[House Report 107-720]
[From the U.S. Government Publishing Office]



107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     107-720

======================================================================



 
  AUTHORIZING THE PRESIDENT OF THE UNITED STATES TO AGREE TO CERTAIN 
AMENDMENTS TO THE AGREEMENT BETWEEN THE GOVERNMENT OF THE UNITED STATES 
 OF AMERICA AND THE GOVERNMENT OF THE UNITED MEXICAN STATES CONCERNING 
THE ESTABLISHMENT OF A BORDER ENVIRONMENT COOPERATION COMMISSION AND A 
        NORTH AMERICAN DEVELOPMENT BANK, AND FOR OTHER PURPOSES

                                _______
                                

October 3, 2002.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Oxley, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 5400]

  The Committee on Financial Services, to whom was referred the 
bill (H.R. 5400) to authorize the President of the United 
States to agree to certain amendments to the Agreement between 
the Government of the United States of America and the 
Government of the United Mexican States concerning the 
establishment of a Border Environment Cooperation Commission 
and a North American Development Bank, and for other purposes, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     4
Background and Need for Legislation..............................     4
Hearings.........................................................     5
Committee Consideration..........................................     5
Committee Votes..................................................     5
Committee Oversight Findings.....................................     6
Performance Goals and Objectives.................................     6
New Budget Authority, Entitlement Authority, and Tax Expenditures     6
Committee Cost Estimate..........................................     6
Congressional Budget Office Estimate.............................     6
Federal Mandates Statement.......................................     6
Advisory Committee Statement.....................................     6
Constitutional Authority Statement...............................     7
Applicability to Legislative Branch..............................     7
Section-by-Section Analysis of the Legislation...................     7
Changes in Existing Law Made by the Bill, as Reported............     8
Minority Views...................................................    10

                               Amendment

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. AUTHORITY TO AGREE TO CERTAIN AMENDMENTS TO THE BORDER 
                    ENVIRONMENT COOPERATION AGREEMENT.

  (a) In General.--Part 2 of subtitle D of title V of Public Law 103-
182 (22 U.S.C. 290m-290m-3) is amended by adding at the end the 
following:

``SEC. 545. AUTHORITY TO AGREE TO CERTAIN AMENDMENTS TO THE BORDER 
                    ENVIRONMENT COOPERATION AGREEMENT.

  ``The President may agree to amendments to the Cooperation Agreement 
that--
          ``(1) enable the Bank to make grants and nonmarket rate loans 
        out of its paid-in capital resources with the approval of its 
        Board; and
          ``(2) amend the definition of `border region' to include the 
        area in the United States that is within 100 kilometers of the 
        international boundary between the United States and Mexico, 
        and the area in Mexico that is within 300 kilometers of the 
        international boundary between the United States and Mexico.''.
  (b) Clerical Amendment.--Section 1(b) of such public law is amended 
in the table of contents by inserting after the item relating to 
section 544 the following:

``Sec. 545. Authority to agree to certain amendments to the Border 
Environment Cooperation Agreement.''.

SEC. 2. ANNUAL REPORT.

  The Secretary of the Treasury shall submit annually to the Committee 
on Financial Services of the House of Representatives and the Committee 
on Foreign Relations of the Senate a written report on the North 
American Development Bank, which addresses the following issues:
          (1) The number and description of the projects that the North 
        American Development Bank has approved. The description shall 
        include the level of market-rate loans, non-market-rate loans, 
        and grants used in an approved project, and a description of 
        whether an approved project is located within 100 kilometers of 
        the international boundary between the United States and Mexico 
        or within 300 kilometers of the international boundary between 
        the United States and Mexico.
          (2) The number and description of the approved projects in 
        which money has been dispersed.
          (3) The number and description of the projects which have 
        been certified by the Border Environment Cooperation 
        Commission, but yet not financed by the North American 
        Development Bank, and the reasons that the projects have not 
        yet been financed.
          (4) The total of the paid-in capital, callable capital, and 
        retained earnings of the North American Development Bank, and 
        the uses of such amounts.
          (5) A description of any efforts and discussions between the 
        United States and Mexican governments to expand the type of 
        projects which the North American Development Bank finances 
        beyond environmental projects.
          (6) A description of any efforts and discussions between the 
        United States and Mexican governments to improve the 
        effectiveness of the North American Development Bank.
          (7) The number and description of projects authorized under 
        the Water Conservation Investment Fund of the North American 
        Development Bank.

