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NADBank Blues

Will border cleanup efforts be abandoned?

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Down in Nogales, Ariz., a single sewer plant serves as brick-and-mortar kidneys for both sides of the U.S.-Mexico line. On good days, this old plant copes with waste seeping along overworked pipes and into its odorous bowels. But on bad days, it can receive nearly double its daily, 17.3 million-gallon capacity.

When that happens, Nogales is awash in sewage. The stench wafts up manholes and backs into toilets.

It's likely this routine predicament would be tolerated nowhere else in America. But down here, it's been going on for years. And for years, Nogales officials have pleaded with federal officials for help.

Assistance finally arrived in December, with a $59.5 million grant to build a new plant. And that's when word arose that the North American Development Bank--the binational institution financing this new plant--was on the verge of collapse.

"At that point, all bets were off," says Hugh Holub, Nogales' special projects director. "We were moving into the final stages of issuing a contract for the design and building of (the new) treatment plant. So of course, if the bank was demolished before we get to that point, we'd be up a creek."

Robert Varady was also watching closely. He's deputy director of the UA's Udall Center for Studies in Public Policy and a member of the Good Neighbor Environmental Board, a federal committee advising the president and Congress on border environmental needs. "It looks as if the NADBank has been saved for now," he says. "But it came very close to being eliminated."

So what's behind the near-demise of a vital institution you've mostly likely never heard of? Some point to Mexican nationalism. But others blame the Bush administration's anti-environmental impulses. "Administration officials don't see it as a priority," says one border watcher, who requested a name not be used. "And they don't figure there are many votes along the border to worry about."

To many others, however, this obscure bank is key to improving the lives of some 8 million residents along the impoverished U.S.-Mexico border.

The NADBank was an outgrowth of the North American Free Trade Agreement, or NAFTA, enacted by Canada, the United States and Mexico in 1993. Headquartered in San Antonio, Texas, it was essentially created to quiet environmentalists and Latino activists, who feared the free-trade compact would further industrialize an already heavily polluted borderland. With $3 billion in lending capital--provided in equal shares by the United States and Mexico--the bank has since helped finance 90 projects, and another 59 are in the pipeline.

At the same time, NADBank funding also triggers U.S. Environmental Protection Agency grants. In total, it is responsible for $2.35 billion in regional improvements, ranging from clean-water systems and dust-reducing pavement projects to crucial waste facilities in Arizona communities such as Bisbee, Yuma and Nogales.

Still, the NADBank has been no stranger to criticism. Environmentalists condemn its secretive operating style, while others have chastised the bank's inability to offer lower-interest loans to desperately poor communities.

Congress liberalized the finance rate structure in 2001, allowing the bank more loan flexibility. But the criticism has nonetheless grown among U.S. Treasury Department officials, who target the bank's administrative costs totaling about $80 million over the past dozen years.

There are also NADBank critics south of the line. According to Hugh Holub, they include officials at Mexico's treasury department, Hacienda. "We were getting info that the attack (on NADBank) was coming from Hacienda," Holub says. "The EPA reaches through the NADBank to (provide grants). So you have the EPA setting all these terms and conditions for spending that money. The Mexicans didn't particularly like having conditions imposed on them--conditions that were impinging on their sovereignty."

Attempts to contact Hacienda officials for comment were unsuccessful.

Nancy Woo is associate director of the EPA's Region 9 Water Division. She denies that the agency is heavy-handed in Mexico. "I don't think that's an issue," she says from her San Francisco office. For example, "We have a very good working relationship with (Mexico's) federal water authority."

This conflict hit a fever pitch last year, when word leaked out that NADBank's future was under discussion between U.S. Treasury and Hacienda negotiators. Those murky bull sessions reportedly included disbanding the NADBank altogether.

Such claims are denied by Brookly McLaughlin, a Treasury Department spokeswoman. "There has probably been some confusion," she says. "There were all these reports that we were talking about closing the bank, and we never said that. We had no intention to close the bank."

Not true, says NADBank spokesman Juan Antonio Flores. "We learned in late January that there were discussions among some representatives at the U.S. Treasury and Hacienda," he says. "They were looking at the role of the bank and what its future may be. Among options being considered was possible closure of the bank."

Still, Treasury Department officials have been more honest about their ongoing complaints. "Our concern is with the functioning of the bank," says McLaughlin. "We think the administrative costs are pretty high."

But that's disingenuous, says Stephen Niemeyer, a policy analyst at the Texas Commission on Environmental Quality. He says the initial rules governing NADBank "were really poorly written, and they really handicapped its functions. You have no one to blame for that but the U.S. Treasury. They were involved in the drafting of it."

Likewise for criticism of the NADBank's lending practices. "What's amazing is that the NADBank is criticized for having poor lending rates, but it's really not their problem," says Niemeyer. "The people who are able to make the changes--the U.S. Treasury Department--have elected not to do it."

Regardless, the bank's latest reprieve is due primarily to pressure from border-area leaders. In March, for example, eight congressional members, including Rep. Raul Grijalva, dispatched a letter to Treasury Secretary John Snow expressing "strong support" for the NADBank. A similar missive was drafted by the Good Neighbor Environmental Board, says Robert Varady. "The very fact that you have all these border congressmen and other institutions screaming that it shouldn't be done away with, that indicates something."

Meanwhile, back in Nogales, Hugh Holub is keeping his fingers crossed--and his nose pinched. "The money isn't in some account," he says. "It's just a commitment that's on somebody's electronic books. And the big contract which creates an irrevocable momentum for this project won't occur until July or August. Anything that torpedoes this between then and now puts us at risk."

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