Poverty and Social Impact Analysis of Groundwater

Over-exploitation in Mexico

The World Bank Latin America and Caribbean Region February 2009

Table of Contents Acknowledgements ........................................................................................................................ i List of Abbreviations and Acronyms ......................................................................................... iii Executive Summary ...................................................................................................................... v

1. Introduction ........................................................................................................................... 1

2. The Situation of Ground Water Resources ........................................................................ 3 A. Background .............................................................................................................................3 B. Causes of groundwater over exploitation ................................................................................4 C. Policy Implications ...............................................................................................................10 D. Collapse Risk: International Experience ..............................................................................11

3. Quantitative Analysis of Poverty and Social Impacts ..................................................... 13

4. Qualitative Analysis of Poverty and Social Impacts ........................................................ 18 A. Fieldwork methodology ........................................................................................................18 B. Fieldwork results: Social impacts of groundwater over-exploitation ...................................23 C. Conclusions ...........................................................................................................................26 D. Policy implications ................................................................................................................26

5. Institutional Issues in Water Management....................................................................... 28 A. Water Sector Institutions .......................................................................................................28 B. Monitoring and Enforcement Mechanisms ...........................................................................29 D. Participation and Organization in Water Sector Institutions in Mexico ...............................33 E. Successes in Integrated Water Resources Management: Lessons Learned from Brazil and Mexico ......................................................................................................................39 F. Main Findings and Challenges ..............................................................................................42 G. Policy Implications ...............................................................................................................43

6. Public Expenditures in the Irrigation Sector: Impacts on Equity and Sustainability ............................................................................................................................... 53

A. Distributional impacts ...........................................................................................................54 B. Incentives for Water Conservation ........................................................................................59 C. Lack of Resources to Support Commercialization and Technical Capacity .........................62 E. Conclusions ...........................................................................................................................65

7. PSIA Main Findings and Final Conclusions .................................................................... 67

8. Annex ................................................................................................................................... 69

9. References ............................................................................................................................ 72

List of Tables Table 1: PAO Model ......................................................................................................... 15Table 2: Rural Poverty Rate Across Municipalities ......................................................... 17Table 3: Weighted Ordinary Least Squares (WOLS) Model ............................................ 17Table 4: Characteristics of States included in fieldwork .................................................. 21Table 5: Impacts of Groundwater over-Exploitation on Poor Farmers ............................ 25Table 6: CONAGUA’s budget allocations to irrigation districts and irrigation units (2006) ................................................................................................................................ 35Table 7: Obstacles for poor farmers to access CONAGUA and SAGARPA resources ... 58 List of Boxes Box 2.1:Are the water savings real? ................................................................................... 9Box 2.2The Case of Groundwater Exploitation in Maharashtra, India ............................ 11Box 5.1: Illegal wells ........................................................................................................ 29Box 5.2: Water markets .................................................................................................... 30Box 5.3: Groundwater irrigation districts ......................................................................... 34Box 5.4: Successful organization of irrigation units: examples from Hidalgo and Aguascalientes .................................................................................................................. 36Box 5.5: COTAS: Leadership and Representation ........................................................... 38Box 5.6: Lessons learned from international case studies ................................................ 40Box 6.1: Water Rights Adjustment Program .................................................................... 61Box 6.2: Farming without technical assistance ................................................................. 63Box 6.3: Obstacles to commercialization ......................................................................... 64 List of Figures Figure 2.1: Variation of the natural average per capita availability of water 1950-2000 (million m3/per capita) ....................................................................................................... 3Figure 2.2:Number of Wells in Mexico .............................................................................. 3Figure 2.3: Level of Water Extraction Versus Poverty Levels ........................................... 4Figure 2.4: Overexploited Aquifers 1975 – 2006 ............................................................... 5Figure 2.5: Spatial Distribution of Aquifers by Level of Exploitation ............................... 5Figure 2.6: GDP and population vs. water availability ....................................................... 6Figure 2.7Geographic distribution of public spending for agriculture per capita of rural population, 2002 ................................................................................................................. 7Figure 2.8: Geographic distribution of CONAGUA spending in water infrastructure per capita of population, 2004 ................................................................................................... 8Figure 3.1: Municipalities with Overexploited Aquifers .................................................. 13Figure 3.2: Rural Poverty in Mexico ................................................................................ 13Figure 3.3: Percentage of Underground ............................................................................ 14Figure 3.4: Percentage of Underground ............................................................................ 14Figure 3.5:Probability of Aquifer Overexploitation and Observed Overexploitation ...... 16Figure 3.6: Weights after PSM ......................................................................................... 16Figure 3.7: Probability of Aquifer Overexploitation Before and After Matching ............ 16Figure 4.1: Rural poverty maps of fieldwork locations .................................................... 22Figure 4.2: A survey of wells no longer in use – Aguascalientes ..................................... 24

Figure 5.1: Water Sector Institutions ................................................................................ 28Figure 6.1: Uso pleno de la infraestructura hidroagrícola - levels of marginality in municipalities of participating irrigation units .................................................................. 55Figure 6.2: Uso eficiente del agua y la energía eléctrica - levels of marginality in municipalities of participating irrigation units .................................................................. 56Figure 6.3: Distribution of program resources according to the size of investment: Alianza para el Campo - Manejo Integral de Suelo y Agua, Aguascalientes, 2005) ....... 57

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ACKNOWLEDGEMENTS This integrated report was prepared by a team led by William Reuben (Senior Social Scientist, Latin America and Caribbean Region). Principal co-authors of the qualitative study are Tim Kessler (Lead Consultant) and Rainer Quitzow (Junior Professional Associate, Social Development Department.) Principal co-authors of the quantitative study are Tito Yepes, (Infrastructure Economist, Latin America and Caribbean Region), Darwin Marcelo (Consultant, Latin America and the Caribbean Region), Kevval Hanna, (Research Analyst, Latin America and the Caribbean Region). Luis Jaramillo (Instituto de Nacional (INE) also co-authored the quantitative study under the leadership of Dr. Carlos Munoz Pena, Director General, Research, Environmental Policy and Economy at INE. McDonald Benjamin (Former Sector Manager, Social Department, Latin America and the Caribbean Region), Gustavo Saltiel (Sector Leader, Latin America and the Caribbean Region), Ethel Sennhauser (Sector Manager, Agriculture, Latin America and the Caribbean Region), and Abel Mejia (Sector Manager, Energy, Water and Transport) provided strategic advice and input. Douglas Olson (Lead Water Resource Specialist) and Hector Garduño (Consultant, World Bank Groundwater Advisory Team) were peer reviewers for the qualitative study. The peer reviewers of the quantitative study were Dorte Verner, (Senior Economist, Latin America and the Caribbean Region), John Nash (Lead Economist, Latin America and the Caribbean Region), Rita Cestti,( Senior Rural Development Specialist , Latin America and the Caribbean Region), Doug Olson (Lead Water Resource Specialist), Peter Brandriss (Senior Program Assistant, East Asia), Eri Watanabe, Consultant, Latin America and the Caribbean Region), and Emilio Portocarrero (Consultant, Latin America and the Caribbean Region.) The integrated study was developed in cooperation with Mexico’s Ministry of Environment and Natural Resources (SEMARNAT) and the National Water Commission (CONAGUA). In particular the team would like to thank Griselda Medina (Assistant Manager, Project Management and Evaluation, External Credit Unit, CONAGUA) and Juan Godinez Zuñiga (Director of External Credit, SEMARNAT) who have been the focal points for the study. Additionally, the team would like to thank Dafne Frausto (CONAGUA – Aguascalientes) for her support in providing and analyzing state-level data as well as her valuable comments to the draft qualitative study. The qualitative study is based on fieldwork conducted in five fieldwork sites covering six over-stressed aquifers in Mexico. The fieldwork was designed and coordinated by Tim Kessler in cooperation with the World Bank team. The data collection in the five fieldwork areas was conducted by Tim Kessler (Costa de Hermosillo and Río Sonora aquifers in Sonora), Maria Guadalupe Quijada (Actopan-Santiago de Anaya aquifer), Rainer Quitzow (Ojocaliente-Aguascalientes-Encarnación aquifer), Gabriela Monsalvo (Acuífero Principal – Región Lagunera), and Maria-Luisa Torregrosa (Valle de Celaya aquifer) Adriana Julieta Barrera Mejía (Comisión Estatal del Agua, Guanajuato),

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Francisco Cueva (COTAS Celaya), Carlos Alberto Gutiérrez Martínez (COTAS Celaya), Dafne Frausto (CONAGUA – Aguascalientes), Eliseo Hernández (Union Regional de Pozos Actopan-El Arenal), Jacinto Mayboca (Comisión Estatal del Agua – Sonora), Medardo Meza (Comisión Estatal del Agua – Sonora), Luís Javier Mona Treviño (SAGARPA), José Luís Moreno (Colegio de Sonora), Aurelio Navarrete Ramírez (Consejo Estatal Hidráulico, Guanajuato), Victor Parada (COTAS Ojocaliente-Aguascalientes-Encarnación), Carolina Romero (SEDSOL), Juan Jaime Sanchez Meza (Comisión Estatal del Agua – Sonora) and Octaviano Viviano (Centro de Apoyo al Desarrollo Rural, Actopan). The team would also like to thank Jan-Peter Schemmel and Sabina Schnell from the Germany Agency for Technical Cooperation (GTZ) for their role as facilitators of the national consultation workshop held in May 2006. The team would like to specially thank the United Kingdom Department for International Development (DFID) – Markets and Governance for Poverty Reduction Trust Fund and the Bank Netherlands Water Partnership Program (BNWPP) Trust Fund, funded by the Government of the Netherlands, for co-financing the study.

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LIST OF ABBREVIATIONS AND ACRONYMS

ASERCA Apoyos y Servicios a la Comercialización Agropecuaria (Assistance and

Services for Agricultural Commercialization) CADER Centro de Apoyo para el Desarrollo Rural (Rural Development Support

Center) CEAS Comisión Estatal del Agua – Sonora (State Water Commission – Sonora) ECLAC UN Economic Commission for Latin America CFE Comisión Federal de Electricidad (Federal Electricity Commission) CIMMYT International Maize and Wheat Improvement Center (Centro

Internacional de Mejoramiento de Maíz y Trigo) COGERH Companhia de Gestão dos Recursos Hídricos (Company for Water

Resources Management) CONAGUA Comisión Nacional del Agua (National Water Commission) CONAPO Consejo Nacional de Población (Nacional Population Council) CONASUPO Compañía Nacional de Subsistencias Populares (National Company of

Popular Subsistences) COTAS Comité Técnico del Agua Subterránea (Groundwater Technical

Comittee DFID United Kingdom Department for International Development ENRP Environment and Natural Resources Program ENVDPL Environmental Development Policy Loan FAO Food and Agricultural Organization of the United Nations FONAES Fondo Nacional de Apoyos a Empresas en Solidaridad (National

Solidarity Fund for Enterprise Support) GDP Gross Domestic Product GoM Government of Mexico GSE Grupo de Seguimiento y Evaluación (Implementation and Evaluation

Group) GTZ Gesellschaft für technische Zusammenarbeit (German Agency for

Technical Cooperation) ID Irrigation District IMTA Instituto Mexicano de Tecnología del Agua (Mexican Institute for Water

Technology) INAGUA Instituto del Agua – Aguascalientes (State water comission -

Aguascalientes) INE Instituto Nacional de Ecología (National Institute of Ecology) INEGI Instituto Nacional de Estadística, Geografía e Informática (Nacional

Institute of Statistics, Geography, and Information Systems) IU Irrigation Unit NGO Non-governmental organization PACOMP Programa de Apoyos a la Competitividad por Ramas de Producción

(Competitiveness Support Program by Productive Sector)

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PADUA Programa de Adecuación de Derechos de Uso del Agua y Redimensionamiento (Water Rights Adjustment Program)

PMIR Programa de Modernización Integral del Riego (Program for Integrated Irrigation Modernization)

PROCAMPO Programa de Apoyos Directos al Campo (Program for Direct Assistance in Agriculture)

PRODESCA Sub-programa de Desarrollo de Capacidades en el Medio Rural (Sub-program for Capacity Development in the Rural Areas)

PROMOAGRO Programa de Promoción Comercial y Fomento a las Exportaciones de Productos Agroalimentarios y Pesqueros Mexicanos (Program for Export Promotion of Agricultural and Fishery Products)

PRyM Programa de Rehabilitación y Modernización (Program for Rehabilitation and Modernization)

PSIA Poverty and Social Impact Analysis REPDA Registro Público de Derechos del Agua (Public Water Rights Registry) SAGARPA Secretaría de Agricultura, Ganadería, Desarrollo Rural, Pesca y

Alimentación (Ministry of Agriculture) SEDESOL Secretaría de Desarrollo Social (Ministry of Social Development) SEMARNAT Secretaría de Medio Ambiente y Recursos Naturales (Ministry of

Environment) SRH Secretaria dos Recursos Hídricos (State Water Resources Secretariat) SRL Sociedad de Responsabilidad Limitado (Limited Liability Organization) WUA Water User Association

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EXECUTIVE SUMMARY

B A C K G R OUND Mexico faces serious challenges in the water sector. Despite significant advances in reforming water sector institutions, sustainable water use remains an elusive goal. While water is relatively abundant in the poorer Southern states, nearly 80 percent of the population and approximately 85 percent of GDP is concentrated in the Northern and Central regions, where water is scarce. As a result, over 50 percent of the volume of water consumed from groundwater sources in Mexico is drawn from its 104 overexploited aquifers, located in the semi-arid and arid parts of the country. While demand for water in the industrial and the municipal sectors is experiencing a steady increase, the vast majority of water consumption remains concentrated in the agricultural sector. Though the agricultural sector accounts for only about 3.5 percent of GDP, nearly 80 percent of Mexico’s water supplies are used for agricultural production. As the primary user of water, the agricultural sector is, therefore, critical for tackling Mexico’s pressing water management challenges. Simultaneously, the agricultural sector is sensitive in terms of its links to poverty reduction. It remains an important source of income for a large number of poor farmers and rural laborers. OBJECTIVE Addressing the water challenges of the agricultural sector is, therefore, critical both in social and environmental terms. It is crucial for tackling the problem of groundwater over-exploitation, and it is where its impacts will have the most immediate impact on the incomes of poor people. For this reason, the World Bank and the Government of Mexico have agreed to conduct a poverty and social impact analysis of water resources management in the agricultural sector. This report presents the findings of a qualitative analysis and a quantitative analysis of poverty and social impacts of groundwater over-exploitation on rural poverty, which was carried out in preparation of the Mexico Sustainable Development DPL. A PPR OA C H A ND R E SE A R C H PR OC E SS The qualitative study builds on an analytical and consultative process carried out over a period approximately two years. This process began with an initial review of existing data and literature, a range of interviews with government officials and other water experts in Mexico City and the State of Guanajuato, and a national consultation workshop. Based on these preliminary activities, a set of research questions was defined and qualitative fieldwork was conducted in six over-stressed aquifers. The fieldwork focused on two general areas of inquiry:

i) Social and environmental dimensions of sustainability: This dimension focused on the local social context within which policies and programs in the

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water sector are implemented and the social factors that facilitate or obstruct sustainable water use.

ii) Social equity and distributional impacts: This second area of inquiry focused on questions of equity in the context of water resources management. This included the question of participation of small and poor farmers in decentralized, participatory water management organizations as well as the equitable distribution of public expenditures.

Data was collected using semi-structured interviews and focus group discussions with a range of stakeholder groups in the rural water sector. In five fieldwork sites comprising six aquifers, the field work team conducted over 150 interviews with individual water users, government officials, and other experts and held fifteen focus groups with a total of approximately 200 water users from different socio-economic backgrounds. The quantitative analysis of poverty and social impacts was carried out jointly by the Instituto Nacional de Ecología (INE) and the World Bank This partnership collaborated on data refinement and on the analytical process. CONAGUA also contributed to the consultative process. ST R UC T UR E OF T H E R E POR T The findings of the research are presented in seven main sections. Section 1 provides an introduction. In section 2, the report identifies the main causes and impacts of groundwater over-extraction. Section 3 analyzes the quantitative poverty and social impacts of ground water overexploitation on rural poverty. Section 4 provides a qualitative analysis of the poverty and social impacts of groundwater management on rural poverty in Mexico. Section 5 focuses on the institutional challenges of water management and the participation of water users in different types of water management organizations. It identifies obstacles and opportunities for collective action within water management organizations and presents relevant lessons from successful national and international experiences. Section 6 analyzes the distributional implications of public expenditures in the water sector and evaluates their role in changing irrigation practices among diverse water users. Based on the previous chapters, the final section (7) presents the main findings of this integrated poverty and social impacts analysis, the final conclusions and the related policy recommendations. C A USE S A ND SOC I A L I M PA C T S OF G R OUNDW A T E R OV E R -E X PL OI T A T I ON The fieldwork conducted for this poverty and social analysis suggests that some poor farmers in pockets of rural Mexico suffer more immediate impacts from the groundwater over-exploitation. Since they typically lack the necessary capital to adapt to falling water tables, they are more likely to give up their productive activities than wealthier farmers. Consequently, groundwater depletion contributes to the migration from rural areas to urban centers in Mexico and to the US. In other words, water policy in Mexico has some links to Mexico’s socio-economic challenges. Finding a sustainable solution to Mexico’s water resources management challenges, therefore, plays a role in addressing problems of rural poverty in the North and its indirect impacts on migration and urbanization.

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Furthermore, the geographic distribution of public investments in agriculture and water infrastructure is highly skewed to those areas where water availability is lowest. While continued support for water resources management is essential for addressing the social and environmental challenges of groundwater depletion in the North of the country, investments in agricultural development and water infrastructure in the poor South could make a substantial contribution to poverty reduction and sustainable development. While in the North water scarcity poses a serious constraint for continued economic development, the South requires the necessary investments to take full advantage of its abundant water resources. Since the Southern Mexican states1

PUB L I C E X PE NDI T UR E S I N T H E I R R I G A T I ON SE C T OR : I M PA C T S ON E QUI T Y A ND SUST A I NA B I L I T Y In addition to this geographic bias, the findings of this study suggest that public resources in the water sector also favor medium and large producers over smaller farmers. SAGARPA’s and CONAGUA’s programs provide financing based on the fulfillment of technical requirements and matching contributions by the beneficiary, which present important obstacles for poor producers to access these resources. Both evidence from program evaluations and fieldwork confirm that poor farmers only receive a relatively small proportion of program resources. The Tarifa 9 subsidy also strongly favors richer farmers. Of the 105,000 recipients of the subsidy, 68,000 receive an annual subsidy of less than Mx$20,000, while 33 users receive a subsidy of over Mx$500,000, which amounts to a Gini coefficient of 0.91.

do not face a problem of groundwater over-exploitation, they do not constitute the focus of this report. Nevertheless, the abundant hydrological resources in the South of Mexico could form part of the solution to the Mexican water crisis. The econometric analysis conducted for the poverty and social impacts concluded that given the geographical and socioeconomic conditions of Mexican municipalities, the current level of groundwater overexploitation does not significantly impact the municipal rural poverty rate. Despite the fact that some poor families may suffer from over-exploitation as shown in the qualitative analysis; at the macro level it is observed that the effect of aquifer overexploitation on the level of municipal poverty is not significant. In addition, the econometric analysis of poverty and social impacts shows that in the short term the rural poor are not particularly affected by the increasing costs of pumping in the water sector caused by groundwater overexploitation. This might be explained because poor producers do not pump water, they use water wheels (norias) or surface water and as the result, the increase in the cost of pumping does not affect them. As such, changes in regulation of electricity tariffs if targeted at pockets where rural poor are concentrated may help to signal better use but have no impact on rural poverty as a whole. Furthermore as it was traditionally thought that irrigation and subsidies for pumping needed to be sustained for its positive impacts on rural poverty, there are now greater opportunities to focus on long-term social policies in the water sector.

