CASE NUMBER: 443
CASE MNEMONIC: MEXFIN
CASE NAME: Financing Environmental Projects in Mexico
A. Identification
1. The Issue
Trade in environmental technologies, those technologies,
goods, and services intended to prevent, control, monitor and
remediate environmental problems, is an important and growing
industry sector. Environmental problems, and the public's
awareness of them, are increasing which fosters much greater
interest in employing environmental technologies to address social
and community needs in many nations; Mexico is no exception.
Concurrent with growing interest in the environment, however, is a
lack of financially viable environmental projects. Businesses and
relevant government institutions need to be aware of the various
financing problems and opportunities. There are a significant
number of financing mechanisms and sources available for projects
in Mexico including various Mexican facilities, multilateral
development bank (MDB), bilateral programs, and private sector
possibilities that can augment the financial viability of many
projects.
2. Description
What often comes to mind when considering the relationship
between trade and environment is a trade-off between the two, i.e.
increasing trade tends to have a progressively negative impact on
the environment. However, there is an industry sector that
specifically addresses environmental issues by trading in goods and
services designed to improve and/or minimize harm to the
environment. This industry sector is called environmental
technologies and includes air, water, and soil pollution control
and prevention; solid and toxic waste management; site remediation;
and environmental monitoring and recycling.
Water and wastewater disposal infrastructure and technology in
the United States is fairly comprehensive. Water and sewage
service in Mexico is far from complete and the lack of these
services in the border region can directly impact American citizens
and territories as well as Mexican citizens and territories. The
health and productivity costs associated with poor water quality
and insufficient wastewater treatment capabilities are a drain on
the Mexican economy.
Mexico, prompted by growing domestic awareness and pressure
from the United States and the North American Free Trade Agreement
(NAFTA) is working to improve its vital environmental
infrastructure. One of the biggest hurdles Mexico faces in
improving its environmental infrastructure is insufficient
financial resources. Securing financing for projects with great
social and environmental value, like water and wastewater projects,
but risky financial prospects is difficult. This difficulty is
exacerbated by the huge scope of Mexicoþs environmental
infrastructure needs which are far beyond the financial capacity of
the Mexican government and will remain so even after Mexico fully
recovers from the 1994 peso crisis. Consequently, Mexico must
consider non-domestic financing sources for its environmental
infrastructure needs.
This paper will address many of the financing options
available. With its commitment to improving Mexicoþs environment,
the Zedillo administration offers a number of official Mexican
financing programs. Multilateral development banks (MDBs), the
bilateral North American Development Bank (NADBank), and a number
of U.S. government agencies also have programs that can help make
Mexican projects more financially viable. Perhaps most
importantly, the resources of the private sector need to be tapped.
Mexicoþs environmental needs are far beyond the capacity of Mexican
resources. Other international programs can help by adding to
Mexicoþs resources but it is the private sector that holds the key
to the Mexicoþs environmental future.
It is important to note that new financing innovations are
being developed all the time and that many of these mechanisms can
be used in varying combinations to suit the needs of all
stakeholders in a project.
Project Financing Prerequisites
One of the most crucial difficulties in financing
environmental projects in Mexico is establishing a dependable
revenue stream. The federal government has historically taken much
of the responsibility for water and sewage systems including their
design, construction, operation, and maintenance. Water and
wastewater system maintenance has been notoriously lax. Only two-
thirds of Mexicoþs 666 municipal treatment plants are operating
because of a lack of maintenance and spare parts, treating only 18
percent of the countryþs wastewater. <1>
Mexicoþs lack of effective maintenance is partly due to the
political nature of government allocations. Maintenance budgets in
particular are easy, low profile targets for raids to soothe other
budgetary considerations and constituencies. Since the populace
depends on the government for water and the government depends on
the population for votes, the government does not consistently
collect fees for water and sewage service and the system managers
have little or no accountability for water or financial efficiency.
This situation produces a budgetary drain on the federal
government and leads to a lack of productive investment in further
infrastructure, particularly during tight budgetary years.
Additionally, the population as a whole is accustomed to paying a
small proportion of the actual costs of water and sewage service
and the government will not terminate service to those who, for
whatever reason, decide not to pay their bill. In 1989, the total
cost of providing drinking water through house connections was
estimated at about 240 pesos per cubic meter but consumers were
only billed some 40 pesos/m3. <2>
For the Mexican water and wastewater infrastructure to sustain
itself in the long run, it must take in sufficient revenues to
cover its operating expenses, current capital costs, and investment
costs for future expansion of the system. The federal government
has traditionally guaranteed support for water and sewage service
which encourages and allows poor financial and commercial
management by water authorities and service customers. For
instance, it has been estimated that for each 100 liters of water
pumped in a typical distribution network, the user receives 60
liters, is billed for 40 as much as six to nine months later, and
eventually pays for 30. <3>
While poor commercial practices accounts for some of the
shortfall, it is also clear that substantial leakage is occurring
due to poorly constructed and maintained systems as well as the
potential for unauthorized/unregistered access. Reducing
þunaccounted for water from 60 percent to 30 percent in a city
growing at 3.5 percent per year would make it possible to postpone
investments in new production facilities by up to 16 years."<4>
Implementing a formal cost control policy to reduce leakage and
improved management practices generally costs $5 to $10 per capita
which can be repaid within two years from improved performance
making increased efficiency highly cost-effective.<5>
It should be noted that the Mexican government could, and
probably should, provide subsidies for the poorer elements of the
population. However, as an explicit transfer for a social purpose
such subsidies would not carry the moral hazard of the current
system. The combination of transparency and the fact that poor or
not, all users would be expected to pay their bill (perhaps with
subsidized help), would help ensure the long term financial
viability of Mexican water and wastewater infrastructure.
Appropriate user fees and their timely collection, in addition
to financing the current system, allow water authorities to obtain
commercial financing through direct lending, bond issuance, or
other creative financing arrangements. Potential financing plans
for infrastructure development will be discussed in greater detail.
For now, it is crucial to realize that most financing sources
require projects to demonstrate reliable revenues sufficient and to
cover all costs.
Consistent user fee collection may seem harsh to a populace
that is relatively poor and accustomed to having the government pay
for the bulk of water and wastewater disposal. It is generally
accepted that the cost of water and sewerage services should not
comprise more than one or two percent of the income of the poorest
segments of the population. According to Lee and Jouravlev, the
average percentage of average manufacturing wages need to fund
water and sewage infrastructure is .88 percent and the average
percentage of the minimum wage needed is 2.15 percent.<6> Given
the guideline of one to two percent, this infrastructure
development charge is feasible although government support for the
poorer segments of the population may be indicated.
