Environmental Technologies Industries

Environmental Technologies Industries

Market Plans

Mexico Environmental Export Market Plan

5. The Water Sector

Mexico’s water market represents the most important single market for U.S. exports of environmental equipment and services. On a gross basis, Mexico is rich in water resources, receiving about 4,799 m

of water per inhabitant per year. At the same time, a great disparity exists between where those resources are located and where they are needed. Most rainfall and water resources occur in the southeastern portion of the country, whereas the majority of the population resides in the central highlands and north of the country.

For example, Mexico City must pump water at great cost from a distance of 127 kilometers to supplement local water resources, including underground aquifers. Further, overexploitation of those aquifers is causing portions of the city to sink at the rate of up to 50 centimeters per year. In the arid northern regions of Mexico, surface water sources do not exist, and it is becoming increasingly difficult to find new underground sources.

At present, 80 percent of Mexico’s water comes from 470 underground aquifers. The government estimates that at least 90 of those aquifers are overexploited or illegally tapped. Protection and rehabilitation of aquifers are among the main drivers behind Mexico’s commitment to treating wastewater discharges, promoting water recycling, and decreasing water losses.

The imbalance between supply and demand creates a strong need in Mexico to better manage and invest in water infrastructure. In fact, Mexico is currently in the midst of a $350 million project financed in conjunction with the World Bank to comprehensively model, monitor, and manage its aquifers. State and municipal governments in Mexico’s north have even studied the feasibility of constructing desalinization plants. It is unlikely that governments will pursue that option because of the high costs of those advanced technologies.

Despite fundamental supply problems, Mexico has been able to supply an increasing percentage of its growing population with potable water. Mexico has increased the percentage of residents having access to potable water to 87.4 percent. Coverage is much higher in urban areas than in rural areas; 91.5 percent of urban residents have access to potable water, whereas only 65.7 percent of rural residents enjoy such access.

Most dollars for potable water infrastructure flow from the federal government. Although municipalities are tasked with providing the service, they are often financially unable to pay for needed system improvements or expansions. Some effort has been made to attract private investment dollars into the potable water sector, but those flows have been limited and in the short term will likely continue to play only a minor role in creating new infrastructure. Mexico continues to have serious municipal wastewater pollution problems with only 22 percent of its wastewater receiving any treatment and only 12 percent treated to meet regulatory standards. Mexico City is one of the worst offenders, generating about 40 m

/s of municipal wastewater while having an installed capacity to treat only 5.6 m

/s. This situation results in an important health hazard because the outflow reaches a river used for irrigation purposes. A similar situation occurs in Mexico’s second largest city, Guadalajara. A lack of wastewater treatment capacity is seen in major cities throughout the country, creating an urgent need for new investments.

Industrial wastewater treatment has seen strong progress in recent years among large corporations but not among medium-sized and small companies, which in many cases continue to discharge chemicals and oils directly into water bodies or municipal sewer systems. Among the worst offenders are those in the chemical, sugar, textile, and pulp and paper segments.

Federal, State, and Local Responsibilities

Mexico’s water regulatory framework and institutions derive their authority from two constitutional mandates. Article 27 of the Mexican Constitution establishes that water resources belong to the federal government and that individuals, companies, and even municipal governments can exploit these resources only through a concession granted by the federal government. The federal government has vested its authority over water resources within the Comisión Nacional del Agua (National Water Commission, or CNA).

Although article 27 puts the federal government in ownership of the resource, article 115 places the responsibility for administering and providing water-related services, including potable water, sewage, and wastewater treatment services, in the hands of municipal governments.

At the local level, authority to provide water services resides with the municipal water utilities, autonomous local water utilities commissioned to provide water services. Because many of those utilities are financially weak, CNA provides funding and technical assistance toward increasing their service capabilities and improving their financial situation.

