02 May The New General Water Law: Challenges and Implications for the Industrial Sector in Mexico
On December 19th, 2024, the Mexican government published the National Agreement on the Human Right to Water and Sustainability (the “Agreement”), supporting the initiative presented on November 12th, 2024, in the Chamber of Deputies (the “Initiative”). This Initiative proposes the issuance of a new General Water Law (the “LGA”, for its acronym in Spanish), that would replace, as applicable, the current National Water Law (hereinafter “LAN”, for its acronym in Spanish).
The Initiative reflects the Mexican government’s commitment to implement public policies aimed at ensuring equitable access to water and its sustainable management, which anticipates significant changes in water regulation in the short term.
1. Introduction
Among the most relevant aspects of the Initiative is the implementation of a more rigorous concession regime, which will establish additional requirements for its granting and management, including, among others, the obligation to carry out water and social impact studies. Likewise, the creation of the Regional Watershed Councils is proposed, which will operate as mechanisms for consultation and citizen participation.
Other significant changes include the potential reduction in permitted water volumes, as well as the incorporation of new guidelines aimed at optimizing the efficient use and management of water resources.
Currently, the LGA is under discussion in the Mexican Congress (the “Congress”). However, if approved without substantial modifications, this new regulatory framework could generate significant impacts, particularly on for companies in the industrial sector whose operations depend on the access and availability of water resources. Therefore, it is essential for companies to anticipate potential changes, adopt risk mitigation measures, and design strategies to ensure the continuity and sustainability of their operations under this new regulation.
2. Background
The Initiative seeks to comply with the decree published on February 8th, 2012, which amended Article 4th of the Constitution to recognize access to water as a fundamental human right, ensuring its equitable, sustainable, and safe distribution.
This decree granted Congress a period of 360 days to issue a General Water Law that would materialize this constitutional right. However, more than 12 years after its enactment, Congress has yet to fulfill this obligation, perpetuating a legislative omission that impacts the management and regulation of water in Mexico. As a result, the right to water is only recognized at the constitutional level, while the secondary legislation in force, contained in the LAN, has not undergone substantial reforms in the last decade.
Under the current regulatory framework, the LAN regulates water resources from a patrimonialism perspective, by establishing that this resource is property of the nation, in accordance with Article 27th of the Constitution. In this context, the LAN focuses on regulating the exploitation, use, and utilization of national waters, their distribution and control, as well as the preservation of their quantity and quality in order to ensure comprehensive sustainable development. Additionally, it grants broad powers to the National Water Commission (“CONAGUA”, for its acronym in Spanish), which serves as the highest water authority in the country.
Congress legislative omission is especially serious in the current context, as Mexico faces its worst water crisis in the last three years. This crisis is evident in critical levels of water availability in regions such as the north of the country, where various states have reported an alarming drop in the levels of their main bodies of water, while the growing demand for water in agricultural, industrial, urban, and human sectors aggravates the situation.
In response to this problem, the proposed LGA seeks to regulate Article 4th of the Constitution from a human rights-based approach, harmonizing water regulation with the principles of the General Law on Ecological Balance and Environmental Protection. Additionally, it promotes collaboration among the three levels of government through mechanisms such as the assignment of specific responsibilities, the implementation of inter-institutional agreements and the development of strategies aimed at mitigating the water crisis under a sustainable approach. These actions are aligned with the objectives of the National Water Program and the principles established in the 2030 Agenda for Sustainable Development.
3. Content of the General Water Law and potential implications for the industrial sector
The eventual entry into force of this regulatory framework will present significant challenges and responsibilities, particularly for the industrial sector and concessionaires, who will face greater obligations and stricter administrative criteria. Below are the main aspects included in the LGA, as well as their potential implications:
3.1. Creation of Regional Watershed Councils
The LGA proposes the creation of Regional Watershed Councils, bodies responsible for implementing consultation and citizen participation mechanisms in water management. These councils will be composed of representatives from various social sectors, including indigenous communities, non-governmental organizations, and industrial sectors.
Their powers include the ability to intervene in matters related to the use and exploitation of water, as well as issuing binding opinions regarding concessions and permits within their jurisdiction.
Potential implications for the industrial sector:
- Companies will have to justify their water needs before bodies that may prioritize other uses, such as human consumption, environmental conservation, or specific community demands, potentially complicating the granting of concessions.
- The involvement of these councils in decision-making could result in increased administrative and technical efforts, including additional costs and more complex processes.
- Companies must actively participate in the Councils to ensure clear commitments regarding the rational use of water, encouraging them to adopt efficient technologies and reduce environmental impact.
3.2. Socio-Water Impact Assessment
The new legislation establishes the mandatory requirement to submit a socio-water impact assessment as a prerequisite for obtaining concessions. This study will be subject to review and approval by the Regional Watershed Councils, which will determine the necessary conditions for carrying out works and activities affecting water resources.
Potential implications for the industrial sector:
- This requirement will involve the hiring of experts and elaboration of specialized studies, increasing the initial costs for applicants.
- Despite its purpose of guaranteeing the human right to water, this process may entail the risk of concessions being rejected or conditioned upon the implementation of mitigation measures.
- The adoption of responsible and sustainable water management practices will be encouraged, potentially generating long-term operational benefits.
3.3. Utilization Pattern
The Utilization Pattern will be an instrument approved annually by the Regional Watershed Councils, which will establish adjustments to extraction volumes, catchment points, uses, and conditions for the use and discharge of water.
Potential implications for the industrial sector:
- The reduction of concessioned volumes during certain periods could affect the operational continuity of industries.
- The uncertainty arising from annual reviews could complicate long-term strategic planning for projects requiring a constant water supply.
