Busting the Bank

Monday, March 20, 2006 | The future is in question for a bank that’s a rare funding source for the public health issues – unclean water, poor air, renegade sewage – that have plagued the border region for decades.

The North American Development Bank, which has given $704 million to fund 90 cross-border health projects, including several in Tijuana and one in San Diego, is under review by the U.S. Treasury Department and Hacienda, its Mexican counterpart. Fearing it will be closed, many in the border’s congressional delegation have requested a meeting with Treasury Secretary John Snow.

“I was very unhappy with the way it was working,” said U.S. Rep. Bob Filner, D-Chula Vista, one of eight congressmen to petition Snow. “But mend it, don’t end it.”

The review comes as the bank has been trying to address criticisms of its management. More than $100 million in loan applications are pending before its board of directors, which hasn’t met in two years and has voted on projects only by e-mail.

The San Antonio-based bank was created 10 years ago to complement the North American Free Trade Agreement. This was the idea behind it: NAFTA would boost trade between the United States and Mexico. But increasing trade would exacerbate existing environmental problems along the border. More trucks would stir up more harmful dust. While economic growth would be stimulated, more residents would generate more sewage and garbage.

The bank was supposed to address those problems by paving dusty roads, expanding sewage treatment plants and building landfills – helping to improve health among border residents, who have the nation’s highest mortality, morbidity and infant mortality rates.

“In a developing country, where resources available for that sort of thing are very restricted, it’s really tough,” said Paul Ganster, director of the Institute for Regional Studies of the Californias at San Diego State University. “The relatively small loans have prevented the problem from getting worse. They’ve solved problems. But other problems have arisen, prompted by growth.”

The bank has funded cross-border health initiatives in the San Diego region, the majority in Tijuana. The Mexican city is coping with the influx of 80,000 to 90,000 new residents annually. The steady population increase fuels health problems with implications on both sides of the border.

In Tijuana, the population copes with conditions that triple its infant-mortality rate. Many homes lack basic plumbing. Some residents are forced to dump their waste in the streets. After a rainfall, the sewage that generates often sweeps across the border and into the Pacific Ocean.

The sewage frequently taints the surf in Imperial Beach, where water access was closed 83 days last year. To address it, the bank gave $22 million in loans and grants to expand an overwhelmed Tijuana sewage treatment plant in 2004. It also aided Tijuana projects that built 80 miles of sewer lines and 62 miles of paved streets. A $17 million grant helped fund a San Diego water reclamation plant that can recycle wastewater into water used by farmers and industries.

Closing the bank would jeopardize projects in Baja California that have a direct impact on Californians’ health, said Ricardo Martinez, senior policy advisor for border affairs at the State Water Resources Control Board.

But Martinez and others are critical of the bank. Its intentions may be good, they say, but it has been dragged down by cumbersome and ineffective policies. Martinez said the bank hasn’t prioritized projects well, noting that it hasn’t funded a California project in five years, even though the state has identified $152 million in border environmental needs.

Other criticisms exist. Critics note that the bank’s loans have been provided at market rates, hardly enticing to struggling communities that can find more attractive sources. And the bank has never been fully funded. The Mexican and U.S. governments have each contributed $153 million to the bank, falling well short of their $225 million commitment. The bank’s board of directors hasn’t met in two years, instead holding votes by e-mail.

“We don’t make the claim that this is an institution that shouldn’t be assessed,” said bank spokesman Juan Antonio Flores. “But we worry there’s a premature conclusion being reached in the two governments.”

Brookly McLaughlin, a U.S. Treasury spokeswoman, said no decisions have been made about the bank’s future. She would not comment on when the bank’s review started or which country’s government prompted it.

“We’ve been in discussions with our Mexican counterparts to assess the bank, the role of the bank, what its appropriate future is,” McLaughlin said. “It’s really taking a look to make sure resources are going to their best use – and that needs haven’t changed.”

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