Mexico has promulgated two main water laws, which derive their authority from article 27. The National Waters Law defines the waters that are the property of the nation and delineates the structure of water rights. The Federal Law of Water Rights establishes the terms, conditions, and pricing for the use of water, including payments for exceeding water-quality discharge limits. That law is updated every year to adjust prices to reflect inflation.

Each state has its own water law, which determines how water services are provided and the method by which water tariffs are set and adjusted. State laws also detail the level of private participation permitted in providing services and developing infrastructure.

Of Mexican states, 19 approve their tariffs through an administrative council of the local water utility, 10 approve them through a vote of the local congress, and 1 allows the state governor to set tariffs. Twenty state laws now allow the suspension of water services to residents or businesses for lack of payment.

In 1998, CNA developed a model state water law, which allows for private participation and sets a comprehensive tariff adjustment system, which is based on the cost of water and economic conditions. The model law also allows termination of service for non-payment. CNA has sought to encourage states to adopt the model law in an effort to modernize the local management of water resources. To date, the states of Hidalgo, Mexico, and Sonora have adopted the model law. In addition, nine states are now seeking state congressional approval of the model law.

Table 5.1 Municipal Discharges

Size of Population	Date of Compliance	Date for Plan Compliance
Larger than 50,000	June 1, 1997	Jan. 1, 2000
20,001 to 50,000	Dec. 31, 1998	Jan. 1, 2005
2,501 to 20,000	Dec. 31, 1999	Jan. 1, 2010

Source: NOM-001-ECOL-1996.
Note: CNA can require earlier compliance on the basis of the impact of the current discharges on the receptor body or if non-heavy metal discharges exceed five times the standard.

U.S. environmental companies will find opportunities in Mexico within the three different levels of government. Within CNA are opportunities for technologies in the areas of water well drilling, water reinjection systems, emergency response services, and water-monitoring services. At the municipal and state levels, opportunities exist for investments in potabilization plants, pumping stations, water networks, water metering systems, billing and collection systems, and wastewater treatment and equipment maintenance systems.

Water Regulations

The Zedillo administration greatly simplified the regulatory structure for wastewater discharges. It replaced the 44 NOMs that regulated wastewater discharges with just three. The original 44 NOMs established a schedule of fees for using and discharging into water bodies. Discharge quality standards were fairly strict, with municipalities required to achieve an effluent quality of 30 mg/l (milligrams per liter) of biological oxygen demand (BOD) and 30 mg/l for total suspended solids (TSS). Industrial standards were set depending on the activity performed and did not take into account the nature of the body of water into which discharges were made. Industrial standards were also strict, making compliance difficult because of the high investment cost.

The reforms not only simplified the regulatory structure but also relaxed the standards. However, penalties for discharges exceeding the standards were increased. The reforms also extended compliance periods, granting a grace period to municipalities and industries not in compliance.

Mexico’s wastewater market is now driven by three regulations, NOM-001-ECOL-1996, NOM-002-ECOL-1997, and NOM-003-ECOL-1997.

NOM-001-ECOL-1996

NOM-001-ECOL-1996, the central driver for the municipal wastewater market, applies to municipalities and industries that discharge directly into water bodies. The standard is based on three categories of receptor water bodies. Thus, municipalities and industries face different standards depending on their population (Table 5.1), the types of discharge (Table 5.2), and the type of receptor body into which they discharge their wastewater (Table 5.3).

Table 5.2 Non-Municipal Discharges

Parameter 1 -BOD tons/day	Parameter 1 - TSS tons/day	Date of Compliance Plan	Date for Compliance
Greater than 3	Greater than 3	June 1, 1997	January 1, 2000
1.2 to 3.0	1.2 to 3.0	December 1, 1998	January 1, 2005
Less than 1.2	Less than 1.2	December 1, 1999	January 1, 2010

Source: NOM-001-ECOL-1996.

