Water Stress: Strategic Risk for Business in Mexico

Water scarcity is emerging as a structural economic risk in Mexico, where 71% of the territory faces high or very high water stress, influencing investment decisions, operational continuity and regulatory compliance across manufacturing, food and beverage, energy and agriculture. The updated Water Law tightens concession rules, increases criminal liability and centralizes oversight, directly affecting M&A strategies, industrial park operations and corporate access to financing. As companies adopt water-efficiency technologies and stricter governance frameworks, water management is becoming a core factor shaping competitiveness, capital allocation and long-term resilience in Mexico’s industrial economy.

Water scarcity is emerging as a structural economic risk in Mexico, where 71% of the territory faces high or very high water stress, reshaping investment, operational continuity and regulatory compliance across manufacturing, food and beverage, energy and agriculture. The updated Water Law tightens concession rules, increases criminal liability and centralizes oversight, directly affecting M&A strategies, industrial park operations and corporate access to financing. 

Water scarcity has ceased to be merely an environmental challenge and has become a structural economic risk factor. In Mexico, where a large portion of the territory faces high water stress, limited water availability is beginning to reshape investment decisions, operational planning and regulatory compliance. For the business sector, access to water, its quality and its governance are no longer secondary variables, but critical elements that directly affect operational continuity, corporate reputation and access to financing.

In Mexico, 71% of the territory faces high or very high water stress, meaning that new water demand can no longer be met. Additionally, 106 municipalities show high vulnerability to droughts, as reported by Red del Agua UNAM (UNAM’s Water Network). Several regions are already experiencing critical levels of water scarcity, particularly in the north and center of the country. One of the most concerning cases is Baja California. According to the State Citizen Water Commission, 2025 was one of the driest years for the region since 1950, reaching an index of 4.67 out of 5, placing it near its highest recorded level.

Eduardo Sánchez, Minister of the State Citizen Water Commission, explained that the region’s dependence on external water sources is nearly total: historically, 95% of its water supply comes from the Colorado River, while only 5% comes from local sources. He noted that insufficient rainfall limits infiltration, leading to the overexploitation of aquifers. “The possibility of supplying water locally becomes almost nonexistent. There is no well that can provide enough water to be considered a reliable source,” Sánchez stated.

A Global Risk with Financial Implications

Globally, studies show that millions of people and economies are exposed to risks stemming from water scarcity and increasingly frequent droughts. Data from the World Resources Institute (WRI), through its Aqueduct Water Risk Atlas, indicate that 25 countries—home to one-quarter of the world’s population—face extremely high water stress each year, using at least 80% of their available renewable water supply. Furthermore, around 4 billion people, or half of the global population, live under conditions of high water stress for at least one month per year.

This level of pressure threatens agricultural production, energy generation, manufacturing and social stability, in a context where global water demand has more than doubled since 1960 due to population growth, industrial expansion and economic development. At the same time, supply is constrained by insufficient infrastructure, ineffective water management policies and the impacts of climate change.

International institutions have warned that water scarcity can significantly affect economic output and expose millions of dollars in financial assets to water-related risk. The European Central Bank (ECB) cautioned that extreme droughts could wipe out up to 15% of the eurozone’s GDP. Additionally, eurozone banks hold US$1.5 trillion in loans exposed to sectors highly vulnerable to water stress, including agriculture, manufacturing, mining and construction—evidence of systemic financial risk. Agriculture is the most exposed sector, with up to 30% of agricultural output in southern Europe at risk.

The ECB emphasizes that water stress has cross-sectoral impacts: it reduces agricultural yields, disrupts manufacturing operations, limits hydropower generation and affects inland shipping. In parallel, insurance firm Allianz estimates that nature degradation could contract the global economy by 2.3%. This global context forces Mexican companies with international operations or global supply chains to view water risk not merely as a local concern, but as a key factor in competitiveness and resilience.