1 The exception to this is Oaxaca, where two aquifers are currently over-exploited.

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Financing is also decoupled from water use, thus failing to provide an incentive to reduce water extraction. In fact, by artificially reducing the cost of groundwater extraction, Tarifa 9 actually represents an added incentive to continue over-exploiting groundwater resources. Programs for the modernization of irrigation infrastructure also fail to promote water conversation. Without any conditions to reduce water extraction and without adequate monitoring, support programs often enable farmers to increase their irrigated area. While this may boost their profitability, it implies an increase in their net groundwater extractions. Finally, many small farmers lack the necessary skills and marketing opportunities to make efficient use of modern irrigation systems. They do not have adequate access to markets or technical know-how to justify conversion to more water efficient crops. In other words, to conserve water, small producers require complementary technical assistance and support for the commercialization of alternative crops. To enable poor farmers to achieve real water savings, an integrated approach to subsidy programs is, therefore, required. Policy options Given that the econometric analysis shows that in the short-term the poor are not particularly impacted by groundwater exploitation, the government has the opportunity to reduce subsidies for water pumping and revise its investment policy in the water sector without affecting the rural poor. However, in the long term, the analysis suggests that social policies to address future, potential negative effects of aquifer overexploitation on the poor need to be taken into account. Along the lines of a reform for groundwater, Mexico should consider proper instruments of social policies to address the challenges of the future, such as the definition and implementation of a strategy of managing the transition of poor farmers out of irrigated agriculture to other rural economic endeavors; and the institutional and capacity building measures to strengthen the participation of the rural poor in local water management mechanisms such as COTAS and basins councils. The qualitative analysis for PSIA shows that the poor miss access, capital and resources to take advantage of pubic investments in irrigation and water infrastructure. The following policy options aim to provide poor farmers with increased access to public support programs, utilize public expenditures more effectively to promote water conservation goals, and provide farmers with support to market alternative crops and make efficient use of irrigation technology. • Ensuring access for poor farmers to government support programs The study shows that many poor producers are unable to access government support programs because they lack the necessary capital to contribute the 50 percent of the investment cost, which is typically required. CONAGUA’s Uso eficiente program has reduced the co-financing requirement to a minimum of 10 percent in municipalities with high and very high levels of marginality. Since introducing the change, no more resources have been invested in municipalities with low and very low levels of marginality. This arrangement could be expanded to other support programs in

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the water sector. Additionally, a percentage of funds could be earmarked for small producers with 5ha or less of land or a similar proxy for income-level. This measure would ensure that a minimum number of beneficiaries would benefit lower income farmers. Another obstacle poor farmers face in accessing government resources is the lack of information about programs and their administrative requirements. To increase awareness of available programs in poor communities, the respective government agencies could further develop outreach to inform producers of existing opportunities. Additionally, the COTAS could receive the mandate and resources for supporting farmers with administrative procedures to apply for government programs. • Linking government support to water conservation while promoting social equity Currently, government programs in the irrigation sector support more efficient use of water resources. However, as mentioned above, this does not imply that farmers will utilize these efficiency gains to achieve real water savings. On the contrary, many farmers indicate that they intend to translate efficiency gains into increased production by expanding the irrigated area. At the same time, however, especially poorer farmers state that they would consider reducing total water extraction in return for resources to modernize their irrigation technology. Without their own resources to invest and with rising extraction costs, many poorer farmers indicate their willingness to accept such conditional support. In exchange for government resources, CONAGUA and SAGARPA’s irrigation programs could introduce requirements to reduce water extraction along with the total concession volume, to install a meter and to allow monitoring by CONAGUA. Based on the experience with the Water Rights Adjustment Program (PADUA), SAGARPA and CONAGUA could jointly develop an approach for integrating the adjustment of water rights with the existing subsidy programs in the irrigation sector. This would not only link government funding to water savings but it might lead to a stronger focus on poorer farmers, who appear to be more willing to accept restrictions on the expansion of the irrigated area • Provide complementary technical assistance and support for commercialization of

alternative crops with a focus on small farmers The need for a more integrated approach does not end with linking investments in irrigation technology with the administration of water rights. The lack of adequate technical assistance and market access for alternative crops are additional obstacles for achieving sustainable water management. Particularly poor farmers may not have the technical skills to maintain profitability, while achieving real reductions in their water use. Moreover, crop conversion is unviable without access to markets for the new products. It is, therefore, essential that investments in irrigation upgrades go hand in hand with technical assistance and marketing support. While it may not be feasible for the government to directly provide technical assistance, it could develop a system for certifying private providers of technical

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assistance. A component of the government’s support for irrigation upgrades could then be used to hire a certified provider under a government contract with a set of performance indicators. Producer organizations, in particular of those crops considered viable alternatives, might be considered one such vehicle for delivering certified technical assistance. • Supporting a transition out of agriculture As mentioned above, this study suggests that some poorer farmers have started abandoning their fields and have migrated to the US and to urban centers in Mexico. In anticipation of this continued process, it will be important to provide poor farmers with support for making a voluntary transition out of agriculture. This would both help mitigate the poverty and social impacts of reduced water availability and help address the problem of groundwater overexploitation. In water stressed areas, a program like PROCAMPO, which currently encourages production, could be converted into a program offering support for a transition to non-agricultural activities. • Reforming the Tarifa 9 subsidy to promote water conservation Today farmers pay the subsidized Tarifa 9 electricity rate for pumping groundwater, creating an incentive to extract more water than is environmentally and economically viable. While eliminating the subsidy is not politically feasible, an alternative approach might offer farmers the voluntary option of receiving several years of the Tarifa 9 subsidy upfront, either as a cash payment or as an investment subsidy. The total amount could be calculated using a formula based on the concession volume and well depth. This could then either be paid out directly or be linked to investments in irrigation upgrades. It could also serve as the counterpart funding for other government programs. This voluntary approach would allow the GoM to experiment with alternative disbursement options to test its attractiveness to farmers. In the medium-term, the experience could help develop a viable option for decoupling the subsidy. • Coordination across agencies and functional units To make the program adjustments for achieving sustainable water resources management, increased coordination and dialogue across functional units and government agencies, including CONAGUA, SAGARPA, and the federal electricity commission, is inevitable. In particular, CONAGUA’s and SAGARPA’s programs in the irrigation sector require a shared set of objectives and principles to effectively address Mexico’s water crisis. W A T E R SE C T OR I NST I T UT I ONS I N M E X I C O The GoM has put in place a set of institutions that are well positioned to fulfill the role of engaging users in water management decisions and garnering the needed cooperation from water users to manage the difficult trade offs facing the country’s Northern and Central areas. The next step is the effective engagement of users in these organizations to develop socially sustainable approaches to water resources management. Lessons learned from international experiences show that continued government support to this process of decentralization is crucial for achieving successes in the establishment of socially and environmentally sustainable water management models.

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This finding is confirmed by the experience of irrigation districts in Mexico, where the majority of public investments in water infrastructure are concentrated. Strong government support has facilitatd a successful decentralization process, while increasing financial self-sufficiency. This type of support and commitment is still lacking, however, in regard to Mexico’s approximately 40,000 irrigation units. Low levels of organization among irrigation units make it difficult for members to access government resources and constrain the government’s ability to carry out its administrative and monitoring functions. Simultaneously, a number of success stories seem to indicate that a combination of economic incentives and government assistance can facilitate collective action. In several cases, poor producers were able to organize and adapt their irrigation practices with the support of the government. Another key institution for engaging producers and other stakeholders in groundwater management are the groundwater technical committees (COTAS). Conceived in the 2004 modification of the National Water Law, the COTAS are associations of water users pertaining to the same aquifer. Within Mexico’s decentralized institutional framework for water resources management, the COTAS are intended to function as forums for water users of different sectors to participate in the bottom-up process for the development of integrated water management plans and in the oversight and management of aquifer resources. However, to date, where COTAS exist their work remains incipient and user participation is still relatively limited. Moreover, in the agricultural sector, existing participation is heavily biased towards medium and large-scale producers. To enable the COTAS to fulfill its mandate of engaging water users in the decision-making process, it is, therefore, essential not only to continue to support their development but to make them more representative of poor producers. Policy options The following policy proposals offer options for making water sector institutions, most importantly the COTAS, more effective at engaging water users in solving the problem of groundwater over-exploitation and for making this participation more inclusive of poorer stakeholders. • Strengthening the role of the river basin councils and COTAS in decision-making The National Water Law calls for the development of integrated water resources management plans in the river basins and aquifers that face water resources problems. To promote the engagement of stakeholders in these water management institutions, their role requires further strengthening. The proposed integrated water management plans need to become the real basis for planning investments and coordinating the activities of the relevant government agencies (most importantly CONAGUA and SAGARPA), and issues of immediate relevance to water users have to be included in discussions. Potential solutions, such as reforms to government support programs to link them with water savings and water rights adjustments, will not be feasible without support from water users. Moreover, they require local approaches that can greatly benefit from the inputs of local producers. Engaging the existing institutions

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in the development of such approaches will both raise their profile and help build the consensus for strategic water management decisions. • Building capacity, accountability and awareness among water users Another problem confronting the COTAS and river basin councils is the lack of awareness and capacity among water users. In the agricultural sector, water users are rarely aware of the institutions and their mandates. Moreover, those producers that participate often lack the capacity to fulfill their duties as representatives. To promote more active engagement by water users, an awareness raising campaign about the role of these institutions would be useful. Such campaigns could also engage user representatives (i.e. delegates to the COTAS or the river basin councils) to help develop their capacity and accountability towards their constituencies. • Promoting participation with equity In addition to being relatively weak, participation is also highly skewed towards wealthier producers. Elections for both the COTAS and the river basin councils are not sufficiently advertised in poor communities. An awareness raising campaign should, therefore, particularly target poor producers and elections should be explicitly advertised via structures, such as ejidos, community radio and other local media, which are more likely to reach poor producers. • Supporting the organization of irrigation units (IUs) To effectively tackle the challenge of groundwater over-exploitation, additional resources will be required to support irrigation units. A major obstacle for channeling more resources to irrigation units, however, is their lack of formal organization. In contrast to irrigation districts, whose members are organized in formal water user associations, irrigation units typically operate on the basis of informal arrangements without legal identity. A first step towards increasing investments in irrigation units, therefore, implies promoting increased formal organization of irrigation units. This would allow members of IUs to jointly apply for government resources, to engage more effectively in participatory water management institutions like the COTAS, and it would facilitate government monitoring functions. While the promotion of water user associations is a long-term challenge, it is an essential ingredient to effective water resources management, and it will require consistent government commitment and support to be successful. • Strengthening the COTAS by diversifying its functions In particular the COTAS, have the potential to engage water users more directly in developing local solutions to groundwater over-exploitation. However, to promote this type of engagement by producers, the COTAS needs to offer direct incentives for them to participate. To provide these incentives, the COTAS could provide a number of services to producers. With consistent support by the government, the COTAS could develop the following functions:

i. Provision of technical information on irrigation methods

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ii. Support farmers with regularization of wells and applications for government support

iii. Supporting the organization of irrigation units in legal water user organizations

iv. Oversee crop conversion fund

To enable the COTAS to develop the functions outlined above, the organizations will require a core annual operating budget to maintain basic functions, such as the organization of regular meetings with COTAS members and engaging in planning functions. In the long term, it may be feasible to generate revenue from water users. However, in the medium term financial support from the government will be crucial for strengthening the COTAS’ role. • Support for COTAS in line with local capacity constraints as well as equity concerns It is important to continue strengthening the COTAS in areas where they have already begun to play a role in local water resources management, as these experiences are essential for providing lessons and examples for their further development throughout Mexico. At the same time, poorer areas experiencing water stress will require particular attention to develop the COTAS and its role in local decision-making. While a blanket approach may not be feasible, a few pilot projects for establishing COTAS in more marginalized areas would be an important step towards a more equitable approach to sustainable water resources management and would provide valuable lessons for the development of the required institutional framework in lower capacity areas.

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1. INTRODUCTION

Since the preparation of its National Development Plan 2001 – 2006, the Government of Mexico has engaged in a systematic process of integrating environmental concerns into its strategic policy framework. Based on the Environment and Natural Resources Program 2001 – 2006 (ENRP) prepared by the Ministry of Environment and Natural Resources (SEMARNAT), the Government of Mexico (GoM) has developed policies focused on mainstreaming the sustainability principle across ministries and institutions. Through a Programmatic Environmental Development Policy Loan (ENVDPL), the World Bank has supported this effort to mainstream environmental concerns in the development agenda of key sectors (water, forestry, tourism and energy) and to improve the efficiency and effectiveness of local environmental management processes throughout the country. In the first operation, the creation of favorable institutional conditions for the implementation of reforms featured as an important objective of the program. The second operation (ENVDPL II) supported the development of legal and regulatory frameworks and the continuation of the GoM’s efforts to consolidate the reform program. The series was followed by a stand alone operation: Mx Sustainable Development DPL), which focused on the implementation and further deepening of reforms. For the preparation of , the Mx Sustainable Development DPL, the World Bank and the GoM have agreed to conduct an analysis of the poverty and social impacts of reforms in key sectors. The objective of this analysis is to evaluate the poverty and social implications of key environmental challenges and to ensure they are considered in the government’s policy response. Due to their strong linkages to issues of poverty, the water and forestry sectors were identified as the primary focus of this effort. An agreement was reached between the Instituto Nacional de Ecologia and the World Bank to collaborate in the implementation of the quantitative analysis. In the water sector, the main focus of the operations has been the challenge of groundwater over-exploitation. To address this challenge, ENVDPL II has supported a number of actions to improve monitoring functions and to strengthen the ongoing process of decentralization in the water sector. As a part of the systematic poverty and social impact analysis of these policies and programs, this report, therefore, examines the social impacts and institutional challenges of water resources management with a particular emphasis on groundwater. The study forms part of a series of World Bank lending and advisory service products with the objective of supporting the Mexican government’s efforts to develop a long-term sustainable water management system. It adds to these activities by considering trade-offs and complementarities of social and environmental aspects of sustainability. This integrated study makes use of the approach for poverty and social impact analysis outlined in the World Bank’s User’s Guide to Poverty and Social Impact Analysis (PSIA). In the context of this approach, poverty and social impact analysis refers to the analysis of the distributional impact of policy reforms on the well-being or welfare of different stakeholder groups, with a particular focus on the poor and vulnerable. This includes impacts channeled through changes, for example, in prices, employment

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opportunities, access to services, and the value of assets or the levels of transfers or taxes. Equally important is the impact of policy on institutional factors, such as access to institutions and decision-making structures among different stakeholders. Finally, it is important to consider the influence of stakeholder groups on the implementation of policy – the political economy of policy reforms. Based on this general approach, this particular study focuses on how current and proposed policies in the water sector affect different types of water users. It considers impacts channeled through changes in the cost and availability of water for agricultural activities as well as distributional impacts of public expenditures related to the irrigation sector. The report also considers how ongoing and proposed institutional changes affect different types of stakeholders and examines how environmental objectives can be made socially sustainable.

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2. THE SITUATION OF GROUND WATER RESOURCES

A. Background

Mexico faces serious challenges in the water sector. It has been widely recognized that the unsustainable use of water in Mexico is a threat for development and that this problem particularly affects poor population. The demographic growth from 25 million people in 1950, to over 100 million today and the spatial concentration of economic activities, most of them in the center and arid northern zones of the country represent a serious challenge for the sustainable use of water. Overexploitation of groundwater has increased steadily over the last decades; it is estimated that by 2006, the aquifers that provided almost 60 percent of the volume of groundwater extraction were overexploited. Despite significant advances in reforming water sector institutions, sustainable water use remains an elusive goal. Graph 2.1 illustrates that in the past 57 years water availability has fallen by 75 percent while Graph 2 below illustrates the increase in the number of wells in Mexico in the same time period. Water quality has also deteriorated steadily, partly as a result of lack of wastewater treatment, with only around 24 percent of wastewater being treated in 2006.

Agriculture, which accounts for only about 4 percent of GDP, is the primary user of water, absorbing nearly 80 percent of Mexico’s water supplies. However, agriculture production remains as the main source of income for a large number of poor farmers and rural laborers. The challenge is to change this pattern causing the minimal social disruption and contributing as much as possible to poverty reduction.

Figure 2.1: Variation of the natural average per capita availability of water 1950-2007 (million m3/per capita)

Figure 2.2:Number of Wells in Mexico

Figure 1

18 035

13 319

9 645

6 9585 725

4 771 4 427 4 416 4312

02 0004 0006 0008 000

10 00012 00014 00016 00018 00020 000

1950 1960 1970 1980 1990 2000 2005 2006 2007

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It is crucial to tackle the problem of groundwater over-exploitation, and where its impacts will have the most immediate impact on the incomes of poor people. Figure 2.3 shows the level of water extraction and poverty levels. Even though the graph illustrates that for the country as a whole the higher fraction of rural households below the poverty line and the higher levels of water extraction do not overlap there are still pockets within the country where this not the case. The integrated report will further explain this outcome. Figure 2.3: Level of Water Extraction Versus Poverty Levels

B. Causes of groundwater over exploitation2

Of Mexico’s 653 aquifers 101 are considered to be over-exploited, meaning that their net annual extraction exceeds their natural recharge. As a result, water tables in these aquifers have been dropping at a rate of one to five meters per year, placing increasing constraints on economic activity. The number of overexploited aquifers has increased rapidly in the past 30 years (See Figure 2.4) As a result water tables in these aquifers have been dropping at a rate of one to five meters per year, placing increasing constraints on economic activity.

2 Unless otherwise indicated, the data in this section have been drawn from official statistics compiled by government agencies, including CONAGUA, SAGARPA, CONAPO, and INEGI. It also draws on Mexico Water Public Expenditure Review (World Bank 2006a) and “The Role of Water Policy in Mexico: Sustainability, Equity, and Economic Growth,” Sustainable Development Working Paper No. 27 (World Bank 2006b).

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Figure 2.4: Overexploited Aquifers 1975 – 2006

Concentration of economic growth in the North and center of the country The causes of groundwater over-extraction are a combination of natural, economic and institutional factors. Most importantly, economic and population growth has been concentrated precisely in those areas where water availability is the lowest. Conversely, the water rich areas, which are located in the South of the country, have lagged behind, in terms of economic development. While 68 percent of water availability is concentrated in the Southern Mexico, it constitutes less than 13 percent of national GDP and approximately 23 percent of the population (See graph 2.5). Figure 2.5: Spatial Distribution of Aquifers by Level of Exploitation Agricultural production, which consumes 77 percent of Mexico’s water resources, is also concentrated in the Northern and Central states. Despite their more urbanized population, they account for more than 87 percent of the total volume of production and more than 90 percent of irrigated agriculture. Meanwhile, over 60 percent of household heads working in Mexico’s primary sector live in Southern states, where the average water availability per capita is more than seven times that of the North and Center and more than twice the

Sustainable Overexploited

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national average. Despite insufficient water availability, Northern productivity rates are significantly higher than in the South. While productivity rates range from 2.25 to 8.6 tons per hectare in the North and Center, the South has an average of approximately 1.79 tons per hectare. Distorted economic incentives and lack of public investment in the South Part of the reason for the imbalance between water availability and agricultural production is related to distorted economic incentives. Firstly, the costs of groundwater water use in the agricultural sector do not reflect its real economic or environmental cost. While municipal and industrial water users pay fees of Mx$0.29 to Mx$14.67 per cubic meter, agricultural water users are exempt from paying any water fees.3

Additionally, the subsidized electricity rate that is applied to electricity used for pumping water for irrigation purposes (known as Tarifa 9) covers only about 35 percent of its cost of production. By artificially lowering the cost of irrigation, this subsidy of approximately Mx$ 7,300 million per year greatly increases the profitability of irrigated agriculture, thus creating an incentive for additional groundwater extraction.

Figure 2.6: GDP and population vs. water availability Subsidizing unsustainable agricultural activities in the North

The concentration of agricultural production in the North and Center has also been supported through government investments. As figures 2.7 and 2.8 show, both in the water sector as well as the agricultural sector, public investments have favored the richer, water scarce regions. Rather than focusing on supporting agricultural activities in the water-rich South, the majority of government programs focus on sustaining agricultural livelihoods in areas where these activities are unsustainable from a long-term

3 In theory the exception to this is for farmers who have surpassed their concession volumes, in which case a fee can be charged. In practice, this rarely occurs. Taking into account the cases where fees are applied, the average water use rate in the agricultural sector is Mx$0.1 per cubic meter.

68%

77% 86% 32 %

23% 14%

Runoff Population GDP

69%

77% 87% 32 %

23% 13%

Runoff Population GDP

Southern Mexico

• 31 % of runoff • 77% of population • 8

7 % of G.D.P. • 92% of irrigation area • 75% of industrial activity

Northern and Central Mexico

Source: CONAGUA (2008) Statistics on Water in Mexico – 2008 Edition.

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environmental perspective. Mexico’s largest agricultural subsidy program, PROCAMPO, provides direct subsidies to farmers based on the amount of land-cultivated, regardless of its impact on water extraction. Alianza para el Campo focuses on increasing productivity, but only few programs promote conversion to less water-intensive crops or other measures focused explicitly on reducing water use. In other words, government subsidies help maintain agricultural activities that are unsustainable both from an economic and an environmental perspective. Figure 2.7Geographic distribution of public spending for agriculture per capita of rural population, 2002

Source: World Bank (2006c). Mexico Assessment of Policy Interventions in the Water Sector.

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Figure 2.8: Geographic distribution of CONAGUA spending in water infrastructure per capita of population, 2004

Source: World Bank (2004) Mexico Public Expenditure Review. Even programs that help farmers modernize their irrigation systems may help promote environmentally unsustainable agricultural activities. While more efficient irrigation systems reduce the gross extraction of groundwater (total amount of water pumped from well) and therefore the cost of production, they may actually exacerbate net extraction levels (gross extraction minus return flows to aquifer). In many cases, farmers use water savings to increase their irrigated area rather than reducing extraction levels. Even if farmers maintain the same irrigated area and reduce their gross extraction levels, this may not necessarily lead to “real” water savings. It may, in fact, increase their net extraction from the aquifer. System losses that previously flowed back into the aquifer are retained by a more efficient irrigation system and typically help increase agricultural output. Simultaneously, these efficiency gains may increase net extraction from the aquifer (see Box 2.1 for more details).

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Water-intensive forage crops Another factor contributing to the over-exploitation of groundwater is that many farmers grow water-intensive forage crops, where water resources are scarce. Since these forage crops have very low rates of water productivity, it is virtually impossible to produce these crops profitably, when taking into consideration the real value of water, including its environmental costs. With irrigation costs kept artificially low, the production of these crops is kept economically viable at the expense of environmental sustainability and the effective use of public resources Lack of monitoring and control Most wells are not monitored by the government, making it impossible to determine how much water individual irrigators are using. As a result, farmers who use more water than their concession allows face no penalties or even a credible threat of sanction. Recently a number of measuring devices have been installed, but water use is still not adequately measured. The number of users visited in 2004 was only about 1 percent of those registered in the REPDA. While recent changes to the national water law impose stricter sanctions and higher fines, they remain unenforceable as long as regular monitoring is not implemented. Too many concessions An additional factor further complicating efforts to limit groundwater use to sustainable levels is the existence of water concessions in excess of water availability. Historically the national government granted water users a variety of often irregular or provisional extraction authorizations. When the national water law was updated in 1992, only 2000 formal entitlements existed. However, there were a multitude of irregular permits that had to be regularized and recorded in the Public Water Rights Registry (REPDA). Due to insufficient institutional and human resources, however, it was not possible to verify the authenticity of permits or confirm legitimate water usage. As a result, today far too many farmers have a legal right to much more water than can be sustainably utilized. Political and institutional factors Mexico faces a classic “tragedy of the commons” dynamic in the rural water sector. Mexican farmers confront a collective action dilemma in which it is rational for each

Box 2.1:Are the water savings real? Investments in improving irrigation efficiency by lining canals, installing drip or sprinkler irrigation, harvesting water, and applying on-farm water management practices are important when they prevent salinization and water logging or improve overall water management. But many people question whether these practices promote real water savings, in which water can be transferred to other users without affecting production levels. Practices that reduce water extractions typically also reduce drainage outflows. Other farmers downstream may be using these drainage flows or they may be flowing back to recharge the aquifer or support important ecosystems. Whether reducing water extractions results in real water savings, therefore, depends on what happens to drainage flows. Reducing water extraction and drainage flows works well in situations where drainage flows damage, pollute or flow to saline sink. In other cases a basin perspective is needed to determine whether the water savings are real. Source: This box is a slightly modified version of a box with the same title in “Chapter 7: Pathways for increasing agricultural water productivity” in Water for Food, Water for Life: A Comprehensive Assessment of Water Management in Agriculture. 2007. London: Earthscan, p. 295.

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individual to maximize use of a scarce resource, even though continued extraction is unsustainable and will eventually result in poor quality, lower yields or exhausted supplies, especially for those who depend on aquifers. International experience has shown that solving this collective action problem requires a combination of top-down and bottom-up measures. It requires a strong legal and policy framework and cooperation across sectors and states. Policies and programs across the relevant government agencies need to create consistent incentives to promote sustainable practices. Additionally, a degree of government control is required to ensure adequate monitoring functions. At the same time, the participation of water users and other local stakeholders in a decentralized water management framework is essential. Without the cooperation of water users, government initiatives to monitor and control water resources are not sustainable. Especially groundwater resources do not lend themselves to centralized oversight, as water users have individualized access to well water. The management of these resources, therefore, requires organized participation of water users.

