EFAi
Chair
a
Bxnostif® Dkirt or
E A
THE
This report has not been reviewed for approval b\B the
U.S. Environmental Protection Agency; and hence, the views
opinions expressed In the do not necessarily
represent those of the Agency or other In the
Government,
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R
Honorable Carol M.
Administrator
US.
20460
Dear Browner:
On of the Environmental Board (EFAB), we are very
to to you the EFAB Report, the Finance
of the North Free Trade This serves as a
up to a 1993 Board on environmental the HS./Mexican
that we to the and of NAFTA,
la. this the Board finance to the
of the NAFTA side for border
We that purpose or should be in
Mexico to infrastructure and that the of such
be based on to the greatest The will
and sound to evaluate the of projects. The
should be to participate in for the borders
leveraging for Furthermore, we
in the billing be as a viable
to for the water and wastewater services.
The recommendations are timely in the
binational ie. the Border Commission and
the North Bank (NADBank)f to and maintain a
the The Board offers its to the in
as a of the BECC and of the the
of for and the of funding .
We are at to discuss this and to provide
any you may
Sincere!1
U-Wiessmann
Environmental Executive Director,
' Board Advisory Board
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Report of the
Environmental Financial Advisory Board
of the
United Environmental Protection
Implementing the Environmental Finance
of the
North American Free Trade Agreement
In 1992, the Board approved a report ("the 1992 Report8') of the
International Committee ("the Committee") to the Administrator regarding the
financing of environmental infrastructure along the Mexican Border. The
1992 Report was intended to assist the Administrator in her efforts in support
of the and approval of the North American Free Trade Agreement
("the NAFTA" or "the Agreement").
Subsequently, the NAFTA was, in fact, approved by the governments of
the United and Mexico.' In its final form, the NAFTA contains a
side which addresses-the financing of environmental
infrastructure the border. The side agreement a
is to be funded at a level of 8450,000,000 an
S2,550tOOO,000 of call If these funds can be at only a 2:1
rarior iiiejgjHji||J^^ for environmental
infrastructure along the border. At a 3:1
be ov^r, S9.00Q.OOO.OOO available. Since official estimates of
are in the S3 - 7 billion range, this means jhat the prpjegted fimdfflg_sjgojiid_be
by the NAFTA.. This is an event of truly historic in
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the to a on a
basis.
. the NAFTA has the Committee resolved to
issue a follow-up -report dealing with the environmental in the
\
TMs has The the
concerning the NAFTA the two reports. The second section contains
six to the in of the she will in
the of the NAFTA.
The six
* That or be in
Mexico to deliver environmental infrastructure services.
* That the financing of such districts be based, to the greatest extent
on fees. ' "
* That the user fees for water and wastewater be
the the end
non-payment of any of the user would be grounds for the
of to the
* That, to the the of the
sector be used to pay for environmental infrastructure projects along the
border.
* That, in determining the role of the in the to
the the utmost
consideration be given to private sector means of leveraging the funds, of the
of the and for
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* That the first order of In financing environmental
infrastructure the border should be to create realistic sound credit
criteria for the financing of projects on behalf of special purpose districts.
In addition to the six recommendations, the Committee
sgryige^..tp,..thg_Administrator to assist.,her h
environmental infrastructure projects alongthe Mexican border.
SKTIONONE
The 1992 Report, after referred t© the Admtnisnator,
one of resource for an group
formed by Dr. Alice M Rivlin, Deputy Director of the Office of Management
and Budget, under the leadership of Jeffrey R. Schafer, Secretary of
the Treasury for International Affairs, to advise the Administration on the
environmental finance aspects of its negotiations with the Government of
'Mexico on the NAFTA.
The NAFTA were concluded and the
was signed by the Presidents of the United and Mexico. The President of
the United then submitted the Agreement to the for
ratification. On November 17, 1993, the U.S. House of Representatives voted to
approve the Agreement. Anticipating a favorable vote, as weM, in the United
Senate (which, in fact, occurred on November 20, 1993), the Committee
convened in Washington, D.C., on November 19, 1993, to formulate advice to the
Administrator on the implementation of the environmental of
the Agreement.
At its meeting, the Committee heard presentations from Jonathan Z.
Cannon, Assistant Administrator for Administration and Resource
Management of the U.S. Environmental Protection Agency (USEPA); DT, John E
Petersen, President of the Government Finance Group, Inc.; Congressman Jim
Kolbe of Arizona; Jeffrey R. Schafer, Secretary of the Treasury for
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International Affairs; E. (Kika) DeLaGarza of Texas, Chairman of
the House Agriculture Committee;.Mario Aguilar, General of
the for Development (SEDESOL) of the Government of
Lynn Fischer,'Policy Analyst, Natural Resources Defense Council;
Lawrence I. Sperling, Senior Attorney-Advisor, International
Program, of Enforcement, USEPA.
