Why Mexican Industries Should Pay Attention to Water in 2026

In 2026, it will be absolutely critical for businesses to be aware of and care about water. At the US–Mexico border, for example, water has shifted from an environmental concern to a core economic and competitiveness issue for Mexico. Border states such as Baja California, Sonora, Chihuahua, Coahuila, Nuevo Leon, and Tamaulipas are experiencing severe water stress while also undergoing rapid industrial and manufacturing growth driven by nearshoring.

As the United States and Mexico prioritize North American goods, the border region has become a hub for production and trade. Nearshoring has steadily grown in the region since NAFTA's establishment in 1994. However, the US-China trade wars and the pandemic further accelerated this growth in 2022. The US government continues to pressure American companies to rely less on China for goods. This agenda has become even more apparent under the current US president, Donald Trump, who raised tariffs on Chinese goods to a record 147.6% in May 2025. The rationale behind decoupling production from China is to diversify imports and avoid supply chain disruptions like those seen during the pandemic. There is also blatant competition between the two countries. Recent industry growth has taken its toll on the landscape for many reasons.

First, Mexico's northern lands are inherently the driest part of the country, and nearshoring efforts have concentrated there due to its proximity to the US-Mexico border. Prolonged droughts in shared basins, such as those of the Colorado River and Rio Grande, reduce the water supply and increase uncertainty. Agriculture in the region uses an estimated 80% of the area's water supply. The addition of the intensified impacts of climate change, including drought, extreme heat, and erratic rainfall, creates a complex landscape for water extraction.

Second, nearshoring focuses on water-intensive industries such as automotive parts production, electronics manufacturing, and medical device production. These industries require large amounts of water for cooling and cleaning purposes, as well as for use as a process medium.

Third, industrial clustering amplifies risk by concentrating demand in already water-stressed regions, turning localized shortages into systemic economic vulnerabilities. While industry clustering may have initially increased efficiency, too many clusters in a single dry region have overstressed the area’s natural resources.

Consequently, industries in northern Mexican states are finding that the region’s water supply is a significant limitation on their production. This water stress produces correlated risks for industry and trade. For Mexican companies operating along the border, unmanaged water stress can result in production interruptions, higher operating costs, regulatory exposure, supply chain instability, and even regulatory shutdowns. Of particular concern is the fact that the region's infrastructure was designed with water as a human right, not a competitive commodity. Thus, the infrastructure is under strain from an increase in industry and a decrease in available water.

The latter makes water efficiency and governance strategies essential for business continuity and success. Global investors, lenders, and insurers are increasingly integrating water risk into environmental, social, and governance (ESG) assessments, as well as credit and operational assessments. As water becomes less reliable, firms face higher fixed investments and more volatile operating costs, which alter cost structures and reduce margin predictability.

Businesses that engage early in binational solutions, technology adoption, and cross-border coordination will be better positioned to manage risk and shape outcomes. Accurately predicting trends, markets, and investments require understanding the natural resources that limit production. A new relationship with natural resources must be intentionally created. Decisions regarding site selection and production must consider limits to natural resources or reinventing water-intensive, overconsumption pathways. Businesses must consider their role in maintaining a social license to operate through transparency, engagement, and responsible water use.

Ultimately, this all comes down to water efficiency and reuse. Efficiency is not just using something until it’s gone but rather embracing a sense of balance. Future projects will only be successful if they incorporate cell sufficiency.

Companies and regions that act first can transform water stewardship from a liability into a competitive advantage. Mexico has the technology and workforce necessary to lead North America in sustainable production without depleting resources. However, success depends on the resilience of the systems that support production. Cross-sector coordination among industry, agriculture, utilities, and regulators can reduce conflict and improve allocation outcomes. At the binational level, enhanced cooperation and information sharing can align water management with the economic realities of an integrated border region.

Water, once taken for granted, is now a defining variable in that equation. Firms and regions that recognize this shift early will be best positioned to transform water stewardship into a lasting competitive advantage.

The US-Mexico Foundation for Science (FUMEC) is uniquely positioned to facilitate collaboration among scientists, researchers, economists, and government officials from the United States and Mexico to mitigate water-related problems in the border region.

In October 2025, we began a preliminary analysis to guide a binational water project proposal. Since then, we have met with field experts from the International Boundary and Water Commission (IBWC), the Center for International Law (CILA), the Mexican Ministry of Economy, the Permanent Forum of Binational Waters, the Baker Public Policy Institute at Rice University, the Southwest Research Institute, the Texas Water Resources Institute, the Water Resources Research Center, the International Water Management Institute, and various universities. These meetings have helped us understand the region’s unique context and relationship with water.

By the end of January 2026, we will release a white paper on the complexity of the US-Mexico border water situation. From February to March, we will host regional workshops in three to four binational regions to define a vision for 2030 and identify potential projects. In April, we will host a central in-person event to finalize the vision and establish project prioritization criteria, at which point we will integrate funders. In May, we will develop complete project proposals, including scope, stakeholders, and financing plans. Then, we will apply FUMEC’s acceleration methodologies to the top five priority projects.

We will select one region along the border on which to base our project. We are excited to announce our partnership with the Permanent Forum of Binational Waters (PFBW) to carry out this project.

(In collaboration with Gabrielle Roman, Scientist in Residence at FUMEC)