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f e a t u r e What's Holding Up the Bank?Binational recommendations on border environmental investment overdue; Geographic Expansion in Mexico possible, while merger of institutions widely opposed by stakeholders by Talli Nauman | February 1, 2002 On Jan. 22, the North American Development Bank (NADB) announced that the city of Nogales, Ariz. had applied for a grant to help with construction of a much-needed $50-million upgrade to its international wastewater treatment plant. The Nogales application was the most recent of a mounting number of petitions submitted to the NADB and its sister institution, the Border Environmental Cooperation Commission (BECC). The surge in project submissions reflects the ever-growing need for new water and waste management infrastructure to allay environmental problems linked to rapid growth and crossborder trade experienced by border communities. The question of how to improve BECC and NADB's performance in meeting these needs, however, is the subject of an ongoing binational probe that has drawn out opposing positions. With the respective teams of Mexican President Vicente Fox and U.S. President George W. Bush considering potentially sweeping reforms to BECC and NADB, central arguments over improving the sister institutions' efficiency remain to be reconciled. The arguments raised during the four months since Sept. 6, when the presidents ordered a binational group to conduct crossborder consultations and submit recommendations on strengthening the agencies, boil down to this:
The deadline for the recommendations, originally slated for Oct. 31, was extended at the joint request of the Good Neighbor Environmental Board, an interdepartmental government advisory panel and its Mexican counterpart, Region I of Mexico's multisectoral National Sustainable Development Advisory Council. Expected in January, announcement of the reform recommendations has again been delayed-indefinitely-to permit continued deliberations, apparently due to lack of consensus. The U.S. EPA, departments of State and Treasury, their Mexican counterparts, and the binational International Boundary and Water Commission are in charge of developing the recommendations. The Ciudad Juárez, Mexico-based BECC and the San Antonio, Texas-based NADB were concocted in order to win congressional backing for the 1994 North American Free Trade Agreement (NAFTA). The argument used to pitch the institutions, amply vindicated after eight years' of increased U.S.-Mexico trade sparked by the treaty: The 2,000-mile border would need funding for environmental infrastructure capable of supporting the growth that increased trade would spark, and at levels far beyond the wherewithal of local governments. So, through a binational accord, the BECC got the job of providing technical assistance for and certification of border water, municipal solid waste, and wastewater treatment projects. The NADB, in turn, was charged with helping finance BECC-certified projects. Progress, But Bank Not Meeting DemandsTo date, the BECC has allocated more than $21 million in aid for infrastructure projects in over 100 communities via its Technical Assistance Program. It has certified 55 projects with an investment value of some $1 billion, benefiting some eight million border residents. The NADB has provided about $326 million in 37 grants, plus nine loans totaling $23.5 million, to assist in construction of the certified projects. In addition, it is supporting 96 capacity-building projects in 64 communities through its Institutional Development Cooperation Program. However, the bank's financing activity is modest when viewed in light of its $2.7-billion lending capacity, and the slow pace with which funds have been disbursed is causing consternation for stakeholders on both sides of the border. Meanwhile, the backlog of border infrastructure needs continues to grow. BECC has nearly 100 projects in the pre-certification stage of development and says that figure represents less than 20% of the area's water and sanitation needs over this decade. The border will require at least $3.5-billion-worth of environmental infrastructure before 2010, according to a needs assessment drawn up by the EPA and the Southwest Center for Environmental Research and Policy (SCERP). To Merge or not To Merge?Citing the slow progress of putting infrastructure in place, the U.S. Treasury Department has been toying with the idea of slimming down the bureaucracy by merging the BECC and NADB into a single entity. Among the arguments in favor of the separation of powers is that it creates a system of checks and balances. Lack of communication between the two institutions and an overlap of responsibilities are the main criticisms of the current arrangement. But the merger proposal has met with wide-ranging opposition on both sides of the border. In 30 verbal comments submitted during five public consultations conducted along the Mexican side of the border in October and November, 21 participants called for the agencies be left autonomous, while five supported consolidation. The San Antonio-based Free Trade Alliance of business leaders recently came out in favor of continuing the dual system. It convened its NADB Liaison Committee in mid-January, and the support group issued a policy advisory advocating preservation of the present structure. [1] The position reinforced that of a number of border nonprofits, such as the Texas Center for Policy Studies (TCPS), an Austin, Texas-based public interest group. "TCPS is strongly opposed to merging BECC and NADBank into a single
