The Environment: Deep Water

Anyone who has traveled to Mexico City knows that its air pollution is horrible. Birds fall from the sky; foreign executives get hardship pay. The air pollution is the worst recorded anywhere in the world, but it is not the most serious threat facing the city. The most serious threat, one that could turn this capital of 20 million people into a ghost town, is that it's running out of water.

Government officials caused the shortage, partly by charging absurdly low prices for water. Recent news has frightened them into scaling back the subsidies. This year they raised water prices, but they did not act boldly enough. Politicians arbitrarily chose the new prices, rather than creating a market for water. It would be purely accidental if the new prices reflected actual supply and demand. No one knows whether they will encourage big enough changes in water allocations or enough conservation.

Mexico's timidity about setting up a water market is similar to California's reluctance to let farmers sell their water rights to higher—mostly urban and drought-stricken—bidders. In both cases, urban water users will suffer. In Mexico, the poor suffer the most.

It took the Mexican government 400 years to create the water crisis. After the Spanish conquest, engineers built canals to drain the lakes surrounding the city and to carry away flood waters. The canals provided the inhabitants with all the water they needed. But during this century, they became so polluted with sewage and runoff that the water they carry is now unsafe.

For decades, the city has gotten nearly all its water from underground aquifers. Growth in the city's population caused huge increases in the demand for water. Instead of charging more, the government simply pumped more. During the 1980s, it pumped up roughly 55 percent more water from the aquifers than was replenished by rainfall each year. You can only do that for so long, and then you run out. Before you run out, you cause havoc.

The havoc takes several forms. First comes subsidence. The ground above an aquifer that is being emptied begins to sink. In parts of downtown Mexico City during the late '80s, the ground sank at the stunning rate of 12 inches a year. That subsidence inflicted millions of dollars of damage on buildings, underground telephone cables, and, of course, water pipes. The broken pipes leaked, which led officials to pump even more. Moreover, depleting the aquifer so quickly made the remaining water more saline. The water may eventually require expensive treatment to be drinkable.

Government officials who saw the damage happening first considered bringing in more water from nearby valleys. But agricultural interests there—much like Owens Valley residents in California who resent Los Angeles—resisted that suggestion. The government could not afford to build more aqueducts anyway.

In 1990, after a scientific symposium sponsored by an environmental group, participants issued this conclusion to the press: "The geohydraulic situation in the Valley of Mexico guarantees the destruction of the city if current water consumption tendencies continue unchanged." That attracted attention. The water agency announced plans to raise water prices. That caused enormous protest.

The water agency had little choice, however. Industry and business, which then used 28 percent of the capital's water, were paying 620 pesos (21 cents) per cubic meter (264 gallons). Residential users, who consumed 57 percent of the total, paid at most 66 pesos (2 cents) per cubic meter. Furthermore, the government metered only 40 percent of users and collected only 30 percent of fees charged. As a result, the system's revenues covered less than 7 percent of its operating costs. With no money for maintenance, all those broken pipes leaked like sieves.

As one would expect, the low prices had an effect on demand. The average resident used 300 liters (89 gallons) a day. That's roughly what we guzzlers in the United States use but twice the consumption of Japan and Western Europe.

Millions of poor Mexico City residents never got a chance to be wasteful. Families in new, outlying settlements had to buy water from roving trucks. They paid higher prices and got only a 200-liter (53-gallon) barrel once every three days.

The water agency put new prices into effect this year, after government approval. Industry now pays on a scale, from 1,000 pesos (33 cents) per cubic meter for 30 cubic meters up to 2,900 pesos (95 cents) per cubic meter for over 240 cubic meters.

Residential users also face a scale. A household with average consumption will pay 404 pesos (13 cents) per cubic meter, or 137 pesos (4.4 cents) per day. So the typical household's water bill in pesos has increased by a factor of 18. The government has yet to measure the impact on consumption.

There are striking parallels between Mexico City and California: fast population growth, an apparent water shortage, refusal by political leaders to displease wealthy recipients of subsidies, and overpumping of ground water. The overarching problem in California, as in Mexico City, is that water has not been valued at its market price. Unfortunately, state leaders are catching on slowly. The drought, now in its fifth year, has prompted only minor reform.

One attempt at change is the Governor's Water Bank, created by Gov. Pete Wilson on February 15, 1991. The bank was supposed to ease water shortages in Southern California by centralizing water-marketing deals. It was supposed to make the messy business of negotiating water prices between many buyers and sellers more "orderly."

The process took on a semblance of order because the state stepped in and dictated the price. Officials at the state Department of Water Resources offered water sellers in northern California $125 per acre-foot (326,000 gallons), based on a hypothetical farm budget. The department buys the water and then sells it to southern users.

Those users include the Los Angeles area's Metropolitan Water District, which is getting half of the total (215,000 acre-feet out of 430,000); San Francisco; and the Santa Clara Water District, south of San Francisco. After transportation charges, buyers pay between $250 and $300 per acre-foot. The Metropolitan Water District might have been willing to pay a higher price to get more, but it wasn't allowed to.

In both Mexico and California, figuring out how to improve the system is much easier than overcoming the political obstacles to change. Top-down reform might work in Mexico, since Mexico City is controlled by the national government, which is now headed by a reform-minded, Harvard-trained economist. California, though, is a different story. The state is run by legislators and a governor who both owe much to the wealthy growers who still get 80 percent of the state's water at a deep discount. California's wider public will get their fair share of the water only when they get mad enough to become politically active.

Both Mexico and California should give a real water market a chance. Prices will work, if we let them.

Rhona Mahony is a free-lance writer in Stanford, California.