Northern Mexico's rapid economic expansion in manufacturing and energy faces significant jeopardy from chronic water scarcity, challenging its pivotal role in global nearshoring and the broader energy transition. This critical interdependency between water and energy demands urgent policy alignment and integrated planning to ensure sustainable development. The region, a historical economic powerhouse due to its U.S. border proximity and entrepreneurial environment, is vital to Mexico’s energy system, hosting oil and gas fields, vast renewable potential, and growing demand for critical minerals. However, over 45% of its aquifers are overexploited, and rainfall averages are among the lowest nationally, exacerbated by fragmented water governance, aging infrastructure, and intensifying climate-induced droughts.
The severe water constraints are already impacting the viability of key industrial and energy projects. The vast shale gas reserves in the Burgos Basin, which could reduce Mexico's reliance on fuel oil, remain largely undeveloped due to the immense water requirements of hydraulic fracturing. Without comprehensive water management, shale gas development will be limited, emphasizing the need for water-efficient clean energy pathways. Similarly, the burgeoning semiconductor manufacturing sector and the exponential growth of data centers, both highly water-intensive, pose significant hurdles for water-stressed cities like Monterrey. Data centers, for instance, can consume up to 1 million gallons of water daily for cooling, simultaneously increasing local energy demand on a fossil-heavy grid. Future developments in these sectors must prioritize water- and energy-efficient designs, ideally powered by local renewables and employing advanced cooling systems.
The public backlash against the cancelled $1.4 billion Constellation Brands brewery in Mexicali underscores the social and reputational risks of water-intensive projects in arid regions. Despite permits, widespread protests over water allocation in an area already strained by reliance on the Colorado River and Mexicali Valley aquifer forced the project's halt. This incident highlights the critical importance of incorporating social license and equitable water access into industrial planning.
Beyond internal challenges, Northern Mexico's water-energy nexus has significant transboundary implications. Under the 1944 Water Treaty, Mexico and the United States share water resources. Declining flows due to drought and overuse are making treaty obligations increasingly difficult to fulfill, leading to past conflicts over water releases. This escalating tension necessitates institutionalized regional cooperation on water and energy, extending to U.S.-Mexico climate and security dialogues.
To ensure a just and sustainable energy transition, Mexico must integrate water as a core input in all energy and industrial strategies. This includes mandating water impact assessments for new infrastructure, prioritizing investment in water-efficient technologies, and developing a skilled workforce focused on the water-energy nexus. Modernizing Mexico's water governance and pricing mechanisms is also crucial. Northern Mexico serves as a frontline region in the global energy transition, offering a cautionary tale: sustainable development hinges on smart governance of water, land, and social equity.