In the last issue of the Quarterly Mexico Water Report, LGA Consulting focused almost exclusively on public sector water opportunities and analysis. In this edition, we will present a better private-public balance that more accurately reflects the nature of the services and experience of LGA Consulting within the water sector. Also, we would like to briefly mention three important issues for your comments and benefit:
We Need Your Feedback to Improve the Quarterly Report
With every new edition of the Report, LGA Consulting staff gain greater context about how the Report should be focused and structured. However, without feedback from our readers, we cannot effectively develop the Report into a helpful and practical resource for you. Not only will your company's feedback help us improve the effectiveness of the Report, it will almost certainly ensure that your specific needs and interests are contemplated and included in the planning of future editions.
Please click here and let us know what have been the most useful articles in these first two editions, themes you would like addressed, and any other information that might help us assist your firm meet the challenges of the Mexican market.
Free Mexico Environmental & Water Events in May
In May, the Director of LGA Consulting will be giving three talks on the Mexican environmental (non-water) and water sectors in Wisconsin and Minnesota. On Tuesday, May 11th, the Director will be speaking in Milwaukee on a panel with the other Wisconsin International Directors from Brazil, Canada, and China about public and private sector opportunities and realities in the Mexican water sector. On Monday, May 17th, the Director will be giving a more comprehensive talk on these same issues in St. Paul, MN at an event organized by the Minnesota Trade Office. Hopefully Wisconsin companies in the western part of the state will be able to make this event. The following day, the Director will join the Director of the Semarnat for the State of Mexico (the Mexican equivalent of the Environmental Protection Administration) at Waukesha County Technical College to give a presentation on private and public sector water and other environmental opportunities and market realities in Mexico. Please contact us for more information about these events.
Free Mexico Water Bids & Awards Analysis
We are continuing to offer Mexico water bid and awards analysis free of charge. If you are interested in receiving this information from January through April of 2010, please contact us. Also, if you are interested in receiving this same information for 2009, let us know.
Like many developing countries, Mexico faces the problem of water shortages and inadequate water treatment technology and infrastructure. Mexico currently treats only 40% of its municipal wastewater. Of even greater concern is the fact that only 10% of the municipal wastewater is treated currently in the Greater Mexico City Area and none of the municipal wastewater in Mexico's second most important city, Guadalajara, is currently treated.
Of equal concern, in relation to wastewater treatment needs, is the fact that of the 653 aquifers in the country, 104 are considered to be overexploited and 68 are on the verge of overexploitation. In light of these problems with 30% of Mexico's aquifers and the limited availability of water, especially in the northern part of the country, the Mexican government is making treatment and reuse activities a priority so that it can meet its goal of 60% wastewater treatment by 2012 and the more lofty goal of 100% treatment by 2030.
Mexico has recently announced several major projects that will help alleviate some of these problems. It looks as if Mexico could have 2000 wastewater treatment plants in operation by the end of the year. Following is a review of the current public and private sector treatment plant infrastructure in the country, and a discussion of the trends for treatment plants during the next few years.
Since 1992, the number of municipal wastewater treatment plants has increased more than 450% from just under 400 plants to 1833 in 2008. From 1992 through 2000, treatment plant construction increased by just under 100%, while from 2000 to 2008, Mexico had a much more dynamic 230% increase. However, most of this increase appears to have come during the Fox Administration (2000-2006) rather than during the first part of the Calderon Administration (2006 - present). Since 1995, when installed capacity began to be monitored in Mexico, this indicator has increased by over 235% . Likewise, the amount of actual treated wastewater has increased from just over 30 m3 per second in 1992 to 83.6 m3 per second in 2008, representing a 275% increase.
