oversight

U.S.-Mexico Border: Issues and Challenges Confronting the United States and Mexico

Published by the Government Accountability Office on 1999-07-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                   United States General Accounting Office

GAO                Report to Congressional Requesters




    July1999       U. S.-MEXICO
                   BORDER

                   Issues and Challenges
                   Confronting the
                   United States and
                   Mexico




                    : :3!                      IGA O
                             Accountability * Integrity * Reliability

GAO/NSIAD-99-190
 -           GAO
         Accountabillty * Integrity * Reliabillty

United States General Accounting Office                                                                               National Security and
Washington, D.C. 20548                                                                                         International Affairs Division



                                                    B-283037

                                                    July 1, 1999

                                                    Congressional Requesters

                                                    Your June 24, 1998, letter to us expressed concern about the overall
                                                    well-being of the border region andwhat appeared to be limited progress in
                                                    addressing border issues. You also expressed concern that the border
                                                    region has had to shoulder a disproportionate share of the cost of
                                                    U.S.-Mexican economic integration. As agreed with your offices, this
                                                    interim report (1) outlines the nature of major border issues and (2)
                                                    provides information on U.S. and Mexican efforts underway to address
                                                    them. We are continuing our in-depth analyses of transportation and
                                                    environmental infrastructure issues affecting the border region. These
                                                    studies are aimed at identifying potential options to address these issues,
                                                    within the context of the overall border situation.


Results in Brief                                    The United States has pursued a strategy of developing closer relations
                                                    with Mexico, in recognition that a stable, democratic, and prosperous
                                                    Mexico is fundamental to U.S. interests. The border region, defined as the
                                                    area 100 kilometers (62 miles) deep on either side of the almost 2,000-mile
                                                    long U.S.-Mexico border,' is the bridge that binds the two countries. Thus,
                                                    the border is critical to U.S. objectives. However, the U.S. border region
                                                    has relatively high unemployment and poverty levels and faces a number of
                                                    development challenges. And, while growing integration has increased
                                                    trade between Mexico and the United States, it has also exacerbated some
                                                    long-standing border problems. At the same time, many U.S. efforts to
                                                    interdict illicit drugs and illegal immigration take place on the border. As a
                                                    result, there is a confluence of seemingly competing objectives at the
                                                    border that have important implications for the United States. (See app. I
                                                    for additional background on border perspectives.)

                                                    The major issues on the border include the following:

                                                        Drug enforcement: The 2,000-mile Mexican border is one of the main
                                                        battlegrounds of the national war on drugs, as law enforcement agencies


                                                    'As defined by the 1983 Agreement for the Protection and Improvement of the Environment in the
                                                    Border Area, known as the "La Paz Agreement."




                                                    Page 1                                           GAO/NSIAD-99-190      U.S.-Mexico Border Issues
B-283037




  try to stop the flow of illicit narcotics into America. An estimated 60
  percent of the cocaine and 29 percent of the heroin sold across America
  in 1998 are believed to have come through the U.S.-Mexico border.
  Further, the cross-border movement of illicit drugs is associated with a
  high level of violence, as well as corruption of U.S. and Mexican officials
  and money laundering. Efforts to stop the flow have put pressure on the
  transportation infrastructure and contributed to congestion at the
  border crossings. (See app. II.)
* Illegal immigration: The border is the primary checkpoint for illegal
  immigration. The U.S. Immigration and Naturalization Service
  apprehended 1.5-million undocumented immigrants on the southwest
  border in fiscal year 1998. Illegal immigration has been shown to be
  associated with increased criminal activities and to raise the cost of
  some federal, state, and local programs. Attempting to assure that only
  eligible individuals enter the United States places a burden on border
  infrastructure and affects the cross-border flow of goods and services.
  (See app. III.)
* Cross-border transportation: The border area provides the
  transportation infrastructure to facilitate trade between the United
  States and Mexico, which has more than doubled since the North
  American Free Trade Agreement went into effect in 1994. Nearly 4
  million trucks and 85 million passenger vehicles entered the United
  States from Mexico in fiscal year 1998. Processing the high volume of
  commercial and passenger traffic while at the same time interdicting
   contraband and illegal immigrants has contributed to congestion and air
  pollution and has placed pressure on the infrastructure of local
   communities along the border. (See app. IV.)
* Environmental infrastructure and public health: The need for
   environmental infrastructure 2 improvement is particularly acute on the
  Mexican side of the border, where many communities are without
  potable water and adequate sanitation. On the U.S. side, most border
   communities have environmental infrastructure, but some facilities
   require repair or expansion. Moreover, most locations are faced with a
   diminishing supply of clean and safe drinking water. Environmental
   infrastructure problems have contributed to public health concerns.
   Many diseases occur at rates much higher in the border region than in
   other areas of the United States and Mexico. Also, there is an increased


2
 Environmental infrastructure refers to the infrastructure designed to protect human health and the
environment along the U.S.-Mexico border by preventing and/or reducing the pollution of air, water, and
soil.