SEC. 3. SENSE OF THE CONGRESS RELATING TO UNITED STATES SUPPORT FOR 
                    NADBANK PROJECTS WHICH FINANCE WATER CONSERVATION 
                    FOR TEXAS IRRIGATORS AND AGRICULTURAL PRODUCERS IN 
                    THE LOWER RIO GRANDE RIVER VALLEY.

  (a) Findings.--The Congress finds that--
          (1) Texas irrigators and agricultural producers are suffering 
        enormous hardships in the lower Rio Grande River valley because 
        of Mexico's failure to abide by the 1944 Water Treaty entered 
        into by the United States and Mexico;
          (2) over the last 10 years, Mexico has accumulated a 
        1,500,000-acre fee water debt to the United States which has 
        resulted in a very minimal and inadequate irrigation water 
        supply in Texas;
          (3) recent studies by Texas A&M University show that water 
        savings of 30 percent or more can be achieved by improvements 
        in irrigation system infrastructure such as canal lining and 
        metering;
          (4) on August 20, 2002, the Board of the North American 
        Development Bank agreed to the creation in the Bank of a Water 
        Conservation Investment Fund, as required by Minute 308 to the 
        1944 Water Treaty, which was an agreement signed by the United 
        States and Mexico on June 28, 2002; and
          (5) the Water Conservation Investment Fund of the North 
        American Development Bank stated that up to $80,000,000 would 
        be available for grant financing of water conservation 
        projects, which grant funds would be divided equally between 
        the United States and Mexico.
  (b) Sense of the Congress.--It is the sense of the Congress that--
          (1) water conservation projects are eligible for funding from 
        the North American Development Bank under the Agreement Between 
        the Government of the United States of America and the 
        Government of the United Mexican States Concerning the 
        Establishment of a Border Environment Cooperation Commission 
        and a North American Development Bank; and
          (2) the Board of the North American Development Bank should 
        support qualified water conservation projects which can assist 
        Texas irrigators and agricultural producers in the lower Rio 
        Grande River Valley.

SEC. 4. SENSE OF THE CONGRESS RELATING TO UNITED STATES SUPPORT FOR 
                    NADBANK PROJECTS WHICH FINANCE WATER CONSERVATION 
                    IN THE SOUTHERN CALIFORNIA AREA.

  It is the sense of the Congress that the Board of the North American 
Development Bank should support--
          (1) the development of qualified water conservation projects 
        in southern California and other eligible areas in the 4 United 
        States border States, including the conjunctive use and storage 
        of surface and ground water, delivery system conservation, the 
        re-regulation of reservoirs, improved irrigation practices, 
        wastewater reclamation, regional water management modeling, 
        operational and optimization studies to improve water 
        conservation, and cross-border water exchanges consistent with 
        treaties; and
          (2) new water supply research and projects along the Mexico 
        border in southern California and other eligible areas in the 4 
        United States border States to desalinate ocean seawater and 
        brackish surface and groundwater, and dispose of or manage the 
        brines resulting from desalination.

SEC. 5. SENSE OF THE CONGRESS RELATING TO UNITED STATES SUPPORT FOR 
                    NADBANK PROJECTS FOR WHICH FINANCE WATER 
                    CONSERVATION FOR IRRIGATORS AND AGRICULTURAL 
                    PRODUCERS IN THE SOUTHWEST UNITED STATES.

