Water Pricing in Mexico: Pricing Structures and Implications

Abstract

Mexican water price structure is set to reflect water availability and its economic value. Considering this framework, nine water availability zones have been established, in which the highest price is paid for zones with scarce amounts of water, and the lowest price is paid in zones with an abundance of water. Additionally, different tariffs have been established according to sectorial users, such as industry, households, and agriculture. This chapter develops a brief framework for water management in Mexico as a context for analyzing the pricing system of water actually used in Mexico. Also, the chapter briefly describes payment for environmental services—hydric (PES-H), as an instrument of environmental policy, because of its effects on pricing water from a forest conservation perspective. We conclude that although the water pricing system depends on water availability, the application of intra-regional tariffs for consumption (the largest water user being the agricultural sector) encourages irrational use due to subsidies applied to consumption.