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

The United States faces a serious housing problem with colonias, unregulated human settlements or subdivisions located in unincorporated areas of counties along the U.S.-Mexico border. These communities have substandard housing and no direct access to basic municipal services for water, drainage, and sewer. Some recent estimates indicate that on the U.S. side there is a need for approximately 31,000 homes, at a cost of at least $1.1 billion.

Affordability, Mortgage Lending, and Public-Private Contributions--Like several of the other infrastructure sections discussed above, the key to the successful construction and financing of housing infrastructure is affordability. In the United States, an extensive and sophisticated mortgage lending system has traditionally made housing affordable to the vast majority of the citizenry. In Mexico, however, the mortgage system is considerably less well-developed and sophisticated. Additionally, in the United States, the existence of a secondary market for the sale and purchase of existing mortgages provides liquidity, decreasing creditors' perceived risk of default by the mortgagee.

Conference attendees proposed the creation of a cross-border housing finance entity which would be capitalized by industries located in the border region, foundations, and all levels of government. Capital from this fund would be used to lend money on a long-term basis to new low-income homeowners.

Conference Conclusions

Two days of intensive panel sessions at the conference yielded impressive results and conclusions. New commitments were made. Senior-level developers, financiers, and regulators from both countries came together to interact in a productive environment. Consensus was reached on what the problem is and what needs to be done, and the individuals who convened the meeting committed to follow through to implement ideas, and eventually bring projects to fruition.

Some of the most important conclusions and commitments reached at the end of this intensive conference include a new understanding of the scope and size of the infrastructure needs of the border; consensus regarding the changing role of federal governments in infrastructure finance; acknowledgment that resolution of the interrelated issues of affordability, the assessment of users fees, and term structure are the keys to successful public-private cooperation in the financing of border infrastructure; agreement that international capital must be made available again to the border regions; and the realization that public-private cooperation on infrastructure development will be required for any progress to be made in the area of border infrastructure finance.

1. "Mexico: Public Services in Private Hands," Business Latin America, June 14, 1993, page 2.

2. Twin Plant News, April 1993, Maquiladora Scoreboard, pp.52.