With the institution of a dedicated revenue stream, water
authorities will be able to attract investors much more easily -
domestic and foreign. Instituting systems that are able to secure
private resources is crucial to the resolution of Mexicoþs
predicament. Mexico does not have the resources now, and will not
even after its economy fully recovers from the 1994 crisis, to fund
the bulk of the water and wastewater projects it needs. If Mexico
is to seriously upgrade its environmental infrastructure, it must
attract private and foreign funds. The best way to attract those
resources is through privatization and capital market development.
Privatization
There are a number of reasons for a government to consider
privatizing state owned enterprises (SOEs). First, the revenue
generated by the sale of SOEs can help the governmentþs fiscal
situation if such revenues are applied judiciously. Many
developing countries, including Mexico, have amassed considerable
debt and have very large debt service payments to maintain. By
applying privatization revenues to the debt, permanent savings are
generated. In addition, the government may no longer need to
provide operating subsidies or need to allocate capital expansion
funds. By alleviating these concerns, the government saves funds
which can be used to pay down the debt further, to boost spending
on priority programs, lower taxes, or reduce borrowing needs.
Reducing borrowing needs puts less pressure on the money supply and
helps keep interest rates low which also spurs investment and
growth. In addition, the privatized business is now a taxpayer and
can actually augment government revenues.
It should be carefully noted, however, that privatization
proceeds used for purposes other than productive investment (such
as debt relief) is simply a waste of a public asset. The sale of
SOEs is simply changing the form of the public asset to a more
fungible resource with the same value. It can be spent wisely or
poorly. But however it is spent, the public sector no longer has
the asset and, consequently should be viewed as a transitory, one
time revenue source. <7> Paying down debt can be effectively
accomplished with such proceeds. Using sale proceeds to start or
maintain ongoing programs will only cause budget crises when
privatization proceeds are no longer available. This privatization
trap should be avoided at almost all costs.
While Mexico has established the Contingency Fund to
institutionalize privatization proceeds for debt relief, remember
that the Fund only gets 80 percent of such proceeds. Given
Mexicoþs economic crisis, politicians are certainly clamoring for
access to the other 20 percent and some are undoubtedly calling for
even more. The Zedillo administration has plans for a further $16
billion in privatization <8> which could intensify political
conflict. The potential political pitfalls in constructively
allocating privatization proceeds means that privatization for
fiscal reasons alone can be a dangerous step and that government
should have a detailed plan for privatization proceeds prior to the
sale.
A second common reason cited for privatization is to improve
efficiency and customer responsiveness. Public sector enterprises
are answerable to government bureaucracies rather than customers
and shareholders. <9> Government often creates conflicting goals
such as improving efficiency and increasing the number of
employees. The potential inefficiencies of government ownership
are amply demonstrated by the two former state run steel companies,
Ahmsa and Sicartsa. Prior to their privatization in 1991, these
two firms generated a global loss of $10.5 billion during the
preceding twelve years resulting in net subsidy transfers of
approximately $700 million per year. <10> Given that steel is a
valuable and readily salable commodity, these losses are staggering
and one can only assume the inefficiencies involved in their
operations must have been equally monumental. While not all
enterprises are þvalue-subtractingþ as were the former steel
companies, we should note that Mexico spends approximately þ36
percent of annual programmable expenses, to finance inefficient and
costly state concerns.þ <11>
Some government inefficiency is due to poor consumer records
and inefficient billing and collection practices. Low collection
rates reflect the publicþs knowledge that the law prohibits cutting
off water service for nonpayment based on the customary belief that
water is a more of a human right than a commodity that must be
purchased. <12>
Excess staff also accounts for considerable inefficiency. It
is common for public water companies in Latin America to employ 5-
10 people per 1,000 water connections while 2-3
employees per 1,000 water connection is the efficient water company
norm. Public companies are frequently beleaguered by political
appointments and the lack of incentives to attract qualified
managerial and technical staff. <13> Privatization can lead to
downsizing which, in many cases, calls for reducing the number of
redundant or unneeded personnel. <14> Although displacing workers
can cause friction and lead to some short term unemployment, in a
larger sense resources that were being wasted on employing people
for the sake of calling them employed get shifted towards more
productive enterprises where workers earn a living and doing so
contributes to a gain, rather than a loss, for the society as a
whole.
Privatization help depoliticize SOE operations. It is common
for SOEs to favor some users with below-market prices or to be used
to employ people for political or social reasons. These policies
can be socially divisive as well as inefficient. Privatization
fosters transparency of business motives and actions which rewards
efficient performance. <15> Private sector businesses will also
have incentives to properly maintain their facilities and make
capital investments to expand the scope of the business. These
expenses, maintenance in particular, are easily sidetracked in the
political process as other, seemingly more important, projects are
inevitably identified and supported by various interest groups and
politicians. The result is badly deferred or non-existent
preventative maintenance which, in turn, contributes an extra set
of needed projects that will compete with future maintenance
budgets.
Privatization can be used to promote wider ownership of
financial assets through share sales. Although sometimes adopted
for social reasons such as notions of distributive justice, selling
or giving shares of a privatizing company to workers and managers
produces its own benefits. Employee share ownership gives
employees something tangible to compensate them for the sudden lack
of job security since the privatized enterprise will not be able to
guarantee their employment or that the business will be successful.
<16> Employee share ownership also provides substantial incentives
for employees and managers to run the business efficiently and
improve customer service.
Privatization, is a commonly used term that refers to a number
of different arrangements that reduce the role of government in the
economy in general and in the privatized firms in general.
Specific privatization arrangements will be discussed below. It is
important to note that the real goal of privatization is the
introduction of competition, not privatization per se. It is the
isolation from competition that tends to make public enterprises
inefficient. Consequently, firms must be privatized into a
competitive business environment for the full gains of
privatization to be realized. <17> þIt is risky to overestimate
privatizations as a means for fiscal reorganization if they and the
rest of the economic measures do not support the permanent
reduction of the public deficit and the creation of efficient
conditions for the privatized companies.þ <18> In this regard is
important to assess how competitive and regulatory constraints will
affect the company under private ownership. <19>
Competition/privatization requires widespread dissemination of
reliable information on the relevant businesses and business
conditions. Fostering more and more transparent information helps
promote democratic principles and is a basic requirement for a
functioning capital market <20> which can assist economic growth
and future privatizations. Capital markets will be discussed in
more detail below.
Privatization can also provide a powerful signal to the
international financial community concerning the governmentþs
commitment to economic reform and trade liberalization. One should
note that privatization and trade liberalization, while frequently
concurrent, are not necessarily directly linked. In that context,
privatization is likely to be a demonstration of part of a greater
trade liberalization program. Public opinion can also be affected
although public opinion is not necessarily as supportive of
privatization efforts as the international financial community.
<21>
The potential reasons for and results of privatization are far
reaching. Privatization can affect the whole society and change
political power structures and the distribution of wealth which
will, in turn, have other affects on politics and wealth as well as
future privatization. Because of the far reaching and dynamic
nature of these effects, privatization policies should be carefully
designed and implemented with great care to ensure that the
potential benefits of such a policy are fully realized.