Page 2                                             GAO/NSIAD-99-190 U.S.-Mexico Border Issues
                  B-283037




                    concern about the growing number of multidrug-resistant tuberculosis
                    cases in the border region. (See app. V.)
                  * Economic development: Although the U.S. border region has
                    experienced some recent economic growth, it still has relatively high
                    unemployment and poverty levels. A number of initiatives are
                    underway to address economic development issues. Projections of high
                    population growth and a change in the rules governing the Mexican
                    maquiladora industry could potentially affect the existing economic
                    development challenges. 3 (See app. VI.)

                  These problems are being addressed by a number of Mexican and U.S.
                  federal, state, and local agencies that are responsible for specific aspects of
                  each problem. In light of the transnational nature of the problems, various
                  binational institutions, programs, and initiatives have also been created,
                  such as the Border Environment Cooperation Commission, the High-Level
                  Contact Group on Narcotics Control, and the New Border Vision. While
                  such binational mechanisms have been able to make some improvements
                  in certain areas, they have not been able to close the gap between what is
                  needed and what exists. The limits on progress may be due in part to the
                  differing levels of development and dissimilar governmental structures of
                  the two countries. In recognition of the special economic development
                  needs of the U.S. border community, the President on May 25, 1999,
                  announced the Southwest Border Economic Development Initiative, which
                  is designed to coordinate federal and local economic development efforts
                  to raise the living standards and overall economic profile of the border
                  region on a sustained basis.

                  The total requirements and their associated costs for addressing the border
                  issues described above are unknown, and there remains no single,
                  binational plan to address border problems. As we continue our in-depth
                  case study analyses of transportation and environment issues, we plan to
                  identify potential strategies to overcome the institutional and
                  programmatic challenges that impede improved conditions on the border.



Agency Comments   We provided a draft of this report to officials from the following agencies
                  that had activities discussed in this report: the Departments of Agriculture,


                  3
                   The maquiladora program allows duty-free imports into Mexico of materials and components from
                  foreign suppliers. These processed materials are assembled into finished products that must then be
                  reexported from Mexico unless special approval is given to sell them in the Mexican market.




                  Page 3                                            GAO/NSIAD-99-190      U.S.-Mexico Border Issues
              B-283037




              Health and Human Services, State, Transportation, and the Treasury; the
              Environmental Protection Agency (EPA); the Irnmmigration and
              Naturalization Service (INS); the U.S. Customs Service; and the Drug
              Enforcement Administration.

              All agencies provided material to update key pieces of information, as well
              as some technical changes that we incorporated where appropriate.
              Treasury and EPA officials commented that the report did not provide
              sufficient detail about some of the activities underway and
              accomplishments made in addressing the border issues. We intended this
              report to be a broad overview of the major border issues and what is being
              done to address them, rather than a detailed examination of each specific
              effort. We plan to provide greater detail in our separate reports on the
              transportation and environmental infrastructure issues.

              We also discussed the draft report with officials representing Mexico's
              Secretariat of Foreign Relations. Their primary concern was that the draft
              did not give sufficient description of the nature of the drug-trafficking
              problem, noting that U.S. demand for drugs is a factor. They said that the
              report should highlight to a greater extent some of the recent counterdrug
              initiatives they have undertaken. They also emphasized the importance of
              the New Border Vision, as a binational commitment to work for sustainable
              economic and social development along the border. They said that this
              effort will more effectively coordinate the multiple mechanisms already
              existing at the federal, state, and local levels. Where appropriate, we have
              added more detail in response to these comments.



Scope and     To obtain information on the major issues on the U.S.-Mexico border, we
              conducted an extensive literature search and relied heavily on a number of
Methodology   issued GAO reports and government studies. We also reviewed documents
              and interviewed officials from the relevant federal, state, and local agencies
              and private sector organizations. In addition, we visited Mexico City,
              where we interviewed U.S. embassy and Mexican government officials. We
              also obtained and analyzed information from our ongoing case studies of
              transportation and environmental infrastructure issues at key sister cities
              along the border.

