International Environment: Environmental Infrastructure Needs in the
U.S.-Mexican Border Region Remain Unmet (Letter Report, 07/22/96,
GAO/RCED-96-179).

GAO provided information on the U.S.-Mexican border region's unmet
environmental infrastructure needs, focusing on the: (1) financial and
institutional challenges facing the United States and Mexico; and (2)
how the Environmental Protection Agency (EPA) identifies and prioritizes
funding for environmental problems along the U.S.-Mexican border.

GAO found that: (1) many environmental infrastructure needs remain unmet
on both sides of the border; (2) these needs are particularly acute on
the Mexican side of the border, where the basic infrastructure is ill
equipped to handle sewage collection, wastewater treatment, and solid
waste disposal; (3) some Mexican communities need to expand the capacity
of their infrastructure to meet ever-increasing population demands and
industrial growth; (4) the Mexican border region has the capacity to
treat 34 percent of its wastewater; (5) the border communities in Texas
have the capacity to meet their solid waste disposal needs for at least
10 years; (6) EPA has spent approximately $520 million to help address
pollution problems along the U.S.-Mexican border, but it has not
developed agencywide criteria to ensure that its resources target the
region's highest-priority needs; (7) communities on both sides of the
border lack experience in planning public works projects, as well as the
financial capacity to fund these projects; (8) the North American
Development Bank provides financing for environmental infrastructure
projects by securing equity, grants, and other sources of funding on a
project-by-project basis; and (9) the Border XXI Program provides
information on how to improve environmental conditions along the
U.S.-Mexican border, develop environmental indicators, expand public
participation, and address environmental health concerns.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-96-179
     TITLE:  International Environment: Environmental Infrastructure 
             Needs in the U.S.-Mexican Border Region Remain Unmet
      DATE:  07/22/96
   SUBJECT:  Water quality
             Wastewater treatment
             Industrial wastes
             Prioritizing
             Sewage treatment
             Water pollution control
             Environmental policies
             International cooperation
             Hazardous substances
             Waste disposal
IDENTIFIER:  NAFTA
             North American Free Trade Agreement
             Mexico
             EPA Border XXI Program
             Texas
             
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Cover
================================================================ COVER


Report to the Ranking Minority Member, Committee on Commerce, House
of Representatives

July 1996

INTERNATIONAL ENVIRONMENT -
ENVIRONMENTAL INFRASTRUCTURE NEEDS
IN THE U.S.-MEXICAN BORDER REGION
REMAIN UNMET

GAO/RCED-96-179

International Environment

(160302)


Abbreviations
=============================================================== ABBREV

  BECC -
  EPA -
  NAFTA -
  GAO -
  NADBank -

Letter
=============================================================== LETTER


B-272087

July 22, 1996

The Honorable John D.  Dingell
Ranking Minority Member
Committee on Commerce
House of Representatives

Dear Mr.  Dingell: 

Communities on both sides of the nearly 2,000-mile U.S.-Mexican
border are confronting numerous environmental problems that pose
serious risks to human health and the environment.  These problems,
which have worsened as the border region's economy, industries, and
population have rapidly expanded over the last two decades, stem from
the wide gap between the increasing domestic and industrial demand
for and availability of environmental infrastructure,\1 including
systems for drinking water, wastewater collection and treatment, and
solid waste disposal.  Despite efforts to narrow this gap, many of
the border region's environmental infrastructure needs remain unmet,
and providing them is estimated to cost nearly $8 billion over the
next 10 years. 

Recognizing the need to address water and air pollution and other
environmental problems on their shared border (particularly because
of the region's rapid drive toward industrialization), the United
States and Mexico have established an extensive framework of
environmental cooperation that dates back to the late-1970s.  More
recently, in 1993 the United States and Mexico signed a supplemental
agreement to the North American Free Trade Agreement (NAFTA) to
strengthen existing cooperation and provide funding for long-standing
environmental problems along the U.S.-Mexican border.  As part of
this supplemental agreement, the United States and Mexico established
the North American Development Bank (NADBank),\2 and each country
committed to providing up to $3 billion in loans and loan guarantees
over the next decade through this new financial institution.  The
NADBank will finance border environmental infrastructure projects,
with priorities in the areas of drinking water, wastewater treatment,
and municipal solid waste.  The agreement also establishes the Border
Environment Cooperation Commission (BECC) to certify for NADBank
financing those infrastructure projects that meet the BECC's
technical, financial, environmental, and other criteria.  Both
organizations have only recently begun operations because
capitalization of the NADBank and appropriations for the BECC did not
begin until fiscal year 1995. 

In response to your concerns about the efforts of both countries to
address border environmental problems under the framework of NAFTA's
supplemental agreement on environmental cooperation, this report
provides information on (1) the U.S.-Mexican border region's current
and projected unmet needs for environmental infrastructure, (2) the
financial and institutional challenges each country faces in
addressing present and future environmental infrastructure needs, and
(3) the way in which the Environmental Protection Agency (EPA) has
identified and prioritized funding for environmental problems along
the U.S.-Mexican border. 


--------------------
\1 Environmental infrastructure--as used in this report--refers to
the infrastructure designed to protect human health and the
environment along the U.S.-Mexican border by preventing and/or
reducing the pollution of air, water, and soil. 

\2 By agreement, each country will capitalize the NADBank with equal
contributions of $225 million of paid-in capital (for a total of $450
million) and $1.275 billion in callable capital (for a total of $2.55
billion) over 4 years.  Paid-in capital is the funding provided
directly to the Bank.  Callable capital is a commitment by the United
States and Mexico to provide additional funds in the case of a
failure by the NADBank to meet financial obligations on its own
bonds.  The Bank's capital is used to finance infrastructure projects
certified by the BECC (90 percent) and separate domestic community
adjustment and investment programs (10 percent).  By pledging equal
shares of paid-in and callable capital stock, the U.S.  and Mexican
Treasuries provide a financial commitment that allows the NADBank to
have a high credit rating and to raise capital in international
financial markets. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Government officials at the federal, state, and local levels in the
United States and Mexico generally agree that on the Mexican side of
the border, the basic infrastructure to connect outlying communities
to the systems for collecting municipal sewage, treating wastewater,
and disposing of solid waste is either insufficient to meet domestic
and industrial demand or, in some cases, nonexistent.  This problem
is more severe in large Mexican communities.  For the most part, U.S. 
border communities have an adequate basic infrastructure to provide
drinking water, treat wastewater, and dispose of solid and hazardous
waste for their residents.  Most environmental needs on the U.S. 
side relate to colonias\3 or to upgrading and expanding the capacity
of the communities' existing infrastructure. 