C. Policy Implications

The GoM is dedicated to achieving sustainable water resources management, and it has already made important legal and regulatory changes to do so. The national water commission (CONAGUA) has established a formal registry of water concession-holders (REPDA), which it updates, to keep track of irrigation infrastructure and volumes extracted. The government has also created a law mandating the installation of water meters on wells, as well as administrative and financial sanctions for non-compliance. In addition, the GoM has made several institutional innovations to achieve sustainable water resource usage. First, it has deconcentrated CONAGUA to the state-level, to make the national agency more responsive to local needs and realities. Second, it decentralized large irrigation districts, giving them considerable autonomy as well as financial responsibilities. Finally, the government created water basin councils to pursue integrated watershed management at the river basin level. These basin councils bring together government and water users in a participatory forum to allow consensus-building among all the relevant stakeholders. It has also promoted the development of so-called groundwater technical committees (COTAS) that deal specifically with local aquifer issues. Despite these significant advances, however, sustainable water use remains an elusive goal. While demand for water in the industrial and the municipal sectors is experiencing a steady increase, the vast majority of water consumption remains concentrated in the agricultural sector. As the primary user of water, the agricultural sector is critical for tackling Mexico’s pressing water management challenges. Simultaneously, the agricultural sector is sensitive in terms of its links to poverty reduction. It remains an important source of income for a large number of poor farmers and rural laborers. Though its share of GDP has declined in recent years, in 2004 it still accounted for 20 percent of the Mexican labor force. Moreover, in 2000, over 70 percent of Mexico’s rural population was considered poor compared to almost 57 percent overall.4

4 Comité Técnico para la Medición de la Pobreza. 2002. “Medición de la Pobreza: Variantes Metodológicas y Estimación Preliminar. México.” D.F.: Secretaría de Desarrollo Social.

Although poverty rates are generally higher in the water rich South, about 28

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percent of the poor population or more than 10 million poor people live in the water scarce North and Center of the country5

D. Collapse Risk: International Experience

. As groundwater levels continue to decline, the resulting increases in groundwater extraction costs, decreasing yields and ultimately the total depletion of groundwater resources will have considerable impacts on economic activity in the agricultural sector with severe consequences for poor farmers and rural laborers.

Collapsing aquifers pose serious risks and consequences for a population. International experiences show that the interactions of multiple forms of stress – economic, social, political and physical – with environmental changes can amplify and attenuate vulnerability abruptly or gradually. In Mexico, there is potential in the long-term for enormous social impacts of ground-water exploitation. Understandably, these effects are not evenly distributed across income groups and people. Poor people will be affected sooner, more and deeper than richer people. Poor people are disproportionably dependent on natural resources and they lack assets, saving and capabilities to withstand environmental shocks. Any downturn in their income and livelihood might lead to irreversible damages such as withholding food for children at critical stages of their development, withdrawing children from school, and abstaining from accessing necessary health care. In addition, it is important to understand gender specific effects of the groundwater exploitation. There are clearly differentiated social impacts between men and women: Women may be more affected by water shortages; girls may be pulled out of school first to fetch water, when water needs to be found further away from the home, etc. Box 2.2 describes some of the major consequences and risks associated serious water groundwater issues in Maharashtra, India. Box 2.2The Case of Groundwater Exploitation in Maharashtra, India Although Maharashtra is one of India’s most developed states, a large part of its population suffers severe and chronic water scarcity due to limited irrigation potential, poor surface irrigation and groundwater exploitation. Around 60 percent of its population still lives in rural areas and agriculture remains the main source of livelihood in the state with 80 percent of the population dependent on agriculture, either as cultivators (42 percent) or laborers (38 percent). Shortage of water directly impacts livelihoods. There can be no agriculture without water, and adequate access to this resource has been crippled by various factors in Maharashtra. As in the rest of the country, groundwater is the main source of water for irrigation in Maharashtra and accounts for 60% of the net irrigated water in India. Groundwater extraction of surface water from tanks is encouraged by subsidies for electricity used to run irrigation pump sets (IPS) primarily benefits rich farmers who can afford IPS. Unchecked by law and enjoying social sanction, groundwater extraction has crossed the dangerous mark in many districts of the state and has caused enormous hardships to the poor. Numerous drinking wells have dried up and the water table has dropped in many of the sugarcane growing villages. Overexploitation has also caused several grave implications such as increased marginality of poor famers, polluted groundwater sources and empty aquifers already threatening the ecosystem. Researchers have stated that if overexploitation of resources 5 The poor living in Mexico City were not included as part of the poor in the North/Center of the country, since it represents a special case in terms of water management, which is not treated in this report.

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continues to go unchecked, the groundwater-based agriculture will collapse, the water quality will drop and many villages will be depopulated. Civil society has suggested to the government of Maharashtra that if rural poverty in Maharashtra is to be addressed, equitable and rational use of water and appropriate practices have to become the main item on the agenda of state policy. Source: Poorest Areas Civil Society (PACS) Program

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3. QUANTITATIVE ANALYSIS OF POVERTY AND SOCIAL IMPACTS

The goal of the quantitative analysis is to establish whether there is a statistically significant impact on rural poverty in Mexico as a result of aquifer overexploitation. A simple graphical observation shows that aquifer overexploitation is not concentrated where the highest poverty rates are. In Mexico 101 aquifers out of 653 are considered to be in an overexploited condition. These aquifers are confined to 297 municipalities, which correspond to 12.3% of total Mexican municipalities and about 11% of total Mexican territory. The data illustrates that aquifer overexploitation occurs mainly in the central and north areas of Mexico (See Figure 3.1). Instead rural poverty at the municipal level (Figure 3.2) is greater in southern states of Mexico.

Figure 3.1: Municipalities with Overexploited Aquifers

Figure 3.2: Rural Poverty in Mexico

Although 12% of total water extracted annually in Mexico comes from underground, it is estimated that half of Mexican territory depends heavily on groundwater sources. In 806 municipalities in Mexico (33% of the total municipalities), 70% of total available water is extracted from underground sources. These same municipalities account for 55% of Mexican territory. There exists a close relationship between the percentage of groundwater extracted annually and aquifer overexploitation. In municipalities with aquifer overexploitation the percentage of groundwater use reaches an average of 73.6%, this percentage is 49% higher than in municipalities without overexploitation. Nearly 64% of groundwater extracted annually in Mexico is for agricultural use. However, in the Yucatan Peninsula, in the central corridor and in northern Mexico this percentage is higher than elsewhere in the country. Of the 1596 municipalities that provide information on the use of groundwater, 701 municipalities (44%) are intensive users of this resource with groundwater use intended exclusively for farming; of total groundwater extracted annually 70% is for agricultural use. These municipalities account for 30% of Mexican territory. By comparing the extraction of groundwater for agricultural use with aquifer exploitation it is observed that both phenomena follow

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similar geographical patterns. As such, 64.5% of municipalities with overexploited aquifers are located in areas where the extraction of groundwater for agricultural purposes is over 70% (See Figure 3.3 and 3.4.)

Figure 3.3: Percentage of Underground Water use and Overexploitation

Figure 3.4: Percentage of Underground Water Use in Agriculture Aquifer Overexploitation

The estimation strategy uses a control and treatment group classification of municipalities. With cross sectional (municipalities) data the strategy for assessing the impact of overexploitation was developed in two stages: First, a control group (CG) was identified in order to make valid comparisons with municipalities with aquifer overexploitation hereinafter defined as the treated group (TG) which is based on probabilistic models and matching methods. This method allows direct comparisons of rural poverty in Mexico between TG and CG and a more refined comparison through regression models which are controlled by other factors that affect the observable level of poverty. In order to define the control group an indicator was calculated to identify the municipalities that, despite not registering as overexploited according to the data, were most similar to those overexploited municipalities. The indicator was defined as the probability of aquifer overexploitation (PAO) in a given municipality. PAO was estimated by a Probit model controlling for geography factors including latitude, volume of underground water, and volume of surface water; a general of intensity of water use proxy by volume of groundwater extracted annually for agriculture use (agriculture, agribusiness, aquaculture and livestock); and a measure of demographics (people per Square kilometer).

PAO is defined as:

)(),,|1( iiiiii DUGOPPAO πφ=== (1) Where the probability of overexploitation “O=1” in a municipality “i” given geographic “G”, intensity of water use “U” and demographic “D” variables is equal to the Accumulated Density Function of the latent variable index which increases if the probability of overexploitation increases. The analysis relied on geographic and socioeconomic information, and data on water availability and use for municipalities in Mexico. The hydrological information was

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provided by the National Water Commission and the Public Registry of Water of Mexico. The socio-economic (the Mexico census of 2000) and geographic information was provided by the National Institute of Ecology (INE) in Mexico. In both cases the information was available for one period. The geographical distance from aquifers to municipalities and municipalities to major cities was calculated by GIS. PAO’s estimation shows (see Table 1) that it increases due to factors such as latitude, the volume of extracted groundwater, the volume of groundwater for agricultural use and population density, and decreases if the use of surface water increases.

Table 1: PAO Model a. PAO model

Variable dF/dx* Latitude 0.014 *** Ln(Underground Water Extracted Volume) 0.036 ***

Ln(Superficial Water Extracted Volume) -0.016 ***

Ln(Underground Water Volume for Agricultural Use 0.014 **

Ln(Population Density) 0.032 *** Number of obs 1323 Wald chi2(5) 141.2 Prob > chi2 0.000 Pseudo R2 0.194 Hosmer-Lemeshow chi2(8) 6.09 Prob > chi2 0.64 *dF/dx: Marginal Effect

The estimated probability of overexploitation obtained from equation (1) follows a pattern quite similar to that of observed overexploitation. However, the graph shows that there are municipalities with high probability of overexploitation (in red) where this phenomenon is not recorded in the data. A control group for municipalities with overexploited aquifers should give greater weight to municipalities without overexploitation, where the probability of overexploitation is higher than in the municipalities where the probability of overexploitation is lower. A straight comparison of the levels of rural poverty among municipalities with overexploitation and those without overexploitation suggests that rural poverty is higher in municipalities with aquifer exploitation. However, one can not conclude that differences in the rate of rural poverty are the result of aquifer overexploitation. As already mentioned, given that the PAO is significantly lower in municipalities without overexploitation, these municipalities are not a valid comparison group. For that reason, in order to obtain a valid CG it was necessary to assign weights to each municipality without overexploitation to ensure that a distribution of PAO was similar to that of municipalities with overexploitation or TG. Weights were assigned to each municipality without overexploitation based on the estimated PAO into the equation (1) to make municipalities comparable. The graph above shows that compared to overexploited municipalities, smoothing has assigned a greater weight to municipalities without overexploitation but with higher PAO.

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Figure 3.5:Probability of Aquifer Overexploitation and Observed Overexploitation

Figure 3.6: Weights after PSM

Figure 3.7 (left) shows PAO for municipalities with and without overexploitation before the matching. It is observed that PAO is higher in those municipalities where there has been overexploitation. The probability of aquifer overexploitation in the exploited municipalities reaches over 30% on average, a 218% increase in municipalities without overexploitation. After assigning different weights to each municipality that is not overexploited, the differences in the distribution functions of PAO are cancelled (Figure 3.7 right), to obtain a CG in order to make valid comparisons Figure 3.7: Probability of Aquifer Overexploitation Before and After Matching

01

23

45

Kden

sity

Sco

re

0 .2 .4 .6 .8 1Probability of Municipality Overexploitation

Overexplioted Aquifers Non-Overexplioted Aquifers

0.5

11.

52

Kde

nsity

Sco

re

0 .2 .4 .6 .8Probability of Municipality Overexploitation after Kernel Smoothed Weighted

Overexploited AquifersNon-Overexploited "Weighted" Aquifers: Control Group

Weights permit the estimation of a simple weighted average (SWA) model of rural poverty in Mexico for municipalities with overexploitation and the Control Groups. This method shows no statistical evidence that there are significant differences in the rate of poverty among rural municipalities with overexploited aquifers and the control group. The differences in the rural poverty rate attributed to aquifer exploitation are reduced dramatically, after controlling for geographical factors, intensity of land use and demographics. For example, central and southern Mexico are characterized by high rates of rural poverty, however, since they are very similar to those municipalities where there is aquifer exploitation, they receive a low weight in the CG. The result is that, on average,

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there are no significant differences in the rural poverty rate between overexploited municipalities and the CG. Table 2: Rural Poverty Rate Across Municipalities

Rural Poverty Rate

Sample Treated Controls Difference S.E. T-stat

Unweighted 0.299 0.366 -0.068 0.008 -8.45 ATT 0.299 0.301 -0.003 0.010 -0.27

ATT: Average Treatment Effect on the Treated The objective of the quantitative analysis is to establish whether the aquifer overexploitation influences the municipal rural poverty rate. More complete models confirm that given current socio-economic conditions in municipalities of Mexico it is not expected that aquifer overexploitation will have a significant effect on the rural poverty rate, controlling by other determinants studied by literature on poverty in Mexico. These determinants are: human capital; household size and over-crowding; and distance to markets and GDP. To estimate an unbiased magnitude of the effect of overexploitation on poverty it is necessary to take into account these factors along with the indicator of overexploitation. To avoid the statistical problems arising from the possible endogeneity of GDP, it was instrumented. Thus, it permits a more consistent specification. In addition it was possible to confirm the existence of omitted variables, as indicated by the Ramsey test, which controlled another possible source of bias in the parameters. Table 3: Weighted Ordinary Least Squares (WOLS) Model

Under these results policies oriented to aquifers may not have a justification in terms of their contribution to alleviate poverty. For instance investment in irrigation systems and electricity subsidies for pumping in areas of overexploited aquifers. Furthermore these policies create distortions for the rural sector and may contribute to maintain the pace of overexploitation with adverse distributional implications and the risks of severe social impacts associated to the collapse of aquifers.

Variable Dummy: 1=Overexploited -0.001 0.000 -0.001 -0.001 -0.015 -0.014 % Illiterate population over 15 years old 0.004 *** 0.004 *** 0.004 *** 0.004 *** 0.002 * 0.002 ** Distance to principal nearest city 0.000 0.000 0.000 0.000 ** 0.000 ** GDP -0.001 -0.001 -0.001 Households whose size is less than 6 people 0.553 *** 0.579 *** Instrumented GDP 0.005 Constant 0.259 *** 0.255 *** 0.263 *** 0.263 *** 0.180 *** 0.160 *** N 1320 1320 1320 1320 1320 1317 bic -2628 -2622 -2645 -2645 -2925 -2909 r2 0.108 0.109 0.129 0.129 0.299 0.294 Ramsey RESET test 0.000 0.000 0.000 0.000 0.010 0.989 * p<.05; ** p<.01; *** p<.001

reg6 WOLS

Dep Var: Rural poverty Rate reg1 reg2 reg3 reg4 reg5

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4. QUALITATIVE ANALYSIS OF POVERTY AND SOCIAL IMPACTS

The qualitative study combines an analytical and consultative process carried out over a time period of approximately two years. The process has included: • An initial review of existing data and literature (October to November 2005): Based on the extensive literature on water issues in Mexico, an overview of the main poverty and social impacts in the water sector was prepared and key information gaps were identified. • Interviews with government officials and other water experts in Mexico City and the State of Guanajuato (December 2005): To validate and further develop the preliminary overview of poverty and social impacts in the water sector, a series of interviews primarily with government officials and other experts were conducted both at the federal and the state level in Guanajuato. This included approximately 30 national policy makers from CONAGUA, the environmental ministry (SEMARNAT), the agricultural ministry (SAGARPA), the National Ecological Institute (INE), the Mexican Institute of Water Technology (IMTA) as well as independent experts. In Guanajuato interviews were held with local officials from CONAGUA and SAGARPA, the state water agency, the local COTAS, the river basin council and an irrigation district. • National consultation workshop (May 2006): Based on this preliminary information, a national consultation workshop was held at the Colegio de México to develop a design for further empirical research to address the information gaps that were identified. Hosted by the environmental institute LEAD-Mexico, the workshop had 45 participants, including officials from CONAGUA, SEMARNAT and INE, as well as local representatives of state water commissions, irrigation districts and COTAS. It also included academic experts and NGO representatives. The event was facilitated by members of German Agency for Technical Cooperation (GTZ), who applied the Think Tools methodology to guide the discussion and prioritize specific policy issues for the design of the empirical research. • Qualitative fieldwork in six over-stressed aquifers (July to October 2006): Based on a set of research questions identified in the national consultation workshop and further developed by the fieldwork team, qualitative research was carried out in six aquifer regions in five different parts of the country (see table 4).

A. Fieldwork methodology

Research focus As noted above, the qualitative fieldwork focused on a set of research questions developed in the national consultation workshop and further refined by the fieldwork team, consisting of one Bank staff member, an international consultant and three local consultants. The objective of the fieldwork was to analyze different local water management models to extract lessons for the implementation of the ongoing decentralization in Mexico’s water sector, for adapting existing water policies to reflect local conditions and to ensure an equitable distributional impact of government programs. The overarching framework for the fieldwork was structured around two general areas of inquiry:

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ii. Social and environmental dimensions of sustainability: This first area of

inquiry focused on the local social context within which policies and programs in the water sector are implemented and the social factors that facilitate or obstruct sustainable water use. In particular, this refers to the opportunities and constraints for cooperation among water users to achieve sustainable groundwater management as well as individual incentives for water conservation.

Both these dimensions are critical for the sustainability of Mexico’s water sector. Since all water users extract water from a common aquifer, only a coordinated effort involving all local stakeholders can successfully achieve the stabilization of the aquifer. Unless stakeholders are confident that other water users are contributing to the needed reductions in water consumption, it is rational for individual users to maintain their extraction levels. Additionally, to achieve individual reductions in water use, economic incentives not only have to reflect the real economic and environmental cost of water but they need to be politically feasible and enforceable on the ground. Water users require access to the necessary resources, markets and technical capacity to respond to economic incentives, and there needs to be a willingness to allow monitoring of individual extraction levels.

To address these different aspects of sustainable water resources management, the fieldwork explored the perceptions of water users in the agricultural sector vis-à-vis water conservation goals and cooperation among water users. It examined stakeholders’ needs to successfully adapt to lower availability or higher cost of water resources as well as their awareness and willingness to participate in collective action.

iii.Social equity and distributional impacts: This second dimension focused on questions of equity in the context of water resources management. It examined how inclusive current models of water resources management are. This included the question of participation of small and poor farmers in decentralized, participatory water management organizations as well as the distribution of public expenditures.

While greater participation and cooperation among water users is crucial to the sustainability, this part of the fieldwork examined how it can also be made equitable. The fieldwork explored obstacles and possible incentives for poor water users to participate in decision-making. It examined how structures of power, authority and access to information and resources shape the ability of poor stakeholders to effectively engage in participatory water management institutions and promote their particular interests.

Additionally, the fieldwork analyzed the ability of poor producers to access public support programs in the water sector. It examined institutional barriers to accessing government programs, including issues like eligibility requirements and technical and financial capacity to take advantage of available government resources.

Research methods

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Structured around these two areas of inquiry, the qualitative fieldwork consisted of semi-structured interviews and focus groups with relevant stakeholder groups in the rural water sector. In five fieldwork sites comprising six aquifers, the fieldwork team conducted over 150 interviews with individual subjects and held fifteen focus groups with a total of approximately 200 water users. Individual interview subjects included water users, local CONAGUA and SAGARPA officials, state water officials, representatives of COTAS and irrigation districts, and other civil society representatives. The water users were characterized by a significant degree of social diversity, in terms of income level, asset distribution and productive activity. They included large and wealthy growers of fruits and vegetables for national and international markets, cattle ranchers, as well as small landholders and ejidatarios, mostly growing basic grains for livestock, small local markets, and self-consumption. Focus groups were held with different water user groups, such as members of irrigation districts and irrigation units, COTAS representatives, female producer groups, groups of young producers, members of an ejido, and members of producer organizations. Following the same set of over-arching questions, focus group discussions were used to stimulate debate on specific water management issues but also enabled participants to raise additional topics for discussion. Participant numbers generally ranged from eight to fifteen, though in several cases larger numbers participated, giving the meetings the character of a broader community meeting. The qualitative information gathered in the five research sites was synthesized in separate fieldwork reports. This report presents the analysis of this information and places it in the national policy context. It then draws general lessons and policy recommendations from the commonalities and differences encountered in the five fieldwork sites. Site selection Five fieldwork sites with significant groundwater over-extraction were chosen for the implementation of the research.6

While all situated in the water-stressed North and Center of Mexico, the five fieldwork sites were also selected to represent different geographic regions and different levels of socio-economic and institutional development existing in those parts of the country. They included two localities in the arid North and three in the semi-arid to temperate Central part of the country. The Northern sites included one in the Northwestern desert state of Sonora, comprising the Rio Sonora and Costa de Hermosillo aquifers, and one in the Northeastern highlands, the Acuífero Principal-Región Lagunera, which spans the states

Each site is in danger of aquifer depletion and is already experiencing agricultural and financial problems resulting from falling water tables. In addition, each demonstrates broad agricultural production profiles that are typical of water-stressed areas throughout the Central and Northern regions of Mexico: high dependence on cattle and dairy farming, making forage production a dominant economic activity, in addition to the cultivation of basic food grains. To a lesser degree, the production of certain types of fruits and vegetables, such as tomatoes, melons, grapes, and others, also play a role in the different areas.

6 A partial exception is in Hidalgo. Due to their close proximity to Mexico City, many users of the Actopan-Santiago de Anaya aquifer have access to untreated waste water (aguas negras) for cultivation of forage crops. The relative availability of water with high organic matter content increases water reliability and provides farmers with an alternative to groundwater.

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of Durango and Coahuila de Zaragoza. In the Central Plateau region, fieldwork was conducted in the Valle de Celaya aquifer in the state of Guanajuato, the Actopan-Santiago de Anaya aquifer in Hidalgo and the Acuífero Interestatal Ojocaliente-Aguascalientes-Encarnación, which spans the states of Jalisco, Zacatecas, and Aguascalientes. Table 4: Characteristics of States included in fieldwork

State Aquifer visited Social Marginalization Index Ranking 2005*

State Water Commission

Main crops (cultivated area)

Hidalgo Actopan-Santiago de Anaya 5 None Corn (grain), Barley, Alfalfa

Guanajuato Valle de Celaya 14 CEA Guanajuato

Corn (grain), Sorghum

Zacatecas Ojocaliente-Aguascalientes-Encarnación

13 CEAPA Beans, Corn (grain), Oats

Jalisco Ojocaliente-Aguascalientes-Encarnacion

27 CEA Jalisco Corn (forage, grain)

Aguascalientes Ojocaliente-Aguascalientes-Encarnación

28 INAGUA Corn (forage, grain)

Durango Acuífero Principal - Región Lagunera

15 None Beans, Corn (grain), Oats

Coahuila de Zaragoza

Acuífero Principal - Región Lagunera

29 CEAS Corn (forage, grain), Sorghum

Sonora Río Sonora & Costa de Hermosillo

26 CEAS Wheat, Alfalfa

* This refers to the ranking of Mexico’s 31 states based on the 2005 Index of Social Marginalization (Marginación) calculated by Mexico’s National Population Council (CONAPO). The more marginalized the state the higher the ranking (Rank 1=most marginalized; Rank 31=least marginalized). In terms of socio-economic development, the fieldwork sites represent a range of profiles. In the National Council for Population’s (CONAPO) compilation of marginalization (marginación) indexes, the states visited rank from 5th (Hidalgo) to 29th (Coahuila de Zaragoza) out of 31 states (where rank number 1 equals the highest degree of marginalization). Of the five fieldwork sites, the Actopan-Santiago de Anaya aquifer in Hidalgo and the Valle de Celaya aquifer in Guanajuato represent the highest degree of rural poverty, where municipal poverty levels lie between 35 to 57 percent. In terms of marginalization, the Actopan-Santiago de Anaya and the Celaya aquifers include areas with low and medium levels of marginalization. The Ojocaliente-Aguascalientes-Encarnación and the Región Lagunera aquifers both have rural poverty levels in the range of 16 to 46 percent and have levels of marginalization ranging from very low to medium. In Sonora both aquifers have rural poverty levels of 16 to 35 percent and levels of marginalization are generally low or very low. (See figure 4.1 for rural poverty maps of the fieldwork locations).7

In terms of water management, the different locations also represent different types of experiences. While the Valle de Celaya and Ojocaliente-Aguascalientes-Encarnación aquifers have two of the most established groundwater technical committees (COTAS) in the country, in the Actopan-Santiago de Anaya aquifer a COTAS has yet to be established. In Sonora and the Región Lagunera aquifer, groundwater committees exist, their role, however, is very limited. All the areas are characterized by the presence of a

7 This data was drawn from official statistics compiled by INEGI and CONAPO. For additional socio-economic data for each aquifer please see the annex.

