Economic valuation of irrigation water in south-eastern Mexico

Abstract

Ongoing discussion on new water legislation in Mexico emphasizes the need to consider the economic dimension of water. Using the net income change method, in this article the economic value of irrigation water is estimated for banana cultivation in the state of Tabasco, which is a tropical region with high rainfall. The main results show that irrigated farms are 34–37% more profitable than rainfed ones with similar revenue levels, with corresponding water values of 1.48–1.75 USD/m³. These values are a proxy of farmers’ maximum willingness to pay, and can be used to inform tariff reform.

Keywords:

• Economic valuation
• tropics
• irrigation water
• net income change
• willingness to pay

Acknowledgements

The authors are grateful to Sebastiaan Hess for his invaluable comments on a previous version of this manuscript and to Paula Novo for inspiring discussions that helped develop ideas in this article. Thanks are also due to the anonymous referees and the editors for valuable comments on earlier drafts.

Notes

1. To facilitate the comparison between the results of different studies and countries, all amounts are expressed in USD. Exchange rates are provided in separate footnotes for the relevant studies.

2. USD 1 = IRR 9,200 (Esmaeili & Vazirzadeh, 2009).

3. USD 1 = JD 0.7092 (Al-Karablieh et al., 2012).

4. The 2012 exchange rate was USD 1 = IRR 12,243 (F. M. Ltd., 2014).

5. The 2004 exchange rate was USD 1 = GBP 0.546 (Bank of England, 2015).

6. The 2012 exchange rate was USD 1 = MNX 13.17 (BANXICO, 2014).