CNA is responsible for enforcing NOM-001-ECOL-1996 because it involves discharges into federal bodies of water. The regulation established compliance dates of 2000, 2005, and 2010, depending on the size of the municipality or urban area (see Table 5.1). The latest available information from CNA indicates that 139 localities have a population greater than 50,000 inhabitants; 181 have a population of between 20,001 and 50,000; and 2,266 have a population in the range of 2,501 to 20,000. More than 70 municipalities with populations greater than 50,000, including Mexico City, are now violating the requirement of having wastewater treatment in place. CNA has begun to penalize those violators by increasing fees for water discharge rights (essentially, fines). In practice, however, it is still less costly for municipalities to pay the increased fees than to spend millions of dollars for wastewater treatment facilities. Further, only about 10 percent of the municipalities are currently paying discharge fees; the rest argue that they lack the resources to pay.

Table 5.3 Water Discharge Parameters

Type of Receptor Body

Parameter		A		B		C
Mg/1 (except as specified)	D.A	M.A	D.A	M.A	D.A	M.A
Grease and oil	15	25	15	25	15	25
Floating material	Ab.	Ab.	Ab.	Ab.	Ab.	Ab.
Sedimentary solids	1	2	1	2	1	2
TSS	150	200	75	125	40	50
BOD	150	200	75	150	30	60
Total nitrogen	40	60	40	60	15	25
Phosphorus	20	30	20	30	15	25
Heavy metals:
Arsenic	0.2	0.4	0.1	0.2	0.1	0.2
Cadmium	0.2	0.4	0.1	0.2	0.1	0.2
Cyanide	2.0	3.0	1.0	2.0	1.0	2.0
Copper	4.0	6.0	4.0	6.0	4.0	6.0
Mercury	0.01	0.02	0.01	0.01	0.01	0.01
Nickel	2.0	4.0	2.0	4.0	2.0	4.0
Lead	0.5	1.0	0.2	0.4	0.2	0.4
Zinc	10.0	20.0	10.0	20.0	10.0	20.0
Ph	5/10	5/10	5/10	5/10	5/10	5/10
Temperature (oC)	N.A.	N.A.	40	40	40	40

D.A. = Daily Average
M.A. = Monthly Average
Ab. = Absent
N.A. = Not Available
Receptor Body A is defined as rivers used for irrigation.
Receptor Body B is defined as urban rivers and surface bodies used for irrigation.
Receptor Body C is defined as rivers that protect aquatic life.
Note: Above standards vary for coastal waters and direct discharges to agricultural land.
Source: NOM-001-ECOL-1996.

NOM-002-ECOL-1997

NOM-002-ECOL-1997 sets the standards for discharges into municipal sewage systems, placing special emphasis on limiting pollutants, such as oils, copper, nickel, and other metals and chemicals, that could damage municipal wastewater systems. Those limits are shown in Table 5.4.

Enforcing NOM-002-ECOL-1997 is the responsibility of the municipalities. Local authorities are allowed to impose fines or even to close the polluting companies. Still, in most cases municipal enforcement capabilities are weak. Municipalities that have already constructed wastewater treatment plants have by far the greatest incentive to verify industrial compliance within their systems because illegal industrial discharges could seriously harm the facilities. For example, the Monterrey water utility (SADM) has increased its verification efforts by investing in both technology and personnel to detect and fine polluters. This trend is expected to increase as more municipalities install wastewater treatment plants. The Mexico City government is considering installing a sewage-monitoring system to ensure industrial pretreatment before building its own municipal wastewater treatment facilities.

NOM-003-ECOL-1997

NOM-003-ECOL-1997 sets the standards for wastewater treatment reuse in public services. It states the maximum limits of polluting agents allowed, depending on whether the reused water will have direct or indirect contact with the population.

Potable Water and Sewage

According to CNA, Mexico has a potable water coverage rate of 87.4 percent and a sewage coverage rate of 73.1 percent. Those rates are high compared with other Latin American countries, and the progress made in potable water supply during the past decade has been outstanding. The main problem Mexico faces is lack of funds for new investments. Almost all those funds currently must come from the federal government because local water utilities are generally inefficient and unable to generate sufficient cash flow. In 1999, 59 percent of Mexican government spending in the water sector came from the federal government, whereas cash flows generated by municipal utilities covered only 7 percent of the total investment.