Communities on both sides of the U.S.-Mexican border face various
financial and institutional challenges to constructing or improving
their environmental infrastructure.  Mexican states and communities
are constrained by their heavy dependence on their federal government
for financing and by their limited authority to raise capital through
local and state taxes and user fees from environmental services. 
Mexican communities also have limited experience in planning,
developing, and managing public works projects.  U.S.  colonias lack
the financial and institutional standing to obtain needed capital
because they are unincorporated communities subject to jurisdictional
disputes between counties, cities, and providers of environmental
services, such as corporations that supply water to rural areas. 
Although the NADBank offers financing for some of the border region's
environmental infrastructure needs, it is unclear whether poorer
communities on either side of the border will be able to afford these
loans unless they are combined with grants or with low-interest loans
from other sources. 

Since 1991, EPA has spent approximately $520 million to help meet
U.S.  obligations with Mexico to address pollution problems along the
border.  Of this amount, EPA spent approximately $441 million
earmarked by the Congress for various projects and programs related
to the wastewater infrastructure and about $79 million at its
discretion for such border-related, binational environmental
activities as training, technical assistance, and data collection. 
EPA has generally allocated its appropriated funds for these
activities on the basis of consultation with binational workgroups
established under the 1983 La Paz Agreement,\4 the agency's program
and regional offices, state and local governments, and
nongovernmental organizations.  Although EPA believes that these
consultations, combined with its general knowledge of the border
region's environmental needs, provide a sound basis to make funding
decisions, EPA has neither comprehensively assessed the region's
environmental infrastructure needs nor developed a set of agencywide
criteria to ensure that its resources target the highest-priority
needs.  In addition, many of the projects (such as coordinating
information exchanges) funded at EPA's discretion are activities with
general objectives that are not clearly linked to measurable
environmental indicators.  In June 1996, EPA released the draft
Border XXI Program that details the plans of the agency and other key
U.S.  and Mexican federal entities for improving environmental
conditions in the border region.  This program improves upon EPA's
past efforts by including plans to organize environmental
information, develop environmental indicators, expand public
participation, and address environmental health concerns. 


--------------------
\3 Although there is no generally agreed-upon definition, the term
"colonia" generally refers to a rural, unincorporated subdivision in
the United States along the Mexican border in which one or more of
the following conditions exist:  substandard housing, inadequate
roads and drainage, and substandard or no water and sewer facilities. 
Available data, although limited, indicate that residents of colonias
are mostly Mexican-American; many work as seasonal farm laborers and
have incomes below the poverty level.  See Rural Development: 
Problems and Progress of Colonia Subdivisions Near Mexico Border
(GAO/RCED-91-37, Nov.  5, 1990). 

\4 This agreement and its several annexes commits the United States
and Mexico to cooperatively address environmental issues in the
border region. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The United States and Mexico share a nearly 2,000-mile border that
stretches from the Pacific Ocean to the Gulf of Mexico.  Although
more than half of this boundary is delineated by the Rio Grande,
communities on both sides of the border are affected by the region's
air quality as well as such common natural resources as groundwater,
aquifers, rivers, and watersheds.  For example, several communities
in and bordering Texas depend on the Rio Grande for drinking water,
domestic and industrial uses, and discharging wastewater.  The cities
of San Diego and Tijuana use the Pacific coastal waters for
recreation, fishing, and wastewater discharge.  Because of the
transboundary character of the border region's ecosystem and the need
to address pollution problems binationally, the United States and
Mexico signed the 1983 La Paz Agreement, which defines the border
region for purposes of environmental cooperation as the area within
100 kilometers (62 miles) of either side of their international
boundary. 

In the last two decades, border communities have experienced
significant population growth.  Between 1980 and 1996, the total
population of border communities has grown from over 4 million to
almost 10 million people.  Most of the population is concentrated in
14 pairs of neighboring cities that are distributed across four U.S. 
and six Mexican states.  (See fig.  1.) Almost one-third of the
population in the border region lives in the San Diego/Tijuana
metropolitan area, while another third is distributed among the
following four large metropolitan areas along the Rio Grande in
Texas:  El Paso/Ciudad Juarez, Laredo/Nuevo Laredo, McAllen/Reynosa,
and Brownsville/Matamoros.  Most of the remaining population in the
border region is scattered among the other nine pairs of neighboring
cities. 

   Figure 1:  Map of U.S.-Mexican
   Border Region

   (See figure in printed
   edition.)

The rapid growth in this region is generally attributed to the
potential of northern Mexican communities to provide economic
opportunities that cannot be found in Mexico's interior because of
adverse economic conditions.  Northern border communities also offer
potential access to the U.S.  job market.  The availability of jobs
with maquiladoras--companies located in Mexico's northern border
region that use imported materials to produce finished goods for
export--has been a key factor in attracting Mexican workers to
migrate to that border.\5 Many of these migrants tend to cluster in
and around suburban areas where housing is affordable but basic
environmental services (such as trash collection, sewage connections,
and a potable water supply) are limited or not available. 

In developing binational solutions to the border region's
environmental problems, policymakers in both countries face unique
challenges because of the transboundary nature of the border
environment, differing approaches to addressing problems in public
policy, and a substantial lack of financial and technical resources. 
To address these problems, the United States and Mexico have
established several mechanisms; in 1993, both governments signed a
supplemental agreement to NAFTA to establish the BECC and the
NADBank, which were created to complement existing funding to improve
the border region's environmental infrastructure and to strengthen
cooperation on addressing the region's environmental problems.  The
BECC's purpose is to certify environmental infrastructure
projects--primarily for drinking water, wastewater treatment, and
municipal solid waste--for subsequent financing by the NADBank in the
form of loans and loan guarantees at market interest rates with
flexible repayment terms.  The agreement encourages the private
sector to invest in projects that are operated and maintained through
user fees paid by polluters and the border communities benefiting
from these projects.  Because of the low income levels of border
communities, both countries have recognized that the ongoing
availability of grant funds and low-interest loans from both sides of
the border that could be combined with NADBank funds was essential to
make environmental infrastructure projects financially viable. 

The BECC and the NADBank complement an existing binational framework
of environmental cooperation dating back to the late-1970s.  As
border communities grappled with an array of pollution problems
linked to the rapid population and industrial expansion at that time,
the International Boundary and Water Commission\6 developed
recommendations for addressing sanitation issues in the border
region.  The Commission now plans, constructs, and operates several
wastewater treatment plants and projects on both sides of the border. 
In 1983, the La Paz Agreement, signed by the presidents of the United
States and Mexico, established binational workgroups to address
various problems with air, soil, and water quality as well as
hazardous waste in the border region.  In 1990, both governments
agreed to implement action plans to bolster efforts undertaken under
the La Paz Agreement to respond to various media-specific pollution
problems, which appeared to have worsened with the region's rapid
population and economic growth. 