| Municipal Wastewater Treatment Plants 1992-2008 | |||
| Year | Treatment Plants | Installed Capacity (l/s) | Treated Volume (l/s) |
| 1992 | 394 | nd | 30,554.0 |
| 1993 | 454 | nd | 30,726.0 |
| 1994 | 461 | nd | 32,065.0 |
| 1995 | 469 | 48,172.0 | 32,905.2 |
| 1996 | 595 | 51,696.3 | 33,745.4 |
| 1997 | 639 | 57,401.7 | 39,388.8 |
| 1998 | 727 | 58,560.2 | 40,854.7 |
| 1999 | 777 | 61,559.0 | 42,396.8 |
| 2000 | 793 | 68,970.0 | 45,927.3 |
| 2001 | 938 | 72,852.6 | 50,810.0 |
| 2002 | 1077 | 79,735.0 | 56,148.5 |
| 2003 | 1182 | 84,331.5 | 60,242.6 |
| 2004 | 1300 | 88,718.3 | 64,541.9 |
| 2005 | 1433 | 95,774.3 | 71,784.8 |
| 2006 | 1593 | 99,764.2 | 74,388.3 |
| 2007 | 1710 | 106,266.7 | 79,388.3 |
| 2008 | 1833 | 113,024.0 | 83,639.6 |
The below table shows the municipal wastewater treatment plants by state, providing a better understanding of where coverage and capacity are greatest at this moment in Mexico. The sparsely populated state of Durango, located in a somewhat dry area in northern Mexico, has the most municipal treatment plants in operation (167), representing almost 10% of all of the plants in Mexico. Sinaloa (136) has the second most plants and Chihuahua (119), also a very dry state, has the third most plants. Somewhat surprisingly, the Mexico City/State of Mexico area, where close to 25% of the Mexican population is located and where wastewater issues are most severe, has only 105 total plants in operation. While the second most important population area, the Greater Guadalajara area, has a comparable 96 treatment plants, this area has only 1/3 of the population of the Valley of Mexico, which makes the Mexico City situation look even more severe.
At first glance, the low number of plants (61, 14th by state) in the third most populated urban center, Monterrey, would seem to be problematic as well. However, the state of Nuevo Leon, where Monterrey is located, has the highest installed capacity (13,244 l/s), treats the most amount of municipal wastewater (11,645 ls) and is only one of two states that reportedly treats all of its municipal wastewater. In fact, the only other states that treat more than 2/3 are Baja California (93%), Chihuahua (71%), Sinaloa (68%), and Quintana Roo/Cancun (67%). The 10 states with less than 25% of municipal wastewater treatment coverage, all of which should be targets for considerable future wastewater treatment activity, are:
While the very important State of Mexico has a relatively low number of plants and low percentage of total treatment coverage, it nonetheless has the third most installed capacity (7,090 l/s) and the fourth most volume treated (5,190 l/s). On the other hand, installed capacity and volume treated figures for the Federal District/Mexico City and Jalisco/Guadalajara areas are almost as problematic, demonstrating clearly the extent of the problem in these two very populous states.
| State | Municipal Wastewater Plants | Coverage (%) | ||
| Number of Plants | Installed Capacity (l/s) | Treated Water (l/s) | ||
| Aguascalientes | 115 | 4,232.5 | 3,470.1 | 100.0 |
| Baja California | 27 | 6,985.1 | 5,262.1 | 92.6 |
| Baja California Sur | 18 | 1,202.5 | 844.8 | 44.9 |
| Campeche | 13 | 101.5 | 61.3 | 3.8 |
| Chiapas | 24 | 1,508.9 | 1,356.1 | 47.2 |
| Chihuahua | 119 | 8,717.6 | 5,928.4 | 71.5 |
| Coahuila de Zaragoza | 21 | 4,966.5 | 3,866.0 | 51.3 |
| Colima | 57 | 1,541.0 | 1.001.8 | 37.8 |
| Distrito Federal | 27 | 6,480.5 | 3,122.8 | 12.9 |
| Durango | 167 | 3,550.9 | 2,671.4 | 58.9 |
| Guanajuato | 60 | 5,790.4 | 4,305.6 | 50.1 |
| Guerrero | 40 | 2,001.3 | 1,216.7 | 33.1 |
| Hidalgo | 13 | 325.5 | 281.7 | 7.5 |
| Jalisco | 96 | 3,766.5 | 3,493.5 | 24.7 |
| Mexico | 78 | 7,090.2 | 5,190.3 | 21.1 |
| Michoacan de Ocampo | 25 | 3,557.0 | 2,473.6 | 27.0 |
| Morelos | 32 | 1,603.2 | 1,214.1 | 18.9 |
| Nayarit | 63 | 2,029.6 | 1,228.4 | 60.5 |
| Nuevo Leon | 61 | 13,244.0 | 11,645.9 | 100.0 |
| Oaxaca | 66 | 1,510.3 | 986.1 | 44.4 |
| Puebla | 69 | 3,023.2 | 2,426.3 | 42.7 |
| Queretaro de Arteaga | 67 | 1,119.5 | 716.2 | 22.7 |
| Quintana Roo | 29 | 2,076.5 | 1,600.9 | 67.0 |
| San Luis Porosi | 21 | 2,124.5 | 1,740.2 | 60.1 |
| Sinaloa | 136 | 5,281.1 | 4,509.9 | 68.4 |
| Sonora | 76 | 4,447.2 | 3,092.0 | 39.6 |
| Tabasco | 72 | 1,850.0 | 1,309.3 | 18.3 |
| Tamaulipas | 39 | 5,613.9 | 4,050.7 | 59.4 |
| Tlaxcala | 52 | 1,232.4 | 872.1 | 58.2 |
| Veracruz de Ignacio de le Llave | 92 | 5,427.6 | 3,171.0 | 26.6 |
| Yucatan | 13 | 78.5 | 68.5 | 2.1 |
| Zacatecas | 45 | 545.6 | 461.0 | 12.1 |
| National Total | 1,833 | 113,024.0 | 83,639.6 | 40.2 |
The following table shows the distribution of municipal wastewater treatment plants by water basin, offering another way to look at the infrastructure and the problem.