  (a) Findings.--The Congress finds as follows:
          (1) Irrigators and agricultural producers are suffering 
        enormous hardships in the southwest United States. The border 
        States of California, Arizona, New Mexico, and Texas are 
        suffering from one of the worst droughts in history. In 
        Arizona, this is the second driest period in recorded history 
        and the worst since 1904.
          (2) In spite of decades of water conservation in the 
        southwest United States, irrigated agriculture uses more than 
        60 percent of surface and ground water.
          (3) The most inadequate water supplies in the United States 
        are in the Southwest, including the lower Colorado River basin 
        and the Great Plains River basins south of the Platte River. In 
        these areas, 70 percent of the water taken from the stream is 
        not returned.
          (4) The amount of water being pumped out of groundwater 
        sources in many areas is greater than the amount being 
        replenished, thus depleting the groundwater supply.
          (5) On August 20, 2002, the Board of the North American 
        Development Bank agreed to the creation in the bank of a Water 
        Conservation Investment Fund.
          (6) The Water Conservation Investment Fund of the North 
        American Development Bank stated that up to $80,000,000 would 
        be available for grant financing of water conservation 
        projects, which grant funds would be divided equally between 
        the United States and Mexico.
  (b) Sense of the Congress.--It is the sense of the Congress that--
          (1) water conservation projects are eligible for funding from 
        the North American Development Bank under the Agreement Between 
        the Government of the United States of America and the 
        Government of the United Mexican States Concerning the 
        Establishment of a Border Environment Cooperation Commission 
        and a North American Development Bank;
          (2) the Board of the North American Development Bank should 
        support qualified water conservation projects that can assist 
        irrigators and agricultural producers; and
          (3) the Board of the North American Development Bank should 
        take into consideration the needs of all of the border states 
        before approving funding for water projects, and strive to fund 
        water conservation projects in each of the border states.

SEC. 6. ADDITIONAL SENSES OF THE CONGRESS.

  (a) It is the sense of the Congress that the Board of the North 
American Development Bank should support the financing of projects, on 
both sides of the international boundary between the United States and 
Mexico, which address coastal issues and the problem of pollution in 
both countries having an environmental impact along the Pacific Ocean 
and Gulf of Mexico shores of the United States and Mexico.
  (b) It is the sense of the Congress that the Board of the North 
American Development Bank should support the financing of projects, on 
both sides of the international boundary between the United States and 
Mexico, which address air pollution.

                          Purpose and Summary

    H.R. 5400 authorizes the President of the United States to 
make certain amendments to the Agreement between the Government 
of the United States of America and the Government of the 
United Mexican States concerning the Border Environment 
Cooperation Commission and the North American Development Bank.
    These institutions were created in 1992 through the North 
American Free Trade Agreement (NAFTA) to provide financing for 
environmental projects in the regions along the border of the 
United States and Mexico. This legislation will authorize an 
agreement reached between the United States and Mexico to 
permit these institutions to make below market rate loans and 
will extend the land area in which these institutions can 
finance projects.

                  Background and Need for Legislation

    The North American Development Bank (NAD Bank) is an 
international financial institution established and capitalized 
in equal parts by the United States and Mexico for the purpose 
of financing environmental infrastructure projects. It was 
created along with its sister institution, the Border 
Environment Cooperation Commission (BECC), in 1993 under NAFTA. 
When they were established, these institutions were to operate 
in a boundary area 100 miles on either side of the U.S. Mexico 
international border.
    In March of 2002, President Bush and Mexican President 
Vincente Fox met at the U.N. International Conference on 
Financing and Development in Monterrey Mexico. At this meeting 
the two leaders agreed that the NAD Bank and the BECC need to 
improve their operations. Currently the NAD Banks has a total 
paid-in capital of $450 million with a total lending capacity 
of nearly $3 billion. However since its inception, the NAD Bank 
has approved only $23.5 million and disbursed only $11 million 
in loans.
    Representatives from the U.S. and Mexico examined several 
proposals to improve the operation of the NAD Bank and the 
BECC. The two sides agreed that in order to increase the number 
of transactions in which these institutions participate, they 
should be permitted to make below market rate loans and grants 
from their paid-in capital. Additionally, the representatives 
agreed that the boundary area on the Mexican side of the border 
should be expanded from 100 kilometers to 300 kilometers.