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small number of large irrigation districts and many smaller irrigation units. However, only in Sonora do irrigation districts cover groundwater resources. In all the other locations irrigation districts relate exclusively to surface water. Finally, most of the states, in which the aquifers are located, have state water commissions. The exceptions are Hidalgo and Durango. The existence of a state water commission reflects both a state’s budgetary resources and political commitment to influencing water policies with implications for water management. Figure 4.1: Rural poverty maps of fieldwork locations

Aquifers: Río Sonora, Costa de Hermosillo, Acuífero Principal – Región Lagunera, Acuífero Interestatal Ojocaliente-Aguascalientes-Encarnación, Celaya, Actopán-Santiago de Anaya

Source: CONAGUA geographic data; CIMMYT poverty data.

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B. Fieldwork results: Social impacts of groundwater over-exploitation

As mentioned above, the over-extraction of groundwater is causing the gradual depletion of aquifers in the Center and North of the country. In the aquifers studied water levels are falling by an estimated three to five meters per year. In some cases, such as the Costa de Hermosillo and Región Lagunera aquifers, this may also imply aquifer degradation, due to intrusion of polluted or salty water. These environmental impacts imply significant socio-economic consequences. Decreasing water availability and quality are reducing crop yields, and falling water

24

tables force farmers to pump water from increasing depths, significantly raising their cost of extraction. Uniformly, farmers, therefore, report that the cost of water extraction, despite the Tarifa 9 electricity subsidies, was one of their most expensive inputs. In all the fieldwork locations, they stated that continuous increases in extraction costs were jeopardizing the economic viability of their productive activities. In fact, this rise in production costs has already forced a number of farmers to abandon or considerably reduce their productive activities, adding to the causes of migration to urban centers in Mexico as well as to the US. In Aguascalientes, the local CONAGUA office surveyed a sample of 903 wells designated for agricultural use and found that 76 wells had been abandoned, cancelled or were transferred to the urban sector. In at least 26 of these cases, the well had dried up completely (see figure 4.2). Though information was not systematically collected on this issue, in a number of cases the survey data revealed that the owners of the wells had migrated to other regions in Mexico as well as the US. Figure 4.2: A survey of wells no longer in use – Aguascalientes

14 13

26

5

18

0

5

10

15

20

25

30

Abandoned Lack ofEquipment

Dry Cancelled Transfer tourban use

Source: CONAGUA administrative data, Aguascalientes, 2006. Before an aquifer completely dries up, the economic consequences for individual producers depend largely on their access to capital for upgrading irrigation infrastructure and for increasing the depths of their wells. Additionally, they depend on the overall profitability of their production and the relative importance of extraction costs in terms of the total value of production. In cases where rising extraction costs make the existing cropping patterns unprofitable, it depends on the producer’s ability to convert to more water efficient or higher value crops. A Thematic Paper of the Human Development Report 2006: Water for Human Development on Mexico’s water crisis, which included a case study of the unsustainable Costa de Hermosillo aquifer, concluded: “The city [Hermosillo] still grows and without expansion of the supply apparently collapse was averted, but the low water table implies that only the richest farmers, with more powerful pumps, have access to the still heavily subsidized water” (Guevara-Sanginés 2006: 13). The qualitative fieldwork conducted in the five aquifers confirmed the assertion that richer and better capitalized farmers are generally more able to maintain profitability in the face of the challenges of falling water tables. While many of the wealthier farmers interviewed had invested or planned to invest in more efficient irrigation technology as well as new, more profitable crops, many poorer farmers and ejidatarios reported that they lacked the necessary funds. Consequently, a large number of smaller farmers have simply reduced their production and in some cases have abandoned their farms to migrate

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to urban areas or to the US. Local CONAGUA and SAGARPA officials also confirmed that producers with lower levels of income were more likely to abandon or reduce productive activities. Table 5 shows such examples from the different aquifer regions. Table 5: Impacts of Groundwater over-Exploitation on Poor Farmers Aquifer region Case examples Ojocaliente-Aguascalientes-Encarnación

In Aguascalientes, a group of six members of an Irrigation Unit explained that without the necessary irrigation technology, exploiting their groundwater resources was no longer “costeable” (economically viable). Five of six ejidatarios were forced to stop using their common well. (Focus group, Ejido Cienega Grande, Aguascalientes)

In Zacatecas, water users claimed that poorer producers were the first to abandon irrigated agriculture because investment costs were too high. Ejidatarios were particularly affected because it was difficult to raise the money and collectively agree on its use. (Focus group, water users, Luis Moya, Zacatecas)

Sonora In Sonora, officials explained that the poorest water users were dependent on shallow wells, called norias, that have a maximum depth of 25 to 30 meters. These are the first wells to dry up. (Interviews with officials from the Sonora state water commission (CEAS) and CEAS study (Moreno 2006))

Región Lagunera “My children moved to the North [US]…this is the first thing that happened when there was no land and no water to irrigate anymore” (Interview Ejidatario, Ejido Banco Nacional)

“When there was no more water, it was a disaster. We didn’t plant any cotton. My father left, my mother got ill, and my brother and I left school to work as domestic servants.” (Interview Ejidatario, Ejido Banco Nacional)

“The price of a water right was used to pay the guy to take them to the US.” (Interview Ejidatario, Ejido Venecia)

Celaya In Celaya, a number of ejidatarios explained that falling water levels required them to invest in drilling deeper wells, which many cannot afford.

Several ejidatarios mentioned that the well no longer provided even for irrigation to supplement available surface water and many are being forced to reduce the irrigated area.

A number of widows in an ejido explained that, due to increasing input costs, including electricity, they had been unable to pay their share of maintenance costs for the common well and were forced to cede their rights to wealthier ejidatarios. (Ejido Yustis)

Actopan-Santiago de Anaya A group of officials explained that many producers who depend on groundwater no longer live in the area. They have migrated to nearby Mexico City and earn their living there.

Source: Fieldwork interviews. Poorer farmers with access to well water also often tend to have smaller and weaker pumps that make access difficult and expensive. Farmers in several of the fieldwork locations reported that their pumps had broken down when water levels fell. Typically, these farmers did not have the funds to upgrade or repair their pumps, leaving them without access to groundwater. As discussed in the following section, richer farmers are also more likely to have access to state support programs for the upgrading of irrigation technology, further enhancing their ability to adapt to increasing irrigation prices. In Sonora, fieldwork showed that water scarcity affects the poor first because they are the

26

most likely to use norias, relatively shallow wells that are the first to dry up when water tables fall. This does not mean that rich farmers are unaffected by falling water tables. While richer farmers can adapt more easily to changes in extraction costs, they may face income losses when water supply is reduced. Results of a simulation of policy interventions conducted by the World Bank showed that larger farms are forced to reduce their cultivated area and suffer losses in farm profit, when water availability is reduced (World Bank 2006c). This was apparent in the relatively prosperous areas visited in Sonora. For instance, major grape producers near Rio Zanjón are routinely unable to extract the volume of water allowed under their concession. The Costa de Hermosillo Irrigation District located on the Pacific coast in Sonora, fruit and vegetable growers have been severely affected by the intrusion of salt water in their wells. They have had to re-locate upriver because of the encroaching Pacific Ocean.

C. Conclusions

The fieldwork conducted for this poverty and social analysis suggests that poor farmers suffer more immediate impacts from the groundwater over-exploitation. Since they typically lack the necessary capital to adapt to falling water tables, they are more likely to give up their productive activities than wealthier farmers. Consequently, groundwater depletion may be contributing to the migration from rural areas to urban centers in Mexico and to the US. In other words, water policy in Mexico is closely linked to Mexico’s socio-economic challenges and vice versa. Finding a sustainable solution to Mexico’s water resources management challenges plays an important role in addressing problems of rural poverty in the North and its indirect impacts on migration and urbanization. At the same time, providing poor farmers who face economic hardship, due to falling water tables with a transition to non-agricultural employment may not only mitigate the poverty and social impacts of Mexico’s water crisis but also help alleviate pressure on scarce water resources. Finally, the geographic distribution of public investments in agriculture and water infrastructure is highly skewed to those areas where water availability is lowest. While continued support for water resources management is essential for addressing the social and environmental challenges of groundwater depletion in the North of the country, investments in agricultural development and water infrastructure in the poor South could make a substantial contribution to poverty reduction. While in the North water scarcity poses a serious constraint for continued economic development, the South requires the necessary investments to take full advantage of its abundant water resources.

D. Policy implications

The qualitative analysis of the PSIA has showed that the poor miss capital and resources to take advantage of water-related policies. It also shows, with more aggregated data for the whole country, that rural poverty in Mexico is not concentrated where aquifer overexploitation is happening the most. As such, changes in regulation of electricity

27

tariffs if handled targeting pockets where rural poor are concentrated may help to signal better use and have no impact on rural poverty. Along the lines of a reform for groundwater, Mexico needs to consider proper instruments of social policies to serve its rural poor. On a local level, the strategy of managing the transition of poor farmers out of irrigated agriculture to other economic endeavors also needs to be incorporated in the policy framework. Policies should focus on targeting groups’ mostly in agriculture and in other sectors affected by groundwater exploitation. In addition, social policies such as cash-transfers, subsidies etc should target the pockets of rural poor found in the qualitative analysis.

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5. INSTITUTIONAL ISSUES IN WATER MANAGEMENT

A. Water Sector Institutions

The water sector has three sets of institutions: The National Water Commission (CONAGUA), the Ministry of Agriculture (SAGARPA) and the Ministry of Environment and Natural Resources (SEMARNAT), at the federal level; the State Water Commissions (CEA), at the state level, and the municipalities and agencies operators (OO) as well as the Units and Irrigation Districts (URDERALES and RD), at the local level (See Figure 5.1) Figure 5.1: Water Sector Institutions

SEMARNATMinistry of Environment and

Natural Resources

CONAGUA National Water Commission

FEDERAL LEVEL

STATE WATER COMISSIONS

IRRIGATION DISTRICTSMUNICIPAL AGENCIES OPERATORS

STATE LEVEL

LOCAL/MUNICIPAL LEVEL

Water Institutions

SAGARPA Ministry of Agriculture –

Primarily Irrigation Policies

** Other Federal Agencies within the water sectorSEDESOL – The Social Protection Ministry plays an actives role in projects related to poverty FONAES – The National Solidarity Fund (a sub-divisioin of the Ministry of Economy) is involved in greenhouse development

CONAGUA was created in 1989 as an agency of the Ministry of Agriculture and Water Resources (SARH), constituting the only federal authority responsible for water. The law of National Water 1992 developed by CONAGUA replaced the Federal Water Act of 1972 and created a modern regulatory framework for water management. CONAGUA is the only federal authority responsible for managing the water policy, the administration of water rights, planning, development of irrigation and drainage, water supply and sanitation, and handling of emergencies and disasters (prevention and response), particularly with regard to flooding. The environmental protection ministry, SEMARNAT, has oversight over water purity and land management decisions. Although CONAGUA is ostensibly accountable to SEMARNAT, in practice CONAGUA controls the highest share of the sector’s budget and operates with a high degree of autonomy. In the mid-nineties, CONAGUA was reorganized to include 13 regional offices with limits based on watersheds with each region containing one or more basins. This reorganization paved the way for devolution and decentralization of human resources management. CONAGUA also plays a key role in managing financial flows for the entire water sector.

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As such, almost all states have a State Water Commission (CEA) or similar entity. The CEA are autonomous entities, usually formed under the authority of the Secretariat of State for Public Works. Its terms of reference differ from one state to another, but all bear some responsibility and authority in the human resources management. CEA’s responsibilities include irrigation and potable water service and sanitation, technical assistance to municipalities and URDERALES and DR, and the supervision the performance of service providers and operating systems for water distribution. SAGARPA also plays a role in water sector mainly through irrigation. The agency’s objective is to promote food production by conducting a sustainable use of water based on availability and more efficient use and greater productivity per volume of resource use and to increase the profitability of agricultural activities for the benefit of producers.

B. Monitoring and Enforcement Mechanisms

In order for any initiatives linking public sector resources to water savings to be effective, a functioning system for measuring and monitoring water withdrawal by individual water users needs to be in place. However, despite increased installations of water meters in recent times, CONAGUA still lacks the resources and personnel to carry out regular monitoring. Only about 1 percent of users registered in the REPDA were visited in 2004. Moreover, fieldwork in the six aquifers revealed that installed meters are frequently in disrepair. CONAGUA officials are keenly aware of these monitoring problems. They note that staffing limitations are only part of the problem. Box 5.1: Illegal wells

While pozos piratas (illegal wells) are a common phenomenon, responses by government officials suggest that the incidence of unregistered wells varies considerably among aquifers. In Guanajuato, the problem appears to be widespread. According to official statistics from the state Secretariat of Agricultural Development, 250,000 hectares are irrigated with water from wells. However, by using alternative measurements methods, such as on-site visits and aerial photography, the Secretariat has found that in practice the area irrigated with groundwater is around 326,000ha. The agency has concluded that while 13,500 wells are registered for agricultural use, the actual number is closer to 18,000. Government officials in Aguascalientes stated that illegal wells are not a significant problem in the state. The Federal Electricity Commission (Comisión Federal de Electricidad – CFE) helps prevent the use of illegal wells, as it will only provide connections to wells with legal concession titles. In Jalisco, on the other hand, water users complained that well-connected producers could obtain new concessions, despite a general prohibition (veda) to drill new wells. They indicated that lack of political will, distance from the capital, as well as instances of corruption among water officials contributed to this lack of enforcement. Similarly, officials in the Rio Sonora aquifer reported that illegal wells were widespread. Yet just a short distance away, producers of the smaller Costa de Hermosillo Irrigation District boasted that they had the highest levels of registration compliance in the state, an assertion confirmed by local CONAGUA officials. These differences between the fieldwork sites seem to indicate that the following factors contribute to the prevalence of illegal wells:

Size and distance from authority

: Large areas are more difficult to monitor, and local CONAGUA oversight tends to be concentrated in areas near the state capital.

Organization

: While formality brings major resource benefits it also increases government oversight. CONAGUA assigns officials to monitor irrigation districts, and has influence over farmers via routine resource allocation decisions. Outside of irrigation districts, users are relatively free of CONAGUA monitoring.

State government reputation

: Perceptions of government corruption undermine producers’ willingness to cooperate with authorities.

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In addition to regular monitoring, to achieve water users’ compliance with their concession amount, a credible enforcement mechanism is required. However, fieldwork revealed that many water users and experts perceive CONAGUA’s sanctioning system as ineffective. Extremely high fines for violating concession limits – typically several thousand US dollars - are criticized as unfair and unrealistic and are, therefore, not seen as a credible threat to water users. The lack of an effective monitoring and enforcement system means that concession volumes have little relevance for farmers’ water extraction. Not the concession volume but the well’s total capacity typically determines the volumes of extraction. In many cases, farmers are not even familiar with their official concession volume. Instead when discussing their access to groundwater resources, they typically refer to the width of their well’s water jet, which is measured in inches (pulgadas). Along with the depth of the well, for most producers this is also a key indicator for changes in water availability. Finally, in some areas, communities resent government efforts to limit water withdrawal, particularly when the land and the well have been the property of a family or ejido for many generations. The prevalence of illegal wells (see box 5.1) as well as market practices, particularly related to the renting of water, clearly reflect this lack of oversight. As discussed in box 5.2, while sales of water concessions are relatively rare, rental markets are commonplace and are rarely determined on the basis of volumetric pricing. Rather well owners typically permit neighbors to extract water for a given time period against very low levels of monetary compensation. The exceptions to this rule are irrigation districts, which typically manage surface water and where oversight is more advanced. Another form of transaction are partial transfers of water rights. Government officials and producers both agree that partial transfers - where one well owner transfers a part of the concession volume to another water user - are rarely followed by the required reductions in water extraction. In other words, the seller rarely reduces extraction to comply with the adjusted concession volume. Since the buyer is typically permitted to drill a new well to access the new water right, it often causes or exacerbates over-extraction of the concession volume. Another policy that was viewed as counter-productive by water users was CONAGUA’s practice of reducing concession volumes when a quota is under-used for a period of time. Users and local officials alike viewed it as a perverse incentive that discourages conservation and compliance with metering. If for economic or hydrological reasons a user is unable to extract the volume permitted under concession, he may actually lose part or all of the concession. For these reasons, the CONAGUA has adopted an approach in which users themselves take primary responsibility for meter installation and monitoring. It has initiated the development of the groundwater technical committees (COTAS) to support precisely these functions. However, as discussed below, the COTAS have evolved slowly and are not yet ready to assume CONAGUA’s responsibilities. Box 5.2: Water markets

Although Mexico’s water law allows the transfer of water concessions, the complete transfer of a concession is relatively rare and normally implies that the user plans to scale back or abandon

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agricultural production. This decision may relate to the fact that agricultural production is no longer profitable, oftentimes due to high extraction costs, or it may be due to a good offer, such as when a city requires the concession for urban use. In some cases, users may also transfer only part of a concession, while retaining their well with a lower concession volume. In the context of weak or non-existent monitoring, numerous respondents stated that partial concession transfers typically cause or exacerbate over-extraction. While the buyer may drill a new well, the seller often maintains existing levels of extraction. A more common occurrence than formal transfers, however, is the practice of renting water. Terms vary widely, with farmers renting water by the season, month or even hour. Only rarely is the amount determined by volumetric measurement. Like the sale of water rights, the rental market is completely unregulated and transactions are determined on a case-by-base basis between two parties, almost always between neighbors. Interviews also indicated that these arrangements are far from being a business. Sellers do not make serious attempts to maximize profitability. Rather, the water market is a common mechanism of adjustment to planting decisions. In any given season, many farmers decide to delay or forego planting, because of lack of capital or manpower, immigration, or non-agricultural opportunities. For those with enough land and capital to expand cultivation, renting water from temporary non-users is a way to ensure adequate supply of this key input. It is also an option for poorer farmers who do not hold their own concession title to get limited access to groundwater. In some cases, water markets provide a way for farmers to stay within the limits of their concession. Those who expect to exceed their quota – especially members of irrigation districts, whose water extraction is more closely monitored by water authorities – often rent water from other members to stay within their volume. In less regulated environments, it may have the opposite effect. Where, due to a lack of monitoring, the concession volume is not a concern, well owners may allow neighbors to pump water, while continuing to extract themselves without regard for the total volume of extraction.

C. The Challenge of Integrated Water Resources Management Lack of coordination across agencies The lack of sufficient monitoring and enforcement by CONAGUA is further exacerbated by a lack of coordination between different government entities intervening in the water sector. As discussed in the previous section, CONAGUA and SAGARPA both carry out a number of investment programs in the irrigation sector. While CONAGUA, the official authority on water management issues, has an institutional mandate to preserve and rationalize water resources, SAGARPA’s activities are guided by the goal of increasing agricultural production and efficiency. Although these are not necessarily incompatible objectives, without active coordination, the two agencies often work at cross-purposes. Interviews with local officials revealed that programs and policies are not only uncoordinated but oftentimes in competition with each other. On the state level, state water and agricultural commissions, where they exist, are additional actors that intervene in water management. In some cases, these entities collaborate with their national counterparts. In richer states for instance, state agencies may support farmers by providing all or part of the counterpart financing required by most SAGARPA and CONAGUA programs. Nonetheless, overall programming remains largely uncoordinated. Several state-level officials also expressed frustration that they lacked the authority to impose sanctions, while CONAGUA was perceived as lacking the local knowledge to effectively engage with water users and manage water resources. Next to the federal and state water and agricultural agencies, there are a range of other federal agencies that implement additional programs and policies within the water sector.

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SEMARNAT has oversight over the purity of water and decisions related to land management as CONAGUA maintains considerable autonomy. At the same time, the health ministry has authority over health-related aspects of water. Even the social protection ministry, SEDESOL, is an active player in water projects designed to reduce poverty and improve livelihoods in highly marginalized communities. In addition, the National Solidarity Fund for Enterprise Support (FONAES), a sub-division of the Ministry of Economy, also provides a percentage of investment for greenhouse development. Institutional reforms The National Water Law recognizes the need for increased coordination across government agencies as well as the participation of other relevant stakeholders to achieve the goal of sustainable water use. It calls for the development of integrated water resources management plans in basins and aquifers that confront problems of over-exploitation. To make these plans effective vehicles for planning and budgeting in the water sector, the law mandates further decentralization and deconcentration of water resource management. This means developing institutions at the basin and aquifer-level that enable the participation of all relevant government agencies (federal, state and municipal), water users and other stakeholders in the development of the integrated water resources management plans. Important steps have been taken towards developing these institutions. CONAGUA has created specialized administrative agencies to carry out water resource management functions on the river basin level, so-called basin organizations (Organismos de Cuenca). It has also established counterpart organizations, the basin councils (Consejos de Cuenca), in which other relevant government agencies and water users are represented. While the water basin councils’ decisions are non-binding, they are intended to guide the basin organizations work. Additionally, CONAGUA has supported the establishment of groundwater technical committees (COTAS), associations of water users in a specified aquifer region, which function as auxiliary organizations of the basin council. Finally, irrigation districts (IDs), which manage primarily surface water, have operated relatively autonomously since internal management was devolved to them in 1992. Once the necessary institutional framework has been fully established, an important step forward will be to shift substantial planning and implementation functions to these new entities. This will require additional changes in terms of financing investments and how budgets are managed in the water sector. International experiences have shown that a combination of central government support, financial responsibility by water users and financial autonomy, in terms of revenues remaining in the basin, are associated with success in integrated water resources management (Kemper et al 2005).8

A necessary complement to the appropriate institutional arrangements is the appropriate engagement of water users in decision-making. As defined by a study conducted by the Inter-American Development Bank (Van Hofwegen and Jaspers 2000) integrated water resources management implies decision-making processes that consider the needs and

8 One of the most successful cases described in Kemper et al 2005 is the Murray-Darling River Basin in Australia. It is an example where a combination of effective stakeholder involvement and a large degree of financial self-sufficiency were achieved through sustained commitment by the government to integrated water resources management. The government has not only recognized local participation in decision-making but helps fund participatory water management institutions.