--------------------
\5 The Mexican government initiated the maquiladora program in 1965
to attract labor-intensive industries to Mexico.  Mexican law allows
maquiladoras to bring materials into Mexico without paying import
duties, provided they use these materials to make goods for export
and ship any hazardous waste generated during production to the
country from which they obtained their source materials.  See
Hazardous Waste:  Management of Maquiladoras' Waste Hampered by Lack
of Information (GAO/RCED-92-102, Feb.  27, 1992). 

\6 The Commission, in its current form, was established as a result
of a 1944 treaty to apportion water resources shared by the United
States and Mexico.  It consists of U.S.  and Mexican sections, each
headed by a commissioner appointed by his or her country.  The
Commission decides how to apply a treaty provision or settle a
boundary dispute in the form of Minutes, which become binding
obligations of both governments. 


   MANY INFRASTRUCTURE NEEDS TO
   PROTECT THE BORDER REGION'S
   ENVIRONMENT REMAIN UNMET
------------------------------------------------------------ Letter :3

Although the United States and Mexico have expanded efforts in recent
years to address environmental problems in the border region, many
environmental infrastructure needs remain unmet and continue to pose
serious threats to human health and the environment on both sides of
the border.  These unmet needs are particularly acute on the Mexican
side of the border, where the basic infrastructure is generally
insufficient and sometimes nonexistent for connecting outlying
communities to services for municipal sewage collection, wastewater
treatment, and solid waste disposal.  Most U.S.  border communities
have an adequate basic infrastructure to provide drinking water,
wastewater treatment, and solid and hazardous waste disposal.  The
colonias, however, have many unmet environmental infrastructure
needs, and some other communities need to expand or upgrade the
capacity of their existing infrastructure to meet the ever-increasing
demand from population and industrial growth. 


      WATER POLLUTION PROBLEMS
---------------------------------------------------------- Letter :3.1

EPA believes that insufficient infrastructure on the Mexican side,
coupled with rapid population and economic growth, has contributed
significantly to severe water pollution problems in the border region
on both sides of the border and poses significant threats to human
health and the environment.  According to Mexico's National Water
Commission, the government agency responsible for national water
policy, the Mexican border region has the capacity to treat only
about 34 percent of the wastewater it generates, and most treatment
plants are also underfinanced and poorly maintained and operated. 
For example, the municipal sewage connections of Matamoros and Ciudad
Juarez reach only about 56 percent and 84 percent of their residents,
respectively, and both cities lack wastewater treatment facilities. 

According to EPA, other sister cities experience similar problems
with water pollution that is mostly caused by inadequate wastewater
treatment capacity and problems with sewage collection.  The sister
cities of Mexicali and Calexico have contributed to severe pollution
of the New River, which flows from Mexicali and drains into the
Salton Sea in California.  The domestic and industrial waste
generated by Mexicali's population of nearly 700,000 and its more
than 200 industrial facilities exceeds the capacity of that city's
two wastewater treatment plants.  As a result, raw and inadequately
treated wastewater is routinely discharged into the New River.  In
Imperial County, California, agricultural runoff and irrigation
return flows also pollute the New River. 


      SOLID WASTE DISPOSAL
      PROBLEMS
---------------------------------------------------------- Letter :3.2

Several border communities, particularly in Mexico, lack the capacity
to collect and dispose of the domestic and industrial solid wastes
they generate.  In such cities as Matamoros and Reynosa, municipal
garbage collection trucks are in poor condition and too few in number
to meet the needs.  Both cities also have problems with their solid
waste disposal facilities.  According to the city official
responsible for environmental control, because the entrance to the
municipal solid waste disposal facility for Matamoros is generally
unguarded, the site is vulnerable to illegal disposal of hazardous
and/or dangerous industrial wastes that threaten the quality of
groundwater.  Furthermore, several families live at or near the site
and rummage through its waste in search of items that can be used or
sold.  About 1 mile from the facility's entrance, waste that is
incinerated in the open produces a thick, dark cloud of smoke that
impairs visibility and the area's air quality.  In addition, an open
canal carrying the city's untreated sewage passes through the site. 
This official told us that the overall conditions at the Matamoros
municipal solid waste disposal facility threaten the health of the
area's residents and the environment.  (See fig.  2.)

   Figure 2:  Conditions at the
   Matamoros Municipal Solid Waste
   Disposal Facility

   (See figure in printed
   edition.)

Reynosa also suffers from an inadequate capacity for solid waste
collection and disposal.  While the city has one municipal dump, it
also has 17 large illegal dumps and hundreds of vacant lots used as
dumps.  According to the Mayor of Reynosa, the inadequacy of the
municipality's domestic waste collection service has prompted the
emergence of approximately 700 illegal trash collectors who use
horse-drawn wagons and usually dispose of trash illegally, including
dumping it into the Rio Grande. 

Most communities on the U.S.  side have an adequate capacity for
solid waste collection and disposal.  According to officials from the
Texas Natural Resource Conservation Commission, most border
communities in Texas have adequate capacity to meet their solid waste
disposal needs for at least the next 10 years.  However, these
officials cautioned that this capacity may be reduced as stricter
enforcement curbs illegal dumping and solid waste collection service
is extended to colonias, where it has often been inconsistent and
inadequate.  In addition, as Mexico increases its enforcement of
solid waste laws, the return of additional maquiladora waste to the
United States will reduce the years of landfill capacity that are
currently projected. 


      PROGRESS IN RESPONDING TO
      SOME BORDER ENVIRONMENTAL
      INFRASTRUCTURE NEEDS
---------------------------------------------------------- Letter :3.3

Several communities on both sides of the border have made progress in
responding to some of their most severe environmental problems. 
Prior to the International Boundary and Water Commission's decision
in 1990 to construct an international treatment plant for Tijuana's
wastewater, the uncontrolled flows of untreated sewage crossing the
international boundary reached a peak of 13 million gallons per day. 
As a result of improved sewage collection in Tijuana, the
uncontrolled flow has been reduced to between 1 million and 2 million
gallons per day.  Furthermore, a sewage treatment facility in Nuevo
Laredo is nearing completion and undergoing testing and will soon
begin treating the city's domestic and industrial wastewater, which
currently drains into the Rio Grande untreated, thereby endangering
human health and the environment on both sides of the border.  Ciudad
Juarez plans to construct wastewater treatment plants and has
submitted proposals to the BECC for certification.  To reduce
pollution of the New River, the U.S.  Congress has appropriated funds
for wastewater infrastructure improvements in Mexicali.  These
improvements include planning and designing facilities and such
short-term projects as "quick fixes" to upgrade aging and overwhelmed
sewage collection and treatment systems.  To address solid waste
problems, the municipality of Nuevo Laredo granted a concession to a
private sector investor for the city's solid waste collection and
disposal systems.  Furthermore, the community opened a new solid
waste landfill (with a guarded entrance) in 1993 and started
patrolling illegal dump sites throughout the city.  According to the
Mayor of Reynosa, the municipal government has similar plans to grant
a solid waste concession to private investors.  In the meantime, the
Ecological Commission of Reynosa, a nonprofit citizens' group, has
organized trash collection drives and has been educating horse-drawn
trash collectors about environmentally sound waste disposal
practices. 