                                Hearings

    On Thursday, May 2, 2002, the Subcommittee on International 
Monetary Policy and Trade held a hearing on the North American 
Development Bank. The Subcommittee received testimony from the 
following witnesses: Mr. Victor Miramontes of American City 
Vista, Texas; the Honorable Jose A. Aranda, Jr., the Mayor of 
Eagle Pass, Texas; the Honorable Ernesto Silva, the City 
Manager of Mercedes, Texas; and Mr. Don Gonzales of Estrada 
Hinojosa & Co., Inc.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
September 26, 2002 and ordered reported H.R. 5400, a bill to 
authorize the President of the United States to agree to 
certain amendments to the Agreement between the Government of 
the United States of America and the Government of the United 
Mexican States concerning the establishment of a Border 
Environment Cooperation Commission and a North American 
Development Bank, and for other purposes, by a voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. No 
record votes were taken with in conjunction with the 
consideration of this legislation. A motion by Mr. Bereuter to 
report the bill to the House with a favorable recommendation 
was agreed to by a voice vote.
    The following amendments were considered by the Committee:

          An amendment by Mr. Royce, No. 1, as modified by 
        unanimous consent, expressing the sense of Congress 
        that the Board of the North American Development Bank 
        should support the development of qualified water 
        projects and water supply and research projects in 
        Southern California and other eligible areas in the 
        four Border States, was agreed to by a voice vote.
          An amendment by Mr. Ose, No. 2, as modified by 
        unanimous consent, expressing the sense of Congress 
        that the Board of the North American Development Bank 
        should amend the definition of ``border region'' to 
        include the area in the United States that is within 
        300 kilometers of the international boundary between 
        the United States and Mexico, was not agreed to by a 
        voice vote.
          An amendment by Mr. Shadegg, No. 3, expressing the 
        sense of Congress with respect to United States support 
        for North American Development Bank projects which 
        finance water conservation for irrigators and 
        agricultural producers in the Southwest United States, 
        was agreed to by a voice vote.
          An amendment by Mr. Ose, No. 4, expressing the sense 
        of Congress that the North American Development Bank 
        should support the financing of projects that address 
        coastal issues and air pollution on both sides of the 
        international boundary between the United States and 
        Mexico, was agreed to by a voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held a hearing and made 
findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The changes made by this legislation will improve the 
performance of the NAD Bank, resulting in improved economic and 
environmental conditions along the southern border between the 
United States and Mexico.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that this 
legislation would result in no new budget authority, 
entitlement authority, or tax expenditures or revenues.

                        Committee Cost Estimate

    The the cost estimate prepared by the Director of the 
Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1974 was not available for the 
timely filing of this report. The Committee estimates that the 
provisions of this bill will result in no new costs to the U.S. 
Government.

                  Congressional Budget Office Estimate

    The the cost estimate prepared by the Director of the 
Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1974 was not available for the 
timely filing of this report. The Chairman of the Committee 
shall cause such estimate to be printed in the Congressional 
Record when it is available.

                       Federal Mandates Statement

    The estimate of Federal mandates prepared by the Director 
of the Congressional Budget Office pursuant to section 423 of 
the Unfunded Mandates Reform Act was not available for the 
timely filing of this report. The Chairman of the Committee 
shall cause such estimate to be printed in the Congressional 
Record when it is available.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional Authority of Congress to enact this legislation 
is provided by Article 1, section 8, clause 1 (relating to the 
general welfare of the United States) and clause 3 (relating to 
the power to regulate interstate and foreign commerce).

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Authority to agree to certain amendments to the Border 
        Environment Cooperation Agreement

    This section authorizes the President of the United States 
to make grants and non-market rate loans out of its paid in 
capital resources with approval of the board. This section 
further amends the definition of ``border region'' to include 
an area in the United States that is within 100 kilometers of 
the international boundary between the United States and Mexico 
and the area in Mexico that is within 300 kilometers of the 
international boundary between the United States and Mexico.

Section 2. Annual report

    This section requires the Secretary if the Treasury to 
submit to the Committee on Financial Services of the House of 
Representatives and the Committee on Foreign Relations of the 
Senate a written report on the performance of the North 
American Development Bank. Among other things this report will 
describe projects approved and funded as well as require 
Treasury to report on any negotiations with the Mexican 
government on expanding the range of projects financed as well 
as on improving the effectiveness of the institution.

