattle farmers.

The proposal would shake up the network of political interests built up during 71 years of rule by the Institutional Revolutionary Party (PRI), which Fox ousted in historic elections last year. Under that system, mining firms, paper mills and ranchers used an estimated 70% of the nation’s water, largely for free, and squandered about half of it in leakages.

The money raised would be earmarked for improving water treatment and supply. Mexico needs to spend at least $3 billion a year to maintain and improve water infrastructure, twice the amount now available, according to the country’s National Water Commission.

Another clause in the bill would pardon $7 billion in debt owed to the water commission, which oversees Mexico’s water supplies and grants concessions allowing states and municipal authorities to tap them. In return, state and local authorities would be expected to pay regularly for water in the future.

“We want municipal and state authorities to take responsibility and start using water more efficiently,” says Rodolfo Lasy Tamayo, chief advisor to Environment and Natural Resources Secretary Victor Lichtinger. “Charging them is one of the best ways to do that, but we will also be offering them all kinds of incentives, whether it is fiscal incentives or technical support to encourage them along this path.”

The moves come as part of a radical new approach by Lichtinger, who has described water as an issue of national security. Remarking on Mexico’s scarce water supplies recently, Lichtinger said: “It appears that in previous administrations, the belief was that not talking about a problem meant that it was not important and would solve itself.”

Lichtinger has even appeared on the television show of popular comedian Adal Ramones to tell viewers: “Turn off the tap when you are brushing your teeth or shaving!”

Currently, 12 million of Mexico’s 100 million people do not have ready access to drinking water, and 30 towns and cities in the north are suffering from a drought so severe that they only have water for a few hours a day.

Deforestation has contributed to the shortages, and so has Mexico’s widespread pollution. According to the National Water Commission, 19% of the country’s water reserves are “contaminated” or “very contaminated” and a further 54% are “lightly contaminated.”

In the Federal District of Mexico City, where some 8 million of the sprawling metropolis’ estimated 22 million people live, authorities insist they cannot guarantee supplies beyond 2010—even allowing for new sources of water already earmarked for exploitation.

These new sources include briny water beneath the freshwater lake of Texcoco. Officials hope to extract this water and treat it in a planned desalination plant. Expected to cost less than $20 million and to be built using modular components, the plant, which has yet to be approved, could be up and running by 2002, local water commission officials say.

“Desalination is not that expensive anymore and the water here is less salty than seawater, so it should be more economic to treat,” says Leopoldo Rodarte, head of the federal district’s Water Commission. (See Q&A.)

However, the plant would only provide six million cubic meters of water a year—just 6% of the current annual shortfall of 95 million cubic meters faced by the city’s residents.

In another proposal to cope with Mexico’s lack of funds for water infrastructure, Cristóbal Jaime Jáquez, director of the National Water Commission, wants tariffs raised by 50%. Jáquez is quick to stress that in designing such an increase, officials would have to be sensitive to the widespread poverty here and the large number of people who still lack running water.

“This doesn’t have to be done immediately, but gradually, and obviously taking into account the socio-economic conditions of different parts of the population,” Jáquez says.

Yet such hikes may be unnecessary if the tax bill—and its green clauses—wins passage. While President Fox has staked a great deal of his considerable political capital on the legislation’s successful passage, his National Action Party (PAN) has no majority in either the lower or upper house of Congress and he will need opposition votes.

“This legislation will probably be amended before it is passed,” says Raúl Benet, the new director of Greenpeace Mexico. “There are a lot of campesinos who will be affected by the law and who are already on the subsistence limit. They will need to be protected. I think there needs to be more consultation rather than just imposing this law from above.”

The National Farming Council (Conesjo Nacional Agropecuario) declines to comment until details of the proposed reforms are made available.

But, the mining industry appears fiercely opposed to the legislation, pointing out that its 75% exemption on water tariffs had been granted because companies themselves take responsibility for exploration and extraction.

“If they expect us to pay the full rate, then that is fine,” says José Luís Lee Moreno, director of the Mining Chamber of Mexico. “But we would obviously expect the government to then provide us with the water in pipes, like they do for everybody else. At the moment we are exempt because we pay for exploration and extraction and even provide water to local villages. It costs the government nothing.”

- Simeon Tegel

Raúl Benet
Greenpeace Mexico
Mexico City, Mexico
Tel: +(52 55) 5590-8350, 5590-6868
Cristóbal Jaime Jáquez
National Water Commission (CNA)
Mexico City, Mexico
Tel: +(52 55) 9159-4100
Rodolfo Lasy Tamayo
Chief Advisor
Environment and Natural Resources Secretariat (Semarnat)
United States
Tel: +(525) 628-0600
José Luís Lee Moreno
Mining Chamber of Mexico
United States
Tel: +(525) 540-6788
Fax: +(525) 540-6061