Of all potable water produced in Mexico, almost 40 percent cannot be accounted for, whether it is lost through leaks, theft, or poor metering. Of the water that can be accounted for, 60 percent is billed to users, with the users paying about 65 percent of what they owe. Thus, of the total water produced in Mexico, users pay for only 23.4 percent. The federal government, in combination with multilateral and bilateral agencies, has carried out a series of efforts toward improving the collection indexes and reducing the amount of water that is unaccounted for. Preliminary success from these efforts is just beginning to be realized.

Table 5.4 Discharge Limits for Municipal Sewage Systems

Parameter	Monthly Average	Daily Average	Instantaneous
Greased oils (mg/l)	50	75	100
Sedimentary solids (mg/l)	5	7.5	10
Total arsenic (ml/l)	0.5	0.75	1
Total cadmium (ml/l)	0.5	0.75	1
Total cyanide (ml/l)	1	1.5	2
Total copper (ml/l)	10	15	20
Total chromium (ml/l)	0.5	0.75	1
Total mercury (ml/l)	0.01	0.01	0.02
Total nickel (ml/l)	4	6	8
Total lead (ml/l)	1	1.5	2
Total zinc (ml/l)	6	9	12

Source: NOM-002-ECOL-1997.

Investment in the potable water sector accounted for $182 million in 1999, which represents approximately 63 percent of the total government investments in the water sector (see Figure 5.1). Potable water will continue to be the focus of direct government spending, but the amounts destined to be used for efficiency improvements and institutional development will increase dramatically because the Fox administration will place special emphasis on strengthening municipal water utilities.

Two important initiatives strengthen and provide federal monies to state and municipal water utilities. The most important is APAZU, a potable water program for urban zones that provides federal monies to municipal water utilities for infrastructure development and efficiency improvement. The other is FORTEM, a program for strengthening of state and municipal authorities. FORTEM, which promotes decentralization efforts, is described further.

APAZU

APAZU allows states and municipalities to request federal financial assistance for the improvement or construction of potable water, sewage, and wastewater treatment infrastructure. To receive federal monies under APAZU, the states or municipalities must sign an agreement whereby they commit to having their municipal water utilities become financially solid or at least reaching a “break even point” on their operations within five years. The main goals of the program are as follows:

To support municipalities and states in strengthening their water utilities as well as to increase coverage of their services
To gradually eliminate federal subsidies granted for the construction of water infrastructure
To focus subsidies on improving physical, commercial, and financial operations of the utilities

The program is available for localities with populations greater than 2,500 inhabitants, whereas in smaller localities CNA will continue to directly finance the development of infrastructure. The program provides the largest federal subsidies to poorer municipalities. The maximum financial participation of the federal government through CNA is shown in Table 5.5.

States or municipalities entering the program must provide CNA with a schedule for completing the works as well as a plan demonstrating how the utility will become profitable in five years. The local congress must authorize the plan so that any tariff increases that are part of the plan will be approved.

The program supports an important market at the local level for efficiency-related equipment and services, including equipment for metering, leak detection and control systems, equipment for detecting water sources, user registration services, and billing control software. Investments for potable water will be especially strong in Mexico City, Guadalajara, and the northern border as well as in other large cities where APAZU is driving municipal water utilities to increase efficiency.

Private Participation in Water Infrastructure

Most potable water and sewage projects funded with government monies are contracted as public works projects. The key players in this segment include large Mexican construction firms, mostly in partnership with international water groups and technology suppliers. In addition to the growth of direct government spending in the water and sewage sectors, private participation in providing these services is expected to grow as states and municipalities seek to gain efficiency and to attract private capital. At present, municipalities have tried several different models of private participation in the water sector. Although the experience has mostly been a positive one, municipalities are moving only slowly into this area.