Most importantly, privatization makes it possible for Mexico
to undertake the extensive work on environmental infrastructure the
Zedillo administration has committed itself to. The resulting
gains in public health, long term environmental health, and the
health of businesses that depend on the environmental resources
such as clean water will justify the investment over time.
Because many environmental technologies and supporting
services are not always available in Mexico, trade in these goods
and services will increase. Privatization will help Mexico create
the environmental infrastructure it wants and contact with foreign
companies and expertise will augment the countryþs indigenous
technical and financial capacity.
Private Sector Participation Options
The term privatization is commonly used as generic expression
that actually describes a range of programs that can transform
government run operations in a variety of ways to include, in
varying degrees, private sector participation. The privatization
method chosen in each instance will reflect the opportunities,
risks, and needs of all the stakeholders involved. Privatization
options can be
broken into two main groups. In the first group, the public sector
still retains ownership while the second group of options involves
varying degrees and mixes of private ownership.
Private sector participation (PSP), where the public sector
still retain ownership, falls into four categories: service
contracts, management contracts, lease arrangements and
concessions. Service contracts are the simplest form of PSP. The
relevant public authority retains ownership and responsibility for
operation and maintenance except for specific, relatively limited
services which are contracted out to private service providers.
Service contracts are commonly used for basic services such as
maintenance, emergency repairs, billing and collection, and
construction. These contracts require little or no investment by
the service provider while the public authority bears all
commercial risks. One major benefit of service contracts is that
payments are directly linked to work performed rather than the
fixed wage guaranteed to public utility employees. <22>
Management contracts are more complicated the service
contracts. Management contracts, in effect, transfer public
authority to a private company for the operation and maintenance of
a particular system or subsystem. The private company has much
greater leeway to make day-to-day management decisions without
assuming any commercial risks since the public authority is still
ultimately responsible for the provision of services. Management
contracts also do not require the private sector participant to
make large scale investment. Similar to service contracts,
management contracts are paid by services rendered and commonly
linked to various performance objectives and efficiency
improvements. <23> Contracting out does not address the need for
new investments to maintain and expand the system and offers only
limited incentives to the contractor for improvements in
performance relative to the potential rewards offered by private
ownership. <24>
Leasing is the third method of private sector participation
that retains sole public ownership. Under a lease agreement, a
private contractor rents the facilities from a public authority for
a designated time period operates, maintains, and manages the
system including the operation and maintenance of offices,
vehicles, spare parts, billings, collections and financing working
capital. The public authority is still responsible for capital
expenditures, replacement of major works, debt service, tariffs,
and cost recovery policies. Since the contractor depends on
collection for revenue, there is tremendous incentive to provide
good service and establish efficient billing and collection
practices. Leasing risks are fairly low and it provides an
opportunity for both sides to effectively assess the prospect of
more extensive future involvement. Lease contracts also stipulate
penalties in case of poor performance. <25> Leasing is a more
powerful tool than contracting because the lesseeþs rewards are
more directly affected by its success in managing the leased
assets. <26>
Concessions are the fourth method of private sector
participation in which public authorities retain ownership. A
concessionaire accepts overall responsibility for all services
including operation, maintenance, management and capital
investments to expand services. Fixed assets remain the property
of the government but are entrusted to the concessionaire during
the period of the contract. Such assets must be returned in like
condition at the conclusion of the contract. By combining
responsibility for investment and operations, operators have great
incentive to make efficient investment decisions since they will
directly reap the rewards of any improvements As in the lease
arrangement, there are normally penalties attached to specific poor
performance criteria. <27>
The second group of privatization techniques involve at least
some private ownership. The simplest of these arrangements is a
management/employee buyout. This technique is particularly
applicable to smaller entities that are already managed effectively
but are saddled by inefficient government directives or other
operational constraints that would no longer be applicable under
private ownership. This arrangement gives employees and managers
direct incentive to operate the firm efficiently and provide the
maximum level of service. <28>
The trade sale method of privatization sells a controlling
interest of an enterprise to the private sector, usually though a
competitive bidding process. There are three types of trade sales.
The first two, commercial tender and investment tender, are
generally used for medium and large enterprises. In a commercial
tender the offer price is the sole deciding factor while decisions
regarding an investment tender may also consider other factors such
as new investment and job retention. The third type, open-outcry
auction, is more commonly used to sell smaller enterprises. One
disadvantage of trade sales is that participation may be
effectively restricted to wealthy local or foreign investors which
can undermine popular support for privatization by exacerbating,
either actually or in the public eye, existing wealth disparities.
<29>
A third and increasingly popular method of privatization is
called Build-Operate-Transfer (BOT) These arrangements are
becoming common for desired infrastructure projects that are beyond
the governmentþs budgetary resources. In a BOT contract, a firm or
consortium finances, builds, owns, and operates a specific new
facility of system for a designated time period after which
ownership of the facility or system is transferred to the
government. The duration of the contract is usually tied to the
period of time needed to retire the incurred debt and provide a
return to equity investors. BOT contracts tend to be very
complicated and involve many parties and a multitude of issues that
must be addressed within the contract including the legal basis for
a private sector firm to operate what had previously been a public
utility, pricing and capital repatriation and currency
convertibility issues and service requirements. BOT contracts have
not been extensively used yet in the water and wastewater sector,
partly due to the extended time horizon necessary for recapturing
investment capital. BOT arrangements tend to be more attractive in
the power and transportation sectors. <30>
Reverse BOT contracts can be an added attraction in countries
where economic or political risks are high. In a reverse BOT, the
government buys or builds the facility and contracts a private firm
to operate it. Over a period of time, the firm may purchase the
facility in installments covering the governments debt service and
management expenses. By taking on much of the initial risk,
governments can encourage more private sector participation and
lower the cost of such participation. <31>
Finally, there is the option of joint ownership. Under a
joint ownership agreement, a public entity and a private firm (or
firms) form a commercial corporation under the regular commercial
laws. Initially, the shares are usually split about evenly between
the public and private sectors although the public sector may
eventually sell off some or all of its interest. The public
authority, however, may wish to keep a special share which would
give it special powers in specific situations. The private sector
generally prevails in the day-to-day management of the corporation
but the public authority is fully cognizant of and has input to
operations through a number of board seats. Joint ownership
arrangements are also quite complicated and require lengthy
agreements that specify the objectives of ownership, duties,
obligations, and rights of all parties, and a profit sharing plan.
Successful joint ownership companies will establish independent
creditworthiness which will enable them to raise capital in the
future by floating corporate bonds or issuing corporate notes which
will not affect public sector debt or budgets. <32>
Privatization provides the opportunity to create another
powerful vehicle for attracting investment: capital markets.
