Wood: Northern Mexico is industrializing rapidly. But this expansion is being jeopardized by chronic water scarcity.

MONTERREY, Nuevo León – An insufficient supply of water threatens Northern Mexico’s attempts to develop data centers and a semiconductor industry.

That is the opinion of Duncan Wood, CEO of Hurst International Consulting LLC. Wood, formerly with the Pacific Council on International Policy and the Mexico Institute, wrote a feature on the topic for the World Economic Forum.

On data centers, Wood wrote: “The growth of artificial intelligence and cloud computing has exponentially increased demand for data centers, with Northern Mexico a cost-effective location to serve North American markets. However, data centers also consume vast energy and water for cooling and redundancy systems. Most regional designs still rely on evaporative cooling, using up to one million gallons of water per day. They drive up local energy demand, deepening reliance on Mexico’s fossil-heavy grid, where renewables remain underdeveloped.”

On semiconductors, Wood wrote: “As the United States incentivizes domestic semiconductor supply chains through the CHIPS Act, northern Mexico is positioning itself as a partner in packaging, testing and assembly. However, semiconductor production is extremely water-intensive, posing challenges for already water-stressed cities such as Monterrey. Building the digital and clean energy economy must align with local water limits and include strong recycling and efficiency measures.”

Wood’s three bullet points are:

• Northern Mexico’s economic expansion in manufacturing and energy is jeopardized by chronic water scarcity.
• The region highlights the urgent need to align water, energy and climate policies in the energy transition.
• Projects such as shale gas, breweries and data centers show how water constraints shape sustainable development.

“Northern Mexico has long been geographically and economically critical to Mexico’s national development. Proximity to the US border, a business-friendly environment and an entrepreneurial culture make the region prime for foreign direct investment, particularly amid the current wave of nearshoring. It is also central to Mexico’s energy system: it hosts oil and gas fields, wind and solar resources, critical minerals, industrial energy users and potentially, next-generation technologies such as hydrogen and advanced battery production,” Wood wrote, in his introduction. 

“Yet the entire region is highly water-stressed. According to Mexico’s National Water Commission, over 45 percent of its aquifers are overexploited and rainfall averages are among the lowest in the country. Water governance is fragmented, infrastructure is ageing and climate change is intensifying drought frequency and severity. As Mexico pursues emissions cuts, energy security and clean tech growth, the north faces a key question: can it sustain the energy transition with shrinking water resources?”

Editor’s Note: Click here to read Duncan Wood’s analysis for the World Economic Forum.

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