Figure 5.1 Water Investment Breakdown, 1999

Source: CNA.

Table 5.5 Federal Government Participation in Funding Water Infrastructure Projects under APAZU Participation (percent)

	Participation (%)
Size of Municipality and Type of Work	Federal	State and Municipal
Population of 2,500–500,000:
Efficiency improvements:
High poverty index	Up to 60	40
Medium poverty index	Up to 48	52
Low poverty index	Up to 42	58
Potable water:
High poverty index	Up to 48	52
Medium poverty index	Up to 30	70
Low poverty index	Up to 18	82
Sewage and wastewater treatment	Up to 42	58
Population of more than 500,000:
Efficiency improvements	Up to 42	58
Potable water	Up to 18	82
Sewage and wastewater treatment	Up to 42	58

Source: Hanhausen & Doménech Consultares, S.C.

Integrated Concessions.

Under the integrated concession scheme, the government grants a concession title to a private operator to operate the entire water system, from water extraction and supply through the treatment of wastewater. The private company is in charge of financing all required infrastructure improvements and is usually required to meet certain water coverage goals. The private company is also in charge of billing customers and collecting those bills.

The cities of Aguascalientes and Cancún have adopted integrated concessions. The concessions have suffered problems, but generally they are considered successful. It is not a certainty that the integrated concession model will work in other cities, as both Cancún and Aguascalientes are somewhat unusual in character. In Cancún, most water customers are luxury hotels; and Aguascalientes enjoys one of the highest living standards in Mexico.

Currently, the best prospects for other integrated concessions are in Mexican tourist cities where strong revenue flows could exist to support private investment. At the same time, local municipal authorities have been reluctant to give up control to private operators.

Management Contracts.

Another scheme involving private participation in providing water services is the management contract. Under a management contract, a private company is paid a fee for achieving certain benchmarks or improvements, such as a set payment for each meter installed or each leak fixed. Such arrangements have proven effective in Mexico City and Puebla. Management contracts have been less controversial than integrated concessions and have been better accepted by local municipal authorities.

The most successful management contract is the one in Mexico City, which survived two government changes, including a change in the party governing Mexico City. The scheme has increased the metering, billing, and collection indexes and has minimized water losses in the secondary distribution network. Management contracts are likely to be implemented in other large Mexican cities and represent an opportunity for U.S. firms that have experience with water system management or that sell efficiency-enhancing equipment, services, or software.

Partial Concession.

The partial concession scheme for private participation is similar to the integrated concession, except that the operator does not have responsibility for wastewater treatment. Rather the private company is responsible for providing potable water services and sewage collection, as well as for billing and collection. The private operator has to accomplish an ambitious investment plan and establish an efficient collection system. The revenues obtained are first used to cover repayment of the required investment program, and any excess goes to the municipality to finance wastewater treatment services.

Municipal Wastewater Treatment

Mexico has a great need to improve the treatment of its municipal wastewater. Of the 239 m

/s of wastewater generated by urban systems, only 42.4 m

/s receive any kind of treatment and only 29 m

/s, or 12 percent of the wastewater generated, is treated in compliance with the standards in NOM-001-ECOL-1996.

According to the National Institute of Ecology, Mexico will generate nearly 360 m

/s of wastewater with 2.81 million metric tons of BOD by 2010. Generation of wastewater at this level will create a treatment deficit of 318 m

/s over current treatment levels. To achieve full compliance, Mexico will have to invest on the order of $7.2 billion and spend about $1 billion per year to operate this treatment capacity.

The Zedillo administration at its start had set a goal of treating to standard up to 82 m

/s of municipal wastewater. That goal was not achieved because both political and financial difficulties stalled a number of major planned investments in new wastewater treatment capacity. For example, major wastewater facilities were put on hold in both Mexico City and Guadalajara largely for political reasons and because of the inability of the parties involved to agree on a technical solution.