Privatization generally involves a single entity or group of
entities but does not institutionalize any ability for investors to
exchange securities and debt instruments on an ongoing basis. A
working capital market could help attract investors for all kinds
of business investment in addition to helping provide the resources
necessary for privatization.
Capital Markets
Privatization is complimented by the existence of efficient
capital markets. Through functioning capital markets, the
government can easily sell shares in entities it wishes to
privatize and local firms can raise investment capital without
necessarily having to pay the sometimes exorbitant interest rates
charged by the banking industry. Capital markets would give
Mexican citizens more investment choices, which are also largely
controlled by the banking industry at this time. Capital markets
would enable states and municipalities, following appropriate
constitutional changes, to issue bonds. This last capability has
been used extensively in the United States for financing local
infrastructure.
For capital markets to work, people must have the opportunity
to freely exchange securities from various entities. To give
people choices in the water and wastewater sector and really create
a market for water securities, Mexico needs to devolve its water
system into independent water authorities. þUsing water
authorities as the institution upon which to build a domestic
investment grade municipal debt market could create a major
breakthrough but would require a systematic effort to set standards
and build regulatory mechanisms to allow for the creation of an
orderly market.þ <33>
Capital markets are a natural partner with privatization.
Privatization helps the development of capital markets by providing
local investments familiar to the population while reducing
deficits and inflationary pressures. <34> Such arrangements can be
crucial in Mexico where there is nothing comparable to the U.S.
municipal bond market that could finance local projects. <35>
Mexican citizens and business would enjoy the benefits of capital
markets because banks have a virtual monopoly on capital lending.
In the case of Mexico, multilateral development bank loans are
þwholesaledþ to Mexico through its development bank, BANOBRAS which
then issues specific project loans to states and municipalities,
but only after adding its own interest rate spread to the cost of
the loan. Consequently, very low cost loans from the World Bank or
other multilateral lending agencies become market rate or near-
market rate financing arrangement when the resources are actually
received by a particular state or municipality. These in country
risks are higher than the original loan to cover inflation,
management costs, sub-sovereign risks, and a hedge on currency
valuation. þThe spread between BANOBRASþs borrowing rate and its
lending rate is setting a very high hurdle for environmental
projects at a time when the underlying economic condition of the
population expected to pay for them is poor.þ <36>
Another option open to Mexico is the creation of independent
water authorities. Such authorities may become increasingly viable
if the Zedillo administration continues with its decentralization
and liberalization plans. The municipalities that will, in theory,
be receiving greater authority and discretion for planning and
implementing local infrastructure projects have had the least
access to and control of resources of any level of government.
Their lack of financial independence makes them generally poor
credit risks. Additionally, states and municipalities are
constitutionally prohibited from incurring international debt. <37>
A responsibly constituted, independent water district is likely to
be far more creditworthy than many municipalities.
In situations of direct government ownership, creditworthiness
can be influenced by political factors and stability. For an
independent water district, credit is easier to establish. For
water districts, the two key credit ingredients are a record of
collecting user fees or taxes and a record of timely payment of
previous obligations. New districts would clearly need credit
enhancement to get started but after several years of successful
operation, they could demonstrate creditworthiness and continue
operations and financing with progressively fewer credit
enhancements. <38>
Privatization, particularly through public sale of shares
helps create broad and diversified share ownership, new companies,
and new investment funds. The sales of shares can help transfer
the financial technology of initial public offerings to the
fledgling securities industry and produce a demonstration effect
for other local firms. Capital markets also invite greater foreign
investment which is important given Mexicoþs substantial capital
needs. <39> A viable Mexican capital market would provide an
invaluable source of long term funding for water and wastewater
project which generally have long term repayment horizons, thereby
filling a significant gap in current Mexican financing
arrangements.
A Mexican capital market could also fit well with the current
trend in pension reform. Previously, pensions were largely
restricted to holding Mexican Treasury Notes (CETES). As these
restrictions are lifted, privately managed funds will increase the
pool of available capital and fund managers will be actively
seeking long term debt to meet investment objectives. <40> Viable
capital markets can also help boost savings rates which will lower
interest rates and make future infrastructure projects more
affordable providing societal benefits far beyond the water and
wastewater treatment sector. <41> Capital markets can also promote
transparency and trade liberalization, vital conditions for
privatization. Although poorly constructed and regulated capital
markets could be abused and manipulated, effective government
regulation will give investors the confidence to increase capital
market holdings which will, in turn, help prevent capital flight
and attract foreign capital. <42>
Mexican capital markets would compliment privatization and
bestow a number of other benefits on Mexico. The combination of
privatization, capital markets, and independent water authorities
would give Mexico a tremendous boost towards its environmental
infrastructure objectives.
Other Funding Options and Credit Enhancements
Even with the resources of privatization and capital markets,
some projects may need additional help. There are numerous
international resources available to assist project financial
credentials. Many of these international instruments offer
excellent technical assistance, particularly during the design
process. If structured well, such assistance can help create much
greater indigenous technical capacity which will benefit Mexicoþs
ability to launch other projects. These funding options help match
Mexicoþs environmental infrastructure and institutional needs with
access to low cost capital. Many multilateral funding options and
credit enhancements are available to privatized or privatizing
firms.
A central feature of Mexican infrastructure financing is that
most projects are designed at finance at the federal level where
the allocation have funds has been responsive to political
criteria. The highly centralized nature of the Mexican system,
although in the process of some change, has left state and
municipal governments with few discretionary resources exacerbated
by a tendency for states to receive different amounts than the
amount actually budgeted. The federal government collects, retains
and spends about 80 percent of revenue, states get about 15 percent
and municipalities the remaining 5 percent. In addition, most
state (92.02 percent) and municipal (91.08 percent) debt is held
directly by the federal government. <43> Because of federal
dominance, many infrastructure projects must go directly through or
get approval from central authorities.
The þtraditionalþ method of funding environmental
infrastructure project is through the Banco Nacional de Obras y
Servicios P£blicos, S.N.C. (BANOBRAS) which is a development bank
owned entirely by the Mexican government. As Mexicoþs primary
development bank for environmental infrastructure projects,
BANOBRAS is frequently involved in one way or another with
infrastructure financing although it does not have enough loanable
money to finance Mexicoþs backlog of water and wastewater projects.
While BANOBRAS does offer a number of different facilities for
environmental financing, the government is encouraging projects to
seek private sector alternatives. A common BANOBRAS loan has a 15
year maturity with an interest rate based on Mexican federal
treasury bills (approximately 40 percent since the peso devaluation
although recovering slowly) plus a spread of 6-10 percent. <44>
BANOBRAS managers a number funds reserved for environmental
projects. The most notable, and perhaps the most likely of these
in the Fondo de Inversi¢n en Infraestructura (FINFRA). FINFRAþs
objective is to promote greater private sector participation in
basic infrastructure projects with high social rates of return.