- Despite the challenges, this measure will encourage process optimization through more efficient technologies and sustainable practices, though such adaptations will require significant investments.
3.4. Discharge permits
It will be mandatory to obtain authorization from the Regional Watershed Council for the discharge of concessioned water into national properties, ensuring compliance with permissible limits of pollutants established in Mexican Official Standards.
Potential implications for the industrial sector:
- The adoption of stricter measures in discharge management will represent high initial costs but will also offer benefits in terms of regulatory compliance and reduced risk of sanctions.
- Non-compliance with these provisions could result in severe sanctions, including fines, suspension of permits, and even the permanent revocation of concessions, which could jeopardize companies' operational continuity.
3.5. Stricter concession regime
The LGA establishes a stricter concession regime, including the following provisions:
- Reduction of concession terms, with a minimum of 5 years and a maximum of 15 years, subject to renewal contingent upon meeting strict criteria.
- Revocation of concessions in case of environmental damage or non-compliance with obligations.
- Evaluations to verify water availability prior to granting new concessions.
- Prohibition of the transfer of concessions, allocations, and access rights for the use and exploitation of water during the first 5 years of the concession term.
- Concessions may only be transferred if the following conditions are met:
i) the transfer must cover the entire volume of water granted, ii) the use must remain consistent with the original purpose of the concession, and iii) The holder must demonstrate compliance with all obligations as a concessionaire.
Potential implications for the industrial sector:
- The reduction in concession terms will require periodic renewals subject to strict evaluations, increasing operational costs.
- Modifications to current concessions could reduce authorized volumes.
- Companies that invest in water-saving technologies and sustainable management practices will have a better chance of complying with the requirements and avoiding sanctions, ensuring the continuity of their operations.
4. Potential outcomes of implementing a new water regulation
The implementation of the LGA could generate a series of effects with significant implications, both positive and challenging. Below are some of the most relevant scenarios:
4.1. Strengthening the protection of water as a human right: The protection of water as a human right will be reinforced, ensuring its prioritized use for human and domestic consumption in compliance with Article 4 of the Constitution. Furthermore, the LGA establishes specific strategies to prevent drought crises at a national level, including the revaluation of water resources in regions with greater scarcity.
4.2. Assignment of broad supervisory and enforcement powers to the authority: The supervisory powers of the water authority will be significantly expanded, enabling more frequent inspections, technical audits, and continuous monitoring of regulatory compliance. Sanctions will include high fines, temporary suspension of activities and, in severe cases, the permanent revocation of concessions. These measures aim to promote greater accountability in water management and usage.
4.3. Restructuring of concession guidelines: The regulatory framework will introduce additional requirements for obtaining and renewing concessions, such as submitting socio-water impact assessments and obtaining approval from the Regional Watershed Councils.
These measures aim to prevent the depletion of aquifers by imposing strict limits on water extraction. Although these provisions promote sustainability, they could generate significant challenges for industrial and agricultural sectors, which will need to adapt to more complex and stringent administrative processes.
4.4. Long-term instability scenario: The new regulatory framework could create uncertainty in the planning of long-term projects that rely on a steady water supply. Industries might face delays in administrative procedures during the transition to new practices. However, to mitigate these risks, companies can adopt strategies such as investing in water efficiency technologies, utilizing alternative sources, and diversifying their water management approaches, thereby ensuring greater resilience to regulatory changes.
5. Recommendations to address future challenges
The new LGA represents a transformation in water management in Mexico. To minimize risks and ensure operational sustainability, companies are advised to adopt the following measures:
5.1. Constant monitoring of the legislative process and business preparedness: Conduct ongoing monitoring of the legislative process to anticipate potential regulatory changes and evaluate their impact on operations. Additionally, it will be essential to train personnel on the new provisions and promote the adoption of best practices in water management. This includes water efficiency programs through the adoption of advanced technologies for resource optimization and reuse of the resource, promoting a culture of sustainability throughout the organization.
5.2. Review of current concessions and permits to assess compliance status: It is recommended to conduct a thorough analysis of current concessions and permits, including an assessment of the compliance status of treatment plants and water management systems. This exercise is particularly relevant for industries with high volumes of water consumption or those located in regions with severe water scarcity. Anticipating potential regulatory requirements will minimize operational risks and ensure the viability of operations.
5.3. Proactive approach and early negotiation with authorities: Companies should prioritize proactive approach with water authorities, including the Regional Watershed Councils, to establish agreements that promote the sustainability of water resources. Such engagement will not only provide certainty in regulatory compliance but also identify opportunities to implement joint solutions for the benefit of water conservation.
5.4. Monitoring of water bodies to ensure water availability: It is crucial for companies to implement continuous monitoring systems for the water sources they use, verifying their availability, quality, and quantity in alignment with the new regulations. This will enable them to anticipate potential restrictions and take preventive measures, such as diversifying water sources or investing in treatment and reuse technologies, ensuring sustainable long-term management of the resource.
Conclusion
The implementation of a new regulatory framework for water management in Mexico has the potential to provide more effective protection of the human right to water, ensuring its equitable, sustainable, and healthy access. It also establishes an appropriate action plan to address the severe water crisis the country is facing.
However, this regulatory change also poses significant challenges for various sectors, particularly the industrial and agricultural ones, which will need to comply with new regulations and guidelines.
Therefore, early preparation, proactive strategies, and the implementation of efficient technologies will be fundamental to mitigating risks, ensuring regulatory compliance, and maintaining operational sustainability within the new legal framework established by the LGA.
Contact
Berenice Soto García
bsoto@cuestacampos.com
Héctor Ceballos González
hceballos@cuestacampos.com
Sofia Cano
scano@cuestacampos.com