Related topics

In 18 Months, Development Bank Has Approved No Loans

August 5, 1996

WASHINGTON (AP) _ A development bank created under the North American Free Trade Agreement has yet to loan any of the $1.5 billion available to improve conditions along the U.S.-Mexico border.

Congressional investigators, in a report to be released later this month, contend that the North American Development Bank’s policies may inhibit loans to poor communities on both sides of the 2,000-mile border.

Designed to respond to criticism that NAFTA would add new pressures on an already overburdened border infrastructure, NADBank has been capitalized with $224 million from the U.S. and Mexican governments. That money will be used to leverage private-sector funds, bringing the San Antonio-based bank’s available lending capital to $1.5 billion.

But in the 18 months since NADBank has been able to loan money, no projects have been approved.

At the same time, lack of basic water, waste water and sanitation services continues to affect the well-being of many of the 10 million Mexicans and Americans who live along the border, the General Accounting Office says in its report.

``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,″ GAO said.

NADBank officials and its supporters argue that it’s far more important for them to take the time necessary to approve viable projects than to rush out loans.

``We just don’t think that enough time has been given to determine whether or not they are going to have any success,″ said Albert Jacquez, chief of staff to Rep. Esteban Torres, the California Democrat who pushed for NADBank’s creation. ``I certainly think the jury is still out.″

But GAO, in a report requested by NAFTA skeptic Rep. John Dingell, D-Mich., questions whether NADBank’s structure is suited to make loans for water, waste water, pollution abatement and other infrastructure projects.

The problems are threefold, GAO suggests:

_NADBank’s requirement that loans must be made at or above market rates, making other, cheaper sources of financing more attractive.

_The small, unincorporated subdivisions on both sides of the border, known as ``colonias,″ most in need of NADBank help don’t have the resources or know-how to deal with government red tape.

_Mexican communities are barred under the Mexican constitution from borrowing directly from foreign lenders, meaning that NADBank loans must be made through Mexico’s Treasury.

``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,″ GAO said.

NADBank officials will not be rushed by the ``perception problem″ that they aren’t loaning money fast enough, said the bank’s deputy managing director, Victor Miramontes. ``We are not going to lose sight of the long-term need to be good stewards of these funds.″

While NADBank must lend at prime rates or above, Miramontes said bank officials will help applicants obtain a blend of government grants to go along with the loans. Four loans are on the verge of approval, he added.

The lack of loans proves NADBank wasn’t created for improvement of border living conditions, one NAFTA critic said.

``I think that NADBank was designed more for political cover than to help the desperately poor communities along the border,″ said Lori Wallach, head of Public Citizen’s Global Trade Watch. ``If it is to have any good effect, it’s going to need to change a bunch of its policies.″

Update hourly