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interests of all water users and other interested parties. To achieve this goal, the World Bank’s Water Resources Sector Strategy (World Bank 2004) identifies the scaling up of water user associations as a key priority. Participation by water users in these organizations is vital for reconciling the positions of diverse stakeholders and legitimizing decisions. While the participation of users in water resources management is crucial for its success, it also implies important challenges. There exists an important risk that elite groups will capture the decision-making process and the available government resources (Kemper et. al 2005). An ECLAC report on approaches to integrated water resources management in Latin America states: The river basin councils are participatory organizations, but their creation alone does not ensure that all stakeholders, from large enterprises to small users, will participate under equal conditions. It would be desirable to establish a mechanism (financing source, transparency, free access to information, technical assistance, decision-making procedures, etc.) to guarantee equality among representatives of different sectors. To the extent that a sector without its own resources has diminished capacity relative to those with financial backing, the latter could end up controlling the system. (Dourojeanni et. al 2002: 72) The World Bank’s Water Resources Sector Strategy (World Bank 2004), therefore, calls for a focus on ensuring that water user associations are representative of all farmers. Elements like the availability of information, incentives for participation by different user groups, the capacity of diverse users to participate, the representation and credibility of the organizations, and their ability to influence decision-making are crucial for achieving this objective.

D. Participation and Organization in Water Sector Institutions in Mexico

In Mexico, the quality of participation and the level of organization among water users vary significantly across different regions and types of institutions. Organizations that deal with surface water typically enjoy a higher degree of water user involvement and participation. The overall level of organization among water users is higher in richer states, such as Guanajuato or Aguascalientes. However, even there participation is highly uneven. In terms of water resources management, CONAGUA generally retains a large degree of control over decision-making. Irrigation organizations: irrigation districts vs. irrigation units Irrigation districts (IDs) and irrigation units (IUs) are the two principal forms, in which irrigated land is organized in Mexico. IDs generally cover larger tracts of land that use large scale irrigation systems, typically for the use of surface water, although a small number also rely on groundwater (see box 5). There are 84 IDs in the country, which cover about 55 percent of irrigated land. The remaining 45 percent are composed of just under 40,000 IUs and primarily utilize groundwater resources.9

Organizational capacity and access to resources are highly skewed towards IDs. Members of IDs are organized in legally registered water user associations (WUAs), which were

Typically, an IU corresponds to one well, which may be used by an individual or a small group of water users.

9 These figures do not take into account that there still exist a large number of unregistered wells.

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created during a process of decentralization in the early 1990s. Water concessions are not given to the individual user but to the WUA, which is responsible for organizing the distribution of water among its members. CONAGUA only retains control of the water source itself, typically a dam, and regulates total water delivery. In other words, CONAGUA only monitors total water use, while the WUA takes on the difficult task of administering its individual allocation. Although CONAGUA is not directly involved in monitoring individual water extractions, the collective interest to fairly distribute scarce resources facilitates oversight of individual users. While this system is very effective in the case of surface water, where CONAGUA can exert full control over the water released from a single source, irrigation districts that rely on groundwater are more difficult to monitor (see box 5.3). Box 5.3: Groundwater irrigation districts

Whereas farmers who depend on surface water can be limited through the opening and closing of canal locks, groundwater users have their own pumps on their own land. It is therefore much more difficult to ensure compliance with extraction levels. Although the internal padron (register) stipulates a quota for all members, they are limited only by the availability of water, the capacity of their pumps and how much they are willing to spend on electricity. CONAGUA monitors water extraction both by checking meters as well as by physical measurement of water table depth. Local CONAGUA officials in Sonora report that the Costa de Hermosillo irrigation district regularly surpasses its allocated volume, while members of the irrigation district’s WUA insist that they have borne the brunt of volume reductions in the aquifer. While the WUA may attempt to avoid oversight by CONAGUA, it also depends on the CONAGUA for economic assistance in maintaining land and irrigation system quality, as well as equipment. In river-based IDs that depend on a dam, the CONAGUA spends a considerable amount on development and maintenance of a main canal and feeder canals. In aquifer-based IDs like Costa de Hermosillo, CONAGUA spends more on land reclamation, desalinization and pumping infrastructure.

The decentralized management of irrigation districts has also facilitated the generation of revenues in the form of member fees. WUAs collect dues from their members and are responsible for allocating resources for maintenance and upgrades of irrigation infrastructure. Nationwide, financial self-sufficiency within IDs has gone from around one third in 1991 to 80 percent in 1994. The WUA also enables producers to negotiate collectively with the government and make demands and appeals as an organization rather than a user. This both provides the members of IDs with additional leverage and simplifies the delivery of investment programs for CONAGUA. It is, therefore, not surprising that IDs receive the bulk of CONAGUA resources. In the 2006 budget, CONAGUA provided more than four times the resources to programs dedicated to irrigation districts compared to programs supporting irrigation units (see table 6). While partly a result of increased organizational capacity, CONAGUA’s financial support also provides the continued incentive to farmers to remain organized and engaged in the WUA.

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Table 6: CONAGUA’s budget allocations to irrigation districts and irrigation units (2006) Programs – Irrigation Districts Budget

allocation (final) – in 1000 Mx$

Percentage of Budget Allocation (%)

Rehabilitación y modernización de Distritos de Riego (Ejercicio directo CONAGUA)

168,584.9

10%

Rehabilitación y modernización de Distritos de Riego (Alianza para el Campo)

530,866.3

31%

Rehabilitación y modernización de Distritos de Riego (Programa del uso sustentable del agua en la cuenca del Río Bravo - Ejercicio directo CONAGUA)

219,714.1

13%

Programa de desarrollo parcelario (Alianza para el Campo) 96,481.4 6% Conservación y operación de Distritos de Riego(Ejercicio directo CONAGUA)

222,532.5

13%

Cuenca Lerma-Chapala (Ejercicio directo CONAGUA)

58,882.1

3%

Sub-total – Irrigation Districts

1,297,061.3

77%

Programs – Irrigation Units Uso eficiente del agua y la energía eléctrica (Alianza para el Campo)

106,462.9

6%

Uso pleno de infraestructura hidroagrícola (Alianza para el Campo)

182,930.2

11%

Sub-total – Irrigation Units

289,393.1

17%

Combined Programs – Irrigation Districts/Irrigation Units Programa de instalación de medidores en fuentes de abastecimiento (Ejercicio directo CONAGUA)

103,281.7

6%

TOTAL

1,689,736.1

Source: Administrative data compiled by CONAGUA. In contrast to IDs, IUs are harder to monitor and control and are relatively neglected by the government, in terms of oversight as well as resource allocation. While the water concession may be held collectively by several individuals or by an ejido, the majority of IUs lack a formal organizational structure. Their small size and lack of organization make it more difficult for members of IUs to access government-funded programs. IUs lack the kind of bargaining power held by the WUAs of IDs as well as the internal decision-making structures to facilitate collective action. Without a representative structure, it is more difficult for the government to deliver investment programs, and for certain programs lack of a formal organizational structure actually disqualifies IUs from accessing resources. By the same token, the lack of organization and formal representation combined with a lower level of government involvement weakens CONAGUA’s ability to carry out its administrative and monitoring functions. In some cases, this lack of oversight is worth more for producers than the potential benefits of formality. Fieldwork in the different aquifers showed that especially poorer producers were often wary to enter into any kind of formal arrangement for fear of being monitored more closely by the government. In other cases, producers stated that collective arrangements were unpopular because certain individuals tended to take advantage of these organizational structures at the expense of those contributing their resources and time.

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Nevertheless, the fieldwork also revealed a number of successful cases, where IUs formed organizational arrangements that allowed them to access government resources and modernize their irrigation practices. What these examples appear to have in common is that government support in establishing the organization and clear economic and financial incentives were critical elements of the success stories. Two good examples come from Hidalgo and Aguascalientes, one of the poorest and one of the wealthiest states in Mexico, respectively. In Hidalgo, CONAGUA actively supported the organization of 17 IUs into an association, while a World Bank-funded project provided the financing, which served both as an incentive to organize and ultimately the means for converting to modern irrigation technology. In Aguascalientes, the state water commission (INAGUA) promoted the formation of an organization of irrigators to manage the distribution of treated waster water provided by a publicly operated water treatment plant. Again a combination of active government support and economic incentives appear to have enabled the success (for more details see box 5.1). Box 5.4: Successful organization of irrigation units: examples from Hidalgo and Aguascalientes The Sociedad de Producción Rural Bajío de la Palmilla in Aguascalientes and the Union Regional de Pozos Actopan-Arenal in Hidalgo are two examples of how a range of relatively poor producers successfully organized and adapted their irrigation practices with government support. In Hidalgo, the poorest fieldwork location studied, 17 Irrigation Units managed to merge to form a single productive organization, the Union Regional de Pozos Actopan-Arenal and subsequently access government resources. As a result its members have improved land usage, upgraded irrigation systems, and now market crops within regional production chains. According to IU members interviewed, two principal factors accounted for this success. The local CONAGUA office not only actively promoted the organization of the IUs, it also provided a financial incentive to do so. One member commented, “The CONAGUA told us that the World Bank was going to provide support, but we had to be with organized IUs. We were interested and we did it, and because we’re organized we have made a lot of progress.” In Aguascalientes, water users were encouraged to organize by the state water commission, INAGUA. Again this initiative included a clear economic incentive – the access to treated wastewater free of charge. Today the irrigation unit includes over 30 members who receive water from the water treatment plant in exchange for reductions in their groundwater concessions. In a focus group discussion members explained that this exchange made economic sense, due to the increasing costs of groundwater extraction. After successfully cooperating on the water distribution, they are beginning to develop plans for joint marketing of their crops. Moreover, the focus group discussion revealed that the experience had facilitated better cooperation with both INAGUA and CONAGUA and raised awareness related to questions of aquifer sustainability. Considering the lack of organization among irrigation units, the organization of users in groundwater technical committees (COTAS) is also a significant challenge. COTAS are auxiliary committees of the river basin councils, which operate as associations of water users pertaining to the same aquifer. Their official role is to function as forums for water users of different sectors to participate in bottom-up processes for the development of integrated water management plans and in the oversight and management of aquifer resources. These COTAS are of particular relevance in over-stressed aquifers, where reductions in water extraction are a necessity. Nationwide 69 COTAS have been established to date. The most advanced examples can be found in richer, high capacity states, where there is simultaneously a problem of

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groundwater over-exploitation. Among the fieldwork locations, the Ojocaliente-Aguascalientes-Encarnación and Celaya aquifers represent two such cases, while the role of the COTAS in Sonora and the Région Lagunera aquifer are more limited. In the Actopán-Santiago de Anaya aquifer in Hidalgo, a COTAS has yet to be established. Even in Guanajuato and the Ojocaliente-Aguascalientes-Encarnación aquifer, however, facilitating effective participation of producers in the activities has been very difficult. Since irrigation units are largely unorganized and lack associative structures, the COTAS lacks the adequate channels to communicate effectively with water users in the agricultural sector10

Another criticism raised by producers in several fieldwork locations is the perception of informants that the COTAS remains dominated by the government. In several interviews, producers stated that the government used the COTAS to legitimize its policies without providing it with any real role in decision-making. This situation is exacerbated by the fact that the COTAS does not receive a stable resource allocation to ensure its operation. Where the COTAS receive any resources at all, they are renegotiated during each budget cycle, which allows the state agencies providing the resources to dominate the activities of the COTAS rather than enabling water users to influence governmental decisions. In the case of the Ojocaliente-Aguascaliente-Encarnación aquifer this problem was particularly apparent, since the COTAS president was simultaneously the director of the Aguascalientes state water agency (INAGUA)

. Consequently, even in the Celaya and Ojocaliente-Aguascalientes-Encarnación aquifers, where the COTAS have an operating budget and permanent staff, awareness of the COTAS and its functions among water users was extremely limited. Small and poor farmers rarely demonstrated any knowledge of the COTAS. Those with some knowledge had been informed by neighbors or friends who happened to be involved in some form in the COTAS activities. There was no evidence of more formal channels of communication to inform producers about activities. In several cases, even officials from the ministry of agriculture (SAGARPA) or other state-level entities were not informed of the COTAS activities. Evidence from fieldwork also suggests that participation within the COTAS is skewed towards wealthier farmers. Leadership positions in the fieldwork areas, such as the agricultural sector representatives of the COTAS, were held by medium and large-scale farmers. Furthermore, only a small number of wealthier farmers receive personal invitations to attend elections for the COTAS board, while the remaining water users are informed through announcements posted in municipal buildings. The rationale for this is that large farmers are more relevant for achieving water conservation goals, due to their large volumes of extraction. Consequently only relatively small numbers of farmers attend the elections, which are dominated by wealthier farmers.

11

10 Organization in other sectors, such as the municipal services and industrial sectors, is less of a challenge, since they are less numerous and less diverse in terms of their socio-economic profile and interests. Nevertheless, it should be noted that among the COTAS studied activities were largely focused on the agricultural sector. This is can be explained by the fact that this is the sector with the most consumption and typically the most inefficient practices. 11 Only water users can be members and hold office in a COTAS. However, since INAGUA holds the title to several water concessions, the director is a member and was elected president of the COTAS.

(for more see box 5.5).

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Box 5.5: COTAS: Leadership and Representation

Whereas farmers who depend on surface water can be limited through the opening and closing of canal locks, groundwater users have their own pumps on their own land. It is therefore much more difficult to ensure compliance with extraction levels. Although the internal padron (register) stipulates a quota for all members, they are limited only by the availability of water, the capacity of their pumps and how much they are willing to spend on electricity. CONAGUA monitors water extraction both by checking meters as well as by physical measurement of water table depth. Local CONAGUA officials in Sonora report that the Costa de Hermosillo irrigation district regularly surpasses its allocated volume, while members of the irrigation district’s WUA insist that they have borne the brunt of volume reductions in the aquifer. While the WUA may attempt to avoid oversight by CONAGUA, it also depends on the CONAGUA for economic assistance in maintaining land and irrigation system quality, as well as equipment. In river-based IDs that depend on a dam, the CONAGUA spends a considerable amount on development and maintenance of a main canal and feeder canals. In aquifer-based IDs like Costa de Hermosillo, CONAGUA spends more on land reclamation, desalinization and pumping infrastructure.

Finally, the fieldwork has shown that producers lack the necessary incentive to participate in the COTAS. Without any formal decision-making function or resource envelope, the COTAS offers few incentives for water users to become involved. Certain COTAS offer support to farmers in processing paperwork to comply with CONAGUA administrative requirements and applications for subsidy programs. However, few farmers take advantage of these services, as there is no systematic outreach offering these services to the poor farmers who need it most. One partial exception to this situation was reported at the Ojocaliente-Aguascalientes-Encarnación COTAS. Here the COTAS had received the mandate to select several beneficiaries for a greenhouse project. According to several producers, this process raised the profile of the COTAS and a number of producers participated in COTAS meetings addressing the issue. However, after the project was completed, no additional investments followed and many producers lost interest in the COTAS activities. While the COTAS did not administer the funds, even the limited task of selecting beneficiaries provided producers with the necessary incentive for participation. River Basin Councils Covering an even larger geographic area, effective representation and participation in river basin councils is an even greater challenge. Again it is hardly possible to achieve effective representation of stakeholder interests in the absence of subsidiary levels of organization. To be effective in channeling stakeholder interests to the basin-level, the river basin council requires strong auxiliary organization, such as the COTAS and other technical working groups. Given the low overall level of organization, it is, therefore, not surprising that awareness of river basin councils is extremely low among users. In fact, in the aquifers studied the overwhelming majority of producers interviewed had never heard of the river basin council. It, therefore, appears that representation is similarly skewed towards wealthier interests. Elections are prepared in a similar way as for the COTAS – with announcements in municipal buildings and personal invitations sent to larger producers.

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As a result, elections are primarily attended by those wealthier producers who receive personal invitations.12

E. Successes in Integrated Water Resources Management: Lessons Learned from Brazil and Mexico

Again like the COTAS, the river basin council also still lacks real influence on decision-making. Meetings are rare – in some case only once a year – and are primarily reserved for official business, such as signing agreements. These agreements are typically developed by CONAGUA staff, and council decisions are largely pro forma. This was also reflected in comments by council representatives in Sonora, Guanajuato and Aguascalientes who stated that concerns they had raised were not taken up. Continued national control over river basin management represents a point of conflict in some areas, such as the states of Guanajuato and Aguascalientes, which have made a major effort to increase state-level autonomy. Officials of the state agencies voiced their frustration about what they perceived as CONAGUA’s continued control over water resources management, despite its limited understanding of local conditions. In other parts of the country, lack of experience, expertise and financial resources among local officials and water users limit the options for greater decentralized authority. Accordingly CONAGUA’s technical and managerial capacity fills the gap of local weak governance. At the same time, CONAGUA’s capacity may help perpetuate the current centralized system and indirectly contribute to institutional weakness at the sub-national level. As Guanajuato’s former water commissioner put it: “it is necessary to get out of the vicious cycle that prevents decentralization ‘as long as no local capacity is available’ and hinders the consolidation of the said capacities on the grounds that there are no attribute nor functions to carry them out . . . The argument that there is no capacity, based on prejudice from a great distance away, is just one way to disguise a paradigm of central control of resources and political power” (Guerrero 2000: 585).

It is an internationally recognized principal of water resources management to decentralize decision-making to the lowest appropriate level. The increasing acceptance of this principle over the past ten to fifteen years has led to the creation of many river basin management organizations intended to facilitate stakeholder involvement to achieve more integrated water management. While the step of creating an appropriate legal and institutional framework has been accomplished in a variety of places, the experience of Mexico and other countries shows that putting these new arrangements into practice involves a number of important obstacles. Initial conditions and different stakeholder capacities and interests can have an important influence on the success of decentralized water resources management. A World Bank study entitled Institutional and Policy Analysis of River Basin Management Decentralization: The Principle of Managing Water Resources at the Lowest Appropriate Level – When and How Does It (Not) Work in Practice (Kemper et al 12 This was confirmed by experts and CONAGUA officials in Aguascalientes and Sonora for the Rio Santiago River Basin Council (Consejo de Cuenca del Río Santiago) and the Upper Northeast River Basin Council (Consejo de Cuenca del Alto Noroeste).

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2005) describes different experiences where decentralized management has been applied and analyzes the factors contributing both to the successes and shortfalls of these cases. Some of the major lessons from this comparative analysis are summarized in box.5.613

The case of Jaguaribe River Basin in Ceará, Brazil The experience of Jaguaribe River Basin in Ceará, Brazil provides an important example where a successful decentralization process has been initiated in relatively unfavorable initial conditions. The basin is relatively poor. Stakeholder participation in water resources management was at odds with a tradition where water was typically controlled either by the government or the owner of the land where the water could be found. Moreover, a small, oligarchical elite dominates the political culture. On the other hand, conflicts that arose over the distribution of water resources during periods of drought provided an incentive to better coordinate water resources management functions. These relatively unfavorable initial conditions were largely overcome by the continued political commitment of the government to promote the principle of participatory, decentralized water resource management. While federal institutions continue to support specific drought relief programs, a self-financed, state-level Water Resource Management Company (COGERH – Companhia de Gestão dos Recursos Hídricos) was created to carry out management, monitoring and enforcement functions. With the creation of COGERH not only a new, more participatory approach to water resources management was adopted but it was the beginning of a transfer of control over federal infrastructure to COGERH.

Box 5.6: Lessons learned from international case studies While the case studies analyzed displayed a significant degree of variety, in terms of the social and political context as well as the specific institutional context, a number of common lessons emerge from the comparative analysis conducted by the World Bank:

Incentives for participation - The presence of severe water resource problems was an important factor in motivating stakeholders to become involved in water resource management institutions. In several cases, the prospect of securing valuable investments in infrastructure was an additional contributing factor.

Sustained engagement – Sustaining engagement by stakeholders appeared to be related to the perception that water resources management organizations played an important role in shaping basin conditions and were making a positive contribution. Additionally, continued support and outreach by the government were important in maintaining engagement.

Government support – The case studies have shown that consistency of government support is as important for successful decentralization as the level of support. Basin organizations that are wholly dependent on government support, on the other hand, may lack the autonomy to really define their own priorities.

Strong legal and institutional framework – Effective decentralization requires a clear legal and institutional framework to enable stakeholders to negotiate based on clear rights and standards.

Prior organization – Prior experiences with self-governance by stakeholders contributes to the success of integrated water resources management.

Levels of economic development – Successful decentralization requires that regional entities have a large enough revenue base to undertake necessary investments. Nevertheless, improvements in water resources management after decentralization have not been limited to wealthy basins.

13 The study includes case studies from Australia, Brazil, Canada, Costa Rica, Indonesia, Poland, and Spain..

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Source: Kemper et al 2005. Subsequently, over a period of more than ten years, COGERH and the State Water Resources Secretariat (SRH – Secretaria dos Recursos Hídricos) supported the creation of various types of local user organizations. Today the Jaguaribe-Banabuiú User Commission defines the annual operating rules according to negotiated allocations. Five sub-basin committees set guidelines, approve rive basin plans and perform conflict resolution functions. Thirty-six use commissions manage “isolated strategic reservoirs,” which store water for use during times of drought. The result has been a radical transformation in water management practices. Water users have become active participants in water management processes. Among other things, an emergency operation plan to better manage water allocations in drought periods has been developed in cooperation between the government and local stakeholders. Water rationing, which was common place before the changes were introduced, no longer poses a major problem, and in 2003 COGERH’s collected revenues reached 83 percent of total financing, a major improvement to previous years. Despite these major advancements, a range of functions remain centralized at the state-level. Authority has been devolved to the state-level, but COGERH and the SRH have been reluctant to transfer more substantial authority to the sub-basin committees and user commission. Their functions remain limited to conflict resolution, water allocations and capacity-building. Major structural projects remain under the control of the state. Both the successes and the shortcomings of this example indicate the key role of the government in initiating and sustaining a successful transition to decentralized water resources management. Even in this relatively poor basin, where the political culture was not pre-disposed to more participatory models of water resources management, stakeholders were successfully mobilized and are now engaged in decision-making processes. Government commitment was crucial to promote these changes and its sustained commitment to engaging stakeholders in decision-making is expected to determine the pace of further advances. The success of Irrigation District 066, Santo Domingo, Baja California Sur A well-known success story of groundwater management in Mexico has been the case of Santo Domingo, Baja California Sur, where an aquifer with critical levels of over-extraction was successfully stabilized. After aquifer depletion had reached critical levels in the mid-1990s, the aquifer reached its first water equilibrium in the 2003/2004 irrigation season. The case provides some of the same lessons as the comparative analysis of international experiences. Here initial conditions favored action by water users. Firstly, Santo Domingo is a relatively wealthy area, where farmers have additional resources to invest in infrastructure upgrades. Secondly, farmers are organized in Irrigation District 066, one of the few groundwater-based IDs in Mexico. The related Water User Association functions as an effective liaison between water users and the government and functions as a vehicle for delivering government support. Finally, farmers in the Santo Domingo aquifer confronted a serious and tangible crisis. Water quality was deteriorating, due to salt water

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intrusion14

Simultaneously, CONAGUA played a supportive role. According to CONAGUA officials,

, and water levels had declined so far that production levels could no longer be sustained. In other words, the need for collective action was immediately apparent to all water users.

