The U.S.-Mexico Border Environment

Evaluating NAFTA's impact

by Amy T. Mignella

part 1 of a two-part series

In recent commentary on NAFTA’s impacts over the last three and one-half years, critics have argued that the agreement should be altered because it is doing little to correct the poor environmental conditions of the U.S.-Mexico border region and is instead fostering problems by promoting increased economic activity. Yet, despite the lack of any significant environmental provisions within the agreement itself and decades of depressed border environmental conditions, positive change is actually beginning to occur, and NAFTA appears to be the reason.

Border History

A multitude of factors has pushed the border environment to its current point. Extensive degradation has resulted from large regional population increases (see box, next page) without concurrent municipal infrastructure development. These population shifts were brought on by the creation of the maquiladora industry in northern Mexico, which increased available employment in the region.

The maquiladora program was established in Mexico in 1966 as a replacement for a previous U.S. program that employed over 180,000 Mexican laborers. The program allowed development of U.S.-owned manufacturing facilities in Mexico. Unfortunately, however, facility construction was not initiated with concurrent infrastructure planning. In addition, neither of the current regulatory agencies—the Environmental Protection Agency and its Mexican counterpart, SEMARNAP—even existed in 1966. Furthermore, both agencies were created with purely domestic agendas. Many years passed before either established international priorities; as such, environmental planning was not on either government’s agenda as industry activity was initiated along the border.

As a result, workers who moved to Mexico’s northern border as the industry sector expanded did not have access to adequate housing, waste treatment services, or clean drinking water. Human wastes ended up in open drainages, creating disease, damaging underlying aquifers, and causing long-term injury to the surrounding border environment. Environmental infrastructure needs went unaddressed in many border communities in the United States, leaving numerous waste and water treatment facilities in violation of federal law.

Disparities between U.S. and Mexican law have also been a factor. At the inception of the maquiladora program, the United States was beginning to enact an array of environmental legislation unlike anything that had previously existed. A command and control approach to enforcement became one element of this new version of government regulation.

A similar trend was not occurring in Mexico, however. Industry oversight was less intense in Mexico, and some companies elected to disregard legal requirements. To some extent, this was paralleled in the United States: the high volume of environmental litigation that was initiated in the 1970s and 1980s indicates that changes in U.S. laws alone did not sufficiently indoctrinate the U.S. business community with regard to environmental concerns.

Even when facilities complied with Mexican environmental requirements, the lack of regional infrastructure to manage effluent streams from factories resulted in further environmental damage. Over time, industry clusters developed along the border, concentrating pollutants in those locations, thereby increasing their impacts.

The Importance of Infrastructure

Unfortunately, history indicates that environmental infrastructure needs in border areas have not been the target of significant domestic expenditures by either country. In 1993, however, the United States and Mexico entered an agreement to establish two new binational environmental agencies to provide technical and financial assistance to border communities needing water quality, wastewater, and solid waste infrastructure.

These institutions include the Border Environment Cooperation Commission (BECC) and the North American Development Bank (NADBank). Both agencies share authority for environmental infrastructure development along the border. BECC functions to guide and “certify” water quality, wastewater treatment and solid waste disposal facility designs for border communities; NADBank was established to finance these projects. Each country paid half of the total initial allocations to establish these entities.

BECC's 1997 operating budget is $3.4 million, excluding specific program grants from other agencies. As the lending institution, the NADBank was allocated $112.5 million in 1995. Equal payments of additional capital are to continue annually through 1998. The significance of this commitment by Mexico is obvious considering the peso devaluation in 1994. The commitment of the two countries also evidences that NAFTA has dramatically increased the importance attached to border environmental problems.

Little has changed along the border corridor since these agencies were created, however, and the lack of action has prompted significant complaints from citizens and government officials in both countries. Difficulties within the BECC and NADBank have occurred for several reasons. Initially, the U.S. Congress was not firm in its support for creating the agencies. Ultimately, the notion prevailed after numerous actual and threatened cancellations of the initiative, a process that was especially precarious for the NADBank.

Once governmental approval had been given, both entities faced the inherently complex task of establishing themselves as new binational institutions. Procedures had to be created that both countries supported, and legal and cultural distinctions between the two neighbors added to the challenge. In addition, the scope of responsibility assigned to BECC is immense; hydrogeologic aspects of the border region alone necessitate complex analysis of any proposed project. Still, the first BECC project was approved in September 1995, within only one year of the agency’s first organizational meeting.

The NADBank faced an even more difficult mission. It was commissioned to provide project financing in the form of loans at interest rates equalling Treasury rates plus two percent, terms hardly favorable to underprivileged and underserved border communities. Repayment questions surrounding many projects pose a serious dilemma for the agency. Consequently, the NADBank delayed action, waiting until December 1996 to issue its first financing approval.

It is possible that neither BECC nor NADBank—nor any other similar entities—would exist today were it not for NAFTA. These institutions can achieve the results envisioned upon their creation, and both are still clearly needed. Changes to NADBank’s mandate on interest rates for its loans would allow it to function as had been intended, paving the way for project construction to move forward.

Amy T. Mignella is Environment Project Director at the National Law Center for Inter-American Free Trade.