              This report is intended to provide a broad overview of the major issues on
              the border and their implications. Therefore, it may not include all of the
              programs and initiatives that may be underway to address specific




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B-283037




problems at the border. Appendix VII contains additional information on
our scope and methodology.


We are sending copies of this report to appropriate congressional
committees and to the Honorable Dan Glickman, Secretary of Agriculture;
the Honorable William M. Daley, Secretary of Commerce; the Honorable
Donna Shalala, Secretary of Health and Human Services; the Honorable
Andrew M. Cuomo, Secretary of Housing and Urban Development; the
Honorable Madeleine Albright, Secretary of State; the Honorable Rodney
Slater, Secretary of Transportation; the Honorable Robert E. Rubin,
Secretary of the Treasury; the Honorable Thomas A. Constantine,
Administrator of the Drug Enforcement Administration; the Honorable
Carol M. Browner, Administrator of the Environmental Protection Agency;
the Honorable Doris Meissner, Commissioner of the Immigration and
Naturalization Service; and the Honorable Raymond W.Kelly,
Commissioner of the U.S. Customs Service. We will also make copies
available to other interested parties upon request.

Please contact me at (202) 512-4128 if you or your staff have any questions
concerning this report. Other GAO contacts and staff acknowledgements
are listed in appendix VIII.




Benjamin F Nelson, Director
International Relations and Trade Issues




Page 5                               GAO/NSIAD-99-190   U.S.-Mexico Border Issues
B-283037




List of Congressional Requesters

The Honorable Henry Bonilla
The Honorable Bob Filner
The Honorable Ruben E. Hinojosa
The Honorable Solomon P. Ortiz
The Honorable Silvestre Reyes
The Honorable Ciro D. Rodriguez
House of Representatives




Page 6                             GAO/NSIAD-99-190   U.S.-Mexico Border Issues
Page 7   GAO/NSIAD-99-190 U.S.-Mexico Border Issues
Contents



Letter                                                                    1
Appendix I                                                               1o
The U.S.-Mexico
Border in Perspective
Appendix II                                                              20
Drug Enforcement
Appendix III                                                             25
Illegal Immigration
Appendix IV                                                              29
Cross-Border
Transportation
Appendix V                                                               35
Environmental
Infrastructure and
Public Health
Appendix VI                                                             45
Current and Emerging
Challenges to
Economic
Development in the
Border Region




                        Page 8   GAO/NSIAD-99-190 U.S.-Mexico Border Issues
                         Contents




Appendix VII                                                                                            49
Objectives, Scope, and
Methodology

Appendix VIII                                                                                           51
GAO Contacts and
Staff
Acknowledgments

Table                    Table I.1: Selected Maquiladora Industry Statistics, by City,
                           March 1999                                                                   13

Figures                  Figure I.1: U.S.-Mexico Border Region and 14 Sister Cities                     11
                         Figure I.2: Mexican Maquiladora Plant                                          14
                         Figure 1.3: A Colonia in Douglas, Arizona                                      15
                         Figure 1.4: South Bay International Wastewater Treatment Plant                 18
                         Figure II.1: Truck X-Ray                                                       24
                         Figure III.1: U.S.-Mexico Border at San Ysidro, California, and
                           Tijuana, Mexico                                                              27
                         Figure IV.1: Commercial Traffic in Laredo, Texas                               30
                         Figure V.1: Agricultural Runoff Near Where the New River Enters
                           the Salton Sea                                                               37




                         Abbreviations

                         BECC        Border Environment Cooperation Commission
                         DEA         Drug Enforcement Administration
                         EPA         Environmental Protection Agency
                         INS         Immigration and Naturalization Service
                         NADBank     North American Development Bank
                         NAFTA       North American Free Trade Agreement



                         Page 9                                 GAO/NSIAD-99-190   U.S.-Mexico Border Issues
Appendix I