   BORDER COMMUNITIES HAVE A
   LIMITED FINANCIAL AND
   ADMINISTRATIVE CAPACITY TO
   FINANCE NEEDED INFRASTRUCTURE
   PROJECTS
------------------------------------------------------------ Letter :4

Mexican border communities and U.S.  colonias face the most immediate
and basic environmental infrastructure needs in the border region,
primarily because of financial and institutional obstacles.  In
Mexico, these obstacles center on the communities' lack of financial
autonomy from the federal and state governments.  For example, the
Mexican Constitution prohibits its states and municipalities from
incurring financial obligations in foreign currencies and with
foreign creditors.  U.S.  colonias are similarly dependent upon
financial assistance from the federal and state governments as well
as local government entities for this assistance to meet their
environmental infrastructure needs.  Communities on both sides of the
border often lack the experience in planning, constructing, and
operating public works projects as well as the financial and
administrative ability to raise capital and to repay debt.\7

To address these obstacles, the NADBank--in coordination with the
BECC and responsible U.S.  and Mexican government agencies (such as
EPA) and border communities--plans to assemble innovative financing
packages to make infrastructure projects financially viable and
self-supporting. 


--------------------
\7 Although Mexico's National Water Commission has developed master
plans for all its priority projects to assist Mexican communities in
the border region with their infrastructure needs, Commission
officials told us that these plans need to be updated to reflect
current economic conditions. 


      BORDER COMMUNITIES RELY
      HEAVILY ON FEDERAL RESOURCES
      FOR PROJECT FINANCING AND
      ADMINISTRATION
---------------------------------------------------------- Letter :4.1

Both Mexican communities and U.S.  colonias face financial and
institutional obstacles to obtaining funds for environmental
infrastructure projects.  To finance these projects, Mexican states
and communities rely heavily on the revenues they receive under a
revenue-sharing system supported by a federal tax.  These revenues
may be used either for direct financing or as leverage for loans from
domestic commercial or development banks.\8

Mexican states generally have the power to decide the share that
communities will receive, either by laws that have established
allocation formulas or legislative decree.  Communities in states
with allocation formulas have reliable revenue streams, which provide
the best guarantee that loans to them will be repaid in a timely
manner.  These communities tend to use their share of the tax as
collateral for loans provided by commercial and federal government
banks.  If a municipal borrower defaults on a loan, creditors can
inform the Mexican Treasury (the agency that administers the tax),
which has the authority to make the loan payment from the revenue
share of the delinquent municipality.  However, the revenue available
to most communities is uncertain because it is dependent upon
allocations made annually by legislative decree.  Such uncertainty
deters these communities from investing in infrastructure
development. 

For many environmental infrastructure projects, communities turn to
Mexico's National Bank of Public Works and Services, known as
BANOBRAS, as a major source of credit.  BANOBRAS lends to states and
communities in Mexican pesos at a few points above the Mexican
Treasury rate, which currently stands at about 26 percent.  BANOBRAS
levies additional interest rates to reduce the risk of losses from
currency devaluations, which have occurred repeatedly in the last
decade.\9 BANOBRAS also administers loans from the World Bank, which
in 1994 extended a $368 million line of credit to support
environmental infrastructure projects under Mexico's Northern Border
Environment Project.\10 BANOBRAS relends these funds to border
communities in Mexican pesos and at higher interest rates to (1)
construct solid waste, hazardous waste, and urban transportation
infrastructure projects and (2) improve the ability of states and
communities to administer environmental programs.  According to
officials of BANOBRAS and border communities, because these
communities often cannot afford to borrow at the high interest rates
BANOBRAS sets, to the extent possible, they use loans from commercial
banks that offer lower rates.  However, the lack of investors'
confidence in the ability of these communities to repay debt limits
their access to commercial loans and makes competing with other
borrowers difficult. 

U.S.  colonias face financial and institutional obstacles similar to
those of their neighboring communities in Mexico.  Because colonias
are unincorporated settlements, they lack the basic financial and
institutional mechanisms available to U.S.  cities with operating
governments and tax bases.  To expand their revenue base from
property taxes and fees for basic public services, some U.S.  cities
have expressed interest in incorporating nearby colonias.  However,
ongoing jurisdictional disputes about service areas among counties,
cities, and corporations that supply water to rural areas have left
many colonias without an environmental infrastructure to meet their
basic needs.  This situation is compounded by the fact that border
counties in Texas and New Mexico, which are usually responsible for
providing basic services for areas outside a city's jurisdiction,
have a limited ability, in comparison to cities, to provide the
needed environmental infrastructure and services because
traditionally they have not provided these services.  As a result,
these border counties often lack the necessary technical, financial,
and personnel resources to assist colonias with meeting their
infrastructure needs. 


--------------------
\8 Both the U.S.  and Mexican governments also have committed to
providing grant funding to assist with environmental infrastructure
projects in the border region, as discussed later. 

\9 Mexico's Financial Crisis:  Origins, Awareness, Assistance, and
Initial Efforts to Recover (GAO/GGD-96-56, Feb.  26, 1996). 

\10 According to a World Bank official, this line of credit was
reduced to about $208 million in May 1996 at the request of the
Mexican government.  This reduction was partially due to the
devaluation of the peso and the high interest rates BANOBRAS charges
to use these funds. 