| No. | Hydrologic Region | Number of Plants in Operation | Installed Capacity (m3/s) | Water Treated (m3/s) |
| I | Peninsula de Baja California | 45 | 8.19 | 6.11 |
| II | Noroeste | 90 | 4.54 | 3.18 |
| III | Pacifico Norte | 249 | 8.38 | 6.60 |
| IV | Balsas | 147 | 7.6 | 5.50 |
| V | Pacifico Sur | 83 | 3.17 | 1.98 |
| VI | Rio Bravo | 188 | 28.32 | 22.23 |
| VII | Cuencas Centrales del Norte | 113 | 5.19 | 4.03 |
| VIII | Lerma-Santiago-Pacifico | 465 | 23.17 | 18.02 |
| IX | Golfo Norte | 91 | 2.91 | 2.31 |
| X | Golfo Central | 127 | 5.35 | 3.14 |
| XI | Fontera Sur | 97 | 3.36 | 2.67 |
| XII | Peninsula de Yucatan | 55 | 2.26 | 1.73 |
| XIII | Aguas del Valle de Mexico | 83 | 10.60 | 6.14 |
| Total | 113.02 | 83.64 | ||
The Rio Bravo River Basin, is the top basin in terms of the volume of treated water with 26.5% of total treated municipal wastewater. This basin, despite only having the third most number of municipal treatment plants, counts with the greatest amount of installed municipal treatment capacity. This river basin includes the state of Nuevo Leon, one of the most industrial in Mexico, with the highest percentage of municipal wastewater treatment in Mexico.
The Mexican River Basin districts, broken down by the percentage of all of the municipal wastewater treated in the country are:
In the river basins located in the northern and central parts of the country, which include the top five basins listed above, we find over 75% of all treated municipal wastewater. In light of the serious water supply problems in these regions, especially in the arid north, and the high water availability in the southern part of the country, these statistical differences are more than understandable and give a clear idea about where future treatment plant construction can be expected.
While current infrastructure figures might present more concern than assurance about the municipal wastewater treatment plant situation in Mexico, there are some positive signs about recent and upcoming plant plans and new projects. In the last four years, 202 municipal wastewater treatment plants were built and 43 were rehabilitated. At this time, 59 plants are under construction throughout the country. During this year, another 100 plants are scheduled to be built with 36 already being put out to bid during the 1st Quarter. By the end of 2010, Mexico will have over 2,000 treatment plants either operating or under construction. And, when the three most important treatment plants in Mexican history come on line in the next few years ("El Ahogado" and "Agua Prieta" in Guadalajara, and "Atotonilco" in the Valley of México), approximately over 50% of wastewater in the Greater Mexico City area and 100% of the wastewater in the Greater Guadalajara area should be treated. So, while there is a lot more to be done, there is quite a bit of activity and apparent commitment to expanding the wastewater treatment plant base in Mexico.
As of 2008, there were 2,082 industrial wastewater plants in operation throughout Mexico. Not all plants are designed to carry out the same processes of treating industrial wastewater. Mexico has four types of treatment plants:
Of these 2,082 plants, 648 or 32% are considered primary while well over half (56%) or 1,185 plants, are considered secondary. Only 66 plants, or 3%, are considered to have tertiary treatment operations while 183 plants, or about 9%, are not characterized by any of these three categories and one would assume are probably more primary than tertiary in nature. Undoubtedly, Mexico lacks the vision and resources to expand its tertiary treatment coverage as a developed country might. While the country still lacks considerable primary and secondary coverage, its somewhat extensive number of secondary plant numbers seem to indicate that Mexico is willing and able to prioritize beyond just basic, traditional, primary treatment goals and technology.