In the rest of the country, a number of wastewater facilities were scheduled to be built by the private sector under BOT arrangements. The peso devaluation in 1994 severely affected those projects. Improved economic conditions, along with financial support from both the Mexican federal government and bilateral institutions, has led to the successful financial restructuring of a few of those stalled projects, and several have been built and are operating. In general, however, the pace of building new wastewater plants under BOT schemes continues to be slow because the cost of the infrastructure exceeds the capacity of many local communities to pay. Table 5.6 summarizes the situation through 1999.

To meet the standards set by NOM-001-ECOL-1996, most medium-sized cities need to construct only a primary wastewater system. On Mexico’s northern border and in large metropolitan areas, secondary systems will be required. At present, 49 percent of the wastewater treatment plants operating in Mexico are stabilization lagoons (see Figure 5.2). Those lagoons generate large amounts of sludge.

CNA estimates that $2.2 billion is needed for communities of over 50,000 inhabitants to comply with NOM-001-ECOL-1996. The compliance date for those larger communities was 2000. For other communities, the compliance dates are either 2005 or 2010; CNA estimates that those communities will need to invest $5 billion by 2010 to reach regulatory compliance.

Priority municipal wastewater projects include those in Baja California, Mexico City, and Guadalajara, which alone represent approximately $1 billion of investment. Although financing has been secured for the Mexico City and Guadalajara projects, political disputes between the federal and local governments have stalled those projects.

By far, Mexico’s largest wastewater project is in Mexico City. If this project were to move forward, it would generate important opportunities for U.S. companies. The current impasse is over differing local and federal views of the appropriate technical solution. The federal government favors a limited number of major facilities, whereas the municipal government proposes to build many small wastewater treatment plants within the city and reuse the water for irrigation and industrial purposes. With new governments recently elected at both the federal and local levels, it is hoped that the project can move forward in the next several years.

Table 5.6 Municipal Wastewater Treatment Plants, 1992–1999

	Total			In Operation			Out of Operation
Year	Plants	Design Capacity (lps)	Plants	Installed Capacity (lps)	Water Treated (lps)	Plants	Installed Capacity (lps)
1992	546	N.A.	394	N.A.	30,554	152	N.A.
1993	650	N.A.	454	N.A.	30,726	196	N.A.
1994	666	42,788	461	N.A.	32,065	205	N.A.
1995	680	54,638	469	48,172	41,706	211	6,466
1996	793	54,765	595	51,696	33,745	198	3,069
1997	821	61,653	639	57,402	39,389	182	4,251
1998	914	63,151	727	58,560	40,855	187	4,591
1999	1,000	67,547	777	61,559	42,397	223	5,988

Source: CNA.

The city of Guadalajara’s investments in wastewater treatment have also been delayed. The city drew up an investment program that combines potable water, sewage, treatment, and efficiency improvements. Local authorities decided to prioritize efficiency improvements because such improvements would create an income flow to pay for other needed investments. The government of Guadalajara, in collaboration with the federal government, has designated over $20 million for this plan, with most resources designated to efficiency improvements.

A third major project opportunity will soon come to fruition in the state of Baja California. Baja California has signed a loan agreement with the Japanese Bank for International Cooperation (JBIC) for an integrated water supply and sanitation project. The loan was signed on March 30, 2000, for 22.2 billion yen (approximately $200 million). The loan monies are being administered by a BANOBRAS trust, and although work has begun, all major aspects of the project were still to be tendered in 2001.

Figure 5.2 Treatment Plants by Process, 1999

Source:

CNA.

Municipal wastewater project opportunities exist in other cities with more than 50,000 inhabitants. Those cities are under pressure to comply with NOM-ECOL-001 by having treatment facilities in place. The best projects are in those municipalities that have secured federal monies from APAZU or that are partially funded by FINFRA. Specific project opportunities are included in Appendix A.