      MEXICAN STATES AND
      COMMUNITIES LACK
      ADMINISTRATIVE EXPERIENCE
      AND THE ABILITY TO BORROW
      FUNDS
---------------------------------------------------------- Letter :4.2

The strong dependence of border communities on the Mexican federal
government has prevented them from gaining the experience necessary
to plan, develop, and manage public works projects.  As a part of
federal efforts to decentralize decision-making, states and
communities have only recently assumed responsibility for planning
and providing key public services to their residents.  Municipal
officials therefore have limited experience in conducting thorough
economic and fiscal analyses of proposed environmental infrastructure
projects.  According to a BANOBRAS official, although Mexican
communities have invested substantial effort to develop their
administrative capabilities, they have not yet reached the point at
which they can issue debt.  For example, recent plans to finance an
$8 million wastewater treatment plant in Ensenada, Baja California,
were delayed when the NADBank's and the State of Baja California's
analyses showed that the project needed technical revisions to meet
the Bank's loan requirements.  For example, the site selected for the
plant and the plant's capacity to treat wastewater were inadequate. 

The Mexican Constitution prohibits states and municipalities from
incurring financial obligations in foreign currencies and/or with
foreign creditors, which prevents them from raising capital outside
of Mexico's domestic market.  Consequently, according to BANOBRAS
officials, although a Mexican community can negotiate a line of
credit, it cannot borrow directly from the NADBank.  Instead,
Mexico's Treasury serves as the recipient of funds for borrowers and
then forwards those funds to BANOBRAS, which relends them to the
borrowers that had requested loans for specific projects.  NADBank
funds are loaned to Mexico's Treasury in dollars but are repaid by
Mexican borrowers through user fees in pesos, resulting in a foreign
exchange risk.  According to NADBank officials, the Mexican
government is funding a new "hedging mechanism" to provide insurance
against currency devaluations for both the NADBank and its Mexican
borrowers.  With this protection, the NADBank will be more willing to
loan funds to Mexican communities because the Bank will have greater
certainty that loans will be repaid. 


      THE NADBANK COULD HELP
      OVERCOME FINANCING BARRIERS
---------------------------------------------------------- Letter :4.3

To supplement existing funding for environmental infrastructure
projects (particularly for drinking water, wastewater treatment, and
municipal solid waste), the NADBank has begun to facilitate
developing and financing environmental infrastructure projects in the
U.S.-Mexican border region.\11 According to the NADBank's Chief
Operating Officer, the Bank plans to provide between $6 billion and
$9 billion for investing in border environmental infrastructure
projects over the next 10 years by using loans, loan guarantees, and
joint arrangements with other sources of financing.  The Bank also
intends to provide financial advisory services to border communities
that are developing projects, a key ingredient to making those
projects financially viable.  In providing these services, the Bank
intends to play a role similar to that of an investment bank by
"acting to secure needed equity, grants, and/or other sources of
financing from a variety of public and private sources on a
project-by-project basis."\12 According to officials from the NADBank
and the U.S.  Treasury, the Bank's investment-banking role is
intended to encourage border communities to depend less on
grant-financing (until recently the predominant form of funding) and
more on loans to be repaid through user fees or other dedicated
sources of revenue.  Providing loans to projects whose financial and
technical elements have received the BECC's certification is intended
to help border communities build the financial and technical
capability to operate and maintain environmental infrastructure
projects through their useful lifetimes. 

Because most U.S.  border cities and counties (with the exception of
colonias) are rated by Moody's\13 as investment grade, they have the
financial standing to qualify for market rate loans, such as those
offered by the NADBank.  However, it is unclear whether U.S.  border
cities and counties will turn to the NADBank for financial
assistance.  The Bank's credit guidelines stipulate that for direct
lending in U.S.  dollars, the bank will charge an interest rate of at
least 1 percent above U.S.  Treasury rates for securities having
comparable maturity dates.  U.S.  state and local officials told us
that U.S.  border communities have cheaper sources of capital for
infrastructure financing at their disposal, such as state revolving
funds\14 and tax-exempt municipal bonds.  However, NADBank officials
point out that the Bank will complement existing financing to help
communities that cannot meet their infrastructure needs solely
through existing financing arrangements.  For example, the NADBank is
reviewing a $25 million potable water treatment project the BECC has
certified for the City of Brawley, California.  Brawley has requested
the NADBank's assistance to develop a financing package to access
about $17 million in private sector financing, with the remaining
balance coming from state and federal grants ($3.85 million) and a
state loan ($5 million). 

Because Mexico lacks a mechanism similar to state revolving loans,
NADBank loans are an attractive alternative for Mexican communities
that are able to incur and repay debt, provided they do not have to
obtain those loans through BANOBRAS at a significantly higher
interest rate.  Most Mexican communities, however, have yet to
achieve the financial standing in capital markets to meet the
NADBank's high standards for creditworthiness.  According to BANOBRAS
officials, the Mexican federal government will likely continue to
play a significant role in providing financial backing to its border
communities.  This assistance will be provided either through
BANOBRAS or through financial guarantees provided by the Mexican
Treasury's federal tax and revenue-sharing system.  However, raising
capital in foreign markets is difficult because Mexico's current
economic situation puts its credit rating just below investment grade
for foreign currency.\15

The Mexican government, in conjunction with the NADBank, is seeking
to resolve some of the financial and administrative obstacles
challenging Mexican communities.  As described earlier, to protect
the NADBank's investors against potential losses from Mexican
currency devaluations, the Mexican government has created a hedging
mechanism for loans issued in dollars.  This mechanism is a form of
insurance for both the NADBank and its Mexican borrowers that will
provide short-term emergency capital to continue repaying loans,
thereby preventing defaults.\16 To complement existing funding from
the NADBank, the Mexican government has also created a revolving loan
fund administered by BANOBRAS to encourage private sector investment
in infrastructure projects that might not otherwise receive funding
due to their size, risk, and/or low return on investment. 

Because U.S.  colonias lack basic financial and administrative
capabilities, state environmental officials do not believe that
NADBank loans will be a practicable option for assisting them.  To
meet the special needs of colonias for water infrastructure
assistance, Texas and New Mexico have received about $186 million,
approximately 36 percent of all EPA's funding for border projects
over the last 5 years.  Even with this funding, most of their
residents have not benefited from environmental improvements,
primarily because the cost to connect to nearby systems is
prohibitive.  Federal and state environmental officials believe that
grant funds will continue indefinitely to be the primary funding
source for U.S.  colonias and similar Mexican communities.  To assist
with these needs, the United States and Mexico have agreed to provide
$700 million each in grant funds to border communities over 7 to 10
years (beginning in fiscal year 1995) to supplement the NADBank and
other funding sources.  The U.S.  share of these funds will be
provided through EPA, which plans to fulfill its commitment within
the next 6 years.  In addition, EPA and the NADBank have begun to
formalize their working relationship through meetings and
correspondence to improve the border communities' access to financing
for infrastructure projects.  The agency has also entered into a
formal agreement with the International Boundary and Water Commission
to provide financial and technical assistance to border communities
to meet the BECC's certification requirements and, in turn, qualify
for financing from the NADBank.  Under this agreement, EPA has begun
to make funding available for wastewater treatment facility planning
and is currently evaluating additional avenues for project
development.\17


--------------------
\11 The agreement establishing the NADBank also stipulates that 10
percent of the Bank's capital may be used for U.S.  and Mexican
community adjustment and investment programs that support NAFTA. 
According to a U.S.  Treasury Department official, this provision was
included to address economic and employment dislocations throughout
the United States and Mexico that may occur from increased trade. 