The impacts of water stress on businesses are multifaceted, affecting daily operations as well as financial and reputational standing. Companies also face higher costs as they turn to alternative sources, including water treatment, reuse systems or third-party purchases, which put pressure on margins and require adjustments to cost structures.

Reputational risk is also intensifying in an environment where consumers and investors demand greater transparency and accountability in natural resource management, particularly from companies with significant water footprints such as data centers and large industrial complexes. Moreover, water scarcity is increasingly reflected in access to financing, as it can influence credit risk assessments by financial institutions, raising the cost of capital for companies exposed to water vulnerabilities.

Regulation, Innovation and Corporate Response

In line with the updated Water Law, Mexican companies are expected to face new regulatory challenges. Omar Aguilar, Partner, Pérez Correa González Law Firm, explains that under the new regulations, water will no longer be treated legally as a commodity but rather as a human right under strict state stewardship.

According to Aguilar, the most significant change for companies is the prohibition on sharing water concessions, fundamentally altering merger and acquisition strategies linked to water rights. Regardless of whether entities are subsidiaries, affiliates or tenants within the same industrial park, each company must now hold its own individual concession.

He also warns that the sanctioning regime has been substantially strengthened. What previously constituted an administrative violation may now become a serious criminal offense prosecuted ex officio. This marks a turning point for administrators, executives and technical and legal officers, who must review and regularize their concessions, ensuring that no permits are expired and that water use remains within authorized volumes. The reform also prohibits transferring or redistributing water between locations or within industrial parks without individualized titles. Oversight will be centralized through the Public Water Registry, an official database that recognizes both corporate permits and the historical and legitimate rights of Indigenous and Afro-descendant communities.

Aguilar recommends that, in this context of heightened scrutiny and potential criminal liability, companies implement comprehensive water management programs without delay. “It is essential to act immediately through comprehensive audits of permit validity and water-use traceability, regardless of ordinary legal deadlines. Likewise, as a regulatory shield, companies must defend the ownership and concessioned volumes against potential reductions by authorities under arguments of excessive concentration of the resource,” he noted.

Nonetheless, beyond the risks, the water crisis is also driving innovation and a transition toward more water-efficient economic models. Bernardo Villasuso, Water Treatment Leader, Ecolab Mexico, emphasizes that five- and ten-year investment decisions can no longer assume guaranteed availability, but must account for quality, regulatory conditions and associated risks. Technological innovation is emerging as a key lever. Sensors, advanced analytics and artificial intelligence now enable real-time monitoring, process optimization and the implementation of the “four Rs”—reduce, reuse, recycle and recover—ensuring that each drop of water goes through multiple cycles before discharge. In 2024, according to the company, these technologies helped save 226 billion gallons of water globally. “In this scenario, measuring, recirculating and reporting not only reduces risk; it becomes a tangible competitive advantage,” Villasuso said.

At the national level, companies such as Grupo Modelo, Coca-Cola Mexico and Grupo Herdez have incorporated water management as a strategic pillar, combining operational efficiency with nature-based solutions. In partnership with the German Agency for International Cooperation (GIZ), Grupo Modelo and Coca-Cola are implementing initiatives in regions such as Calera (Zacatecas), Apan (Hidalgo) and Mexico City to promote aquifer recharge through rainwater capture systems, reforestation and sustainable agricultural practices. The Agua Firme project, running from 2020 to 2027, aims to generate measurable improvements in water quantity and quality in high-stress communities, supported by monitoring technologies and technical training.

In parallel, companies have made significant progress in reducing their water footprint in production processes. Grupo Modelo reduced its water use from approximately five liters to two liters per liter of beer over five years. Grupo Herdez promotes drip irrigation systems that achieve up to 60% water savings compared to traditional methods and has reduced water intensity per ton produced by 17% since 2018. The company also complements its strategy with social impact initiatives, including the installation of rainwater harvesting cisterns, purification wells and biodigester-equipped sanitation systems in communities, integrating efficiency, sustainability and territorial responsibility.