In the following table, you can see the distribution of industrial treatment plants in each state as of 2008. You can also see from a comparison of this table and the above table on treatment coverage by river basin that in 2008, Mexican industrial treatment plants treated 33.78 m3 per second, or approximately 40% of the total municipal wastewater treatment. The Wisconsin Trade Office would like to hear from U.S. companies in this segment to better understand how these figures compare to the United States and other developed and less developed countries and to what extent these figures should be a major or minor concern.
| State | Industrial Wastewater Plants | ||
| Number of Plants in Operations | Installed Capacity (m3/s) | Treated Water (m3/s) | |
| Aguascalientes | 53 | 0.26 | 0.13 |
| Baja California | 179 | 0.67 | 0.15 |
| Baja California Sur | 7 | 0.01 | 0.01 |
| Campeche | 49 | 0.50 | 0.16 |
| Chiapas | 66 | 0.88 | 0.61 |
| Chihuahua | 8 | 0.47 | 0.31 |
| Coahuila de Zaragoza | 34 | 7.37 | 0.72 |
| Colima | 20 | 0.66 | 0.29 |
| Distrito Federal | 120 | 0.40 | 0.39 |
| Durango | 31 | 0.68 | 0.34 |
| Guanajuato | 45 | 0.40 | 0.18 |
| Guerrero | 8 | 0.06 | 0.04 |
| Hidalgo | 43 | 2.42 | 1.29 |
| Jalisco | 34 | 1.51 | 1.51 |
| Mexico | 319 | 4.57 | 3.21 |
| Michoacan de Ocampo | 50 | 3.81 | 2.70 |
| Morelos | 83 | 2.75 | 2.64 |
| Nayarit | 5 | 0.16 | 0.16 |
| Nuevo Leon | 91 | 4.13 | 3.00 |
| Oaxaca | 15 | 1.22 | 0.90 |
| Puebla | 96 | 2.87 | 2.62 |
| Queretaro de Arteaga | 107 | 1.10 | 0.51 |
| Quintana Roo | 2 | 0.01 | 0.01 |
| San Luis Porosi | 74 | 1.27 | 0.63 |
| Sinaloa | 47 | 3.16 | 0.85 |
| Sonora | 23 | 0.36 | 0.16 |
| Tabasco | 115 | 1.28 | 0.15 |
| Tamaulipas | 46 | 1.64 | 1.12 |
| Tlaxcala | 106 | 0.25 | 0.22 |
| Veracruz de Ignacio de le Llave | 161 | 11.62 | 8.65 |
| Yucatan | 36 | 0.11 | 0.07 |
| Zacatecas | 9 | 0.16 | 0.04 |
| National Total | 2,082 | 56.75 | 33.78 |
The above table shows that the State of Mexico, Mexico's most industrial state, has a leading position in industrial wastewater treatment with 319 plants. The State of Mexico industrial plants represent 15% of all industrial plants in Mexico, and when combined with those in the Federal District/Mexico City, represent 21% of industrial plants nationwide. Baja California, with a heavy concentration of maquiladora operations, has the second most industrial plants with 179. Veracruz, a center for paper, sugar, and petroleum industries, has one of the most extensive river networks and the third most industrial plants with 161 plants. Veracruz has more installed capacity (11.62 m3 per second) and volume treated (8.65 m3 per second) than any other state, representing over 20% of national industrial installed capacity and over 25% of total industrial water treated. As a result, the 439 industrial plants in the State of Mexico/Mexico City area represent only 15% of the national installed capacity (4.97m3) and 10% of national volume treated (3.6m3). It is interesting to note that despite the fact that the State of Mexico has the second most installed capacity and volume treated and twice as many industrial plants as Veracruz, it has less than 40% of the industrial plant capacity and treatment of Veracruz.
Mexico is far from meeting its wastewater treatment needs and requires considerably more funding and prioritization for Mexico to meet 2012 and 2030 public and private sector treatment plant goals. The increase in public and private treatment plant construction is a clear example of Mexico's attempt to make water treatment and reuse a higher priority within the context of Mexico's water infrastructure. The significant increases in federal/Conagua funding and local/state water sector investment during the Calderon Administration seem to reinforce the credibility and viability of treatment plant construction as a core focus of Mexican water infrastructure efforts.
It is also important to mention that we are seeing the beginning of a trend away from government officials requesting traditional technology towards considering slightly more expensive technologies with much better returns and treatment benefits. This is an important sign that Mexico might be beginning to address and resolve not only its quantitative but also its qualitative treatment problems and challenges. This should also mean that in the short term, Mexico will need considerable foreign company products and equipment in order to meet these quantitative and qualitative goals and to maintain the current and expanding treatment plant infrastructure.
