Summary of Annual Meeting of NADBANK, July 11th, 2000

San Antonio, Texas

Summary by Cyrus Reed

During the annual public meeting of the North American Development Bank, held on July 11th, the NADBANK Board declared that it will publicly release next week its document -- Maximizing the Lending Capacity of the NADB -- along with comments received thus far -- for a 45-day public comment period. The document, which will be available on NADBANK's website (www.nadbank.org) discusses the possibility of expanding both the sector's of the Bank's mandate -- beyond water pollution, wastewater and municipal solid waste management -- and the geographical area eligible for financing from 100 kilomters to 300 kilometers from the US-Mexico border. The third recommendation of the document is to find financial tools and mechanisms to increase lending.

In addition, during the meeting, it was announced that the NADBANK Board had passed a resolution promising that it would work with its sister institution the BECC -- Border Environment Cooperation Commission -- in considering these options. A copy of the resolution will be available on the NADBANK web site in the next few days according to Director Victor Miramontes.

During the meeting, the NADBANK's Raul Rodriguez presented NADBANK's current funding activity. Through July of 2000, NADBANK has approved funding for 29 projects, whose total value equals $831 million. NADBANK has participated with over $265 million in BEIF grants and NADBANK loans and loan guarantees. IN addition, the BANK has provided grants and technical assistance to 82 other projects in 60 communities for institutional strengthening through the IDP -- Institutional Development Cooperation Program (IDP). IN addition, 82 individuals from 39 communities have participated in the NADBANK's three-day Utility Management Institute (UMI) programs.

Mr. Rodriguez also emphasized how NADB lending capacity is virtually untapped, which is the reason the BANK and its board are pursuing the possibility of mandate expansion. He reiterated that BECC and NADBANK would be working on this together. Thus far, NADB loans have made up less than 5% of total financing of water and wastewater projects, which Rodriguez compared with other insitutions such as the World Bank (2.85% in water and wastewater), BANOBRAS (11.14%) and the European Development Bank (3.25%). For the foreseeable future, NADBANK does not anticipate increasing its lending for these sectors due to financial and legal barriers in both countries. Instead, the Board in November of 1999 asked the Management to explore mechanisms and sectors for expansion in order to maximize the lending capacity of the bank. Mr. Rodriguez stressed they would still maintain water, wastewater and solid waste as the priority -- as per the agreement establishing BECC and NADBANK --but need to pursue other avenues. He also mentioned the general consensus for expansion that existed in a workshop sponsored by the NADBANK the previous day, at which 30 experts gave testimony

(Editorial Note: There were in fact a wide degree of opinions at the experts meeting about to what degree the NADBANK should pursue geographic and area expansion, although there was a consensus that it was a good idea to at least consider it, given NADBANK's problems loaning money)

Director Victor Miramontes then introduced new BECC chairman Fernando Macias, who spoke about the need to better coordinate projects between the BECC and NADBANK and streamline both institutions. He said that while both institutions must be cautious in approaching the expansion issue, BECC would certainly work with NADBANK on it.

During the question and answer part of the session, several individuals gave presentations, including Bart Christenson, from CAL EPA, Carlos Rincon from Environmental Defense, Tom Brown, Charlotte Stanton from Stanford University on "the Americas Project": Erin Martin Ross, representing Border Trade Alliance; Maria Josefina Guerrero from Nogales, Sonora and a BECC Advisory Council Member, Francisco Trevi–o, also a BECC advisory council member from Reynosa, Tamaulipas; Andrea Abel from National Wildlife Federation: myself, Cyrus Reed, from Texas Center for Policy Studies; a representative from Ciudad Juarez to announce that the wastewater treatment plants were now in operations, among others. Victor Miramontes also read a letter into the record from Jerry Santillan, representing the City of Brawley, about the progress of the Brawley water plant, functioning since June 2nd.