15

• Awareness-raising: CONAGUA promoted a “culture of water” as well as the conversion to new cropping patterns.

it intervened in the following areas to facilitate aquifer stabilization:

• Organization of stakeholders: CONAGUA supported the creation of a COTAS and encouraged stakeholders to participate in finding solutions.

• Capacity-building: CONAGUA supported capacity-building among technicians and producers to convert to new crops and modernize irrigation practices.

• Monitoring and enforcement of reduced concession volumes: CONAGUA reduced the irrigation district’s concession volume and enforced compliance with quotas by closing the wells of repeat offenders. It carried out monthly inspections of extractions and annual monitoring of static levels and water quality.

• Financial support: CONAGUA funded several millions of US dollars worth of investments to modernize Irrigation District 066 over a period of only a few years. According to CONAGUA, between 2003 and 2005 total investment reached over Mx$90million for only about 1400 water users.16

These different components of CONAGUA’s support were not only sustained over a period of several years, they were also complemented by other government agencies. SAGARPA supported crop conversion by working with farmers and existing producer organizations to identify market opportunities for alternative crops both domestically and abroad. It was only through these complementary measures that the necessary economic conditions were created for sustainable reductions in water extraction. Based on the alternative marketing opportunities that were created, farmers were able to convert to new crops and lower their overall water use.

F. Main Findings and Challenges

Both Brazil and Mexico show the critical role that government support plays in the establishment of participatory water resources management. Furthermore, while the Mexican example presents more favorable initial conditions, the Brazilian case shows that success need not be limited to wealthier river basins. With sustained commitment and support from the relevant government agencies, obstacles, such as a lack of organization and existing conflicts between stakeholders, can be overcome to promote negotiated solutions to water management challenges. The Santo Domingo case illustrates the importance of cooperation across relevant government agencies. The concerted efforts of CONAGUA and SAGARPA in providing both the necessary irrigation investments and the necessary support for crop conversion

14 The Santo Domingo aquifer is one of 17 aquifers with salt water intrusion (CONAGUA 2007). 15 Findings summarized in a presentation by CONAGUA officials at the 4th World Water Forum entitled Estabilización del acuífero del Valle de Santo Domingo: Acciones para lograr el equilibrio (CONAGUA 2006). 16 According to figures in the presentation (CONAGUA 2006), the average total investment made over these three years for each of Santo Domingo’s 1363 users was about US$ 6,500.

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were critical in achieving the ultimate goal of aquifer stabilization. This finding accentuates the need for an integrated approach to water resources management. Not only investments in hydrological infrastructure but complementary support for the creation of the necessary economic conditions are required for sustainable water resources management. This implies further that not only water user groups but relevant economic actors, such as producer organizations, must be engaged in the promotion of solutions to water management challenges, such as the over-exploitation of groundwater resources. While the decentralization of water resources management in Mexico has made important advances, current practices show that the participation of water users remains limited. The greatest advances have been made in the decentralization of irrigation districts. Due to the difficulty to control groundwater extraction, however, participation of water users is even more crucial for achieving its sustainable management. Only with the support of water users will it be possible to reduce groundwater extraction. This requires coordinated government attention and clear incentives for users to participate. Neither of these conditions is currently met in Mexico’s water sector. SAGARPA and CONAGUA, the most significant government agencies intervening in the water sector, have not been able to coordinate their programs effectively to ensure coherence and consistent incentives. The water management institutions mandated to perform coordination functions at the basin and aquifer-levels and to engage water users in planning processes remain relatively weak. Moreover, awareness of these institutions and participation among water users are largely limited to wealthier farmers. A lack of information, incentives and institutionalized channels for smaller farmers to participate and voice their concerns preclude a wider participation among farmers. Additionally, the lack of organization on the level of the irrigation unit complicates the channeling of information to smaller producers. Lessons learned from Santo Domingo and Ceará, Brazil show that government commitment and support for participatory forms of water management can play a crucial role in advancing the process of decentralization and achieving successes in the establishment of socially and environmentally sustainable water management models. This finding is also confirmed by the experience of irrigation districts in Mexico, where the majority of public investments in water infrastructure are concentrated. Strong government support has facilitated a successful decentralization process, while increasing financial self-sufficiency. Government support for the effective participation of water users in the COTAS and river basin councils will, therefore, be essential. Moreover, a greater focus on irrigation units, which extract the majority of groundwater, will be necessary for achieving reductions in groundwater extraction. Finally, fieldwork shows that a particular concern in Mexico will be to identify and put in place the right incentives, representation structures, channels of information and capacity building to ensure the representation of poorer users in participatory institutions.

G. Policy Implications

Mexican water reforms have made significant advances in achieving sustainable water resources management. However, to date these reforms have not yet achieved their primary objectives. Particularly in the case of groundwater, reforms have not achieved sustainable aquifer use. If over-extraction continues, aquifer depletion is certain to have serious negative impacts for poor farmers: increased electricity costs associated with

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pumping from deeper wells, as well as partial or complete loss of access to groundwater, which directly reduces crop production and income. As the fieldwork conducted for this study suggests, in many cases these impacts are already being felt. This study considers the negative social impacts of continued over-exploitation of groundwater resources on poor farmers and the social and institutional challenges of achieving sustainable water management. At the same time, it considers the distributional impacts of water sector programs and the inclusiveness of the participatory water management organizations that have been created in the past years. From this analysis, policy options in two broad areas emerge to better promote water management goals and enhance social equity in the water sector. This section presents options (i) for enhancing the design of government support programs to better target poor producers, while promoting water conservation; and (ii) for enhancing the effectiveness and inclusiveness of participatory water management organizations, in particular the COTAS. Government Support programs in the Water Sector: Policy Options to Promote Water Conservation and Improved Targeting The findings of this study suggest that public resources in the water sector as well as the agricultural sector more broadly are not only biased towards medium and large producers, but they also fail to promote water conservation goals. Investments in agriculture focus primarily on the Northern and Central states, where water availability is the lowest. More specifically in the water sector, SAGARPA’s and CONAGUA’s programs provide financing based on the fulfillment of technical requirements and matching contributions by the beneficiary, which present important obstacles for poor producers to access the resources. Furthermore, financing is decoupled from water use, thus failing to provide an incentive to reduce water consumption. In fact, by artificially reducing the cost of groundwater extraction, Tarifa 9 actually represents an added incentive to continue over-exploiting groundwater resources. Finally, many small farmers lack the necessary skills to make efficient use of modern irrigation systems, and they do not have adequate access to market opportunities to justify conversion to more water efficient crops. In other words, to conserve water, small producers require complimentary technical assistance and support for the commercialization of alternative crops. The following policy options aim to provide poor farmers with increased access to public support programs, utilize public support programs more effectively to promote water conservation goals, and provide farmers with support to market alternative crops and make efficient use of irrigation technology. It also proposes offering farmers support for a voluntary transition out of agriculture.

• Investing in agricultural development in Mexico’s Southern states Since the Southern Mexican states17

17 The exception to this is Oaxaca, where two aquifers are currently over-exploited.

do not face a problem of groundwater over-exploitation, they do not constitute the focus of this report. However, the abundant hydrological resources in the South of Mexico could form part of the solution to the Mexican water crisis. With appropriate support programs, the production of certain water intensive crops might be shifted to Southern states. Moreover, the development of

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Southern agricultural production could contribute to poverty reduction in some of Mexico’s poorest regions. Currently, this objective is not a priority of Mexico’s agricultural policy, as the low levels of government spending in Southern Mexico reveal. Increased attention to the Mexico’s South should be a priority both to promote poverty reduction and to alleviate Mexico’s water crisis.

• Ensuring access for poor farmers to government support programs The study shows that many poor producers are unable to access government support programs because they lack the necessary capital to contribute the 50 percent of the investment cost, which is typically required. CONAGUA’s Uso eficiente program has reduced the co-financing requirement to a minimum of 10 percent in municipalities with high and very high levels of marginality. Since introducing the change, no more resources have been invested in municipalities with low and very low levels of marginality. This arrangement could be expanded to other support programs in the water sector. Additionally, a percentage of funds could be earmarked for small producers with 5ha or less of land or a similar proxy for income-level. This measure would ensure that a minimum number of beneficiaries would benefit lower income farmers. Another obstacle poor farmers face in accessing government resources is the lack of information about programs and their administrative requirements. To increase awareness of available programs in poor communities, the respective government agencies could further develop outreach to inform producers of existing opportunities. Systematic information campaigns could engage various channels, including local media, municipal governments, producer organizations, COTAS, state-level agencies, etc. Additionally, farmers need support for completing required administrative procedures. The COTAS could receive the mandate and adequate resources to advertise and perform such support functions for various programs in the water sector.

• Linking government support to water conservation while promoting social equity Currently, government support programs in the irrigation sector support more efficient use of water resources. Program evaluations show that this goal is met in many cases. However, this does not imply that farmers will utilize these efficiency gains to achieve real water savings. On the contrary, many farmers indicate that they intend to translate efficiency gains into increased production by expanding the irrigated area. At the same time, however, especially poorer farmers state that they would consider reducing total water extraction in return for resources to modernize their irrigation technology. Without their own resources to invest and with rising extraction costs, many poorer farmers indicate their willingness to accept such conditional support. In exchange for government resources, CONAGUA and SAGARPA’s irrigation programs could introduce requirements to reduce water extraction along with the total concession volume, to install a meter and to allow monitoring by CONAGUA. This would not only link government funding to water savings but it might lead to a stronger focus on poorer farmers, who appear to be more willing to accept restrictions on the expansion of the irrigated area. The water rights adjustment program (PADUA), which is aimed at reducing water extraction by compensating farmers in return for renouncing all or part of their water right, provides some experience with such an initiative. As recognized in the World Bank’s Sustainable Development Working Paper No. 24, “The Role of the Water Rights

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Adjustment Program in Water Sustainability and Rural Development” (Asad and Garduño 2005), this program has faced a combination of legal and practical challenges and has been carried out in a relatively isolated manner. With a narrow focus on the cancellation or reduction of water rights, the program fails to address the economic and technical aspects of achieving the required water savings. The paper, therefore, recommends integrating PADUA with other complementary programs in the water sector. Based on the experience with PADUA, SAGARPA and CONAGUA could jointly develop an approach for integrating the adjustment of water rights with the existing subsidy programs in the irrigation sector. One of the major challenges of such an approach would be defining the permitted levels of extraction. To achieve real water savings, net extraction would have to be reduced, which typically implies reductions in the irrigated area. This would require considerable awareness raising and dialogue with water users. Moreover, these programs should also maintain some degree of flexibility, so they can be adapted to local conditions. To address these challenges, the COTAS could serve as a forum for communicating the program goals and consulting with water users on the specific local arrangements.18

• Provide complementary technical assistance and support for commercialization of alternative crops with a focus on small farmers

Asad and Garduño (2005) also point out that a lack of appropriate information and monitoring of wells make it difficult to ensure compliance with required water savings. However, an integrated approach to government support could provide a mechanism for developing the appropriate monitoring and control functions. Other programs that do not directly provide resources for irrigation upgrades could also provide incentives for water savings. PROCAMPO has recently introduced a program where farmers can receive an advance of up to three years of PROCAMPO subsidies. The goal is to allow farmers to use PROCAMPO subsidies for investment purposes. This advance could be expanded to five years for farmers who commit to reductions in water consumption and related monitoring requirements.

The need for a more integrated approach does not end with linking investments in irrigation technology with the administration of water rights. The lack of adequate technical assistance and market access for alternative crops are additional obstacles for achieving sustainable water management. Particularly poor farmers may not have the technical skills to maximize the benefits of modern irrigation technology. Moreover, crop conversion is unviable without access to markets for the new products. It is, therefore, essential that investments in irrigation upgrades go hand in hand with technical assistance and marketing support. While it may not be feasible for the government to directly provide technical assistance, an option might be to develop a system for certifying private providers of technical assistance. A component of the government’s support for irrigation upgrades could then be used to hire a certified provider under a government contract with a set of performance indicators. Producer organizations, in particular of those crops considered viable alternatives, might be considered one such vehicle for delivering certified technical assistance. 18 Where a COTAS does not exist, such a consultative process could provide the basis for establishing one.

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Support for commercialization could be organized through multiple channels. Again producer organizations of water efficient crops could be targeted to provide assistance in marketing these crops. Another proposal put forth in the World Bank study on PADUA is the creation of a crop conversion fund managed by producers. To ensure its focus on achieving water savings, the COTAS could exercise an oversight function over such a fund.

• Supporting a transition out of agriculture This study suggests that some poorer farmers who face increasing production costs as a result of falling water tables are abandoning their fields and migrating to the US or to other areas of Mexico. If over-exploitation continues, it is likely that this process will accelerate and that smaller farmers will be the main losers. Without the capital and the technical capacity to invest in irrigation technology and crop conversion, they are less able to adapt to the reduced water availability and increasing extraction costs. While some small farmers may be able to adapt their practices with targeted government support, a large number of farmers will not succeed in making this transition. In anticipation of this process, the government could, therefore, provide farmers with support for making a transition to non-agricultural activities. This would both help mitigate the poverty and social impacts of reduced water availability and help address the problem of over-exploitation. It should, therefore, be considered to go beyond supporting crop conversion and conditional support for modernizing irrigation practices. In water stressed areas, programs like PROCAMPO could be converted into programs to support the transition out of agriculture. Currently the program pursues the opposite objective. It rewards farmers for keeping their land under production. In areas where this is detrimental to the management of water resources, it may be considered to allow PROCAMPO payments to be used for a transition out of agriculture. Like the previous proposals, such an approach would have to be embedded in integrated water resources management strategies and requires a local process of dialogue. Water management institutions like the COTAS are required for facilitating such a process and finding locally appropriate solutions. The central government can support this process by providing program options and an enabling framework on the policy level.

• Reforming the Tarifa 9 subsidy to promote water conservation Today farmers pay the subsidized Tarifa 9 electricity rate for pumping groundwater. This creates an incentive to extract more water than is environmentally and economically viable. The quantitative analysis of this study also concludes that interventions in overexploited aquifers do not have significant poverty implications. Therefore eliminating the subsidy would not carry significant negative poverty impacts. Although the reform may not prove to be politically feasible, various options for decoupling the subsidy from water consumption have been brought forward in the World Bank economic and sector work on policy interventions in the water sector in Mexico (Asad and Dinar 2006). These options involve refunding the subsidy based on measurements, such as historical consumption by farmers or farm size. However, previous initiatives, such as capping the subsidy based on historical consumption, have shown that even such refunding proposals are difficult to implement, due to resistance by farmers. An alternative approach might offer farmers the voluntary option of receiving the Tarifa 9 subsidy either as a cash payment or as an investment subsidy. Similar to the

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PROCAMPO initiative, farmers would have the option of receiving the subsidy upfront, possibly several years at a time. The total amount could be calculated using a formula based on the concession volume and well depth. This could then either be paid out directly or be linked to investments in irrigation upgrades and reductions in irrigated area. It could also serve as counterpart funding for other government programs. The investment option could be delivered via PROCAMPO or another SAGARPA or CONAGUA irrigation program. This voluntary approach would allow the GoM to experiment with alternative disbursement options to test its attractiveness to farmers. In the medium-term, the experience could help develop a viable option for decoupling the subsidy.

• Coordination across agencies and functional units To make the program adjustments required for achieving sustainable water resources management, increased coordination and dialogue across functional units and government agencies, including CONAGUA, SAGARPA and the federal electricity commission, is inevitable. Without closer coordination of the policies and programs affecting the water sector, in particular in the area of agriculture, the goal of sustainable water resources management will remain an elusive goal. SAGARPA’s and CONAGUA’s policies for supporting the modernization of irrigation practices, for instance, have to pursue common objectives based on shared principles. This requires dialogue about the different programs and their impact on water resources management both at the local level, in the context of integrated water management plans, as well as the central level to ensure the consistency of federal policies and programs. Water Management Institutions As mentioned above, none of the proposals aimed at water conservation goals will be effective without the cooperation of water users. International experience has shown that decentralized and participatory institutions can have an important, positive impact on both social and environmental aspects of water management. The case of Santo Domingo, Baja California Sur is an example where a strong water user organization coupled with consistent government support brought about the necessary changes to stabilize an over-exploited aquifer. In Ceará, participatory institutions have enabled users to effectively address recurring social conflicts related to water management issues during droughts. The GoM has put in place a set of institutions that are well positioned to fulfill the role of engaging users in water management decisions and garnering the needed cooperation from water users to manage the difficult trade offs facing the country’s North and Central areas. The next step is the effective engagement of users in these organizations to develop socially sustainable approaches to water resources management. Related to groundwater management, the groundwater technical committees (COTAS) are particularly important. Designed to engage water users in solutions to groundwater over-exploitation, the COTAS play a central role in the decentralized institutional framework put in place by the National Water Law. However, to date, where COTAS exist their work remains incipient and user participation is still relatively limited. Moreover, existing participation is heavily biased towards medium and large-scale producers.

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The following policy proposals offer options for making water sector institutions, most importantly the COTAS, more effective at engaging water users in solving the problem of groundwater over-exploitation and for making this participation more inclusive of poorer stakeholders.

• Strengthening the role of the river basin councils and COTAS in decision-making The National Water Law calls for the development of integrated water resources management plans in the river basins and aquifers that face water resources problems. These plans should be developed not only using an integrated approach, bringing together the different government agencies, but to be effective they require the support and involvement of water users. To date, however, discussions in the COTAS and river basin councils have had relatively limited relevance for defining policies and programs. They have thus also offered water users with few incentives to remain actively engaged in discussions. To promote the engagement of stakeholders in these water management institutions, their role requires further strengthening. The proposed integrated water management plans need to become the real basis for planning investments and coordinating the activities of the relevant government agencies (most importantly CONAGUA and SAGARPA), and issues of immediate relevance to water users have to be included in discussions. Potential solutions, such as reforms to government support programs to link them with water savings and water rights adjustments, will not be feasible without support from water users. Moreover, they require local approaches that can greatly benefit from the inputs of local producers. Engaging the existing institutions in the development of such approaches will both raise their profile and help build the consensus for strategic water management decisions.

• Building capacity, accountability and awareness among water users Another problem confronting the COTAS and river basin councils is the lack of awareness and capacity among water users. In the agricultural sector, water users are rarely aware of the institutions and their mandates. Moreover, those producers that participate often lack the capacity to fulfill their duties as representatives. The result is a lack of accountability towards constituents. To promote more active engagement by water users, an awareness raising campaign about the role of these institutions would be useful. In addition to raising awareness among users, such campaigns could engage user representatives (i.e. delegates to the COTAS or the river basin councils) to help develop their capacity. By participating in outreach programs, their capacity to perform their duties as representatives and communicate with their constituency could be developed. Additionally, CONAGUA could develop a set of guidelines for river basin council delegates on reporting back information to their constituencies and provide financial support not only for attending meetings but for conducting annual meetings to inform water users. In the case of the COTAS, CONAGUA might provide guidance and support to integrate accountability mechanisms into their procedures. Finally, a public awareness campaign might involve municipal governments, both to engage them as stakeholders of water resources management and to develop a role for municipal governments to provide local support to user representatives.

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• Promoting participation with equity In addition to being relatively weak, participation is also highly skewed towards wealthier producers. Elections for both the COTAS and the river basin councils are not sufficiently advertised in poor communities. An awareness raising campaign should, therefore, particularly target poor producers and elections should be explicitly advertised via structures, such as ejidos, community radios and other local media, which are more likely to reach poor producers. Finally, especially in larger states elections may have to be held in multiple locations to ensure access for farmers located in more remote areas.

• Supporting the organization of irrigation units (IUs) Currently, the majority of CONAGUA’s irrigation budget is invested in irrigation district. To effectively tackle the challenge of groundwater over-exploitation, additional resources will be required to support irrigation units. A major obstacle for channeling more resources to irrigation units, however, is their lack of formal organization. In contrast to irrigation districts, whose members are organized in formal water user associations, irrigation units typically operate on the basis of informal arrangements without legal identity. A first step towards increasing investments in irrigation units, therefore, implies promoting increased formal organization of irrigation units. This would allow members of IUs to jointly apply for government resources, thereby lowering transaction costs for both farmers and the government. Additionally, increased organization of irrigation units is an essential step towards effective engagement of water users in the COTAS and for enhancing the government’s monitoring capacity. Representatives of such user associations would be natural counterparts for discussions in the COTAS and could serve as vehicles of communication with water users. User organizations could also help facilitate government monitoring functions. If government resources were linked to water savings, a user association would be an essential vehicle for monitoring compliance. In the effort to achieve real water savings, better organization of small producers may also help promote increased cooperation among producers in areas of production and marketing. In many cases, farmers may have to consolidate their productive activities, in order to reduce the irrigation units’ total irrigated area and achieve real water savings. Individually, producers may not be able to remain profitable, while reducing net water extractions. Promoting better organization of producers is, therefore, another important aspect of an integrated approach to government assistance in the irrigation sector. The promotion of water user associations is a long-term challenge. However, it is an essential ingredient to effective water resources management, and it will require consistent government commitment and support to be successful. An outreach program about the COTAS could include information on organizing in user associations. The COTAS could also support the administrative process of creating a legal water user organization.19

• Strengthening the COTAS by diversifying its functions

In particular the COTAS, which cover a smaller geographical area than the river basin councils, have the potential to engage water users more directly in developing local 19 Making organization in water user associations an eligibility requirement for government resources is not suggested here as this would exclude many poorer farmers from government resources.

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solutions to groundwater over-exploitation. However, to promote this type of engagement by producers, the COTAS needs to offer direct incentives for them to participate. As mentioned above, most importantly its role in decision-making needs to be expanded. Additionally, the COTAS could provide a number of services to producers. These services could both help producers meet water conservation objectives and provide incentives to actively engage with the COTAS. While the particular services would have to be defined locally, some of the functions that might be established with consistent government support are:

i. Provision of technical information on irrigation methods

: The COTAS could provide technical information on irrigation methods. The COTAS in Celaya has already begun experimenting with the creation of model irrigation plots. These types of activities could be technically supported by local universities, while the COTAS could support outreach activities.

ii. Support farmers with regularization of wells and applications for government support

: In many places, the COTAS already supports farmers to regularize their water concessions. This support function should be continued and expanded with support to farmers interested in applying for different types of government support. It could provide information on various programs and help farmers with application procedures.

iii. Supporting the organization of irrigation units in legal water user organizations

: As stated above, the COTAS could have a role in supporting farmers to organize as legal water user organizations. This initiative could be promoted in tandem with support for accessing government resources.

iv. Oversee crop conversion fund

To enable the COTAS to develop the functions outlined above, the organizations will require a core annual operating budget to maintain basic functions, such as the organization of regular meetings with COTAS members and engaging in planning functions. In the long term, it may be feasible to generate revenue from water users. However, in the medium term financial support from the government will be crucial for strengthening the COTAS role.