FINFRA offers a venture capital package that expects financial
returns similar to those offered to private investors and
subordinated capital package which will reduce external financing
needs for projects with high social value but below market rates of
return. Generally, FINFRA will not expect repayment for the
latter. Mexico also operates a private sector bank, Nacional
Financiera, S.A. (NAFINSA) which concentrates on small and medium
sized business. <45>
Many of the resources loaned by BANOBRAS, NAFINSA, and FINFRA
originate from World Bank (WB) and Inter-American Development Bank
(IDB) loans. World Bank and IDB in particular, also offer various
credit enhancement and strengthening packages that make eligible
projects more affordable by reducing initial equity requirements or
interest rates, by extending loan maturities or by offering
insurance against political and economic risks not related to the
operation of the project. The Partial Risk Guarantee is insures
investors against political risks such as war, expropriation,
currency convertibility. Currency convertibility is a significant
issue because most investors will want payment in dollars or other
hard currency while collections for water and wastewater services
will be in pesos. It also is specifically oriented towards risks
due to governmental non-performance of contractual obligations.
<46>
The Partial Credit Guarantee program allows for loan term
extensions by offering insurance for those years in which private
financing would be otherwise available. Water and wastewater
projects typically require ten to fifteen year financing, far
beyond the three financing generally available in Mexico due to the
aftermath of the peso crisis. This facility provides a þAAA rateþ
guarantee on debt issued from the maturity of the initial financing
to the end of a more suitable time period. For instance, if a
project could obtain five year financing privately, but not the
fifteen year debt required to make the project affordable, the
facility would guarantee financing from the fifth to the fifteenth
year making the initial loan package much more affordable. The IDB
offers similar programs. <47>
In both these guarantee programs, the borrowing country must
normally provide a counter-guarantee for its own performance. In
effect, the country assumes most of the risk itself.
This requirement, however, increases loan costs to the point that
they are similar to a direct government loan. In addition, the
government has limitations on the number of counter-guarantees it
can offer without affecting its financial credibility.
Counterguarantees also may lead to the impression that the Mexican
government will, in effect, continually subsidize projects which
will make it more difficult for them to establish independent
credit credentials. <48>
The International Finance Corporation (IFC) is the private
lending branch of WB. Because of its private sector mandate, IFC
can only lend to private sector projects. The IFC syndicates þBþ
loans to institutional investors and remains the lender of record
creating the IFC umbrella. The presence of an international
organization as senior lender assures other investors that adverse
government action will not damage their investment prospects.
While not as powerful as a WB guarantee program, the IFC umbrella
has earned a BBB rating from Standard & Poors. A singular
advantage of the IFC "B" loan is that it does not require
governmental counter-guarantees which minimizes policy discussion
and substantially shortens the application and approval process.
<49>
Another WB institution, the Multilateral Investment Guarantee
Agency (MIGA) also offers political and currency risk insurance.
These programs are widely accepted by investors and have short
implementation periods. <50> However, Mexico is not a signatory to
the MIGA convention because of its objection to international
arbitration, an integral part of the MIGA conventionþs dispute
settlement mechanism. In Mexico, apparently, arbitration is seen
as an abrogation of sovereignty <51> and, consequently, very
unpopular and politically dangerous.
The United States has established financing mechanism that has
produced some positive results. The Clean Water State Revolving
Fund, funded by EPA helps fund many water and wastewater projects
throughout the United States. The State Revolving Fund provides an
ongoing source of low-cost project finance for environmental
projects in the United States and is particularly geared towards
small and medium sized projects which tend to have greater
difficulty in establishing commercial viability than large urban
projects. A similar Mexican facility could provide short term
financing for new projects. After the initial time period, perhaps
three to five years, the project would have established its own
creditworthiness allowing the project to attract financing from
other resources. Once a project establishes its creditworthiness
and refinances the project through commercial or other lenders, the
funds would be available to help launch other projects. By using
a short term credit facility to help projects establish credibility
such that they can secure long term debt, a revolving fund can
facilitate the start of many more projects than if the loans were
structured to be repaid in the long term time frame (20-30 or more
years) common to water and wastewater infrastructure projects. <52>
Another possible financing mechanism involves credit pooling
sometimes known as bond banks. Credit pools or bond banks combine
the resources of local governments with limited access to capital,
those that lack financial expertise or a project of sufficient size
or credit history to make the group of municipalities more
attractive to investors. The resulting economy of scale can
provide easier access to capital and lower borrowing costs. <53>
The previously mentioned FINFRA, started in 1995, operates a $125
million bond bank for infrastructure. <54>
The North American Development Bank (NADBank) was created
specifically to fund environmental project in the border region.
NADBankþs three highest priorities are wastewater treatment,
drinking water, and municipal waste. All NADBank projects must
first be certified as environmentally, socially, and financially
viable by the Border Environmental Cooperation Commission (BECC).
NADBank will fund projects that can demonstrate financial
viability. Through the use of direct lending and loan guarantees,
it hopes to facilitate $6 to $9 billion of investments over the
next decade. <55>
The U.S. Export-Import Bank (Ex-Im) is another potential
source of infrastructure finance. Its applicability to water
projects is somewhat limited because water projects typically do
not involve a large export component. Ex-Im financing arrangement
are most useful for highly capital intensive exports such as
independent power projects. In 1994, Ex-Im created a separate
department for non-recourse financing and Mexico is its largest
market. <56> Projects earning Ex-Im project finance must be stand
alone projects, i.e. the project will pay for itself out of its own
cash flows. Ex-Im does not require direct sovereign guarantees
which streamlines process and reduces implementation time. Ex-Imþs
typical loan duration is 10 years, 12 years for power projects.
Ex-Im also matches the best credit terms allowed by OECD.
The U.S. Overseas Private Investment Corporation (OPIC) can
provide political risk insurance or long term loan guarantees.
OPIC is very interested in environmental finance, including
wastewater treatment projects and could greatly facilitate many
Mexican projects. Unfortunately, Mexico cannot access OPIC project
finance funds because it is not a signatory to the OPIC accord,
also due to the international arbitration requirements (as with
MIGA, above). <57>
Another option open to Mexico is the creation of independent
water authorities. Such authorities may become increasingly viable
if the Zedillo administration continues with its decentralization
and liberalization plans. The municipalities that will, in theory,
be receiving greater authority and discretion for planning and
implementing local infrastructure projects have had the least
access to and control of resources of any level of government.
Their lack of financial independence makes them generally poor
credit risks. Additionally, states and municipalities are
constitutionally prohibited from incurring international debt. <58>
A responsibly constituted, independent water district is likely to
be far more creditworthy than many municipalities.