\12 Loan and Guaranty Policies and Operational Procedures for
Projects Certified by the Border Environment Cooperation Commission,
North American Development Bank, Dec.  18, 1995. 

\13 Moody's Investors Service provides global bond-rating services
that evaluate credit risks in the world's capital markets. 

\14 State revolving funds were established by the Water Quality Act
of 1987 as a primary source of financing for wastewater treatment
facilities and related purposes at the state level.  They provide
states with federal "seed money" in the form of grants to capitalize
their revolving funds.  The states use their revolving funds to make
loans to local governments, and, as loans are repaid, the funds are
replenished. 

\15 The devaluation of the peso in December 1994 precipitated a
crisis in Mexico's financial institutions and markets.  Despite
recent progress, interest rates continue to be high, the peso
continues to be volatile, the banking sector remains strained, and
economic growth has been weaker than predicted. 

\16 According to NADBank officials, this hedging mechanism--which is
operated by BANOBRAS--will only be available to the NADBank and/or
organizations working with the NADBank. 

\17 The Commission will serve as the project manager, and the work
will be done by consulting engineering firms. 


   EPA NEEDS TO FOCUS
   BORDER-RELATED ACTIVITIES ON
   THE REGION'S GREATEST NEEDS
------------------------------------------------------------ Letter :5

Between fiscal years 1991 and 1995, EPA invested approximately $520
million on border-related environmental activities in two general
categories--funds that the Congress had earmarked for water
infrastructure assistance ($441 million) and funds that were spent at
the agency's discretion ($79 million).  Those funds earmarked by the
Congress were channeled to (1) the International Boundary and Water
Commission, primarily to reduce wastewater flows from Mexico into the
United States and the pollution of surface water and groundwater
resources shared by the two nations and (2) Texas and New Mexico, to
provide water infrastructure assistance to colonias.  The remainder
of EPA's funding was spent at the agency's discretion and supported a
variety of media-specific activities outlined in the 1983 La Paz
Agreement as well as other priorities for the agency. 

EPA's discretionary expenditures for border-related activities were
spread across 11 program areas.  (See table 1.) Funding within each
program area was further divided across a wide range of projects,
such as training; technical assistance; data gathering on the types,
magnitudes, sources, and impacts of pollution; coordinating existing
data on the border region; and testing low-cost and/or less-polluting
technologies.  For example, the Compendium of EPA Binational and
Domestic U.S.-Mexico Activities (June 1995) and the listing of the
Border XXI Community Grants for fiscal year 1995 show that EPA
dispersed these funds to over 130 projects. 



                                Table 1
                
                 EPA's Funding of U.S.-Mexican Border-
                 Related Activities, Fiscal Years 1991
                              Through 1995

                         (Dollars in thousands)

Program                                    Funding level       Percent
----------------------------------------  --------------  ------------
International Activities\a                       $14,673            18
Water                                            1,248\b             2
Air and Radiation                                 12,094            15
Enforcement and Compliance Assurance               4,339             5
Research and Development                           5,404             7
Solid Waste and Emergency Response                10,316            13
Regional Operations and State and Local            1,464             2
 Relations
S.C.E.R.P.\c                                      10,000            13
Other border activities                         19,870\d            25
======================================================================
Total                                            $79,408           100
----------------------------------------------------------------------
\a Regions 6 and 9 receive a large portion of these funds for
specific projects. 

\b This amount reflects EPA's funding for border-related water
activities not channeled to the International Boundary and Water
Commission. 

\c The Southwest Center for Environmental Research and Policy is a
consortium of five U.S.  and four Mexican universities funded by the
U.S.  Congress.  However, these funds were not requested by EPA. 

\d This amount reflects EPA's border-related funding for fiscal years
1991 and 1992 that was not identified by program areas.  It also
includes funding for fiscal years 1991 through 1995 for
border-related activities for the Office of Prevention, Pesticides,
and Toxic Substances ($520,000) and the Office of Policy, Planning,
and Evaluation ($250,000). 

Source:  GAO's analysis of EPA's data. 

The expenditures shown in table 1 include a variety of media-specific
projects that EPA has funded on the basis of input from stakeholders
in the border region's environmental activities, including binational
workgroups, EPA's program and regional offices, state and local
governments, and nongovernmental organizations.  Some of the
activities receiving EPA's funding clearly target environmental needs
and provide details on how the information gathered will be used to
remediate a specific problem.  For example, one project is
establishing air-monitoring networks in Tijuana and Mexicali to
determine the sources, magnitude, and effects of air pollution.  EPA
plans to use the data collected from this effort to develop
cost-effective control strategies and to measure progress and
compliance. 

Nevertheless, many of the projects funded at EPA's discretion are
activities that do not include environmental indicators and specific
objectives that are clearly linked to measurable environmental
outcomes.  For example, several of the agency's binational activities
are driven by objectives that include facilitating the exchange of
information, improving peer relations, and reaching an understanding
between the United States and Mexico.  While regional agency
officials believe that many of these activities will improve
environmental conditions by increasing the ability of Mexican
communities and agencies to address pollution problems and by
developing basic information upon which to make funding decisions,
they also acknowledged that the benefits of these activities may not
be directly traceable to environmental improvements.  Activities with
general objectives that lack environmental indicators make it
difficult for EPA to link specific activities to measurable changes
in environmental conditions and to measure the effect of its funding
decisions on remediating the border region's most critical
environmental problems.  According to an EPA headquarters official,
the agency could have been more thorough in quantifying the effects
of its expenditures on improving conditions in the border region. 

EPA plans to initiate several efforts to link its future funding
decisions on projects for the border region to environmental goals. 
For example, EPA plans to play a central role in a newly established
binational workgroup that will inventory all existing environmental
information for the border region.  EPA also plans to focus its
funding on projects that have measurable environmental benefits.  In
addition, EPA plans to assess the border region's water supply and
wastewater infrastructure needs and has initiated a dialogue with the
NADBank to discuss cooperative funding arrangements for environmental
projects. 

