DALLAS -- Few details on the financial structure of the North American Development Bank were hammered out before its creation last fall to secure needed votes in the U.S. Congress to pass the North American Free Trade Agreement.
But the intent of the binational bank promoted by Latino and environmental groups was clear: to fund environmental projects along the heavily polluted U.S.-Mexico border and to provide grants and assistance to communities that lose jobs from increased trade.
"The NAD bank will provide financing to meet special needs where other sources are not available," said Mozelle Thompson, deputy assistant secretary for government financial policy. "There is a great need on the Mexican side of the border ... but I anticipate there will be some needs on the U.S. side of the border."
Raul Ojeda-Hinojosa, a professor at the University of California at Los Angeles and a leading proponent of the bank, agreed. "It would fill in where private capital may not be available in poorer regions and help those areas take advantage of gains in trade," he said.
The NAD bank would be funded by $225 million each from Mexico and the United States. The seed money could be leveraged to provide up to $3 billion in capital for loans, credit guarantees, and credit enhancements.
The loans are expected to be particularly beneficial to Mexican communities because no tax-exempt bond financing is available, whereas many U.S. communities could continue to use such bonds because interest costs could be less, investment banking and government sources said.
"Mexico does not have a public finance system similar to the United States,'" Thompson said.
Under the program, a new Border Environmental Cooperation Commission in Juarez, Mexico, will recommend environmental projects for financing by the NAD bank, whose headquarters will be in San Antonio.