The U.S.-Mexico Border in Perspective


                  The border between the United States and Mexico extends for almost 2,000
                  miles, from the Gulf of Mexico in the east to the Pacific Ocean in the west.
                  The border region, as defined by the La Paz Agreement of 1983,' is 100
                  kilometers (62 miles) deep on either side of the border. As can be seen in
                  the map (fig. I.1), there are four U.S. states and six Mexican states along the
                  border. In Texas, which comprises roughly half of the border, the border is
                  defined by the Rio Grande River. California, Arizona, and New Mexico
                  have land border crossings. In all, there are 45 border crossings, 2 with
                  estimates of around 278 million to 351 million persons legally crossing the
                  border from Mexico into the United States in fiscal year 1998. 3




              'The 1983 Agreement for the Protection and Improvement of the Environment in the Border Area,
              commonly referred to as the "La Paz Agreement."
              2
               According to the State Department This number includes two bridges that are currently under
              construction.
              3
               These numbers are based on the differing estimating techniques of the U.S. Customs Service and the
              Immigration and Naturalization Service, respectively, and include both vehicle and pedestrian traffic.




              Page 10                                            GAO/NSIAD-99-190       U.S.-Mexico Border Issues
                                           Appendix I
                                           The U.S.-Mexico Border in Perspective




Figure 1.1: U.S.-Mexico Border Region and 14 Sister Cities




           San Dilegion
                  live
                   commute                 Further, many peoplex            have
                                                                           on one members
                                                                                  side of the  both sides
                                                                                            onborder and of the border.
                                                                                                                   daily to
         ua Mex call      nuls




                                                                                                      Zagoz MA




                                           sister cities often constitute binational and bicultural "single" communities.

                                           There or
                                           work       14 sister
                                                 areschool      orBorder
                                                            on the twin
                                                                    other  side.on the
                                                                        citiateds
                                                                          Industrializaaccounting                          92
                                                                                                             foster job growthund



Border Population                          The border regiorZs population has changed dramatically since 1965 when
                                            Mexico initiated the Border Industrialization Program to foster job growth
                                                          thregion by sponsoring a maquiladora, or export assembly,
                                            in its northern




                                            Page 11                                   GAO/NSIAD-99-190 U.S.-Mexico Border Issues
                  Appendix I
                  The U.S.-Mexico Border in Perspective




                  industry. 4 As more jobs were created, more Mexican workers moved to
                  border cities, which experienced significant population growth. For
                  example, the population of Ciudad Juarez, Mexico, grew from 650,000 in
                   1980 to an estimate of over 1.1 million by 1999. TUuana, Mexico, grew from
                  428,000 in 1980 to about 989,000 in 1995. Its twin city across the border,
                  San Diego, went from 875,530 in 1980 to over 1.1 million by 1994. In 1997,
                  the Environmental Protection Agency (EPA) estimated that the population
                  of the U.S.-Mexico border region was greater than 10.5 million people, with
                  about 6.2 million people in the United States and about 4.3 million in
                  Mexico. The population on both sides has grown far faster than the
                  population in either country as a whole. The population on the U.S. side of
                  the border is increasing at an annual rate of 2.7 percent, compared to a total
                  U.S. growth rate of 0.95 percent. The population on the Mexican side of the
                  border is growing at an annual rate of 3 percent, compared to a total
                  Mexican population growth rate of 1.8 percent. Current population
                  projections forecast a doubling of the border population over the next 20
                  years.



The Maquiladora   As of March 1999, the Mexican government statistical agency reported a
Industry          total of about 3,200 maquiladora plants throughout Mexico, with total
                  employment of 1,090,000. Mexico's border region had a reported 1,751
                  maquiladora plants with 651,580 workers, according to the statistical
                  agency. The border states of Chihuahua, Baja California Norte, and
                  Tamaulipas employed the most maquiladora workers in Mexico, together
                  accounting for about 61 percent of maquiladora employment. The top
                  locations for border maquiladoras included the cities of Ciudad JuArez and
                  Tijuana. In March 1999, the number of workers employed in maquiladora
                  plants in these two cities reached nearly 370,400 workers, or approximately
                  34 percent; of total Mexican maquiladora employment.5 Table I.1 shows the
                  number of plants and employees in the major border cities.




                  4
                   The maquiladora program allows duty-free imports into Mexico of materials and components from
                  foreign suppliers. These processed materials are assembled into finished products that must then be
                  reexported from Mexico unless special approval is given to sell them in the Mexican market.
                  'For a detailed discussion of the maquiladora industry in historical perspective, see Lucinda Vargas,
                  Business Frontiers. Issue 4 (Dallas, Tx: Federal Reserve Bank of Dallas, El Paso Branch, 1998).




