The U.S./Mexico border infrastructure finance conference spotlights strategies to attract private capital - Special NAFTA Issue

Business America, Oct 18, 1993 by Jay L. Camillo

New light was shed this summer on strategies to attract private finance for U.S./Mexico border infrastructure projects. On July 15-16, 1993, in San Antonio, Tex., the U.S. Department of Commerce and the Mexican Secretariat of Social Development convened a group of 500 leading U.S. and Mexican project developers, private-sector financiers, and government representatives for the U.S.-Mexico Border Infrastructure Finance Conference. Projects in the environment, transportation, independent power production, and housing sectors were analyzed at the conference. The conference made significant progress in addressing border infrastructure needs, and signalled a new spirit of cooperation on border infrastructure issues between the public and private sectors of both nations.

The conference attracted senior U.S. and Mexican private sector financiers, project developers, and cabinet-level government officials. Keynote speeches by leading U.S. and Mexican officials were followed by working sessions that analyzed the four individual infrastructure sectors. U.S. cabinet-level participants included co-conveners of the conference Secretary of Commerce Ronald Brown and Mexican Secretary for Social Development Luis Donaldo Colosio; U.S. Secretary of Transportation Federico Pena; Mexican Secretary of Communications and Transportation Emilio Gamboa Patron; U.S. Secretary of Energy Hazel O'Leary; Mexican Secretary of Energy, Mines and Industry Emilio Lozoya Thalmann; U.S. Administrator Carol Browner of the Environmental Protection Agency; and U.S. Secretary of Housing and Urban Development Henry Cisneros.

"An Historic Event"--In recent years, infrastructure deficits along the U.S./Mexico border have been exacerbated by rapid regional economic and population growth. One result of this growth has been a major increase in the overland trade of goods and movement of people through several of the region's major sister cities. In response to this critical situation, several government programs have been implemented recently to spur border infrastructure development.

Simultaneously, the North American Free Trade Agreement has focused considerable media, environmental, and business community attention on the infrastructure deficit in this critically important area. It is within this context, and because of the opportunity for real progress that exists as a result of the new attention given to the border region, that the U.S. Department of Commerce decided to convene a conference of the senior-most private and public sector individuals responsible for the planning, construction, and financing of the most essential types of border infrastructure. Because of the timing of the conference, the level of individuals gathered, the truly interactive sessions that they attended, the binational nature of the conference, and the progress made at the event, Secretary Brown and others were moved to call the U.S./Mexico Border Infrastructure Finance Conference "an historic event."

The Current State of Border Infrastructure

The 2,000-mile-long border region consists of four U.S. and six Mexican states, and covers 240,000 square miles. Due to a combination of economic, social, and demographic factors, border population increased nearly 60 percent from 1980 to 1990, to approximately 10 million. The economic output of the region has also grown dramatically since the mid-1960s, when the government of Mexico established the maquiladora program to promote foreign investment in assembly facilities located along the border. There are currently more than 2,000 maquiladora facilities located near the 14 sister cities of the border region.

Infrastructure development in the border region, however, has lagged far behind population and economic growth due to several interrelated factors, including: insufficient tax bases in border communities stemming from low per capita income levels, regulatory impediments to private financing, rapid population growth in unincorporated areas, the high cost of capital resulting from low credit ratings, and the nature of the projects themselves, which frequently do not generate adequate revenue streams to attract private financing for construction, maintenance, and operation.

The U.S./Mexico Border Infrastructure Finance Conference became necessary because of the incompatibility of these two trends: population and economic growth, and deteriorating or non-existent infrastructure. The conference attacked the difficult issues that currently confront the border region and proposed solutions for border infrastructure financing dilemmas in the environmental, housing, transportation, and independent power generation sectors.

Challenges in Environmental Infrastructure

In few sectors has the strain on border infrastructure been more severe and more noticeable than in the area of environmental facilities. Increased trade, population growth, and economic output, coupled with poor or non-existent environmental infrastructure, have strained the environmental balance in the border area. New environmental infrastructure is needed most urgently in the water, sewage, and solid and hazardous waste disposal and recycling sectors. The bulk of these needs relate directly to residential and light commercial development as opposed to heavy industrial requirements.