Competition for Water in the Lerma-Chapala Basin

Abstract

Competition for water in the Lerma-Chapala basin in central Mexico has brought on a state of crisis. Rampant competition for groundwater has produced dramatic declines in aquifer levels (2.1 meters per year sustained over decades). In early 2000, the stored volume in the receiving waters of Lake Chapala was 28% of capacity, among the lowest levels recorded since systematic data collection began in 1934; runoff inflows have declined significantly with increased consumptive use upstream and declining groundwater levels. Surface water resources, which are subject to considerable inter-annual variability, have conventionally been used for low-to medium-valued irrigated production. Water demand is increasing for all consumptive use sectors (particularly domestic and industrial uses, but also agriculture), reinforcing the critical need for effective allocation mechanisms. The basin is subject to rapidly changing policy and economic conditions. Institutional innovations include a recent water law, basin-level water resources planning, increased user participation in water management, and nascent intra-sectoral water markets. In addition, the past few years have seen the introduction of a broad and far-reaching set of neo-liberal policies including Mexico’s signing of the North American Free Trade Agreement, the lifting of price controls for agricultural commodities, and the rolling back of subsidies, particularly for electrical energy. Partly in response to — but clearly with a momentum that proceeded — the changing macro-economic context, there has been rapid urbanization accompanied by seasonal or permanent migration from rural areas to the United States. These processes have important implications for agricultural production and the associated water use. This paper presents and analyzes data to characterize current water use and demand. Evolving water allocation mechanisms are assessed. We review the 1991 interstate treaty on the basin’s surface waters and assess the tradeoffs associated with the inter-sectoral water transfers it mandates. Economic valuation techniques are applied for the urban and agricultural water use sectors, with the results indicating that the highest marginal values lie in industrial water use (US$ 0.86–1.34 m⁻³) followed by commercial (US$ 0.26–0.94 m⁻³) and domestic uses (US$ 0.24–0.46 m⁻³). Lower marginal values were estimated for agricultural use, differentiated by canal water (US$ 0.06–0.24 m⁻³) and groundwater sources (US$ 0.07–0.72 m⁻³). The bulk transfer of 240 million cubic meters of water from agriculture to Lake Chapala for subsequent urban uses in Guadalajara city in November 1999 resulted in an estimated US$ 14.1 million in foregone agricultural benefits, equivalent to US$ 0.06 m⁻³. Given that estimated urban water values are at least four (and up to 20) times greater than this loss, compensation of the benefits foregone by farmers appears to be economically feasible for urban water users. An option contract arrangement in which urban users agree to compensate farmers for foregone benefits appears to be a possible approach to intersectoral allocation in the basin.