                  Page 12                                             GAO/NSIAD-99-190 U.S.-Mexico Border Issues
Appendix I
The U.S.-Mexico Border in Perspective




Table 1.1: Selected Maquiladora Industry Statistics, by City, March 1999

                                                                Number of        Number of
City, state                                                   maquiladoras       employees
Tecate, Baja California Norte                                             123        11,730
Mexicali, Baja California Norte                                           179        50,368
Tijuana, Baja California Norte                                            731       153,453
Nogales, Sonora                                                            85        33,644
Ciudad Juarez, Chihuahua                                                  254       216,945
Piedras Negras, Coahuila                                                   44        15,687
Ciudad Acuna, Coahuila                                                     57        33,426
Nuevo Laredo, Tamaulipas                                                   54        21,533
Matamoros, Tamaulipas                                                     118        56,734
Ciudad Reynosa, Tamaulipas                                                106        58,060
Total                                                                    1,751      651,580
Source: Mexican National Institute for Statistics, Geography, and Information.

In 1994, the North American Free Trade Agreement (NAFTA) established
new rules that affected the maquiladora program. For example, by 2001,
Mexico will restrict the duty preferences available to maquiladoras for
non-NAFrA-originating raw materials used in the manufacture or assembly
of finished products. In addition, changes brought about by NAFTA and
Mexican law will virtually eliminate all restrictions on foreign investment in
the manufacturing sector, making it unnecessary to establish a maquiladora
facility to assemble in Mexico. It is too early to predict what the effects of
the changes in the maquiladora law will be for the border region. (See app.
VI for details.) Figure 1.2 illustrates a maquiladora plant in Tijuana, Mexico,
near the Otay Mesa crossing.




Page 13                                           GAO/NSIAD-99-190 U.S.-Mexico Border Issues
                         Appendix I
                         The U.S.-Mexico Border in Perspective




                         Figure 1.2: Mexican Maquiladora Plant




Poverty on the Border   Relatively high levels of poverty exist in the border region. Many of the
                        poorest counties in the United States are found there, especially in Texas.
                        There are also low levels of educational attainment, a relatively young
                        population, and a high percentage of new immigrants. Using Census data,
                        we calculated that about 24 percent6 of the population living in U.S. border
                        counties in 1996 lived in poverty,7 compared with a national poverty rate of
                        nearly 14 percent in this same year. In Texas alone, the population living at
                        or below the poverty line is 35 percent, based on 1990 Census data. Income
                        distribution also varies widely along the border. For example, according to
                        Census data, about 16 percent of residents in San Diego County, California,
                        were below the poverty line, as compared to about 52 percent in Starr
                        County, Texas, in 1996. Three of the 10 poorest counties in the United


                        6
                         Poverty rate estimates are our calculations based on Census data The Census data has a 90-percent
                        confidence interval.
                        7
                         The Census Bureau updates poverty thresholds each year for use in calculating all official poverty
                        population figures. Thresholds are estimated by size of family and age of members. For example, in
                        1996, the poverty threshold for a single person aged 65 or older was $7,525, while that of a family of four
                        with two children under 18 was $15,911.




                        Page 14                                             GAO/NSIAD-99-190        U.S.-Mexico Border Issues
Appendix I
The U.S.-Mexico Border in Perspective




States are located in the border area, and the federal government has
                                                                   8
designated 21 U.S. border communities as economically distressed.

The poverty is more acute in the border areas called colonias. The term
"colonia" generally refers to an unincorporated, low-income community
endemic to the U.S.-Mexico border. These communities are characterized
by substandard housing, inadequate roads and drainage, substandard or no
water and sewer facilities, and no garbage disposal services. Although
colonias are found in all four U.S. border states, they are most common in
Texas and New Mexico. EPA estimated in 1997 that the colonias'
population includes over 390,000 people in Texas and over 42,000 in New
Mexico. Figure 1.3 illustrates an example of a U.S. colonia.


Figure 1.3: A Colonia in Douglas, Arizona




                 -I-I




Although poor by U.S. standards, Mexico's northern border is considered to
be one of the more affluent areas of the country. Compared to other areas



8An area of general economic distress is defined, for all urban and rural communities, as any census
tract that has a poverty rate of at least 20 percent, or any designated Federal Empowerment Zone,
Supplemental Empowerment Zone, Enhanced Enterprise Community, or Enterprise Community.
Furthermore, any additional rural or Indian reservation area may be so designated after considering the
following factors: (1) unemployment rate, (2) degree of poverty,(3) extent of outmigration, and (4) rate
of business formation and rate of business growth.