.
The Committee has reviewed the Agreement and makes a of
observations and recommendations to the Administrator concerning the
implementation of the environmental finance aspects of the accords.
The Committee notes that under the NAFTA, the responsibility for
environmental infrastructure pursuant to the was
divided two "new binational agencies, the Border, Environmental
Commission (BECC) and the North American
(NADBank).
The Agreement envisions the BECC as an agency whose respoesibiHty it
is to work with communities to generate needed environmental infrastructure
projects. The BECC's role will then be to coordinate the planning and
financing of projects-and then to "certify" them for 'funding to the
NADBank. The BECC will have a ten-member binational board of directors on
which the Administrator will serve. The BECC will be required to consult with
an 18-mem.ber Advisory Council, of which nine members will come from each
country.
The NADBank will be capitalized with 5225,000,000 of.cash each from the
United and with an additional SI,275,000,000 of callable
from Ninety of the banks funds will be to
environmental infrastructure projects. The purpose of .the NADBank is
to fund, "as appropriate", "certified" by the BECC The NADBank is to
have a six-member board, three from each country. It is that the
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will as one of the U.S. of the NADBank. In
for the of or by the it is also
the U.S. to the Witt be in
the of the National Advisory on
Financial as established by
11269 of 14, and for the
be a of
The it are two of the
to the to the
environmental infrastructure should be financed
by the sector,...". The "that, to the
in the
be by
who from the projects, and should be to or private
control".
In the 1992 the recommended that the of
the border, to the extent be
on It
on be as the to
projects. The Committee notes the to the
for fee the In
the
1) the BECC the of (or
in the of as the
by which are
the NADBank!
2) to the be the
of such
At the 19, the the of
Dr. to be an and of
and for in the Dr.
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also law, the for of
Is of It is not to
for
The in the border with
nor service was little or no of paying for
and for were to random on a
in to a for
districts, the
3) That the user for water and wastewater be
the biffing and system, to the end
the Committee that both the and the to
the eaU for the involvement of the sector as far as Is
The Committee, reiterates its
4) to the the of the
be to for the
border.
In this the noted that the NADBank is with
of cash and of In with the
1992 in to the of the
and die the will in
to be the
5) That the be to of
Insurance or of supplemental Private capital,
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The Committee noted most importantly that if the of the NADBank
can be at a 3:1 or even 2:1 ratio,
all of_the_estiinated-S - 7
jnfgggtructure itgegjs_a|pjigjiie_bgi)rdert TMs would be an event of truly
Mitoric not only for the United and Mexico, but for the
entire international effort to improve environmental quality.
eac ndiidua an
Finally s the Committee observes that although the BECC iss on the one
hand, required to "certify" projects to the NADBank, the NADBank is, on the
other hand, only required to fund such projects "as appropriate".
The Committee noted several instances where there, were organizations
where the loan origination function was not well coordinated with the loan
approval function. When this happens there can be grave problems, to a
context such problems can be readily ..dealt and But,
the NAFTA is a political issue, as are the environmental on the
border. The BECC the NADBank were for one purpose only: to
provide a solution t© problems. The public will high
expectations that the BECC/NADBank will, in fact, solve many of the problems.
Therefore, if there is any conflict between the credit criteria of -the
BECC and the credit criteria of the NADBank, men there could be very serious
political repercussions that will not be easy to resolve. This is espedaljy
significant «toce the Administrator will serve as a director of both .the
and.the,,fc|[ARBank. and will be a member of the Natioqal Advisory Committee
wjjjcJiJnstiTicjg_diejJ.S. difgg|ois_of the N, ADBanfc wjth respect to their votes
Si as well. The Committee recommends, therefore, that
these matters be addressed before they become problems: Therefore, in order
to assure a smooth working relationship between the two the first
order of should be the development of realistic sound
which the BECC, the NADBank and the MAC aE on
criteria are
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it is In the of all be
in a as the of the
In this ways the dollar of will
be to be financed and the maximum amelioration will
the of the NADBank.
To this the
6) as Its of the
for the of on of
districts in order to the greatest dollar of environmental
projects to be by the
of the NADBank.
In the to the
the the creation of sound credit,
criteria for NADBmtk loans,
the
lQ£ll|^taffl.^^^^^^n,,^^^^L8^ffl^^^S.,^££^^^Q..^
» for any further or efforts she
in this
In the the NAFTA is one of the
of for the
in the Twentieth Century. It that the
of the if implemented, will the
will enjoy a of Improving
the Committee the as its
to in the of die |o
the of to the
8
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