In the absence of a comprehensive assessment of needs among all
environmental media and program areas, over the past 5 years EPA has
spent about $79 million at its discretion to address various
environmental problems (including activities to improve the quality
of air and safely dispose of hazardous waste).  While EPA officials
told us that the agency has not initiated any actions to prepare such
a comprehensive assessment, they said that it will likely assess
these needs within 5 years.  Timely action to establish priorities
based upon such an assessment is essential to EPA's selecting the
most critical projects to fund. 

According to a NADBank official, the Bank believes its success
depends on EPA's timely efforts to provide funds for environmental
infrastructure projects with the highest priority.  He noted that the
problems confronting the region greatly exceed the public and private
finances available to address them over the next several years and
that expenditures of limited funds should be directed to achieve the
maximum environmental benefits for the region.  He said that the Bank
views EPA's funding as critical to the Bank's development of
affordable financing packages for border communities and assistance
in building their technical, financial, and administrative capacity
to support infrastructure projects. 

EPA will continue its role in assisting border communities with their
environmental infrastructure needs under the new Border XXI Program
released in draft form in June 1996.\18

This program will build upon efforts taken under EPA's Integrated
Environmental Plan for the Mexican-U.S.  Border Area (First Stage,
1992-1994) to improve environmental conditions in the border region. 
The new program will attempt to overcome shortcomings identified with
that plan by expanding the new program's scope, increasing public
input into the decision-making process, integrating environmental
protection with natural resource management, and increasing attention
to environmental health concerns.  U.S.  and Mexican federal entities
responsible for environmental conditions in the border region will
work cooperatively through nine multiagency Border XXI Workgroups\19
to implement the new program. 

Among the objectives of the Border XXI Program will be to inventory
all environmental data for the border region and to establish
environmental indicators.  Inventorying all environmental data would
help ensure that EPA's limited funds for the border region are spent
on activities that address the most urgent needs first.  In addition,
a timely assessment of environmental data would help

  -- environmental stakeholders in the region target their funding
     requests,

  -- the NADBank consider funding requests from border communities,
     and

  -- the Congress earmark funds for the region's highest-priority
     needs. 

However, the program does not include specific plans to use the
inventory of environmental data to

  -- establish criteria within as well as across the nine Border XXI
     Workgroups,

  -- set priorities based upon the established criteria, and

  -- clearly link the activities chosen for funding to environmental
     indicators. 


--------------------
\18 U.S./Mexico Border XXI Program:  Draft Framework Document, EPA
(June 1996). 

\19 Six of these workgroups (Water, Air, Hazardous and Solid Waste,
Contingency Planning and Emergency Response, Cooperative Enforcement,
and Pollution Prevention) will continue and expand on the work of the
binational La Paz Workgroups that have been in existence for several
years.  Three new workgroups will be established--Environmental
Information Resources, Environmental Health, and Natural Resources. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

Although the United States and Mexico have made some progress in
improving the border region's environmental infrastructure, serious
pollution problems persist that pose an ongoing threat to the health
of residents and the environment.  The environmental infrastructure
needs of Mexican communities and U.S.  colonias are particularly
acute because of insufficient financial and technical resources. 
Limited access to affordable financing continues to prevent many of
these border communities from extending basic environmental
infrastructure services to residents.  To improve access by border
communities to needed infrastructure financing, EPA and the NADBank
have begun to formalize their working relationship through meetings
and correspondence.  Similarly, the International Boundary and Water
Commission and EPA have formally agreed to support the wastewater
infrastructure planning efforts of U.S.  and Mexican border
communities to help them meet the BECC's certification requirements
and enhance their eligibility for financing from the NADBank. 
Despite these efforts, it is not certain that this financing will be
affordable to communities on either side of the border. 

EPA's funding for the border region provides a critical resource for
U.S.  border communities that lack the necessary financial and
technical capacity to address their basic environmental
infrastructure needs.  The agency has been working to improve the
bases for making funding decisions on border-related activities
through several data-gathering, coordination, and other efforts.  EPA
plans to build on its ongoing border-related activities under the new
Border XXI Program.  This will include a central role for the agency
in inventorying all environmental information for the border region
and assessing this region's needs for water supply and wastewater
infrastructure.  However, the draft Border XXI Program does not
detail specific plans to use this inventory of environmental
information to sequentially do the following: 

  -- establish criteria within as well as across the nine binational
     workgroups,

  -- set priorities based upon these criteria within and across these
     groups, and

  -- link the priority activities it chooses to fund to measurable
     environmental outcomes. 

Such a systematic approach is needed to ensure that EPA's limited
funds target the region's most critical needs first. 


   RECOMMENDATIONS FOR THE
   ADMINISTRATOR OF EPA
------------------------------------------------------------ Letter :7

To ensure that EPA's funding for border-related activities addresses
the region's highest-priority environmental needs, we recommend that
the Administrator, EPA, work with key federal entities in the United
States and Mexico that are involved in developing and implementing
the U.S./Mexico Border XXI Program to ensure the program includes
specific plans to (1) use the inventory of all environmental data for
the border region to establish criteria within as well as across the
nine binational workgroups (taking into account the relative risks to
human health and the environment), (2) set priorities within and
across the binational workgroups according to the established
criteria, and (3) clearly link the priority activities chosen for
funding to environmental indicators. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :8

We provided copies of a draft of this report to the State Department
and EPA for their review and comment.  We met with officials of these
agencies who are responsible for environmental programs in the
U.S.-Mexican border region.  These officials included the Principal
Deputy Assistant Administrator for the Office of International
Activities, EPA; Chief of the Municipal Assistance Branch, Office of
Wastewater Management, EPA; the Environmental Officer and the Special
Assistant, International Boundary and Water Commission, both with the
Office of Mexican Affairs, State Department; and the Deputy Director,
International Finance and Development, State Department.  State
Department and EPA officials generally agreed with the information in
the report and provided technical and editorial comments that we have
incorporated into the report as appropriate.  However, EPA had more
extensive comments and wanted us to include some additional points. 
The principal comments are discussed below. 

EPA officials believe that the agency has made significant progress
in meeting its obligations under the La Paz Agreement.  This progress
has primarily been made through (1) establishing binational
workgroups and (2) setting joint binational priorities within these
groups through negotiations with their Mexican counterparts and with
input from key environmental stakeholders in the border region. 
Although we agree that EPA has made progress, as noted in our report,
the agency did not use its available data on media and programs to
comprehensively assess the border region's environmental needs before
negotiating joint binational priorities with its Mexican
counterparts.  Such an assessment is needed to prioritize projects
within as well as across binational workgroups to (1) allow the
relative merits of competing projects to be ranked by decisionmakers
according to their urgency and (2) maximize the use of limited
funding to achieve the greatest environmental benefits. 