Section 3. Sense of the Congress relating to United States support for 
        NADBank projects which finance water conservation for Texas 
        irrigators and agricultural producers in the lower Rio Grande 
        Valley

    This section expresses the sense of Congress that water 
conservation projects are eligible for funding from the NAD 
Bank and that the Board should support qualified water 
conservation projects which can assist irrigators and 
agricultural producers in Texas.

Section 4. Sense of the Congress relating to United States support for 
        NAD Bank Projects which finance water conservation in the 
        southern California area

    This section expresses the sense of Congress that the Board 
of the NAD Banks should support the development of qualified 
water projects in southern California, and other eligible areas 
in the 4 Border States.

Section 5. Sense of the Congress relating to United States support for 
        NADBank projects for which finance water conservation for 
        irrigators and agricultural producers in the southwest United 
        States

    This section expresses the sense of Congress that the Board 
of the North American Development Bank should support qualified 
water conservation projects that can assist irrigators and 
agricultural producers. Additionally, this section expresses 
the sense of the Congress that the Board should take into 
consideration the needs of all the Border States before 
approving funding water projects and should strive to fund 
water conservation projects in each of the Border States.

Section 6. Additional senses of the Congress

    This section expresses the sense of Congress that the Board 
of the NAD Bank should support projects that address coastal 
pollution issues and projects that address air pollution in 
both Mexico and the United States.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

         NORTH AMERICAN FREE TRADE AGREEMENT IMPLEMENTATION ACT


                          (Public Law 103-182)

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

  (a) * * *
  (b) Table of Contents.--
Sec. 1. Short title and table of contents.
     * * * * * * *

 TITLE V--NAFTA TRANSITIONAL ADJUSTMENT ASSISTANCE AND OTHER PROVISIONS

     * * * * * * *

       Subtitle D--Implementation of NAFTA Supplemental Agreements

     * * * * * * *

     Part 2--North American Development Bank and Related Provisions

Sec. 541. North American Development Bank.
     * * * * * * *
Sec. 545. Authority to agree to certain amendments to the Border 
          Environment Cooperation Agreement.

           *       *       *       *       *       *       *


TITLE V--NAFTA TRANSITIONAL ADJUSTMENT ASSISTANCE AND OTHER PROVISIONS

           *       *       *       *       *       *       *


Subtitle D--Implementation of NAFTA Supplemental Agreements

           *       *       *       *       *       *       *


PART 2--NORTH AMERICAN DEVELOPMENT BANK AND RELATED PROVISIONS

           *       *       *       *       *       *       *


SEC. 545. AUTHORITY TO AGREE TO CERTAIN AMENDMENTS TO THE BORDER 
                    ENVIRONMENT COOPERATION AGREEMENT.

  The President may agree to amendments to the Cooperation 
Agreement that--
          (1) enable the Bank to make grants and nonmarket rate 
        loans out of its paid-in capital resources with the 
        approval of its Board; and
          (2) amend the definition of ``border region'' to 
        include the area in the United States that is within 
        100 kilometers of the international boundary between 
        the United States and Mexico, and the area in Mexico 
        that is within 300 kilometers of the international 
        boundary between the United States and Mexico.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    The reporting provisions of H.R. 5400 reflect the 
seriousness with which this Committee takes its oversight of 
the U.S. Treasury's role in the operation of the North American 
Development Bank. NADBank fills a critical role as the only 
development bank specifically dedicated to the U.S./Mexican 
border region. Hundreds of very poor communities on both sides 
of the U.S./Mexico border are in desperate need of additional 
public finance opportunities. NADBank was specifically created 
to fill this need, and it is imperative that the U.S. Treasury 
act aggressively to ensure that the full potential of this 
institution is realized. This Committee will closely monitor 
Treasury's work in this area in the years ahead.

                                   John J. LaFalce.
                                   Charles A. Gonzalez.

                                
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