Mr Christenson said that CAL EPA will certainly respond to the document, but emphasized the importance of keeping the focus on water, wastewater and solid waste within the border area; Mr. Rinc—n focussed on a project that he said is ready to be financed and would make an excellent case study which could be replicated in other border cities -- the financing of the I and M inspection centers in Ciudad Juarez so they can purchase the equipment needed to test vehicles. Erin Martin Ross emphasized the need to preserve and expand the BEIF grant funding, look for ways to make NADBANK loans more affordable. She said she believed that BTA would support expanding the mandate, but not the geographic area, because within 100 km are where the needs are greatest and was intent of agreement. Maria Josefina Guerrero also supports the expanded sectors approach because of the vast needs, but cautioned that BECC and NADBANK or other institutions must conduct a thorough review of the 40 certified projects to see if they are actually meeting the needs of border residents. Without a sense of how successful the institutions have or haven't been it is very difficult to move forward. Mr. Trevi–o emphasized the role BECC and NADBANK can play in promoting public participation, while thanking NADBANK for expansion ideas. Ms. Abel reminded the Board that the BECC-NADBANK experiment was not occuring in a vacuum, but was part of a larger debate about trade agreements and environment, and what they decided to do here would have larger repercussions, given recent debates about FTAA, WTO, etc. She emphasized the need to keep and strengthen the BECC-NADBANK structure and not, at the present time, to expand the geographic area. She also spoke of need to consider -- as per the recommendation of the document -- other financial mechanisms to make loans more affordable.

Following public comments, the Chairmanship of the Board was passed from the U.S. to Mexico. New chairman Carlos Garcia Moreno, representing Hacienda (Mexico's treasury) assured the audience that NADBANK would indeed work with BECC and that NADBANK-financed projects would be certified by BECC. Secondly, Mr. Garcia Moreno emphasized that BECC/NADBANK projects had involved the public directly in design, debate, construction, and the institution was there to serve that public. Moreover, Mr. Garcia Moreno emphasized that the reasons for looking at expanding the mandate and geographic area was because the present system wasn't working well enough, and they had an opportunity to have more beneficial impact in the communities. That is why the BANK and its board is also willing to look at how loans could be lent in different conditions, processes, time scales to attempt to make them more attractive. His final point was the need for BECC and NADBANK to work together to make the certification process more accelerated and better coordinated, to assure that money was getting spent efficiently in the communities.

TCPS will be revising/developing a position paper on the issues which we will make available on our web site (www.texascenter.org/btep) in English and Spanish by early next week -- (ignore the previous announcement that it would be available today).

Following is a summary of Texas Center for Policy Studies' comments at the NADBANK annual meeting:

TCPS fully supports the third recommendation, to look for tools and financial mechanisms to buy down the interest. This should include actually looking at NADB loan criteria itself.

We urge NADBANK to approach any expansion as a joint effort with the BECC. THE NADBANK and BECC were created to "help preserve, protect and enhance the environment of the border region in order to advance the well-being of the people of the U.S. and Mexico" Many of the areas or new sector being considered are worthy of consideration. For example, expanding to include housing improvements, particularly those linked to water and wastewater service, are within the current mandate, while direct mortgage lending requires a much broader public debate since it falls outside of the current charter.

TCPS is not in full agreement with the charter analysis contained in the NADBANK draft report. While we will be providing a full legal analysis later on, we wanted to point out that Article II, Chapter III, which the NADBANK relies upon to ask for expansion of the mandate, deals only with the Commission (i.e. the BECC) and does not apply to expanding NADBANK functions alone.

Again, the NADBANK financing process can not nor should it be de-linked from the BECC certification process.

We also can not support at this time the expansion beyond the 100 kilometer zone. Board may want to consider looking at projects outside the 100 km zone which impact the border's health and environment, as the charter allows. Thus, BECC and Nadbank may be able to consider a wastewater treatment plant in Chihuahua if it impacts the border region, even thought it is outside the 100 kilometer region. Simply expanding the border could be very controversial politically and pit border communities against new cities like Los Angeles, Phoenix, Chihuahua and Monterrey.