Mexico’s Constitutional Reforms on Water: Game Changer for US-Mexico Bilateral Relations and Doing Business in Mexico?

On February 5, 2024, former President López Obrador introduced a bill to reform Mexico’s Constitution, amending Article 4 on water as a human right, Article 27 on ownership of primary water sources (surface and groundwater), the water concessions regime for allocating water rights to all social and economic sectors, and a related Transitory Article.   

The bill continues its way toward becoming law. The incumbent government’s sweeping party majority means the reforms are highly likely to pass. This document reflects on how these constitutional amendments might influence domestic and foreign investment, escalate tensions, and inject further complexity into the US-Mexico agenda.  

Context 

The water sector in Mexico has long been neglected in various areas, including legislatively. Water has been extracted and used with insufficient planning, monitoring, and oversight. The numbers for aquifers, particularly in the northern and central parts of Mexico, where nearshoring interests and climate change play a relevant role, show a strong trend toward depletion. This is backed by official figures that show around a quarter of Mexico’s 653 aquifers are overexploited, with many more in deficit.  

Some of these aquifers straddle the border and are shared with the US. Neither the 1944 US-Mexico Water Treaty nor the United States-Mexico-Canada Agreement (USMCA) environmental chapter mention these aquifers; however, the latter includes binding environmental provisions subject to dispute resolution.[1] Despite our shared reliance on closely integrated supply chains[2] that drive our economies and strengthen the region’s global competitiveness, signs of growing conflict surrounding these shared resources are more concerning. 

Water was not high on Mexico’s political agenda until very recently. During newly elected President Claudia Sheinbaum’s inaugural speech, her initial 100-day plan shed light on what might come. She stated that: “This administration shall prioritize access to water. This month, we will implement a program to bring order to concessions and transfer of water rights. Water belongs to the Nation.” 

Her statements underscore the complexity of navigating water sharing in a more competitive environment affected by climate change risks. 

Intended Reforms 

The Mexican Constitution regulates water as (i) a human right, (ii) a shared good belonging to the Nation subject to allocation by concessions, and (iii) a public service. 

The proposed constitutional amendment arguably aims to guarantee and protect water as a human right. This amendment seemingly aligns with the new President’s agenda, which also wants to emphasize that water is a common good, not a tradable commodity.  

a) Preferential use of water  

In 2012, access to water and sanitation for personal and domestic uses was recognized as a human right protected by the Constitution.   

The proposed amendment to Article 4 of the Constitution aims to strengthen this right by prioritizing water for personal and domestic consumption above all others, affording constitutional protection to what has been regulated for over two decades in the National Water Law (a key criteria for granting water concessions).  

At first glance, the reform’s approval may not be a real game changer. However, future impacts are likely to entail stricter processes for granting new water concessions or increasing water allocations under existing concessions that are different from this preferential use or may pose risks thereto.  

b)Water concession bans 

Apart from this preferential use, the bill proposes to amend Article 27 of the Constitution prohibiting granting water concessions to private parties in areas with "low availability".  

This change would imply that water may only be allocated to water organisms that provide public services to population centers to ensure personal and domestic consumption. Wouldn’t this reform be counterproductive to rural communities, clinics, schools, farms, and other sectors not within the statutory definition of a population center? 

Furthermore, the bill fails to clearly frame the concept of “low availability,” which suggests that the stakes surrounding the amendment of the secondary legal framework (the National Water Law and the pending General Act governing Water) will be much higher.   

If approved, this could have far-reaching implications for granting new concessions, extending terms, or allocating water under existing concessions, particularly in border states with arid and semi-arid environments of great interest to nearshoring. These impacts are already apparent in unprecedented decisions by the water authority to reduce the original term of concessions by as much as 40% based on current water availability when applying for extensions. 

Conclusions 

Mexico’s need to modernize and rebalance its legal framework on water significantly to drive development and address climate change is not in doubt; however, if not carefully thought out and implemented, the intended reforms may be counterintuitive. They could prove detrimental to rural areas and otherwise dissuade new or long-term investment, negatively impacting sustainable projects and industry competitiveness in these affected regions. Conflicts would likely rise, sparking increased reliance on dispute resolution mechanisms, exacerbating tensions along the US-Mexico border, and further threatening the USMCA’s 2026 review.  

Any legal reform must emphasize water sustainability, reuse, and regeneration, and strengthen the existing water concession regime to enhance legal certainty for water users, ensure fair allocation of water rights to all social and economic sectors, and furnish the legal framework with the required flexibility if we are to adapt to increasingly unpredictable weather patterns brought on by climate change and mitigate social, financial and business continuity risks. 

[1] Under the USMCA, the US presented the International Boundary and Water Commission (IBWC) with project to mitigate contaminated transboundary flows.

[2] Mexico is the focus of attention to companies endeavoring to nearshore their supply chains.