: Crop conversion and the necessary marketing support has not been a systematic priority of government programs. A crop conversion fund, managed by producers, could provide the necessary support for poor farmers to seriously consider the option. While it may not be within the scope of the COTAS to directly manage such a fund, it could have an oversight function to ensure links to water conservation goals.

• Support for COTAS in line with local capacity constraints as well as equity In line with the principle of local water resources management, support for the COTAS should correspond to the particular needs and constraints of the different aquifer areas. Priority support should, of course, be given to COTAS in areas of groundwater over-exploitation. It is also important to continue strengthening the COTAS in areas where they have begun to take shape and where they have begun to play a role in local water resources management. These experiences are essential for providing lessons and examples for their further development throughout Mexico.

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At the same time, however, poorer areas experiencing groundwater stress will require particular attention to develop the COTAS and its role in local decision-making. While a blanket approach to developing COTAS may not be feasible, a few pilot projects for establishing COTAS in more marginalized areas would be an important step towards an equitable approach to sustainable water resources management. This would provide lessons for the development of the required institutional framework in lower capacity areas and would provide support where it is most needed.

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6. PUBLIC EXPENDITURES IN THE IRRIGATION SECTOR: IMPACTS ON EQUITY AND

SUSTAINABILITY

In Mexico there are three main types of irrigation systems: the DR, URDERALES and private irrigation schemes. While the role of farmers has been to gain greater relevance, CONAGUA remains the leader in the sector in terms of policies, subsidies, programs and standards. Despite the fact that irrigation systems are generally operated and maintained by users, they depend heavily on government for funding for continuous improvements in the system and training thereby limiting their autonomy. A major reform of Mexico’s National Water Law as amended in 2004 is the transfer of operational responsibilities and implementation of centralized and decentralized entities of CONAGUA toward full decentralization. Most agencies operators of the country must solve a series of problems which are becoming increasingly serious. Among them are a lack of continuity in work programs and high staff turnover, mainly from their managers; outdated infrastructure that is in poor condition and presents constant failures due to its heavy use and little maintenance, water loss ranging from 30 to 50% through leakages occurring in distribution networks; inefficiencies in measuring, billing and collections; a lack of appropriate pricing policies combined with little economic capacity often can not cover operating costs and maintenance of infrastructure; administrative and operational inefficiencies arising from lack of trained staff; and short term solutions for on-going water problems. The Government of Mexico finances a variety of programs in the agricultural sector to increase the profitability of production, encourage investment and increase efficiency. As mentioned in the other sections, overall these investments are highly skewed to the wealthier, water scarce North and Center of the country. Additionally, fieldwork results as well as administrative data suggest that programs in the irrigation sector typically favor wealthier producers, while poorer farmers - even in the North of the country - only have very limited access to government funds for irrigation technology. This chapter begins with an analysis of the distributional impact of several programs administrated by SAGARPA and CONAGUA supporting the modernization of irrigation infrastructure and the Tarifa 9 electricity subsidy for pumping groundwater for agricultural uses. The analysis is based on existing program evaluations and administrative data as well as qualitative data gathered during fieldwork. This is followed by an analysis of the current role of these and other government programs in promoting sustainable water use in the agricultural sector. Government programs in the irrigation sector The main programs directly supporting the modernization of irrigation infrastructure are administered by SAGARPA and CONAGUA. They include: SAGARPA:

• Manejo Integral de Suelo y Agua

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CONAGUA:

• Uso pleno de la infraestructura hidroagrícola • Uso eficiente del agua y la energía eléctrica

CONAGUA has additional programs to support maintenance and modernization of irrigation infrastructure. However, with the exception of the two programs mentioned above, these programs all focus exclusively on irrigation districts and, thus primarily on surface water. Uso pleno de la infraestructura hidroagrícola and Uso eficiente del agua y la energía electríca are the main programs that support irrigation units. While the former supports the modernizing of irrigation tubes and canals, the latter provides funding for upgrading wells and pumps. SAGARPA’s Manejo Integral de Suelo y Agua program is part of Alianza para el Campo, SAGARPA’s most important program for modernizing and transforming agricultural production. Alianza funds are used for a variety of agricultural investments with a significant part going to irrigation infrastructure20. SAGARPA also administers PROCAMPO, a large-scale income support program based on the amount of land cultivated. However, survey data suggests that PROCAMPO resources are rarely used to actually finance investment or modernization of any kind. Despite some regulatory changes to provide incentives for increasing investment, it remains essentially a rural poverty reduction program.21

A. Distributional impacts

Both available administrative data and qualitative results from fieldwork in the six aquifer regions suggest that richer farmers tend to have easier access to government programs and thus receive a disproportionate share of financial resources for irrigation. Several factors account for this bias in the different programs. Most importantly, the majority of programs require that producers provide matching funds to receive support. Moreover, oftentimes farmers are required to finance investments up front, while the program reimburses the 50 percent of the cost retroactively. Poorer farmers who lack the resources and cash flow to finance all or even part of the investment are, therefore, excluded from such arrangements. In some cases this is partially mitigated, when state entities provide farmers with all or part of their required contribution. Typically, however, this is only done in richer states, where resources are available. Additional obstacles include lack of adequate information in poor communities and lack of capacity among poor farmers to follow complicated administrative and technical requirements. Evidence from program evaluations and administrative data: CONAGUA Evaluations of the two CONAGUA programs serving irrigation units confirmed the relatively limited emphasis placed on marginalized areas. While the evaluations do not consider the socio-economic status of the beneficiaries themselves, they identify the degree of marginality (marginación) of the municipalities where the participating irrigation units are located. The evaluations of the past four years (2003 to 2006) reveal

20 CONAGUA’s Uso Pleno and Uso Eficiente programs are also officially under the umbrella of SAGARPA’s Alianza para el Campo. However, they are administered directly by CONAGUA. 21 According to a survey of PROCAMPO beneficiaries, about 42 percent use the transfers to cover basic needs like food, transportation, clothes and medicine, while barely a quarter of respondents reported that that they use the funds for productive activities on the land (Rosenzweig 2005).

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that the performance in targeting municipalities with high and very high levels of marginality fluctuates considerably. In the case of Uso pleno the amount spent in municipalities with high to very high levels of marginality ranges from 10 to 45 percent.22

Figure 6.1: Uso pleno de la infraestructura hidroagrícola - levels of marginality in municipalities of participating irrigation units

For Uso eficiente the range is from 17 to 50 percent (see figures 6.1 and 6.2). Overall, Uso eficiente allocates a larger proportion of its resources to municipalities with high and very high levels of marginality than Uso pleno. However, it also receives a smaller share of the resources (on average around 38 percent less). As a result, the combined percentage invested in municipalities with high and very high marginality does not surpass 35 percent and was as low as 13 percent in 2004. If investments in areas with medium to high marginality are included the percentage ranges from 33 to 62 percent. In 2006, Uso eficiente allocated 100 percent of its resources to municipalities of medium to high and high to very high marginality. This shift occurred after the rules of operation were changed to allow a subsidy of up to 90 percent of the total investment cost in areas with high and very levels of marginality. Though the impact of this change is not explicitly evaluated, the results suggest the importance of this adjustment for the distribution of the subsidy program (CONAGUA 2004a/b to 2007a/b).

23

33

22

22

30

10

50

10

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22

45

20

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30

10

30

0%

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20%

30%

40%

50%

60%

70%

80%

90%

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2003 2004 2005 2006

High to very high

Medium to high

Medium

Medium to low

Low

Source: CONAGUA program evaluations 2003 to 2006 (CONAGUA 2004b to 2007b).

22 Since some irrigation units may be span more than one municipality, the evaluation lists combined categories, like medium to high or medium to low.

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Figure 6.2: Uso eficiente del agua y la energía eléctrica - levels of marginality in municipalities of participating irrigation units

10

10

10

20

50

41

8

17

17

17

20

20

30

30

56

44

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2003 2004 2005 2006

High to very high

Medium to high

Medium

Medium to low

Low

Source: CONAGUA program evaluations 2003 to 2006 (CONAGUA 2004a to 2007a). Evidence from program evaluations and administrative data: SAGARPA SAGARPA’s Alianza para el Campo covers a variety of different program areas. The most important of these, accounting for more than 70 percent of total spending, are agriculture (Programa de Fomento Agrícola), livestock production (Programa de Fomento Ganadero) and rural development (Programa de Desarrollo Rural). Among these, the rural development programs, which account for about one third of national Alianza funds, are the only part of Alianza that is targeted specifically to socially marginalized communities. Since the livestock and agriculture programs are “demand driven,” allocation is based primarily on the timeliness and technical quality of applications – in addition to the capital required to receive a matching grant. As a component of one of Fomento Agrícola’s sub-programs, the program Manejo Integral de Suelo y Agua, which provides irrigation infrastructure investments, therefore, is not linked to any targeting criteria. Though no specific data exists for the Manejo Integral de Suelo y Agua sub-program, almost 80 percent of total Fomento Agrícola expenditures in 2005 went to producers that are relatively well off. On average, these beneficiaries had at least 10.1 to 50ha of irrigated land, 25 to 75 livestock, and assets worth Mx$25,000 to 100,000.23

Administrative data for the Manejo Integral de Suelo y Agua program in the state of Aguascalientes also confirms that the majority of support goes to medium and large scale farmers.

24

23 These statistics are drawn from the 2005 program evaluation (FAO/SAGARPA 2006a). The figures are based on a classification of producers in five categories created for the purpose of the program evaluation. Each producer is classified as one of the five categories, based on a combination of schooling, irrigated area, number of livestock, value of assets, and level of technology. According to this classification, 80 percent of funds go to beneficiaries of Type 3 or above. Type 3 is classified as having on average 10 to 12 years of schooling, 10.1 to 50ha of irrigated land, 25 to 75 livestock, assets worth Mx$25,000 to 100,000, and a technological level of 41 to 60 (index). 24 It should be noted that Aguascalientes is a relatively rich state and may, therefore, have less of a need to orient resources towards poor producers. Nevertheless, there are many farmers, especially ejidatarios, with plots of 5ha or less in the state.

As shown on figure 6.3, in 2005 over 70 percent of SAGARPA funds for irrigation technology went to investments covering over 20ha of individually owned irrigated land. The average size of these investments was 40ha. Only 2 percent of investments went to individually owned land of 5ha or less, while only 12 percent of investments went to organizations or other groups, none of which were ejidos. 82%

12%

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Figure 6.3: Distribution of program resources according to the size of investment: Alianza para el Campo - Manejo Integral de Suelo y Agua, Aguascalientes, 2005)

0

10

20

30

40

50

60

70

80Pe

rcen

t of t

otal

reso

urce

s

Percentage 72 6 8 2 12

Individual investments of more than 20ha

Individual investments between 10.1ha and

20ha

Individual investments between 5.1ha and

10ha

Individual investments of 5ha or less

Investments for organizations or other

groups

Source: SAGARPA administrative data, Aguascalientes, 2005. Tarifa 9 The Tarifa 9 subsidy also strongly favors richer farmers. Of the 105,000 recipients of the subsidy, 68,000 receive an annual subsidy of less than Mx$20,000, while 33 users receive a subsidy of over Mx$500,000. This amounts to a Gini coefficient of 0.91 for the distribution of the subsidy among its recipients (World Bank 2006a). Evidence from fieldwork Interviews with ejidatarios confirmed that traditional communal farmers have extremely limited access to Alianza resources. The most common explanation was that they were unable to provide the required matching grant. However, some ejidatarios also reported that they had applied for Alianza funding but they had simply received no answer, not even an official rejection. In Sonora, several ejidatarios claimed that they had been waiting for a response for between one and three years. A SAGARPA official at the Ures rural development district in Sonora confirmed this stating that the sector social – the term applied to ejidos – is categorically excluded from Alianza grants, even if ejidatarios have the required up-front capital. He claimed that the only individuals within his district that had gained access to Alianza funding were a municipal president and a senator. Moreover, small irrigation units reported almost no access to CONAGUA support. In Hidalgo, members of one irrigation unit reported that CONAGUA had rejected all their requests for funding until they formed the Union Regional de Pozos Actopan with 16 other irrigation units (see table 7). Forming this larger entity was the pre-condition for accessing CONAGUA resources. While this particular case turned into a success story, it represents an exception to the rule, since only a small proportion of small farmers are organized in this way.

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Table 7: Obstacles for poor farmers to access CONAGUA and SAGARPA resources Aquifer region Case examples Ojocaliente-Aguascalientes-Encarnación

Representatives of five different ejidos all stated that they could not apply for government programs, since they lacked the capital to finance their own contribution.

While Alianza para el Campo was generally known, several poor producers had not heard of any CONAGUA programs.

One group of ejidatarios applied for an Alianza grant, but never received an answer.

Sonora All ejidatarios interviewed who reported that they had applied for Alianza funding said that they had not received an answer.

These ejidatarios also stated that the complex technical requirements made it necessary to hire an external consultant to prepare the application.

Many of the ejidatarios were also simply unaware of the existing programs.

A SAGARPA official claimed that the only individuals within his district that had gained access to Alianza funding were a municipal president and a senator.

Región Lagunera Several ejidatarios explained that they did not have access to the required documents to be able to apply for government programs.

Some poor producers mentioned that they did not trust the consultants that could prepare proposals for them. They believed that their primary interest was to generate orders for their technical services.

Aquifer region Case examples Celaya A number of poor producers stated that they lacked the

necessary access to information about how to apply for the different programs.

Small producers explained that they were unable to pay the costs related to the programs. Some stated they would be willing to finance their part through a loan, but lacked access to credit.

Hidalgo Members of an irrigation unit explained that their applications had been rejected until they formed a union of 17 irrigation units.

Source: Fieldwork interviews. Poorer farmers also reported a number of obstacles related to the administrative features of the programs. One of the most common was technical requirements. In addition to up-front capital requirements, the paperwork required to receive Alianza support is considerable. Ejidatarios rarely apply for an Alianza grant actually by themselves. Rather, they contract an independent consultant – typically an agronomist or engineer – familiar with the technical and administrative requirements of the program. This involves an extra cost and also a risk. Access to subsidies is also largely conditioned on the availability of information. Most poor farmers had very little specific knowledge about subsidy programs: eligibility requirements, application processes, etc. Information is available; both at rural development district offices and the internet, but physically remote and economically marginalized farmers find it difficult to get access to it.

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Another obstacle to subsidy access is legal status. Although ejidos and Irrigation Units25

B. Incentives for Water Conservation

include the majority of farmers who use irrigation, and also include some of the sector’s poorest producers, they are largely excluded from Alianza funding. One reason is their semi-formal legal status. Because ejidos have communal decision-making structures, government agencies and banks typically avoid them: in the event of a problem, it is not clear who is accountable. Ejidatarios often reported lack of proper documentation of land ownership and water rights as important obstacles to accessing government programs.

In terms of impact on water extraction, it is clear that government expenditures in the irrigation sector are not linked to water conservation. Not only is the government not utilizing subsidies to promote water conservation, but certain subsidies, most notably the Tarifa 9 susbsidy, create incentives for increased groundwater extraction. Tarifa 9 The Tarifa 9 subsidy is well-known to be a major incentive for increased water extraction by farmers. By subsidizing the cost of extracting groundwater, it allows farmers to use more water than is both environmentally and economically sustainable. To reduce this incentive, the Mexican government has issued a new regulation, which alters the tariff structure to limit the total subsidy amount. In April 2005, the government issued a decree which (1) ended the Tarifa 9 subsidy after the volume of the water concession had been reached, and (2) mandated the use of water meter readings as the basis for calculation26

Fieldwork in Aguascalientes revealed that the use of historical data for applying a limit to Tarifa 9 led to significant increases in electricity costs for a large number of farmers. In some cases, this practice bore the additional problem that it rewarded irrigators who over-extracted water during previous years by legally sanctioning that amount. Nevertheless, especially poorer farmers complained that the increased electricity costs threatened their economic viability. As a result, social pressure has made it the norm in Aguascalientes to apply the latter method of estimation, based on a pump functioning non-stop. In other words, in practice the subsidy program has returned to its original conditions, providing irrigators with virtually unlimited, low-cost electricity. Irrigators in the other fieldwork sites did not even mention the problem of Tarifa 9 phase-outs, suggesting that their

. However, since metering has been uneven and water withdrawal is rarely monitored, the required data on water extraction were rarely available to apply the regulation in this form. Accordingly, the regulation also included an alternative formula for indirectly estimating water withdrawal based on electricity consumption, maximum well-depth and pump efficiency. Shortly after it was introduced, however, water users challenged this formula on the basis that it overestimated water withdrawal. The Agricultural Energy Law was subsequently modified to end the link to water concession volumes. Instead, it limited Tarifa 9 subsidies to the amount of electricity consumed during the prior two years, or, if these data are unavailable, to the energy consumed by a pump operating at full capacity all the time.

25 Ejidos and irrigation units (IUs) are not mutually exclusive institutional categories. While the majority of IUs are independent proprietors, most ejidos that irrigate are also IUs. 26 Diario Oficial, April 4, 2005, pp. 64-65.

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energy bills did not substantially change after April 2005, when the regulatory modification was introduced. Programs for irrigation infrastructure While both SAGARPA and CONAGUA provide significant resources for the maintenance and upgrading of irrigation infrastructure, these are typically not linked to water conservation. Though CONAGUA’s programs, Uso pleno and Uso eficiente, support the increased efficiency of irrigation technology, they do not require any commitments from farmers to actually reduce water extraction or comply with regular monitoring requirements. SAGARPA’s main subsidy programs are similarly de-linked from water use. Both Alianza and PROCAMPO distribute funds according to financial and administrative criteria that are unrelated to water extraction. The program evaluations of both SAGARPA’s and CONAGUA’s programs reveal that initially the investments in more efficient irrigation technology do lead to reductions in gross water extraction. It is not clear, however, whether these initial reductions in water extraction actually lead to real water savings (reductions in net extraction levels). Efficiency improvements not only reduce total water extractions, they also reduce return flows to the aquifer. In the absence of parallel measures to ensure that the crop mix and size of the irrigated area translate into real water savings, the net impact on water extraction may, therefore, be negative (see box 2.1 for more). Program evaluations as well as the qualitative fieldwork suggest that in practice not even initial reductions in gross water extractions are typically sustained. Lacking any requirement to maintain these reductions, beneficiaries indicate their intentions to expand their irrigated area, while maintaining or even increasing water extraction above the initial amounts. The evaluations of the Uso eficiente and Uso pleno programs for 2003 show that 42 and 60 percent of beneficiaries, respectively, claimed to use less water in the year immediately following the investment. However, 73 and 80 percent of respective users also indicated that they intended to utilize water savings to expand their irrigated area or add additional crops in the future, rather than sustaining the reductions in water extraction. In 16 and 8 percent of cases producers indicated that the modernization of their equipment would allow them to increase water extraction to make full use of previously underexploited water concessions. While there is no data to confirm this hypothesis, it would appear that larger farmers are the most likely to expand their irrigated area after a modernization of their irrigation infrastructure. In contrast to poorer farmers, they are likely to have access to the required land resources to expand the area of irrigation. In other words, the programs bias towards larger farmers may further undermine water conservation.

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Box 6.1: Water Rights Adjustment Program One of the more innovative approaches to limiting water use is the Water Rights Adjustment Program (PADUA), which is administered by SAGARPA. PADUA is essentially a “buy-back” initiative aimed at permanently reducing the level of water extraction in over-stressed aquifers. Under PADUA, the Mexican government offers two basic incentives to farmers. The first is money in exchange for all or part of the water corresponding to a concession. Where the concession-holder retains part of his water volume in order to continue agricultural production, PADUA may also be linked to resources for infrastructure upgrading. In other cases, SAGARPA pays for the entire concession, and physically seals the well(s) of the former concession-holder. Notwithstanding its potential, to date PADUA has not been applied extensively, but rather piloted in a few over-exploited irrigation districts in Sonora, Guanajuato and Chihuahua. Moreover, the ministry of finance has not set aside regular funds from the general budget. PADUA’s 2004 budget was Mx$225 million and all of it was allocated to just two states, Guanajuato and Chihuahua (SAGARPA 2005: 10). In terms of project results, pilot applications of PADUA have revealed a number of legal and practical challenges. The first of these was the question whether SAGARPA had the legal right to pay farmers for renouncing their water right. (Asad and Garduño 2005: 14-17). Additionally, PADUA encountered problems in implementation, including:

Compensation: In the absence of a robust market for water rights, some users have tried to negotiate for a higher level of compensation than the government is willing to pay. In Guanajuato the government’s maximum offer was Mx$2.50 pesos per cubic meter, while water users claimed that existing markets put the price at about Mx$6. SAGARPA has been extremely hesitant to provide higher levels of compensation not only because of budget limitations, but also because of the likelihood that the government’s compensation will become a leading indicator, and could fuel speculation and gauging between users.

Poorly defined water rights

. It is not always clear how much water users have a right to. In Guanajuato, the official water concession registry (REPDA) recorded 656 wells, but an actual count revealed almost twice that number. Residents produced documents requesting CONAGUA to register wells dating back ten years or more, but had never been answered. They insisted that they had rights to water from all the wells, and demanded payment accordingly to forego those rights.

Monitoring

. Even when SAGARPA pays for a concession, it requires measurement and monitoring by CONAGUA to ensure that water is not still being extracted. This may be a problem when the concession-holder rents out water to third parties.

Paying for nothing

. Many concession-holders have long since stopped producing crops, engaging in local non-agricultural work, or having moved to the city or abroad. In other words, SAGARPA sometimes pays for water that is not used in the first place, having no impact on conservation. (SAGARPA 2005: 21).

An isolated approach

: The combination of these problems points to the fact that water right adjustments cannot be carried out in isolation. Without complementary measures that help farmers to reduce their water extraction, few farmers will consider selling their concession.

The evaluation of Alianza’s Programa de Fomento Agrícola 2005 indicates that modernizations in irrigation systems reduced water extraction by a total of approximately 11.9 percent in the year following their installation. However, it is likely that beneficiaries of the Manejo Integral de Suelo y Agua program are similarly inclined to utilize efficiency gains to expand their irrigated area. The evaluation states that “increased efficiency does not translate per se into net water savings” (FAO/SAGARPA 2006a:69) and indicates that modernized irrigation systems coupled with subsidized

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electricity actually provides additional incentives to extract water, as it makes agricultural production more profitable. This assessment is also strongly supported by fieldwork results. An over-whelming majority of farmers confirmed that increases in efficiency are typically translated into expansions in the irrigated area. In fact, when asked why farmers were interested in obtaining subsidies for modernizing their irrigation technology, they commonly expressed the objective of increasing production, while maintaining the same levels of water extraction. Considering the associated reductions in return flows, this suggests that the modernization of irrigation practices actually increases net extraction levels. A number of CONAGUA and SAGARPA officials confirmed that the programs may even have the effect of increasing gross water extraction. For instance, the installation of more extensive canals or pipes enable farmers to bring water to crops farther from the point at which water enters the parcel.