institution. Such an unwarranted change ... would be enormously and unnecessarily
disruptive to the current progress being made in certifying and funding
border environmental infrastructure projects, the group stated in written
comments to the U.S. government in October. "As far as we can determine,
there is absolutely no groundswell of support for this option from the
border," it added. Oscar Romo, a Tijuana, Mexico-based member of the National Sustainable Development Advisory Council's Region I, says BECC has fomented "a new culture of public participation" in Mexico. [2] Members of the Good Neighbor Environmental Board also filed comments in support of maintaining BECC's independence. Mark Spalding, International Environmental Policy and Law lecturer at UC-San Diego says he hopes the final reform recommendations will result in "a strengthening of the BECC and its sustainable development certification program." Possibly the most influential voice raised in opposition to the merger is that of the four U.S. border governors, with whom President Bush identifies. They issued a statement in December calling for an audit of the institutions prior to any decision on merging. [3] Their opposition to the Treasury Department's pro-merger stance is one of the main reasons the binational group has delayed making any recommendations, informed sources told the Americas Program. Topping off the votes of confidence for BECC is Mexican Environment and Natural Resources Secretariat (SEMARNAT) chief Victor Lichtinger. "The Mexican government supports all efforts to keep this the great organization it presently is," he says. He adds that given the threat to international cooperation posed by the current global situation, "it is important that organizations like BECC exist, which foster the solidarity of both nations." Southward Geographic Expansion of BECC/NADB Gains SupportDespite the current impasse, however, review group members have reached agreement on one contentious issue: some additional geographic expansion into Mexico of the BECC-NADB's sphere of influence, according to Jerry Clifford, EPA Office of International Activities deputy director and a member of BECC's board of directors. [4] The BECC-NADB's founding mandate was to support public environmental infrastructure projects in the free-trade zone, defined as an area 60 miles (100 kms) wide on each side of the international border. Mexico has argued that expanding that area could rope in more affluent
localities that could afford to take advantage of NADB lending rates,
thereby empowering the bank to speed Mexican development. The original proposal to expand the bank's zone of operations, floated in the early summer of 2000, met with widespread disapproval from border stakeholders, who suggested that other options be examined first. One such alternative already being explored is that of allowing NADB more flexibility in its financing programs. Pilot projects aimed at achieving that flexibility that were approved by both countries in early 2001 have begun to indicate the effectiveness of such measures. NADB doubled its lending last year, cutting interest rates for some projects in half as part of its new Low Interest Rate Lending Facility. [5] The pilot projects were the result in part of reforms included under a November 2000 partial mandate expansion allowing lower lending rates for some bank projects and permitting support for a wider range of environmental infrastructure, including certain transportation and hazardous chemical management projects. Meanwhile, EPA funding which infused another $84 million into the bank's Border Environmental Infrastructure Fund, allowed the bank to increase grant outlays during 2001. Routes to EfficiencyEnvironmental groups like the NWF continue to say that those pilot projects should be given time to mature and bear fruit before any additional decision is made on overhauling BECC and NADB. Spalding seconds the motion. "What I would like to see come out of the process is a slightly expanded agenda for the two institutions: most ideally the endorsement by the two federal governments of the BECC-NADB agreement on mandate expansion, which I think was a reasonable first start and should be given a decent chance to work," he says. A major overhaul actually could slow the process of distributing monies instead of advancing it, because the action would require congressional approval and binational renegotiation of the agreement that created BECC and NADB, warns Marico Sayoc, the EPA's U.S.-Mexican border coordinator and BECC-NADB program manager. [6] A detailed inquiry into the agencies' day-to-day operations is the best way to go about deciding what to do with them, many observers agree. While the NWF has called for an "outside analysis," U.S. border governors and the Free Trade Alliance want a "systematic business process review " by the U.S. Treasury Department. [7] Public and local government representation on BECC-NADB boards is another shared demand of stakeholders, regardless of what shape the agencies take in the future. The presidents must decide whether and how to heed these various calls for BECC-NADB reform. In any case, says Spalding, the time has come for "a real commitment by the two governments to fund the backlog of the border region's environmental infrastructure needs." Talli Nauman is editor-at-large for the IRC's Americas Program.
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