 Page 15                                           GAO/NSIAD-99-190 U.S.-Mexico Border Issues
                               Appendix I
                               The U.S.-Mexico Border in Perspective




                              of the country, the Mexican side of the border has lower unemployment,
                              higher incomes, more even income distribution, and more services.
                              Although better off than much of the rest of Mexico, communities on the
                              Mexican side of the border also confront deficiencies in basic services.
                              According: to a 1996 EPA study, about 12 percent of the population in major
                              Mexican border cities lack access to safe drinking water, and only about 69
                              percent live in residences connected to sewage collection systems.
                              Furthermore, only 34 percent of the wastewater produced in Mexican
                              border cities is treated.


What Are the Unique           The transnational nature of the border issues, the differing levels of
Challenges in                 development in the United States and Mexico, and the dissimilar
                              governmental structures make border issues difficult to address. Many of
Addressing Border             the major border issues are essentially not "domestic," but transnational
Issues?                       issues that transcend political boundaries. For example, El Paso, Texas,
                               and its sister city, Ciudad Juarez, have a serious air pollution problem. The
                              -mountains surrounding the cities create a single air basin, causing airborne
                               pollution to stagnate over the area. Only by working together to mitigate
                               the sources of the pollution will either city enjoy clean, healthy air. The
                               situation is essentially the same for many other important border issues,
                               such as drug interdiction, immigration, congestion at border crossings,
                               availability and management of water, and health concerns (such as the
                               high levels of tuberculosis in the border region). Addressing these complex
                               transnational issues requires coordination and cooperation among
                               numerous U.S. federal, state, and local agencies, and with their Mexican
                               counterparts.


Transnational Nature of the   The United States and Mexico recognize the transnational nature of the
Issues                        major issues on the border and have worked to build a closer bilateral
                              relationship. To this end, they have created numerous binational
                              institutions to foster joint action. Among them are the U.S.-Mexico
                              Binational Commission, established in 1981, and the Border Liaison
                              Mechanism, which was created in 1993. The Binational Commission meets
                              annually at the Cabinet level and works on a wide range of issues, such as
                              drugs, immigration, and border cooperation, that are critical to
                              U.S.-Mexican relations and the border region. The Border Liaison
                              Mechanism is chaired by the consuls-general or consuls in the sister or pair
                              cities. It brings together the U.S. and Mexican sides-local federal, state,
                              and municipal officials, as well as business and community groups---in
                              order to develop joint actions to help resolve local problems, such as


                              Page 16                                  GAO/NSIAD-99-190 U.S.-Mexico Border Issues
                           Appendix I
                           The U.S.-Mexico Border in Perspective




                           cross-border law enforcement issues, health concerns, and coordination of
                           port security and operations.

                           The U.S. and Mexican governments have recently developed an initiative
                           called the New Border Vision. In May 1997, President Clinton and
                           President Zedillo proposed to devise a comprehensive and long-lasting
                           strategy to transform the border into a model of bilateral cooperation.
                           They agreed on the need to promote sustainable economic and social
                           development as well as to improve the well-being and safety of families and
                           communities along the shared border.



Disparity in Development   A second challenge in addressing border issues is the disparity between the
Levels                     United States and Mexico in terms of level of development. This, in turn,
                           results in differing levels of resources available to address border
                           problems. Many parts of Mexico's northern border are poor by U.S.
                           standards, yet the northern border is relatively well off as compared to
                           other parts of Mexico. In addition, the Mexican government has been
                           focused on improving its overall economy, reducing government spending,
                           and dealing with less-developed regions in the south. This means that the
                           amount of funding that is available from Mexico for border projects is
                           limited. For example, the United States and Mexico agreed to jointly
                           finance a new wastewater treatment plant in South Bay, California, and a
                           plant expansion at Nogales, Arizona, to treat waste generated on the
                           Mexican side of the border. As a result of limited resources and higher
                           priorities elsewhere in the country, Mexico contributed $17.8 million of the
                           total cost of $321.9 million for both projects. The United States financed
                           Mexico's share of project costs and agreed to 10 annual installment
                           payments to repay the loan. Figure I.4 illustrates the new South Bay
                           wastewater treatment plant, just inside the border near San Diego, which
                           exclusively treats wastewater from Tijuana, Mexico.




