Water Subsidies and Aquifer depletion in Mexico’s Arid Regions

Farmers in middle and high income industrialized countries tend to be heavily subsidized by their governments thanks to their important political weight. Mexican farmers are not the exception. Even after the structural reforms of the 1990s in which the country scrapped policies like guaranteed prices and privatized fertilizer firms, farmers in Mexico still receive hundreds of millions of dollars per year in transfers. Some of them take the form of matching grants to buy inputs or equipment, through a program called Alianza para el Campo. Those producing corn receive a direct transfer per ton sold as “commercialization support”; while other important export crops such as coffee and sugar are the objects of specific support programs with generous budgets. Across the board support takes the form of a zero VAT rate that all the agrochemicals enjoy, and, at the center of our argument, a subsidy of more than 2/3 the cost of electricity for those irrigating with groundwater, all this on top of a zero price for water itself.