APRIL 1996 · VOLUME 17 · NUMBER 4

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E N V I R O N M E N T

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CIUDAD JUAREZ, MEXICO -- The Border Environmental Cooperation Commission (BECC) -- established in a North American Free Trade Agreement side agreement to address environmental degradation along the U.S.-Mexico border -- is hitting turbulence from non-governmental organizations (NGOs) in its initial run down the Rio Grande.

A broad consensus exists that the environmental needs of BECC's jurisdiction -- all the territory within 100 kilometers of the border -- exceed BECC's resources.

BECC's mandate limits the agency to projects designed to clean up water ways, sewage and solid waste in the region. As Washington, D.C.-based Public Citizen pointed out in its January 1996 report "The Border Betrayed," this job description excludes life-shortening air pollution problems caused by swelling numbers of people, cars and industrial assembly plants (maquiladoras) along the border. Nor does BECC address a host of threats to area species and their habitats.

Yet regional water and waste problems pose persistent threats to wildlife and people, especially in the colonias on both sides of the border, where working-class families live without adequate water or sewage facilities. For this reason, BECC would have few detractors if it did nothing more than make major strides toward equitably providing such infrastructure in the borderlands.

Borderland NGOs, however, say it will be difficult for the fledgling bi-national agency to overcome limitations that surfaced at the agency's inception. BECC General Manager Roger Frauenfelder, who was appointed in February 1995, acknowledges some initial growing pains, but says BECC is now hitting its institutional stride.

Eco-injustice or fiscal discipline?

Critics argue that BECC procedures and financing requirements will make it difficult for the agency to make a dent in the border's overwhelming environmental infrastructure needs. The Ciudad Juarez-based BECC has no project funds of its own. A major source of funding for its projects is the San Antonio, Texas-based North American Development Bank (NADBank), which was established under the same NAFTA side agreement as BECC. After BECC approves a project, it typically proceeds to NADBank for a funding evaluation, though not all BECC projects seek NADBank funds. This bank had yet to make a loan. NADBank expects to close a loan for a $17.2 million water treatment plant in Brawley, California in May, according to Deputy Managing Director Victor Miramontes.

By late January 1996, the bank had $225 million in capital, half of from Mexico and half from the United States. NADBank is supposed to receive a total of $450 million in equal portions from the two countries. NADBank also has more than $1.2 billion in callable capital from the two countries. Drawing on private investment capital and federal, state and local government funds, NADBank has pledged to leverage between $6 billion and $9 billion on behalf of the border region over the next decade.

NGOs say a couple funding problems hamstring NADBank, starting with the fact that it will never have enough money. At the time of the NAFTA debate, for example, the Sierra Club estimated that $20.7 billion would be required to clean up the border.

NGOs also contend that the structure of NADBank loans may make them inappropriate for many communities on both sides of the border.

On the U.S. side, NADBank funds lack the tax-free status of municipal bonds, and thus require a higher interest rate than the funds many government entities can raise on their own. U.S. cities such as El Paso, Texas, which BECC has certified for a $11.7 million wastewater reclamation project, have access to cheaper funds elsewhere. Nonetheless, Miramontes says NADBank is a relevant player on the U.S. side because it can channel funds and technical assistance to small, poor or unincorporated communities that lack access to preferential funding. NADBank can even aid cities such as El Paso, Miramontes says, by lining up other sources of funds from foundations or federal and state agencies.

On the Mexican side of the border, the issue is whether the neediest communities can afford to pay back NADBank loans. Low-wage workers will be unable to pay high user fees for NADBank-funded infrastructure services, and municipalities' tax revenues are too low, claim critics of the NAFTA institution. The challenge of these communities repaying dollar loans was highlighted by the December 1994 devaluation, in which the peso lost more than half of its buying power in dollar terms.

"BECC is really disappointing," says Richard Boren of the El Paso-based International Environmental Alliance of the Bravo. "It's practically for profit. Since they're short of money, they're trying to get projects that can be paid back."

Fresh on Boren's mind is the case of two wastewater treatment plants proposed for El Paso's neighbor, Ciudad Juarez. This $40 million project is the first of the 34 applications BECC had received by January 1996. While the project has support from many on the BECC board and staff, a decision has been postponed because of doubts about whether city residents can repay such a debt. In the meantime, open sewer canals dump 55 million gallons a day of raw sewage and run-off from the city's 350 maquiladoras into the Rio Grande.

Miramontes says some NGOs cannot understand that NADBank is a bank and "banks will never make a loan to a community without the capacity to repay." Here again, Miramontes insists that NADBank can overcome this limitation by creatively designing deals that combine what a community can repay to NADBank with other sources of federal, state and foundation funds. BECC's Frauenfelder echoes this appeal to give the agencies a chance to display their creative funding finesse.

NGO representatives and some Mexican government officials are increasingly looking to the booming maquiladora industry as a source of funds to augment household user fees in poor Mexican border communities.

Independent Ecological Group of Nogales Director Teresa Leal says that local maquiladoras should pay at least 75 percent of the cost of a BECC water project for Nogales, in Sonora state. Like the Ciudad Juarez project, many doubts have been raised about the ability of Nogales residents to pay off the $39 million loan that has been requested. BECC certified this project in January 1996, despite the fact that no credible repayment plan had been presented by the applicant, Sonora State's Secretary of Urban Infrastructure.

Although maquiladoras stick out along the border as a potential source of funds, many of these companies will resist paying, even when the infrastructure in question would appear to benefit them directly. In January 1996, for example, following an 80 percent cut in federal funds to Ciudad Juarez, city Treasurer Gabriel Uranga announced plans to impose a tax on local maquiladoras for road improvements that he said would ease truck traffic between the maquiladoras and the U.S. border. Until that time, Juarez maquiladoras had voluntarily contributed $10 per employee per year to city coffers. The Maquiladora Association in Juarez complained that the new tax would amount to a 250 percent increase in what its members pay the city, and in late January the association announced it would take legal action to block the tax, according to Mexican newspaper accounts.

