Addressing Environmental Liabilities In MexicoThu, 01/11/2018 - 11:56
Q: What are the main problems that Mexico faces regarding water and waste management and what is the role of the private sector in addressing these?
A: Meeting the needs for water and waste infrastructure is one of the main regional challenges for Latin America. I think Mexico is lagging in water and waste management, as only about 55 percent of its wastewater is treated, according to CONAGUA. Regarding waste, around 85 percent is sent to landfills, but many of these are not in compliance with environmental regulations and best practices, presenting risks of soil and groundwater contamination and release of air emissions including different pollutants and Green House Gases (GHG). Mexico produces more than 100,000 tons of garbage a day, demanding a large investment for its appropriate management. The country also has an important number of environmental liabilities related to contaminated sites, many of them since decades ago and that now need to be addressed remediation and/or restoration programs to rehabilitate the sites as they can potentially contaminate watersheds and have harmful effects on human health.
Veolia believes that the private sector has a key role to play as the needs are numerous and governments cannot cover them all by themselves. Beyond the economic matters, such as funding allocation, the technological expertise is also a key contribution that the private sector has the capacity to make. Governments are not always able to develop the specialized expertise to execute projects, whereas Veolia, for example, has been advocated to water, waste and energy management for the past 160 years.
Q: How should water management infrastructure projects be prioritized?
A: Infrastructure priorities can be perceived differently by different actors, so the challenge becomes one of merging multiple perspectives into creating the best infrastructure needed. To start, there must be a definition of whether water projects will be carried exclusively by the government or if it is better to allow the participation of the private sector. We believe that each city and each hydrological zone requires a tailored strategy. Solutions should not be generalized, always having the government or private companies handling all water-management matters.
For example, in Mexico City, we work with SACMEX doing water measuring, invoicing and collecting on behalf of the institution. We contribute by making this huge process more efficient, which in the end is translated into savings for the government. We also have operated the whole municipal water system of Aguascalientes for 25 years, from extracting water from wells to redistributing, measuring and invoicing it, among others. I believe this is a good example of how a private company can operate within a public body in a reliable way. When we entered this contract, continuity in water services in Aguascalientes was around 65 percent, but we have improved it up to 99.5 percent.
Q: What are the key factors to consider when ensuring a reliable and efficient water management system and how can Veolia contribute to this goal?
A: Besides all the commercial matters that water systems entail, water management also implies the rehabilitation of potable water networks and sewage infrastructure. Veolia offers the technology to repair pipes without having to break ground and disrupt streets. Understanding the disturbance that these works can represent in densely populated cities, we developed technologies with autonomous robots that identify where subsoil infrastructure repairs are needed and that carry them out with the least disruption to urban dynamics. We believe that this rehabilitation is the right opportunity for the private sector to become a strategic ally for the government to address the enormous challenges that the country has together.
Veolia has been working in Mexico for 25 years and we hope to further see the government opening the door to PPPs for developing water infrastructure. We understand that water is a complicated topic as any private investment is often perceived as the privatization of a human right. I think that water is a human right, but its piping and purification are not, at least in cities as densified as Mexico City. So private participation is crucial, especially in cities that have no water and need to invest in desalination plants as well as wastewater treatments plants and systems for water reuse.
In ensuring an efficient and reliable water management system, all major infrastructure projects must start with a diagnostic study to identify the conditions of water and sewage networks that allow determination of how much needs to be invested and how it will be represented in savings and efficiency. But Latin American countries are not used to take this step and usually prefer to start digging blindly. Diagnostic tests allow allocating resources where most needed. For example, Mexico lacks specialized tests to determine the level of investment required to address all leakage problems. But I have witnessed that once a city or municipality has decided to invest in fixing leaks, the benefits are immediate as the amount of water loss is reduced and more water is available.
Q: What is the role of a circular economy in improving the water and waste management sectors in Mexico?
A: Veolia is dedicated to promoting a circular economy through all its processes. I think this is the global development model to pursue because it not only shifts from a linear economy that extracts, uses and disposes of resources but promotes reuse and recycling. China recently launched a regulation that prohibits import of material for recycling. As China was the biggest receptor of this material, countries now need to find other alternatives for disposing of their waste. This entails developing more infrastructure for waste management and recycling and modernizing existing facilities. So, if a material cannot be reused, at least it can be turned into energy. For example, EU countries estimate that China’s ban will represent an additional investment of €10 billion to convert its recycling facilities, so that is the challenge for local and federal governments.
Regarding the industrial sector, the circular economy demands companies have an extended responsibility approach to products. This means that after manufacturing a given product and delivering it to the supply chain or the end consumer, companies believe their responsibility ends and have no obligation regarding what happens with the product in the future. This is shifting to reincorporating products into manufacturing processes after their useful life ends. The industry must open space in its value chain to better use materials and waste. I believe that a circular economy approach should be driving the next administration and industrial agenda in the future.
Q: How is your partnership with the energy companies and why were you the right partner to operate their plants?
A: Regarding water management for energy companies, we operate four water plants for five Iberdrola electricity stations. We won the bid for this project a couple of years ago as the company understood that its expertise was energy generation, for which water matters are simply fundamental. As the latter is not Iberdrola’s core business, it tendered the operation of its water treatment plants. Our management has saved the company US$1.1 million per year because we know how to manage water plants efficiently and with the required technology. We also operate residual water treatment plants for Ternium.
We are striving to further develop our industrial solutions for water management. When starting in Mexico we were lagging in this niche because our core business for many years was the sale of water treatment equipment though Veolia’s Water Technologies. But we realized that even if we sold the best equipment to a client that does not have the expertise to properly use it, the machinery would eventually fail. So, for the last five years, we have implemented a business model that integrates our equipment as part of the management services we offer. We make the installation, finance the equipment and operate it in long-term contracts to add more value to the industry.