Creditworthiness is based on many things when a government is
involved. For a water district, the two key ingredients are a
record of collecting user fees or taxes and a record of timely
payment of previous obligations. New districts would clearly need
credit enhancement to get started but after several years of
successful operation, could demonstrate creditworthiness and
continue operations and financing with progressively fewer credit
enhancements. <59>
With NAFTA in place, Mexico is likely to continue to increase
its trade volume. Particularly in the border area with it
concentration of industry, environmental concerns will continue to
grow. The environmental provisions of NAFTA, combined with an
increasingly environmentally aware Mexican population and an
administration willing to tackle difficult environmental issues
create the right conditions for Mexico to really upgrade its
environmental infrastructure.
Trade in environmental technologies will increase to help
Mexico upgrade its infrastructure. There are clearly many
financing options and many of them can be combined in various ways.
By employing all available resources, both domestic and foreign,
Mexico will attract the financial resources necessary for its
infrastructure needs and will build its own technical capability
which will help Mexico continue to address its environmental
financing needs.
3. Related Cases:
LATTECH Case
4. Draft author: David Field, June 14, 1997
B. Legal Filters:
5. Discourse and Status: AGRee and INPROGress
6. Forum and Scope: Mexico and UNILateral
7. Decision Breadth: 1 (Mexico)
While Mexico is the subject of this paper, Mexican
environmental factors affect surrounding countries. The most
significant impact is on the Mexico-U.S. border region. It is
Mexicoþs largest land border, Mexicoþs most heavily industrialized
area, and the region of Mexico experiencing the largest population
gains. As a result of these factors, Mexican environmental
concerns, particularly those of northern Mexico, are of concern to
the United States as well. These mutual concerns have been
codified in the North American Agreement on Environmental
Cooperation signed as an adjunct to the North American Free Trade
Agreement (NAFTA). This agreement identifies a region within 100
kilometers of the border as an area of concern for both nations and
establishes several organizations to address the environmental
issues in the border region, the Border Environmental Cooperation
Commission (BECC) and the North American Development Bank
(NADBank).
Border XXI is a binational effort sponsored by U.S. EPA and
SEMARNAP to create an integrated environmental strategy for the
border area. It specifically institutionalizes input from private
citizens, businesses, communities, states, and NGOs from both sides
of the border. The resulting strategy is expected to produce an
accurate reflection of the interests of all the stakeholders in the
border region.
8. Legal Standing: LAW
C. GEOGRAPHIC Clusters
9. Geographic Domain: North America
Geographic Site: Southern North America
Geographic Impact: Mexico
10. Sub-National Factors: YES
Historically, Mexico has had a very centralized government.
Starting slowly with the Salinas administration and gathering
momentum during the current Zedillo administration, Mexico is
pursuing decentralization. While the federal government retains
considerable powers, particularly in the crucial areas of taxation
and allocation of government revenues to states and municipalities,
sub-national entities are likely to have their authority and
decision making abilities expanded. However, it should be noted
that much of the institutional capacity exists at the federal level
and that situation is likely to persist for some time. The level
of education, particularly at the local level, is frequently
insufficient to properly design and manage large projects and the
complex financial arrangements that accompany them. Despite these
capacity problems, regional and municipal factors will play
significant role in the success of future environmental projects.
11. Type of Habitat: DRY
D. Trade Clusters
12. Type of Measure: Regulatory Standard (REGSTD)
Public demand for better environmental infrastructure along
with Mexicoþs environmental agreements with its North American
neighbors is the driving force behind Mexicoþs efforts to improve
its performance. International pressure, especially from the
United States and the NAAEC has also prompted Mexico to tighten its
environmental regulations and increase the rate of inspections more
than ten-fold since the NAAEC was signed.
13. Direct vs. Indirect Impacts: INDIRECT
14. Relation of Measure to Environmental Impact
a. Directly Related to Product: NO
b. Indirectly Related to Product: YES Water Technology
c. Not Related to Product: NO
d. Related to Process: YES Water
Financing issues will directly and indirectly affect many
products and processes. Financing mechanisms can make or break
projects that are desperately needed in a social and environmental
sense. Many environmental infrastructure projects, especially in
water and wastewater treatment,
can have a dramatic affect on the local population in terms of
jobs, local pride, and overall quality of life. Financing
mechanisms as outlined in this paper, through the application of
user fees introduce greater accountability and transparency to the
local business environment which can also have far reaching
societal impacts.
15. Trade Product Identification: Environmental Technology
16. Economic Data
Prior to 1995, the water and wastewater market was estimated
at over $1 billion and was experiencing growth rates of 20 percent
and above. Following the devaluation of the peso in 1995, the
market collapsed and little was invested. The sector has rebounded
considerably in the last two years and the market estimate for 1997
is $700 million and is projected to grow at 15 percent. <60>
17. Impact of Measure on Trade Competitiveness: HIGH
The resourcefulness of the financing team for environmental
projects may very well be the determining factor in developing
markets such as Mexico. The relative lack of financial expertise
and commercial management by local authorities means that projects
that include financing arrangements are much more likely to be
selected.
18. Industry Sector: MANY
Water is needed to sustain life and, in varying quantities,
most manufacturing processes. Consequently, financing for water
projects will impact the availability of water to most industry
sectors including OILGAS, UTIL, FURN, PRIMET, FABMET, NEMACH,
EMACH, DOTH, FOOD, TEXT, PAPER, CHEM, PLAST, LEATHER, MOTH, TOUR,
SOTH.
19. Exporter and Importer: MANY and Mexico
V. Environment Clusters
20. Environmental Problem Type: Water
21. Species Information
22. Impact and Effect: HIGH and STRUCTURE
23. Urgency and Lifetime: Medium and 100s of years
24. Substitutes: Conservation
VI. Other factors
25. Culture: NO
Mexican politics and culture are undergoing significant
changes, partly due to the needs of environmental projects and
their attendant financing. By making water projects accountable to
the population served rather than the central government, projects
and industries become depoliticized. Given Mexicoþs history of
patronage and clientism, especially around public works, local
accountability is a big step. The populace will also undergo a
major change of mind about its relationship with water. Since the
government has substantially undercharged water users and refuses
to cutoff service even if bills remain delinquent for extended
periods, the public believes water to be a right rather than a
commodity. In areas with plenty of clean water for a small
population, this notion is workable. However, in a rapidly
growing, very arid country like Mexico (which is classified as over
50 percent desert), the water supply is soon outstripped by water
demand and it becomes impossible for everyone to fully exercise
their þrightþ to all the water they could want. These changes will
have long term impacts on Mexican politics and society for decades
to come.
26. Human Rights: NO
27. Trans-boundary Issues: YES
Much of the financing Mexico requires will come from foreign
investors and international organizations. The success or failure
of Mexico's pollution control efforts will also impact its
neighbors, the United States in particular. In addition to air
pollution that freely moves over borders, there are numerous cases
of water pollution generated in Mexico that flow to the United
States.
Some current examples from the border region are indicative of
the need for immediately addressing water and sewerage problems.
Ciudad Juarez dumps 55 million gallons of raw sewage daily into the
Rio Grande. The river is so polluted in some areas that skin
contact threatens exposure to cholera, hepatitis and dysentery.