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Status of Major Wastewater Treatment Plants in the Valley of Mexico
Earlier this spring, Mexico announced the winning bid for the largest wastewater treatment plant in Latin America, called Atotonilco. When this plant is fully operational (2-3 years), it is supposed to be able to treat over 50% of all of the wastewater in the greater Mexico City, an area where currently only 10% of wastewater is being treated. However, OHL from Spain decided to contest the award that was given to a group headed up by Grupo Carso, which also submitted the winning bids for the two large wastewater treatment plants in Guadalajara that will supposedly be able to handle 100% of the greater Guadalajara wastewater once fully operational. OHL is contending that its bid met the technology requirements of the bid and was 4% less expensive than the Carso-led bid. Evidently, the OHL-lead bid was disqualified for a number of technical/administrative requirement reasons that at first glance appear to be somewhat questionable or subjective rather than objective. A number of people in the industry have said that they believe that the complaints by OHL have some validity and that the process of dealing with the complaint will probably not be resolved until sometime during the fall of 2010. However, despite this legal challenge, the Mexican government has gone ahead and granted the award to Grupo Carso and continues to describe the project in the press as having been awarded to Grupo Carso and its partners, ICA and Mitsui, without referring to the challenge. As a result, the state of this all important project and whether the OHL group has arguments to win the case and prevail over the Grupo Carso group, with its strong domestic and political ties, is unclear at this time.
Concerning the next round of wastewater treatment plants in the Valley of Mexico, there have been some recent articles with commentaries about how there may not be sufficient funding in 2010 and that as a result, these plants would be indefinitely put on hold. However, staff of the Mexico Trade Office has spoken with a number of contacts in the industry who have provided the following information about the status of these important projects. It is being reported that the important "El Caracol" tertiary treatment plant in the Valley of Mexico will be let out for bid in August or September of this year, and that Conagua funding and FONADIN financing is in place to proceed without delay. While the other major Valley of Mexico plant, "Zumpango," may not proceed this year, funding and financing does not seem to be the real issue. It looks as if the project will be let out for bid in early 2011 with full funding and financing. While this plant will have secondary treatment capacities, it will present important opportunities for foreign products and technology. It also appears that the funding, financing, and bids for most of the rest of the wastewater treatment plants in Mexico, outside of the Valley of Mexico, are on schedule for completion in 2010.
It is of vital importance to be able to understand to what extent the products that are being used in the Mexican market are bought from local companies or imported from abroad. This decision is a function of perceived minimum quality needed, price, availability, and other factors. Below is a cross section of the products that are used in the market, and how we see their buying tendencies.
| Imported Product Preference | Both | Domestic Product Preference |
| GIS
& SCADA Automation and Controls Equipment Wastewater/Reuse Equipment Treatment Plant Facilities Data Management Systems CIS & Meters Well Drilling Systems Chemicals Desalination Equipment Rain Water Reclamation |
Analyzers
& Manometers Filtration Equipment & Media Treatment Plant Systems Tanks Leak Detection Equipment Laboratory & Sampling Equipment Process Equipment Aerators & Diffusers Compressors & Blowers Disinfection Systems Consulting Pumps & Valves Storm/Rain Drainage Solutions |
Contractors
& Construction Services Pipe/Water Distribution Equipment Sludge Handling Systems Gates & Flumes Metal Fabrication Needs Chemical Feed Equipment Corrosion & Cathodic Protection/Control Equipment Chlorine Coatings & Linings Sewer/Collection Systems & Equipment Traditional Treatment Options |
This chart provides a feel for the foreign products and equipment that are the most likely to find a market in Mexico, those that foreign companies are most likely going to struggle to sell because of domestic competition and their advantages, and those where there is an important domestic presence but still viable opportunities for higher end foreign products.
The Mexican public and private water sectors require a variety of types of products, equipment, and technologies to deal with current and future needs. However, while the Mexican water sector is trying to become more sophisticated in its strategies and approaches, it is still behind in many of the developments and trends in the United States. As a result, it is important to be able to identify which products and technologies are right for the market at this time, and which are more likely to be successfully introduced in the market in the future when the infrastructure, revenue, and the commitment to improvements is at another level. This is something that LGA Consulting helps clients to understand and future editions of the Quarterly Mexico Water Report will deal with this issue.
In 2009, Mexican bottled water volumes grew 6% and current sales revenues grew by 8.6%, making the market third highest in the world behind China and the United States. As a result, Mexico produced 26,000 billion liters of bottled water and $140 billion pesos (US$10.7 billion) in revenue. The graph below demonstrates the enormous revenue growth in the sector, with revenue having doubled since 2004 and having increased by 1/3 since 2006.