C. Lack of Resources to Support Commercialization and Technical Capacity

The modernization of irrigation technology alone cannot achieve the real water savings required for addressing Mexico’s water crisis. To achieve reductions in net extraction levels, farmers require strategies that enable them to maintain profits, while significantly reducing their gross extractions. In most cases, this will also imply reducing their irrigated area. To confront this challenge, the installation of modern irrigation technology needs to be accompanied with complementary measures, like the conversion to higher-value and more water efficient crops. In some cases, greenhouses and other technological innovations offer further water saving potential. However, like the installation of modern irrigation infrastructure, these measures imply significant economic and technical challenges, especially for poor producers. Many producers lack the necessary technical capacity and access to market opportunities to justify investments in new technology or alternative crops. However, government programs offering marketing or technical support are very limited. The main capacity building program within Alianza para el Campo is PRODESCA (Sub-programa de desarrollo de capacidades en el medio rural), which forms part of Alianza’s rural development program. However, in 2005 PRODESCA only received 13 percent of the rural development program’s resources, which amounts to less than 4 percent of total Alianza resources (FAO/SAGARPA 2006b). The principal program supporting commercialization is entitled Programa de Apoyos al Productor por Excedentes de Comercializción. Like Alianza para el Campo, its budget has increased over the past years, averaging about 13.5 percent of SAGARPA’s total budget between 2000 and 2005 and totaling Mx$6.331 million in 2005. However, over half of this total typically goes to a program entitled Ingreso Objetivo, which provides price guarantees for a limited number of crops. In 2005 Ingreso Objetivo received over 70 percent of total program resources, of which 52 percent provided price guarantees to corn producers. The programs directly targeting commercialization, including support for crop conversion, are relatively limited. In 2005 these programs amounted to less than Mx$1.5billion. Finally, the Programa de Apoyos al Productor por Excedentes de Comercialización is highly concentrated geographically. In 2005 only four states

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(Sinaloa, Sonora, Tamaulipas and Jalisco) received 69 percent of all resources (FAO/SAGARPA 2006c). During fieldwork in the six aquifer regions, many poorer farmers explained that a lack of resources, technical skills and secure markets prevented them from changing their current productive activities. Achieving real water savings while maintaining overall profitability implies a combination of financial, technical, and commercial challenges. It not only requires modern irrigation technology but also conversion to higher value crops. Farmers, therefore, face the simultaneous challenges of investing in and learning new irrigation and crop production technology as well as finding a buyer for their new crops. Box 6.2: Farming without technical assistance Even when producers have access to public resources, lack of technical assistance often prevents them from taking full advantage of investments in irrigation infrastructure. In the late 1980s, Mexico’s long-established system of public sector purchases, input distribution and technical assistance was dismantled. However, particularly in the area of technical assistance, nothing took its place. As a result, producers who lack their own technically qualified staff have to make complex planting and irrigation decisions on their own. Numerous local government officials and experts interviewed during fieldwork worried about the lack of availability of technical assistance. An official at the Ures rural development district, Sonora complained that cattle ranchers “don’t know how to irrigate anymore.” He argued that many of them use the most water when supply is lowest, and no governmental authority has done anything to influence forage planting decisions. A small agricultural supplier in Celaya reported that inputs are expensive and technical assistance is scarce. In one of the wealthier areas studied, he claimed that 90 percent of the people who visited his store asked for information. In Hidalgo, a CADER chief stated that producers complained about the lack of agricultural extension services, and that many engineers and technical advisors who lost employment with the government have formed consulting firms that charge for what was once a government-provided service. In Zacatecas, the secretary of the local COTAS stated that he knew of numerous cases, where producers had installed modern irrigation systems only to revert back to their old methods, due to their lack of technical skills. Several grape growers in Aguascalientes stated that their main constraint was not the lack of resources but the lack of good quality technical assistance to maintain their irrigation systems. On the production side, farmers must learn new planting, harvesting and irrigation methods, upgrade their land accordingly, and invest in new equipment and biotechnology. On the commercial side, they must find a local distributor who will buy, at a fair price, during the brief period of time in which their produce is fresh, and comply with health and quality standards. The latter are especially onerous for U.S. and European markets. While richer farmers can afford to invest in the necessary certifications to access new markets, poorer farmers often lack both the technical know-how and the financial resources. Additionally, fresh fruits and vegetables are far more complicated to transport than crops like corn, wheat or alfalfa, which are relatively resistant to transit over rough terrain. Fruits and vegetables may get damaged or spoiled before they arrive at the selling point. Local experts in the different aquifer regions also emphasized that many smaller farmers who install drip irrigation technology – both with and without government support –fail to properly use and maintain the systems. As a result, these farmers are often unable to irrigate more efficiently and may eventually revert back to their original practices.

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Box 6.3: Obstacles to commercialization During the 1970s and 1980s, the government actively promoted the creation of rural credit unions and producer associations. Most of these were created to produce and commercialize grains in the context of a guaranteed pricing system organized by CONASUPO, Mexico’s now defunct state agricultural marketing agency. However, with the dismantling of this system in the 1990’s, most of these organizations disappeared, and today most farmers market their products on an individual basis. Accessing markets typically require resources and expertise that go beyond the capacity of many small farmers. Producers in the different aquifer areas described a number of different obstacles to commercialization that they face:

Many farmers reported that they are highly vulnerable to merchants and distributors. Ejidatarios in Aguascalientes mentioned that coyotes dictated prices and physically prevented farmers from bringing their crops to nearby markets.

Medium and large growers in Celaya complained of manipulation by agro-industry. They reported that seeds for vegetables are sold by transnational agrobusiness firms and are expensive. Moreover, producers themselves lack the capacity or knowledge to determine the quality of seeds or whether they are defective, and lack technical support to assist them in this critical aspect of commercialization. Two ejidatarios in Celaya had participated in a cash crop contract, the sale of lettuce to a transnational company. According to the producers, the company sold them a defective seeds that yielded low-quality crops, which were categorically rejected by the same company. Lacking legal protection or a regulatory arbiter, the investment was a total loss.

In Sonora, one focus group in San Miguel Horcasitas identified transport as a major problem. While the town is not very far from Sonora’s capital, the trip still takes about three hours, and requires a sturdy truck, due to very poor road conditions. While crops like corn, wheat or alfalfa are relatively resistant to transit over rough terrain, more valuable crops like fruits and vegetables would arrive in Hermosillo badly bruised and damaged. Local farmers argued that supermarkets would either reject a large proportion of the cargo, which would be an economic loss, or reject the entire lot to avoid the costs of inspection. Moreover, export to the US is currently unthinkable. US law stipulates that no produce sold to the public may travel more than two kilometers of unpaved roads, and requires certification of transport conditions.

A grape producer in Sonora emphasized the importance of certification to ensure a stable market for his goods. Even though he sold nothing to Europe, he explained that it was essential to maintain the appropriate certifications. “If anything happens in the US market --- prices drop, the government slaps on restrictions – I’ll have an alternative.” He noted that the initial certification cost several thousands of dollars and required a costly annual renewal. “For me it’s a relatively insignificant cost, but for a small farmer, it would be impossible. The only way for them to get this kind of certification is to form an association.”

D. Linking Government Support to Water Savings As discussed in preceding sections, government support in the water sector is largely focused on large producers and provides only weak or even negative incentives for sustainable water use. Moreover, there is an important lack of resources to finance crucial complementary services to overcome obstacles in the areas of commercialization and technical knowledge. As a result, only few poor farmers are able to take the risk of modernizing their irrigation systems and adjusting their productive activities. Those farmers who do invest in modern irrigation technology, typically large, well-capitalized producers, have few incentives to translate efficiency gains into real water savings. Interviews with water users and government officials, however, indicated that under the right conditions especially poor farmers are willing to reduce their water extraction and undertake the necessary changes in their productive activities. Water users were asked to

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consider a formal agreement in which users would agree to permanently reduce their concession volume, install water meters and permit regular monitoring, in exchange for financial and technical support to upgrade irrigation infrastructure or commercialize water-efficient crops. Especially poor farmers responded overwhelmingly favorably to this proposal. Virtually all small farmers, including independent proprietors and ejidatarios, readily agreed with the general principal of water conservation in exchange for resources. This finding is also supported by a study of Irrigation Units carried out by the Sonora state water commission (Moreno 2006). While implementation would depend on an effective system to monitor water extraction, this indicates an opportunity for government resources to be reoriented to provide stronger incentives for water savings. Some large growers, on the other hand, showed resistance to reductions in water consumption. Those from the Costa de Hermosillo Irrigation District dismissed any deal involving water reductions as unfair. In a focus group discussion, a member stated, “We have already cut back too much, and they can’t ask us to go any further.” Indeed, the group stuck by its longstanding demand for compensation over cutbacks already imposed. In addition, older farmers tended to demonstrate the most intransigence about change – a potentially important finding since the average age of farmers in the region is relatively high and getting higher.

E. Conclusions

These findings suggest that government support, which primarily targets larger producers, not only has adverse distributional impacts but also targets water users that are less likely to entertain long-term reductions in water extraction. At the same time, to make efficient use of modern irrigation technology, small farmers require more than just financial support. Technical assistance and marketing support are essential elements for small farmers pursuing the complementary steps of crop conversion and modernization of irrigation infrastructure. It is clear that existing technical assistance and commercialization programs do not satisfy the needs in this area. Furthermore, to translate infrastructure upgrades into more sustainable levels of water extraction government support has to be linked to explicit water saving requirements and an effective monitoring system. Such water saving requirements would have to be high enough to ensure reductions in net extractions by the individual farmers. In other words, reducing gross extractions alone will not suffice, but in most cases the irrigated area would have to be reduced as well. This goal can only be achieved with significant complementary assistance and monitoring. In this context, it is important to emphasize that most farmers see the need to retain access to enough water to remain productive. Interviews with large and small producers alike suggest that closing down wells – as opposed to reducing concession volumes – is seen as a drastic step that makes an agricultural livelihood unviable. Rather integrated subsidy programs, which combine financial incentives with capacity building and monitoring elements, would bear considerably higher potential for achieving water savings. Simultaneously, farmers might be offered support for converting to a non-agricultural livelihood. In return for relinquishing their water right, farmers might receive not only a one-time cash payment – as in the PADUA approach – but access to support for a transition to an alternative form of employment. One approach might involve

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restructuring the PROCAMPO subsidy for water-stressed areas. Rather than supporting the continued cultivation of land, it might support a transition out of agriculture. Finally, to achieve this combination of monitoring and support, it is essential to garner the support of producers. The particular mix of crop conversion, modernization of irrigation systems, reductions in irrigated area and other water conservation measures can only be determined on the local level with the participation of water users themselves. In other words, to sustainably address the challenge of groundwater over-exploitation localized solutions are required. While general operating rules should be improved to ensure that investments in irrigation systems are linked to water savings and that access to programs becomes more equitable, the ultimate solution will have to be adapted to the local conditions and will have to involve the participation of local stakeholders. The challenge of creating the conditions for the development and implementation of such local solutions is discussed in the following chapter.

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7. PSIA MAIN FINDINGS AND FINAL CONCLUSIONS Mexico faces serious challenges in the water sector. Despite significant advances in reforming water sector institutions, sustainable water use remains an elusive goal. If action is not taken on groundwater overexploitation, the potential poverty and social impacts will be catastrophic in the future as shown in other countries. As some aquifers get to a point of no return, it will be poor farmers with fewer opportunities to adapt or move into a better location that will be affected the most. This situation is spurred by a geographical bias that concentrates public expenditures in irrigation, and other infrastructure in the northern states where water availability is the lowest. While continued support for water resources management is essential for addressing the social and environmental challenges of groundwater depletion in the North of the country, investments in agricultural development in the poorer South could make a substantial contribution to poverty reduction and sustainable development. Agriculture, which accounts for only about 4 percent of GDP, is the primary user of water, absorbing nearly 80 percent of Mexico’s water supplies. However, agriculture production remains as the main source of income for a large number of poor farmers and rural laborers. In addition, the PSIA highlights that water policies, in particular, public investments in irrigation systems and subsidizing electricity for pumping in areas of overexploited aquifers are unsustainable and have a regressive distributional impact. Poor farmers at large are not benefiting from them. The findings of the PSIA suggest that public resources in the water sector also favor medium to large producers over smaller farmers. It identified that the technical requirements and matching contributions established in some SAGARPA and CONAGUA’s programs limit the access of poor farmers. The small farmers who do not have the skills and marketing opportunities to make efficient use of modern irrigation systems are left behind. For instance, Tarifa 9 subsidy strongly favors richer farmers; of the 105,000 recipients of the subsidy, 68,000 receive an annual subsidy of less than Mx$20,000, while 33 users receive a subsidy of over Mx$500,000, which amounts to a Gini coefficient of 0.91. Because the subsidy lacks conditions to reduce water extraction and adequate monitoring, it is causing an increase in irrigated area rather than reducing extractions. This maintains a high profitability of land and consequently a distortion in the agriculture sector with distributional impacts. In addition, the PSIA highlights that poor farmers are likely to be most affected by aquifer overexploitation in the future as they lack the capital to adapt to falling water tables when they reach a critical level and therefore are more likely to give up their productive activities than wealthier famers as analyses made of the links between water overexploitation and poverty in other areas of the world, indicate. Consequently, groundwater depletion will further contribute to the migration of people from poor rural areas to urban centers in Mexico and to the U.S. On the current poverty impacts of aquifer overexploitation, the PSIA reached three main conclusions that are key considering simultaneously. At the macro or country level it does not find significant links between rural poverty rates and aquifers overexploitation. The econometric analysis of the PSIA shows that in the short term the rural poor are not particularly affected by the increasing costs of pumping in the water sector caused by

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groundwater overexploitation. This might be explained because poor producers do not pump water, they use water wheels (norias) or surface water and as the result, the increase in the cost of pumping does not affect them. In addition, the qualitative analysis of the PSIA shows that the poor miss access, capital and resources to take advantage of pubic investments in irrigation and water infrastructure. Despite the lack of counterfactual evidence that the current situation of aquifers does not impact rural poverty in Mexico as whole, it is important to consider pockets of rural poverty where water depletion is causing substantial problems to rural families. In fact, the qualitative studies made by the PSIA at the local level indicate that the rural poor are affected for the current situation of aquifers overexploitation because they lack the capital to adapt to falling water tables and they are more likely to give up their productive activities than wealthier farmers. These conclusions are central to any policy on groundwater in Mexico. It was traditionally thought that irrigation and subsidies for pumping needed to be sustained for its positive impacts on rural poverty. Qualitative analysis of the PSIA has shown that the poor lack capital and resources to take advantage of those subsidies. In addition, the quantitative analyses of the poverty and social impacts show that with more aggregated data for the whole country, that rural poverty in Mexico is not concentrated where aquifer overexploitation is the highest. As such, changes in regulation of electricity tariffs if targeted at pockets where rural poor are concentrated may help to signal better use but have no impact on rural poverty as a whole. Therefore, the government has the opportunity to reduce subsidies to water pumping and revise its investment policy in the water sector without affecting the rural poor. However, in the long term, the analysis suggests that social policies to address future, potential negative effects of aquifer overexploitation on the poor need to be seriously taken into account. Along the lines of a reform for groundwater, Mexico should consider proper instruments of social policies to address the challenges of the future, such as the definition and implementation of a strategy of managing the transition of poor farmers out of irrigated agriculture to other rural economic endeavors; and the institutional and capacity building measures to strengthen the participation of the rural poor in local water management mechanisms such as COTAS and basins councils.

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8. ANNEX SOC I O-E C ONOM I C PR OF I L E S OF F I E L DW OR K L OC A T I ONS

■ Very low levels of marginality

■ Low levels of marginality ■ Medium levels o

marginality ■ High levels of margina

Acuífero Actopan-Santiago de Anaya

Municipality GDP (in US$ PPP)

GDP per capita(in US$ PPP)

Primary sector

(% of labor force)

Secondary sector

(% of labor force)

Terciary sector

(% of labor force)

Marginality index

HDI

Hidalgo Tetepango 55,859,451 6,252 15.3 51.4 30 -1,10 0.7748Hidalgo Mixquiahuala de Juárez 222,780,449 6,353 22.6 26.8 48.5 -1.036549 0.7781Hidalgo Actopan 296,007,923 6,434 15.4 29 53.5 -0.939678 0.7785Hidalgo Francisco I. Madero 186,897,480 6,560 29.5 17.7 51 -0.872297 0.7823Hidalgo Ajacuba 79,032,427 5,448 19.7 47.4 31 -0.745799 0.7525Hidalgo Arenal, El 64,026,907 4,502 19.7 37.7 41 -0.312077 0.7466Hidalgo Santiago de Anaya 75,190,245 5,536 34.8 27.5 35.8 -0.166507 0.7441

12,102,374,400.00 5,136 25.2 28.7 44 -0.75

(high, 5º) 0.7515Hidalgo Acuífero Celaya

Municipality GDP (in US$ PPP)

GDP per capita(in US$ PPP)

Primary sector

(% of labor force)

Secondary sector

(% of labor force)

Terciary sector

(% of labor force)

Marginality index

HDI

Guanajuato Celaya 2,525,225,052 6,594 8 28 60 -1.46 0.8444Guanajuato Cortázar 313,883,022 3,858 19 32 45 -0.94 0.8185Guanajuato Villagrán 171,957,163 3,743 17 45 35 -0.93 0.8057Guanajuato Apaseo el Grande 228,485,112 3,324 20 40 34 -0.56 0.7758Guanajuato Apaseo el Alto 168,576,039 2,967 20 36 37 -0.44 0.7928Guanajuato Sta.Cruz Juventino Rosas 183,079,284 2,796 34 28 34 -0.33 0.7756Guanajuato Comonfort 182,565,758 2,699 22 35 39 -0.13 0.7764

33,382,379,520 6,797 13,07 36,00 46,730.09

(med, 14º) 0.7662Guanajuato

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Acuífero Interestatal Ojocaliente-Aguascalientes-Encarnación

Municipality GDP (in US$ PPP)

GDP per capita(in US$ PPP)

Primary sector

(% of labor force)

Secondary sector

(% of labor force)

Terciary sector

(% of labor force)

Marginality index

HDI

Aguascalientes Aguascalientes 5,957,512,490 9,259 2.4 33 61.8 -1.871350 0.8205Aguascalientes Pabellón de Arteaga 183,363,605 5,347 15 41.8 40 -1.361102 0.7771Zacatecas Cuauhtémoc 60,543,216 5,593 30.7 40 27 -1,24 0.7466Aguascalientes Jesús María 363,705,790 5,674 10 46 40 -1.141389 0.7709Aguascalientes Rincón de Romos 194,122,186 4,660 19 41.2 37.2 -1.124312 0.7653Aguascalientes S. Francisco d. l. Romos 102,611,604 5,114 17.6 46.3 34 -1.072335 0.7643Zacatecas Luis Moya 66,253,701 5,803 27.6 36.3 32.6 -0,79 0.7601Zacatecas Trancoso 71,673,756 5,480 13.5 32 48.7 -0,79 0.7470Jalisco Teocaltiche 170,707,904 4,492 21 35.4 42.4 -0.681649 0.7309Zacatecas Ojocaliente 236,938,736 6,200 19 29.3 48.9 -0,66 0.7566Aguascalientes Tepezalá 73,247,691 4,437 29 40.7 27.2 -0.656142 0.7502

Aguascalientes 11,410,062,336 10,857 7 35 55- 0.95

(low, 28º) 0.8246

58,572,382,208 8,716 10 31.8 54.9-0.76

(low, 27º) 0.8007

7,023,371,264 5,070 20.67 26.7 49.480.15

(med., 13º) 0.7563

Jalisco

Zacatecas Acuífero Principal – Región Lagunera

Municipality GDP (in US$ PPP)

GDP per capita(in US$ PPP)

Primary sector

(% of labor force)

Secondary sector

(% of labor force)

Terciary sector

(% of labor force)

Marginality index

HDI

Coahuila de Z. Torreón 6,125,446,101 11,568 2 34 60 -1.982973 0.8373Durango Gómez Palacio 2,595,610,683 9,497 7 42 48 -1.638340 0.8120Durango Lerdo 910,883,493 8,101 12 40 45 -1.307881 0.7978Coahuila de Z. Matamoros 531,911,015 5,780 15 46 37 -1.147338 0.7646Coahuila de Z. Francisco I. Madero 244,950,407 5,273 17.7 41.5 38.5 -1.133161 0.7582Durango San Pedro del Gallo 5,674,948 3,025 63 10.6 25 -0.988934 0.7256Coahuila de Z. Viesca 76,708,534 4,044 31 46.6 20.5 -0.523356 0.7243

31,309,488,128 12,602 5.2 42.3 49.2

-1.137 (very low,

29º) 0.8284

12,320,795,648 8,123 15 31.1 51-0.018

(med., 15º) 0.791Durango

Coahuila de Zaragoza

71

Acuífero Río Sonora

Municipality GDP (in US$ PPP)

GDP per capita(in US$ PPP)

Primary sector

(% of labor force)

Secondary sector

(% of labor force)

Terciary sector

(% of labor force)

Marginality index

HDI

Sonora Hermosillo 6,987,006,865 11,457 8 28 60 -1.820001 0.8366Sonora San Felipe de Jesús 3,075,327 7,393 38.5 25.4 33.9 -1.341022 0.7961Sonora Huépac 8,727,761 7,643 40 22.5 31 -1.297027 0.8129Sonora Ures 50,932,926 5,325 38 22.8 35.2 -1.135636 0.7770Sonora Banámichi 9,757,413 6,575 35.3 28.7 34.9 -1.069712 0.7857Sonora Baviácora 22,025,276 5,914 27 40 31.9 -1.055282 0.7714Sonora Aconchi 14,406,486 5,953 30 38.7 28 -1.025016 0.7706Sonora Arizpe 19,314,531 5,687 40 33.8 24.3 -0.839024 0.7641

24,882,583,552 10,430 15.8 29.39 51.2-0.74

(low, 26º) 0.8163Sonora Acuífero Costa de Hermosillo

Municipality GDP (in US$ PPP)

GDP per capita(in US$ PPP)

Primary sector

(% of labor force)

Secondary sector

(% of labor force)

Terciary sector

(% of labor force)

Marginality index

HDI

Sonora Hermosillo 6,987,006,865 11,457 8 28 60 -1.820001 0.8366

24,882,583,552.00 10,430 15,8 29,39 51,2-0,74

(low, 26º) 0.8163Sonora Sources: GDP and HDI data: UNDP (2004); Labor data:INEGI (2000); Marginality data: CONAPO (2005).

72

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