This water is still used for irrigation purposes in Mexico. <61>
The New River, which flows from Mexico into Californiaþs
Imperial Valley, transports 20-25 million gallons of partially
treated domestic and industrial wastewater and about three million
gallons of untreated industrial wastewater into California every
day. Some monitoring reports have shown high level of DDT, PCBs,
chloroform, thichloroethane, toluene, and xylene. Fecal coliform
levels have been discovered in concentrations several thousand
percent higher than the level considered potentially fatal to
humans. <62>
Tijuanaþs sewage system has a capacity of 17 million gallons
per day of sewage but the cityþs average sewage output in 1995 was
35-40 million gallons per day. <63> In Mexicoþs border region, 88
percent of the residents of the 23 border cities have access to
drinking water and 69 percent have access to sewage collection
systems. The capacity of the treatment plants in these cities is
34 percent of total need. <64> Given the aforementioned treatment
rate of 15 percent for industrial effluents in the relatively
highly industrialized border region, water and wastewater
infrastructure needs will require significant attention.
28. Relevant Literature
Anderson, Terry L., and Peter J. Hill, eds., The Privatization
Process; A Worldwide Perspective. Lanham, MD: Rowman and
Littlefield Publishers, Inc., 1996.
Apogee Research International, Ltd., Innovative Financing of Water
and Wastewater Infrastructure in the NAFTA Partners: A Focus on
Mexico and a Recommendation. Report presented at PRO-ECO þ94,
Monterrey, Mexico.
Border XXI site, various chapters.
http://www.epa.gov/region09/cross_pr/usmex/index.html. Accessed
3/19/97.
de Bartolome, Karen , "Environmental Investment in Mexico: A U.S.
Perspective," working paper from Mexico/U.S. Global Forum, Aspen
Colorado May 30 - June 2, 1996, p. 13.
US/Mexico Aspen Global Forum, Access to Capital for Environmental
Infrastructure and Creating a Secondary Mortgage Market, a report
based on the proceedings of the U.S./Mexico Aspen Global Forum,
Aspen, Colorado, May 30 - June 2, 1996.
Edwards, Jack K. and Werner Baer, "The State and the Private
Sector in Latin America: Reflections on the Past, the Present and
the Future," The Quarterly Review of Economics and
Finance, Vol. 33, Special Issue (1993), pp. 9-19.
Field, David and Doug Kogan, Maquiladorasþ Pollution Problems Will
Require Major Investments to Solve," IRRC Corporate Social Issues
Reporter, October/November 1996, pp. 17-20.
Field, David and Doug Kogan, "Border XXI Program Aims to Bring
Sustainable Development to Maquiladora Region," IRRC Corporate
Social Issues Reporter, October/November 1996, p. 21.
Glade, William, ed. with Rossana Corona, Bigger Economies, Smaller
Governments; Privatization in Latin America. Boulder, CO: Westview
Press, 1996.
Hagler Bailly Services, Inc., U.S. Water Wastewater Export Plan
(preliminary draft prepared for Office of Environmental
Technologies Exports, U.S. Department of Commerce, ashington,
D.C.), February 1997.
Hass, James E., Christopher Stillman Bender, and Alberto Diaz-
Cayeros, "The Challenge of Environmental Infrastructure Finance in
Mexico," Access to Capital for Environmental Infrastructure and
Creating a Secondary Mortgage Market, a report based on the
proceedings of the U.S./Mexico Aspen Global Forum, Aspen, Colorado,
May 30 - June 2, 1996.
Idelovitch, Emanuel and Klas Ringskog, Private Sector Participation
in Water Supply and Sanitation in Latin America. Washington, D.C.:
The World Bank, 1995.
Kaplan, Marshall, "Perceptions of the World Bank, IDB and Related
Institutions Concerning Their Involvement in Mexico: Effect on
Environmental Infrastructure," Access to Capital for environmental
Infrastructure and Creating a Secondary Mortgage Market, a report
based on the proceedings of the U.S./Mexico Aspen Global Forum,
Aspen, Colorado, May 30 - June 2, 1996.
Lee, Terence and Andrei Jouravlev, "Self-financing Water Supply and
Sanitation Services," CEPAL Review, v.48 (December 1992), pp. 117-
128.
McLindon, Michael, P., Privatization and Capital Market
Development; Strategies to Promote Economic Growth. Westport, CT:
Praeger, 1996.
Nickum, James E. and William K. Easter, eds., Metropolitan Water
Use Conflicts in Asia and the Pacific. San Francisco: Westview
Press, 1994.
Randall, Laura, ed., Changing Structure of Mexico: Political,
Social, and Economic Prospects. Armonk, New York: M.E. Sharpe,
1996.
Solanes, Miguel, "The Privatization of Public Water Utilities,"
CEPAL Review, v56 (August 1995), pp. 153-167.
Spulber, Nicolas and Asghar Sabbaghi, Economics of Water Resources:
From Regulation to Privatization. Boston: Kluwer Academic
Publishers, 1994.
Teichman, Judith A., Privatization and Political Change in Mexico.
Pittsburgh, PA: University of Pittsburgh Press, 1995.
Vigneswaran, S. and C. Visvanathan, Water Treatment Processes:
Simple Options. New York: CRC Press, 1995.
United States Department of Commerce, Funding Sources for
Environmental Projects in Mexico Washington, D.C.: U.S. DoC,
International Trade Administration, Environmental echnologies
Exports, 1996.
United States Department of Commerce, Financing Environmental
Project in Mexico Washington, D.C.: U.S. DoC, International Trade
Administration, Environmental Technologies Exports, 1996.
United States Environmental Protection Agency, The Clean Water
State Revolving Fund; Financing Americaþs Environmental
Infrastructure -- A Report of Progress. Washington, D.C.: U.S.
EPA, Office of Water, 1995. EPA 832-R095-001
United States Environmental Protection Agency, Environmental
Pollution Control Alternatives: Drinking Water Treatment for Small
Communities. Washington, D.C.: U.S. EPA , Technology Transfer,
1990. EPA/625/5-90/025
United States Environmental Protection Agency, Office of Policy,
Planning and Evaluation, U.S./Mexico Border Environmental Report;
Surface Water Quality, 1996.
US/Mexico Aspen Global Forum, Access to Capital for Environmental
Infrastructure and Creating a Secondary Mortgage Market, a report
based on the proceedings of the U.S./Mexico Aspen Global Forum,
Aspen, Colorado, May 30 - June 2, 1996.
References
<1> Karen de Bartolome citing Environment Watch: Latin America
(1996) in "Environmental Investment in Mexico: A U.S. Perspective,"
p. 8. Working paper submitted for Mexico/U.S. Global Forum, Aspen,
Colorado, May 30 - June 2, 1996.