The low quality of the tap water in Mexico due to the hazards of the microorganisms and bacteria as well as odor and sediment problems, have helped strengthen the demand for bottled water. Advertising campaigns exhorting the health benefits of purified water plus a very effective distribution system by the major players have also been crucial for this industry. While most of the rest of the world seems to be moving away from bottled water and toward tap water purification solutions for environmental and cost reasons, the continued skepticism on the part of most Mexican consumers for home tap water purification systems keeps the already maturing Mexican bottled water market vibrant.
According to a study done by the Mexican National Water Commission (Conagua), the quality of the superficial water in Mexico is:
Mexico is among the top countries in the world for the consumption of bottled water. Consumption statistics for 2004 in the first table below show that Mexico is the second largest market behind the United States. In fact, 2009 figures show that Mexico (8.6% increase) was third in overall bottled water revenue growth behind only China (71.5%) and right with the second place U.S. market (8.8%). Some industry sources have reported that Mexican revenues for bottled water could be close to equaling those of the United States. Considering that Mexico has only 33-40% of the population of the United States, these consumption and revenue figures are even more noteworthy.
The second table below shows that Mexico also was the second largest consumer of bottled water per capita, well ahead of the United States and other countries and only behind Italy. The Trade Office sees no significant trends that have occurred since 2004 that would suggest that the nature of these indicators and figures would be dramatically different today.
| Top Countries Bottled water consumption in liters in 2004 |
| USA - 26,000 million |
| Mexico - 18,000 million |
| China - 12,000 million |
| Brazil - 12,000 million |
| Top Countries Bottled water consumption per capita in 2004 |
| Italy - 184 liters |
| Mexico - 169 liters |
| Belgium - 145 liters |
| France - 145 liters |
| Spain - 137 liters |
The retail bottled water market in Mexico is dominated by multinationals but there is considerable competition. Unlike the U.S. market where Nestle (>50% of the market) and D&S Waters (25-33% of the market) control the majority of the market, the three major competitors in the Mexican retail market (Danone, PepsiCo, and Coca-Cola) account for only 40% of total sales. Surprisingly, Nestle, the U.S. bottled water leader appears to have less than 2% of the Mexican market. In 2006, Coca Cola reported that 20% of its revenue came from bottled water sales, and there is every reason to believe that that figure today represents as high as 25%, if not 30%, of its sales today.
There are almost 6,000 bottled water manufacturers in Mexico, with 10 large consortiums, 150 large companies, 300 medium companies, 600 small companies, and 5,000 micro-companies in the mix. The National Association of Purified Water Distributors estimates that close to 85% of bottled water comes from small/micro bottlers. The lead companies have strong national distribution and sales support thanks to other major channel synergies, and they count on extensive promotional and advertising campaigns to position their brands. Smaller companies have strong regional components that help them compete in some market segments, especially with 20 Liter containers known as garrafones, which is the standard way to go to market for household drinking water use for upper, middle, and even lower class consumers although some lower class consumers simply drink water from the tap. Many of these local, micro companies, perhaps even 50%, do not currently meet Mexican minimum quality standards yet find a way to avoid regulations and government or sector oversight and standard implementation.
Although Mexico has traditionally been, and continues to be, one of the most important consumers of soft drinks, bottled water volumes have surpassed those of carbonated water, milk and beer since 2003. Bottled water's revenue share among beverages (alcoholic and non-alcoholic) went from 19.7% in 2002 to 28.2% in 2007.
Bottled water is relatively cheap in comparison with other beverages. However, it is interesting to note that 1,000 liters of tap water in Mexico would cost between 1.70 and 2.50 pesos (15-20 U.S. cents) to deliver to the end-user while the same amount of bottled water could have a retail price of 2,500 pesos, or close to US$200. One day, the reality that purifying tap water is much less expensive than bottled water options will impact the viability of this industry but this might not happen for decades, or more, considering the current Mexican water "culture". However, as bottling prices go up, the need for adapting to this option will begin to change and perhaps faster than we can imagine under the current national water reality.
In Mexico, bottled water represents a third of the cost of carbonated waters and soft drinks. A recent study from the Mexican Institute of Consumer Protection shows that the price of soft drinks and carbonated waters is 67% above that of bottled water (does not include garrafones). Nonetheless, in 2009, bottled water prices increased 13-14%. Therefore, while one liter of soft drinks costs 7.12 pesos (US$0.55) to produce, bottled water costs only 4.27 pesos (US$0.33). It is interesting to note that in the United States, one gallon of bottled water costs almost 1/3 less than in Mexico, or about US$0.13. Nonetheless, Mexicans still consume considerably more soft drinks than bottled water. The average Mexican family spends 211 pesos (US$16) per month on soft drinks vs 135 pesos on bottled water (US$10).