The efforts to comply with regulation NOM-001-ECOL-1996 have started to open an important market for sludge treatment and disposal. A regulation for sludge treatment and disposal issued by INE is under review. The passage of this regulation would open an important market for sludge treatment and disposal technologies.

The Border Market

The market for municipal wastewater treatment on the U.S.-Mexico border is substantially different from that in the rest of the country. Stricter treatment standards often apply, and bilateral institutions (specifically, BECC, NADBank, and the U.S. EPA) offer technical and financial support.

The border area covers 100 kilometers north and south of the boundary and includes a combined Mexican and U.S. population of 10.6 million in 10 states. The area’s population has registered impressive growth rates in the past five years and is expected to double by 2015. Much of the border growth is attributed to implementing of NAFTA and installing assembly plants (maquiladoras) on the Mexican side of the border. These manufacturing facilities represent more than 4,000 companies and employ more than 850,000 workers.

The border region will represent an important environmental market in municipal wastewater and other areas for years to come because of a huge backlog of environmental needs and because the region is expected to continue its rapid growth. Some estimates place this growth at higher than 8 percent per year in many metropolitan areas.

According to a 1999 assessment by the U.S. General Accounting Office, 12 percent of the border population lacks access to potable water, 30 percent to wastewater treatment facilities, and 25 percent to solid waste disposal facilities. An estimated $3.2 billion is needed to correct those infrastructure deficiencies on both sides of the border; about 77 percent of that amount is needed for wastewater treatment.

Since 1994, the United States and Mexico have provided about $3.1 billion to address border environmental infrastructure needs. The United States has contributed about 80 percent of that amount. Many barriers exist to overcoming the environmental infrastructure problems of border communities, key among them the lack of human capital to plan, implement, and maintain environmental infrastructure and the limited ability of communities to obtain affordable financing to build needed projects.

Industrial Wastewater Treatment

The industrial sector offers excellent opportunities for sales of U.S. technology and services, especially in the wastewater treatment sector. As local communities build municipal wastewater facilities to comply with NOM-001-ECOL-1996, they also increase their efforts to limit industrial discharges into their sewage systems. Further, industries that discharge directly into federal water bodies face CNA fines if discharges are not curtailed. Those factors, combined with the volunteer audit program and incentives for environmental investment, as well as improved economic conditions, have created a dynamic market for industrial wastewater treatment.

Identifying industrial wastewater treatment projects is not easy because polluting companies are careful to protect their image. One method for finding industrial wastewater treatment projects is to have constant communication with chambers, associations, and industrial groups in Mexico. Industrial sectors that are among the worst polluting, and thus in need of wastewater treatment technologies, include the following: sugar, beverages, chemical, pulp and paper, textile, leather and tannery, food, basic metals, and petroleum and petrochemical.

In recent years, the giant state-owned petroleum company PEMEX implemented an exhaustive plan to protect the environment and to be recognized as a clean industry. PEMEX applied to the volunteer environmental audit program for approximately 70 percent of its facilities, and to date 50 percent of its facilities have been awarded clean industry certificates. The other 20 percent are in the process of making investments so that they may comply with the action plans resulting from their environmental audits.

Case Study 5.1 PEMEX Refinación, Integrated Wastewater Project

PEMEX Refinación, the division in charge of refining activities, has made significant investments in wastewater treatment and reuse, especially at its six refineries. In 1996, PEMEX began operating a new wastewater treatment plant in the Salamanca refinery. That plant treats 100 percent of the municipal wastewater generated by the nearby city of Salamanca and then provides the treated water as process water for the petrochemical complex. The plant has eliminated the refinery’s need to extract 20,000 m3/s daily from natural sources by substituting the treated municipal wastewater.

In 1999, a wastewater treatment plant to service the Cadereyta refinery came into operation under a services contract with a private company. The plant treats and recycles 21,600 m3 of water per day.

PEMEX has also built wastewater treatment facilities at its Madero and Salina Cruz refineries. Treatment plants for the Tula and Minatitlán refineries are in the final stages of construction. The Minatitlán facility is expected to enter operations in mid-2001.