Cognizant of how tightfisted maquiladoras can be when it comes to wages and social spending, Leal proposes that maquiladoras in Nogales that refuse to fund the new water project should be cut off from the city's water and wastewater system and forced to build their own.

Public loan, private business

While serious questions have been raised about the ability of underpaid maquiladora workers to pay off such amenities as wastewater treatment plants, there is little doubt that their employers can meet such loan repayment requirements. Indeed, BECC touched off another controversy in January 1996, when it postponed the Juarez plant while quickly certifying a $1 million wastewater treatment project submitted by a privately owned maquiladora industrial park in Matamoros, Tamaulipas. NGOs had urged BECC to move slowly and carefully on the application from Grupo Arguelles FINSA, which is owned by one of Mexico's wealthiest families.

"Now they've set a precedent to fund these polluters and industry," says Boren. "That industrial park should've funded that facility itself. They [BECC] are going to totally defy their mandate if they go on down this road."

Other NGO representatives say they are not opposed to every corporate application to BECC, but that the FINSA project offers too little public benefit to have merited approval. "I'm opposed to having private interests involved in projects that are exclusively to the benefit of private companies," says Cyrus Reed of the Texas Center for Policy Studies. "If it's a private company treating the wastewater of a private company and the public, then that's OK."

Dick Kamp of the Bisbee, Arizona-based Border Ecology Project adds, "There may be cases where an industrial loan would be better than a half-assed community one -- as long as it has a community benefit."

In the FINSA case, the community benefit component was grafted on at the eleventh hour in order to rationalize certification of the project. As originally proposed, the FINSA project only would have treated wastewater from FINSA's Del Norte Industrial Park. In response to outcries from NGOs, a community neighboring the industrial park, and Lynda Taylor, the "public member" of BECC's Board and a project director at the Albuquerque, New Mexico-based Southwest Research and Information Center, $50,000 of the project was earmarked to benefit the community.

Reflecting the slipshod way in which the deal was put together, however, FINSA does not plan to give the community a check. Rather, it is planning to provide $50,000 worth of service to the community, which has had minimal participation in the project design. The poor communities known as colonias are thinking of turning down the services, report community activists.

Of the 34 active applications before BECC in late January 1996, seven appeared to have been submitted by private commercial interests, some of which are of questionable environmental merit. These applications include three tire-recycling proposals for the Baja California cities of Tijuana and Mexicali, a plastics recycling facility for San Antonio, Texas and a biological waste incinerator and paper recycling facility for Tijuana. One of these projects, the $480 million paper recycling plant for Tijuana proposed by North-South Trade and Investment Ltd. of Encinitas, California, is by far the most expensive proposal BECC has received.

"Many of the applicants are multinational corporations submitting proposals for incinerators, landfills and tire recycling," Boren says. "We see BECC's mandate as being for nonprofits."

Murky waters

NGOs -- as well as some member of the U.S. Congress -- also have accused BECC of attempting to contravene its mandate by resisting public participation and scrutiny. At a November 1994 meeting, BECC adopted procedural rules that allowed the board of directors to confer and make decisions behind closed doors, to limit public participation and expand document confidentiality.

Representatives Richard Gephardt, D-Missouri, and Esteban Torres, D-California, also protested in a letter to U.S. Secretary of State Warren Christopher that the rules "violate the spirit of openness upon which the BECC and NADBank were founded."

NGOs spent much of 1995 prodding BECC to adopt and follow open, participatory policies, work that paid off in some "pretty good" guidelines, according to Michael Gregory of the Arizona Toxics Project. After the guidelines were approved, however, BECC's staff and board proceeded to ignore them.

"At the Nogales [BECC] meeting [in January 1996, they] stepped back from what was developing as an open process with satisfactory participation," Gregory says. "They've gone back to making decisions in secret and blatantly certifying projects that don't meet their criteria." As examples of projects that fall short of BECC's theoretical certification criteria, Gregory cites FINSA's perfunctory community component and the lack of an impact-fee study for the Nogales water project.

Concerns about BECC's commitment to meaningful public participation were exacerbated by a letter the BECC staff prepared for the Board of Directors that described broad support for the FINSA project at a September 26, 1995 public meeting. NGOs were concerned about the letter not only because it falsely characterized public sentiments, but also because it was written before the public meeting took place. The Texas Center for Policy Studies received a copy of the letter six days before the date of the meeting that the letter summarizes.

Asked why BECC would violate its own guidelines on the need for participation and impact fee studies, Gregory says, "They're under incredible political pressure from Mexico to give them money. Mexico wants projects immediately. They're not giving themselves time to make sure the projects are correct."

"The first projects were small projects that, if we'd been at another point of evolution, we might've taken more time with," says NADBank's Miramontes. "But we needed some successes." Miramontes says that in a late January 1996 meeting, BECC and NADBank decided that, now that they have some certified projects on the table, they can slow down the process.

A final NGO concern about BECC certification criteria was that, as originally drafted, the criteria failed to reflect the sustainable development language of BECC's charter. In response to browbeating from Gephardt, NGOs and BECC public member Lynda Taylor, however, BECC's final certification criteria reflect some important concessions to this concern. Nonetheless, the sustainable development criterion, which had been opposed by the U.S. Treasury and Environmental Protection Agency, was not adopted as a requirement, as was the repayment requirement. Instead, BECC pledged to award bonus points to projects deemed to incorporate sustainability features.