Bottled water consumption is expected to grow by 5% annually between now and 2014. If this 5% growth figure is met, it should mean annual production equal to 33,000 million liters and annual sales of $169 billion pesos or US$13 billion by 2014.
LGA Consulting obtains, analyzes, and provides water bid and award information on the Mexican market on a monthly basis and to our knowledge, we are the only firm or organization that provides this information in English. If your company would like a copy of this analysis, please click here and send an e-mail message to us requesting this information.
LGA Consulting obtains information on the details of the requests for bids and later their awards, including the date of the bid and the award, the entity and location, the products required, along with the winner and amount of the award. We also track all of the participants in the bids so that we have a comprehensive understanding of the Mexican intermediaries that companies should be working with to be able to participate in these opportunities.
Analysis of 1st Quarter Mexico Water Requests for Bids
Below is a graph showing the general characteristics of the almost 250 water bids/projects published during the first quarter of 2010. These projects are classified into four major groups for classification purposes: equipment; rehabilitation or modification; potable water; and wastewater/drainage/sewage. While there is a specific equipment category for requests for bids, it is understood that in reality, in each of these bid categories, products and equipment are important components.
The graph demonstrates that 44% of the bids were related to potable water projects, while 42% were related to wastewater projects, with only 7% related to modifiction or remodeling projects and 6% on strictly equipment requests. It is important to mention that many products and equipment are not requested through the more formal water bid process but through the simpler and often preferred direct acquisition process that can be employed when certain products or technology is required, the values of the purchases do not meet a certain minimum threshold, or local/state water entities find other loopholes. In future Quarterly Reports the Mexico Office will analyze these purchases and their trends as well.
In analyzing the above-mentioned 89 potable water bids, 72 are focused on the construction of new plants and systems while 17 are focused on rehabilitation efforts. Below is the breakdown of these bids by state.
| Percentage of Potable Water Works per State | ||
| State | Total Bids | % |
| Baja California |
1 | 1% |
| Campeche |
1 | 1% |
| Chiapas |
29 | 33% |
| Chihuahua |
10 | 11% |
| Estado de Mexico |
2 | 2% |
| Guerrero |
28 | 31% |
| Hidalgo |
1 | 1% |
| Nayarit |
5 | 6% |
| Nuevo Leon |
1 | 1% |
| Puebla |
1 | 1% |
| San Luis Potosí |
1 | 1% |
| Sonora |
2 | 2% |
| Tabasco |
1 | 1% |
| Tamaulipas |
3 | 3% |
| Yucatan |
3 | 3% |
| Total | 89 | 100% |
The table shows that during the first quarter of 2010, three states had the greatest amount of potable water bidding activity. Chiapas, Mexico's southernmost state and one of the poorest states, had the most potable water projects with 29, of those 24 are focused on new projects and 5 on rehabilitation projects. Guerrero, also a relatively poor state, had 28 such bids all focused on new works/projects. The requests for bids from these two states represented close to 2/3 of the potable water bids during the first quarter. Regarding wastewater projects, of the 84 bids, 36 were focused on the construction or renovation of treatment plants with the construction of new plants representing close to 90% demonstrating the commitment that Conagua made to wastewater treatement last year.
Of the remaining roughly 15% of the requests for bids, about half were focused on remodeling or modification projects and the other half for water treatment and conditioning equipment. Of the 15 remodeling bids, 40% were from Chihuahua. Of the bids for equipment, over 80% were for new equipment with the rest directed to equipment repair or maintenance. In this category, tanks, meters and pumps were the most regularly requested products. Over 60% of these new equipment bids came from Chiapas, San Luis Potosí and Federal District bids.
Analysis of 1st Quarter Mexico Water AwardsBelow is the analysis of the 1st Quarter water bids that have been awarded thus far. The values and the amount of awards so far this year are rather modest. While we still consider the vibrant bid activity during the first quarter to be more representative of the spending trend in 2010, we are a little concerned by the low values and low number of awards that have been released so far in 2010. And, despite these limitations, these figures do give us a fair understanding of the location and nature of 1st Quarter water-related awards, especially in the potable water segment.