                           Page 17                                 GAO/NSIAD-99-190   U.S.-Mexico Border Issues
                            Appendix I
                            The U.S.-Me:ico Border in Perspective




                            Figure 1.4: South Bay International Wastewater Treatment Plant




Differences in Government   Differing JU.S. and Mexican governmental structures also create a challenge
Structure                   to joint action. Mexico has had a centralized government structure in
                            which authority is generally contained in Mexico City. Policy and resource
                            allocation decisions that affect border issues are typically made in Mexico
                            City. Thus, Mexican states and local governments in the border region
                            generally have not had the authority or resources to address border issues.
                            While Mexico is beginning to delegate more authority to state and local
                            officials, this shift in authority is made more difficult because local officials
                            can only serve one 3-year term. The resulting turnover among officials
                            makes building institutional expertise and continuity difficult, and new
                            relationships have to be developed between U.S. and Mexican
                            counterparts. It also means that there are no assurances that the initiatives
                            of one administration will be carried out by its successor.

                            In the United States, the federal government shares authority and
                            responsibility with the states on matters such as natural resources
                            management, the environment, transportation, and health issues. For
                            instance, most highways in the United States are planned, built, and
                            maintained by the states. Decisions about the location of a new highway
                            are typically made by state and local officials. Because of these differences



                            Page 18                                 GAO/NSIAD-99-190   U.S.-Mexico Border Issues
Appendix I
The U.S.-Mexico Border in Perspective




in government responsibilities, on certain issues, the Mexican counterparts
to U.S. state and local authorities have not had the authority to make
decisions on actions to address common border problems. The U.S.
officials have had to negotiate with Mexican federal officials, who have
many priorities in addition to the northern border.




Page 19                                 GAO/NSIAD-99-190 U.S.-Mexico Border Issues
Appendix II

Drug Enforcement


                        The need to stop the flow of illicit narcotics from Mexico to the United
                        States has had major implications for the U.S.-Mexico border area, where
                        much of the enforcement effort takes place. This drug enforcement mission
                        affects the processing of both people and cargo that cross the border. The
                        cross-border movement of drugs has been accompanied by other criminal
                        activities on both sides of the border, including the corruption of law
                        enforcement officials, violence, and money laundering. The United States
                        and Mexico consider drug trafficking to be a major threat to their
                        respective national security and have attempted to address drug-trafficking
                        issues through coordination and the development of a binational
                        counternarcotics strategy. Much of the U.S. efforts are focused on
                        providing assistance to U.S. law enforcement organizations along the
                        border to enhance their drug interdiction capabilities. The principal U.S.
                        agencies combating the flow of drugs across the border are the U.S.
                        Customs Service, the Drug Enforcement Administration (DEA), the
                        Department of Defense, and the Immigration and Naturalization Service
                        (INS).



What Is the Nature of   At present, Mexico is the principal transit route for most of the cocaine and
the Drug Problem?       much of the heroin and foreign-produced marijuana that is consumed in the
                        United States. U.S. agencies estimate that about 60 percent of the almost
                        340 metric tons of cocaine entering the United States in 1998 passed
                        through Mexico and, despite Mexican drug eradication efforts, Mexico
                        remains a major source country for marijuana and heroin sold in the United
                        States. According to DEA, almost all of the estimated 6 metric tons of
                        heroin produced in Mexico in 1998 will reach U.S. markets. In February
                        1999, the I)EA Administrator testified that a study DEA has underway
                        indicates that as much as 29 percent of the heroin used in the United States
                        is smuggled in by Mexican drug-trafficking organizations. DEA also
                        estimates that the majority of the methamphetamine available in the United
                        States is either produced in Mexico and transported to the United States or
                        manufactured in the United States by Mexican drug traffickers.

                        The drug-trafficking problem in the United States and Mexico is associated
                        with corruption of law enforcement officials, violence, and money
                        laundering:

                        * A major impediment to U.S. and Mexican counternarcotics efforts is the
                          corrupting influence that drug trafficking activities have on law
                          enforcement. According to one U.S. estimate, Mexican narcotics
                          traffickers spend billions of dollars a year to suborn Mexican



                        Page 20                               GAO/NSIAD-99-190 U.S.-Mexico Border Issues
Appendix II
Drug Enforcement




   government officials at all levels.' Recognizing the impact of corruption
   on law enforcement agencies, the president of Mexico (1) expanded the
   role of the military in counternarcotics activities and (2) introduced a
   screening process for personnel working in certain law enforcement
   activities. However, neither of these initiatives can be considered a
   panacea for the narcotics-related problems confronting the two
   countries. In fact, since these initiatives, a number of senior military
   and screened personnel were found to be either involved in or
   suspected of conducting drug-related activities.