EPA officials also provided us with a copy of its U.S./Mexico Border
XXI Program:  Draft Framework Document after we had submitted our
draft report to them for comment.  This new program details the plans
of EPA and other key U.S.  and Mexican federal entities for the
border region and will build on current binational efforts.  The
draft program's objectives include plans to inventory all existing
environmental information on the border region and develop
environmental indicators to measure whether environmental policy is
addressing the most urgent environmental problems there.  The program
also states that each year the program's priorities will be weighed
against available funding.  This program is a good start towards
addressing shortcomings identified under EPA's Integrated
Environmental Plan for the Mexican-U.S.  Border Area (First Stage,
1992-1994) because it includes plans to organize environmental
information, expand public participation, and address environmental
health concerns.  However, the draft program does not clearly state
that it will sequentially do the following within as well as across
the nine binational workgroups:\20 use the inventory to establish
criteria, use these criteria to set priorities, and then use these
priorities to determine which activities are most urgent and merit
funding.  In addition, the draft program should link all funded
activities to environmental indicators.  Without a systematic
approach, EPA cannot prioritize projects within and across binational
workgroups to ensure that its limited funds are used to target the
highest-priority needs first.  In light of the new information EPA
provided, we have modified our recommendations to address the
U.S./Mexico Border XXI Program:  Draft Framework Document. 


--------------------
\20 Although the workgroups under the Border XXI Program will be
expanded to involve multiple agencies, according to the draft
program, EPA will play a central role in eight of the nine workgroups
and provide funding to support their activities. 


---------------------------------------------------------- Letter :8.1

To respond to this report's objectives, we met with officials from
EPA headquarters and regional offices as well as the departments of
the State and Treasury.  We also interviewed a wide range of other
U.S.  and Mexican officials from both governmental and
nongovernmental organizations.  In addition, we reviewed documents
provided by these officials as well as pertinent laws and
regulations.  We also traveled extensively in the U.S.-Mexican border
region.  Appendix I contains additional information on our scope and
methodology. 

As arranged with your office, unless you announce its contents
earlier, we plan no further distribution of this report until 30 days
after the date of this letter.  At that time, we will send copies to
the Administrator of EPA and the Secretary of State.  We will also
make copies available to others on request.  Please call me at (202)
512-6111 if you or your staff have any questions.  Major contributors
to this report are listed in appendix II. 

Sincerely yours,

Peter F.  Guerrero
Director, Environmental
 Protection Issues


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

Concerned about the efforts of the United States and Mexico to
address environmental infrastructure needs in the border region, the
Ranking Minority Member of the House Committee on Commerce asked us
to examine (1) the U.S.-Mexican border region's current and projected
unmet needs for environmental infrastructure, (2) the financial and
institutional challenges each country faces in addressing present and
future environmental infrastructure needs, and (3) the way in which
the Environmental Protection Agency (EPA) has identified and
prioritized funding for environmental problems along the U.S.-Mexican
border. 

We reviewed relevant documents and agreements between the United
States and Mexico, such as NAFTA's supplemental agreement on
environmental cooperation for the border region and the accompanying
legislation to implement it, the 1983 La Paz Agreement, the
Integrated Border Environmental Plan, and the International Boundary
and Water Commission's Minutes on sanitation issues in the region. 
To review the border region's environmental infrastructure needs and
the financial and institutional obstacles challenging its
communities, we reviewed documentation from EPA, the Office of U.S. 
Trade Representative, the Office of the Texas Governor, the
California Environmental Protection Agency, the Texas Natural
Resource Conservation Commission, and the Texas Water Development
Board, as well as nongovernmental organizations such as the U.S. 
Council of the Mexico-U.S.  Business Committee, the Sierra Club, the
Texas Center for Policy Studies, the Environmental Law Institute, and
the International City/County Management Association. 

We interviewed officials from EPA headquarters and Regions 6 and 9;
the EPA Representative to the U.S.  Embassy in Mexico City; the New
Mexico Environment Department; the Office of U.S.  Trade
Representative; the Treasury Department, the Office of International
Debt Policy; the State Department (primarily Consulate General Staff
in the border region); and the BECC, including members of the Board
of Directors; and the General Manager and Deputy Manager of the
NADBank.  We also interviewed representatives of nongovernmental
organizations on both sides of the border, such as the Sierra Club,
the Texas Center for Policy Studies, the Environmental Defense Fund,
the Border Ecology Project, the Environmental Health Coalition, the
Center for International Environmental Law, the Southwest Center for
Environmental Research and Policy, the Northern Border College, the
Ecological Commission of Reynosa, the Natural Resources Defense
Council, the Surfriders' Foundation, and the U.S.-Mexico Border
Progress Foundation, and the Mexican Embassy in Washington, D.C. 

In Mexico, we interviewed officials and reviewed documents from the
National Water Commission; the Ministry of Social Development; the
Ministry of Environment, Natural Resources, and Fisheries; the Office
of the Mexican Attorney General for Environmental Protection; the
Ministry of Commerce and Industrial Development; the Secretariat of
Foreign Relations; the National Bank of Public Works and Services
(BANOBRAS); and the World Bank. 

To complement our review of documents and information gathered from
interviews, we visited the sister cities of Brownsville/Matamoros,
McAllen/Reynosa, Laredo/Nuevo Laredo, El Paso/Ciudad Juarez,
Calexico/Mexicali, and San Diego/Tijuana to interview a wide range of
governmental and nongovernmental officials.  We chose these cities on
the basis of their relative size, the severity of their environmental
problems, and the level of investment in their environmental
infrastructure projects.  In Matamoros, we visited the municipal
solid waste disposal site and an industrial park.  In Nuevo Laredo
and San Diego, we toured wastewater treatment facilities managed by
the International Boundary and Water Commission.  We also visited
colonias in El Paso, Texas, and Sunland Park, New Mexico, to assess
the lack of basic environmental infrastructure. 

For our review of EPA's efforts to identify and prioritize border
environmental problems, we interviewed officials and analyzed
documents from EPA's Office of International Activities and Office of
Water, Regions 6 and 9, and EPA's San Diego and El Paso border
offices. 

We did not independently confirm the accuracy and validity of
technical data provided to us by various governmental and
nongovernmental organizations on both sides of the border.  We
performed our work from June 1995 through June 1996 in accordance
with generally accepted government auditing standards.  EPA and the
State Department reviewed a draft of this report, and we have
incorporated their comments where appropriate. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II

Edward Kratzer, Assistant Director
Jaime E.  Lizarraga, Senior Evaluator
Beverly L.  Norwood, Evaluator-in-Charge
Karen Keegan, Senior Attorney


*** End of document. ***