Potable Water - 37% of the bids for potable water projects resulted in awards of over 172 million pesos. Of these awards, although 73% were for the construction of new potable water works, these represented just over 50% (88.8 million pesos) of the total value. Chiapas and Chihuahua were the states with the largest awards, with Chiapas having over 50% and the largest project in the segment worth 13.5 million pesos. Chihuahua had 38% of the awards with the largest award being just under 8 million pesos.
On the other hand, the remaining 27% of the potable water awards dealt with remodeling and modification of already existing potable water works resulting in awards of 83.4 million pesos. The largest project in this segment, and twice the size of the largest new construction award, was in Chiapas, worth 30 million pesos. It is interesting to note that these awards represent 48% of the value of all of the potable water awards despite the relatively low number of awards. This would seem to demonstrate that there are considerable opportunities in the remodeling potable water works.
The above information seems to suggest that Chiapas, one of Mexico's poorest states, offers some interesting and potentially important opportunities with both new construction and remodeling projects. Chihuahua also seems like a state with considerable public sector water opportunities in both new construction and remodeling projects.
Wastewater, Drainage, Sewage - In this relatively large segment, only three awards have been granted so far this year and the amounts were very small. All three awards were granted for projects in the state of Chiapas, and the total for all three awards was a little over 10 million pesos. We expect that in April and perhaps May, the great majority of these projects will be awarded.
Equipment & Rehabilitation - Finally, in the other two smaller bid categories of equipment and rehabilitation, only three awards have been granted so far this year, two for rehabilitation and one for equipment. To clarify, the difference between these rehabilitation projects and the remodeling and modification projects mentioned above is that the above projects were described specifically as potable water projects while these rehabilitation projects were not categorized as such. The two rehabilitation projects in this segment were located in San Luis Potosi and Sonora, with the San Luis Potosi Project being three times as large. Concerning the lone equipment award, this was granted in Sinaloa and for the relatively low amount of $1.35 million pesos.
Treatment Plant Bids & AwardsThe first article in this edition of the Quarterly Report focused on current and future water treatment plants. As a result, we thought that analyzing the bids and awards for treatment plants would be a good way to complement and complete our analysis of treatment plant dynamic in Mexico. The following table shows the states where there were bids for water treatment plants during the first quarter of this year:
|
Construction
of Treatment Plants Bids per =
State |
||
|
State |
Total =
Bids |
% |
|
Campeche |
2 |
7% |
|
Chiapas |
11 |
36% |
|
Estado de =
Mexico |
5 |
16% |
|
Guanajuato |
1 |
3% |
|
Guerrero |
1 |
3% |
|
Hidalgo |
1 |
3% |
|
Tlaxcala |
2 |
7% |
|
Veracruz |
8 |
25% |
|
Total |
31 |
100% |
As the table shows, Chiapas had over 33% of the treatment plant bids, Veracruz 25%, and the State of Mexico over 15%, with the three states representing almost 80% of all of the water treatment bids during the first quarter. Clearly, these treatment plant bid numbers, along with the above potable and wastewater bid numbers, demonstrate heavy activity in the center and south regions of the country and a strong commitment to treatment plant construction.
While the very large plants and interstate or interbasin plants are often bid out by Conagua at the federal level, it is important to realize that the great majority of bids for treatment plants, in general and during the first quarter of 2010, come from non-federal sources. Most of these requests for bids come from state rather than local/city water agencies, probably in light of the financial, administrative, and technical synergies that are available at the state level but not necessarily at the majority of city or local levels. While these bids are non-federal in focus, most if not all of these bids rely heavily on Conagua matching funds and related Conagua construction incentives and infrastructure funding financing in order to be realized.
Concerning treatment plant awards, only 17% of the bids have been awarded so far in 2010, for a total amount of 54 million pesos. The largest of these projects was awarded in Chiapas for the modest amount of 18.5 million pesos, suggesting that thse numerous plant bids in the state are generally smaller than larger in nature. The tiny state of Tlaxcala also had two bid awards for treatment plant projects with a value of 16 million pesos and 11.8 million pesos respectively. The remaining 7.65 million pesos were assigned to three treatment plant projects in Chiapas.
The treatment plant bids during the first quarter of 2010 seem to reflect the water treatment emphasis that Conagua is promoting. While there might be less plant bid activity in the Greater Mexico City area this year versus 2009, this does not seem to hold true for the central and southern parts of the country, or for the country as a whole, when analyzing first quarter treatment plant bids. If 57 new plants were built in 2009 and about 100 are programmed for 2010, the 31 newly bid plants in the 1st Quarter would seem to indicate that treatment plant growth should be more dynamic than in the fairly vibrant 2009 and that the 100 plant target is reachable.