<2> Terence Lee and Andrei Jouravlev citing Comision Nacional del
Agua (1989) in þSelf-financing Water Supply and Sanitation
Services,þ CEPAL Review, No. 48 (December 1992), p. 118.
<3> Lee and Jouravlev, pp. 119-120.
<4> Lee and Jouravlev, p. 120.
<5> James E. Nickum and William K. Easter, eds., citing Richardson
(1988), Metropolitan Water Use Conflicts in Asia and the Pacific.
San Francisco: Westview Press, 1994. p. 30.
<6> Nickum and Easter, eds., p. 126.
<7> William Glade, ed. with Rossana Corona, Bigger Economies,
Smaller Governments; Privatization in Latin America. Boulder, CO:
Westview Press, 1996, p. 139, 156.
<8> Terry L. Anderson, and Peter J. Hill, eds., The Privatization
Process; A Worldwide Perspective. Lanham, MD: Rowman and
Littlefield Publishers, Inc., 1996, p. 185.
<9> Anderson and Hill, p. 3.
<10> Anderson and Hill, p. 181.
<11> Anderson and Hill, p. 184.
<12> Emanuel Idelovitch and Klas Ringskog, Private Sector
Participation in Water Supply and Sanitation in Latin America.
Washington, D.C.: The World Bank, 1995, p. 9.
<13> Idelovitch and Ringskog, p. 9.
<14> Anderson and Hill, p. 2-3.
<15> Anderson and Hill, p. 4.
<16> Anderson and Hill, p. 4-5.
<17> Nicolas Spulber and Asghar Sabbaghi, Economics of Water
Resources: From Regulation to Privatization. Boston: Kluwer
Academic Publishers, 1994, p. 201.
<18> Glade, p. 186.
<19> Spulber and Sabbaghi, p. 276.
<20> Glade, p. 159.
<21> Solanes, Miguel, þThe Privatization of Public Water
Utilities,þ CEPAL Review, v56 (August 1995), p. 163.
<22> Idelovitch and Ringskog, p. 14.
<23> Idelovitch and Ringskog, p. 14-15.
<24> Michael P. McLindon, Privatization and Capital Market
Development; Strategies to Promote Economic Growth. Westport, CT:
Praeger, 1996, p. 17.
<25> Idelovitch and Ringskog, pp. 15-16.
<26> McLindon, p. 17.
<27> Idelovitch and Ringskog, pp. 16-17.
<28> McLindon, p. 18.
<29> McLindon, p. 18-19.
<30> Idelovitch and Ringskog, pp. 17-18.
<31> Idelovitch and Ringskog, pp. 18-19.
<32> Idelovitch and Ringskog, p. 19.
<33> James E. Hass, Christopher Stillman Bender, and Alberto Diaz-
Cayeros, "The Challenge of Environmental Infrastructure Finance in
Mexico," Access to Capital for Environmental Infrastructure and
Creating a Secondary Mortgage Market, a report based on the
proceedings of the U.S./Mexico Aspen Global Forum, Aspen, Colorado,
May 30 - June 2,1996, pp. 2-3.
<34> McLindon, pp. 35-36.
<35> Apogee Research International, Ltd., Innovative Financing of
Water and Wastewater Infrastructure in the NAFTA Partners: A Focus
on Mexico and a Recommendation. Report presented at PRO-ECO 94,
Monterrey, Mexico, p. 6.
<36> Karen de Bartolome, "Environmental Investment in Mexico: A
U.S. Perspective," working paper from Mexico/U.S. Global Forum,
Aspen Colorado May 30 - June 2, 1996, p. 13.
<37> US/Mexico Aspen Global Forum, Access to Capital for
Environmental Infrastructure and Creating a Secondary Mortgage
Market, a report based on the proceedings of the U.S./Mexico Aspen
Global Forum, Aspen, Colorado, May 30 - June 2, 1996, p. 22.
<38> Hass, Bender, and Diaz-Cayeros, pp. 20-21.
<39> McLindon, pp. 35-36.
<40> Hass, Bender, and Diaz-Cayeros, p. 23.
<41> Apogee Research, Inc., p. 19.
<42> Jack K. Edwards and Werner Baer, "The State and the Private
Sector in Latin America: Reflections on the Past, the Present and
the Future," The Quarterly Review of Economics and Finance, Vol.
33, Special Issue (1993), p. 17.
<43> Hass, Bender, and Diaz-Cayeros, pp. 6-7.
<44> Hass, Bender, and Diaz-Cayeros, p. 15.
<45> U.S. Department of Commerce, International Trade
Administration, Funding Sources for Environmental Projects in
Mexico. Washington, D.C.: U.S. Department of Commerce, May 1996,
pp. 23-24.
<46> Hass, Bender, and Diaz-Cayeros, p. 26.
<47> Hass, Bender, and Diaz-Cayeros, pp. 26-28.
<48> Marshall Kaplan, "Perceptions of the World Bank, IDB, and
Related Institutions Concerning Their Involvement in Mexico: Effect
on Environmental Infrastructure," p. 5. Working paper submitted
for Mexico/U.S. Global Forum, Aspen, Colorado, May 30 - June 2,
1996.
<49> Hass, Bender, and Diaz-Cayeros, pp. 27-28.
<50> Hass, Bender, and Diaz-Cayeros, p. 28.
<51> Kaplan, p. 6.
<52> Hass, Bender, and Diaz-Cayeros, p. 25. See also U.S.
Environmental Protection Agency, The Clean Water State Revolving
Fund; Financing Americaþs Environmental Infrastructure- A Report of
Progress, January 1995. EPA 832-R-95-001.
<53> Apogee Research, Inc., p. 17-18.
<54> Hass, Bender, and Diaz-Cayeros, p. 25.
<55> United States Environmental Protection Agency, Office of
Policy, Planning and Evaluation, U.S./Mexico Border Environmental
Report; Surface Water Quality, 1996, p. 10.
<56> Hass, Bender, and Diaz-Cayeros, p. 28.
<57> Hass, Bender, and Diaz-Cayeros, pp. 28-29.
<58> U.S./Mexico Aspen Global Forum, p. 22.
<59> Hass, Bender, and Diaz-Cayeros, pp. 20-21.
<60> Hagler Bailly Services, Inc., U.S. Water Wastewater Export
Plan (preliminary draft prepared for Office of Environmental
Technologies Exports, U.S. Department of Commerce, February 1997,
p. 4.
<61> Doug Cogan and David Field, "Maquiladoras' Pollution Problems
Will Require Major Investments to Solve," Corporate Social Issues
Reporter (Investor Responsibility Research Center),
October/November 1996, p. 18.
<62> Cogan and Field, p. 18.
<63> Cogan and Field, p. 18.
<64> Border XXI, III.2 "Water," p. 1. Web site
http://www.epa.gov/region09.cross_pr/usmex/index.htm. Accessed
3/19/97.