Water-Monitoring Equipment and Services

CNA is developing a laboratory network to meet the increased demand for improved water monitoring and testing. One function of the laboratories will be to monitor drinking water supplies, including surface waters, wells, and aquifers, and to identify pollution sources. The second purpose of the network will be to certify public and private laboratories under a program called Project for the Modernization of Water Management. The laboratory network program is being partially funded by a World Bank loan and by the federal government.

Important progress has been made on that project. CNA has completed its National Reference Laboratory in Mexico City and now is upgrading its network of 13 laboratories, of which 6 will be equipped with Betex filtration and monitoring systems. CNA will also procure mobile laboratories to provide coverage to cities where no permanent laboratories exist.

At the state and municipal levels, water-monitoring and testing equipment will also represent good opportunities for U.S. companies. For example, the Mexico City government is beginning to install a sewer-monitoring network to detect illegal hazardous waste dumping. So far, only one monitoring station has been tendered, and it was to have been installed before the third quarter of 2001. The monitoring network will consist of 18 stations (fixed and mobile), which will measure metals, oils, and other hazardous materials in the water.

One of the Fox administration’s priorities is to increase private participation in providing water services. Success in this effort will further fuel the demand for monitoring and testing equipment. Private operators will be particularly diligent in monitoring to protect their investments.

Best Prospects

Engineering and Construction

In the short term, projects with financial assistance from multilateral and bilateral institutions and the Mexican federal government will represent the best opportunities for construction and engineering services and equipment. It is recommended that U.S. firms participating in this market seek Mexican partners so that they will be eligible to participate in national tenders and can use the local partners’ knowledge to more effectively bid on public works projects.

Some upcoming opportunities for engineering and construction projects are described in Appendix A. Other projects are listed in Table 5.7. The discussions for the Mexico City wastewater treatment project have not finished, and the project is not expected to move forward in the short term.

Water Service Providers

Water utility operators have opportunities in the short term to provide consulting services to municipal water utilities. Some utilities have received or will receive funding through APAZU and FORTEM to improve their efficiency. In the medium term, integrated concessions and management or service contracts similar in nature to the ones in Mexico City, Cancún, and Aguascalientes are expected to be implemented in other Mexican cities. The Mexico City contract will terminate in 2003, and the government has yet to announce if the contract will be renewed or if a new tender will take place. The city of Saltillo, Coahuila, is evaluating the convenience of creating a mixed company (50-percent public and 50-percent private) to take over the water and wastewater operations. The selection of the private partner was expected to be tendered in late 2001.

Table 5.7 Engineering and Construction Projects

Project	Funding
Torreon-Oxidation Lagoons	FINFRA
Sewage System in Tlalnepantla State of Mexico	FINFRA
Municipal and Industrial Wastewater Collection and Treatment Project in Poza Rica, Veracruz Feasibility Study	U.S. TDA
Manantiales, Coahuila, Wastewater Treatment Plant	BECC/NADBank
Reynosa, Tamaulipas, Sanitation Project ($83.4 million)	BECC/NADBank
Tecate,Baja California,Water and Wastewater Improvement	BECC/NADBank

Source: Hanhausen & Doménech Consultares, S.C.

Equipment Firms

Equipment firms will find opportunities in several distinct areas of the marketplace, including opportunities to sell to Mexican and international companies that win bids to build and operate major water infrastructure projects. The demand for inspection, verification, laboratory, and testing equipment will continue to be strong. The Mexico City sewage-monitoring network represents an important opportunity for suppliers of that type of equipment. Other cities will also strengthen their sewage monitoring in order to identify polluters that could damage municipal systems.

As the new administration pushes efficiency gains at the local level, the market for meters, digital readers, billing software, and other devices will expand, as well as that for the training of system operators. The best sales opportunities will occur in the larger cities, which have the financial capacity to invest in the more technologically advanced solutions.

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