  Drug-related corruption of law enforcement is not limited to Mexico.
  Some U.S. Immigration and Naturalization Service and U.S. Customs
  Service employees on the U.S.-Mexico border have engaged in a variety
  of illegal drug-related activities. Such activities have included waving
  drug loads through at the border crossings, coordinating the movement
  of drugs across the border, transporting drugs past U.S. Border Patrol
  checkpoints, selling drugs, and disclosing drug intelligence information
  to drug traffickers. 2
* Violence is also an outgrowth of the illicit drug situation that affects
  both sides of the border. Organized crime groups from Mexico have
  relied on violence as an essential tool of their trade. For example,
  between September 1996 and February 1999, DEA recorded 141 threats
  or violent incidents against U.S. law enforcement personnel, their
  Mexican counterparts, public officials, or informants in Mexico or along
  the border. According to DEA, much of the drug-related violence, which
  has become commonplace in Mexico, has spilled over to communities
  within the United States.
* Money laundering is another byproduct of drug trafficking. According
  to the Department of State, Mexico continues to be the primary haven
  for money laundering in Latin America. Drug cartels launder the
  proceeds of crime in legitimate businesses in both the United States and
  Mexico, favoring transportation and other industries that can be used to
  facilitate drug, cash, and arms smuggling or to further money-laundering
  activities. In May 1998, Customs concluded Operation Casablanca, the
  largest and most comprehensive drug money-laundering investigation in
  the history of U.S. law enforcement. This 3-year investigation netted


'See Drug Control: Update on U.S.-Mexican Counternarcotics Activities (GAO/T-NSIAD-99-98, Mar. 4,
1999).

2See Drug Control: INS and Customs Can Do More to Prevent Drug-Related Employee Corruption
(GAO/GGD-99-31, Mar. 30,1999).




Page 21                                          GAO/NSIAD-99-190      U.S.-Mexico Border Issues
                       Appendix II
                       Drug Enforcement




                          about $100 million in illicit drug proceeds and culminated in the arrest
                          of 168 individuals from 12 of Mexico's largest banking institutions. 3
                          Additionally, three Mexican banks were indicted for participating in the
                          money-laundering scheme.


What Efforts Are      The United States and Mexico have attempted to address drug-trafficking
Underway to Counter   issues by (1) coordinating their efforts, particularly through periodic
                      meetings of senior government officials and (2) developing a binational
the Drug Threat?      counternarcotics strategy. The United States has also increased its
                      counternarcotics assistance to Mexico, and U.S. law enforcement
                      organizations have received additional support along the southwest border
                      in order to enhance drug interdiction capabilities.

                      The United States and Mexico have established a number of formal and
                      informal mechanisms to increase cooperation and coordination between
                      the two countries on law enforcement and narcotics-related issues. The
                      two principal formal coordinating forums are the U.S.-Mexico High-Level
                      Contact Group on Narcotics Control and the senior Law Enforcement
                      Plenary. The contact group, led by the U.S. Director of the Office of
                      National Drug Control Policy and the Mexican Foreign Secretary and the
                      Attorney General, met twice in 1998. An ad hoc meeting between the
                      Mexican and the U.S. Attorneys General occurred in July 1998 and resulted
                      in the creation of a process for enhanced consultations and cooperation in
                      sensitive cross-border operations. Additionally, Mexico created the
                      Bilateral Task Force, a special unit within the Mexican Attorney General's
                      office responsible for investigating and dismantling the most significant
                      drug-trafficking organizations along the U.S.-Mexican border.

                      The United States and Mexico have also developed the Binational Drug
                      Strategy, released in February 1998, which contained 16 general objectives.
                      Among them were the goals of reducing the production and distribution of
                      illegal drugs in both countries, increasing the security of the border, and
                      focusing law enforcement efforts against criminal organizations. Since the
                      issuance of the binational strategy, a number of joint working groups, made
                      up of U.S. and Mexican officials, have been formed. One result of these
                      meetings was the development of joint performance measures and


                      3
                       See Drug Conlrol: Update on U.S.-Mexican Counternarcotics Efforts (GAO/T-NSIAD-99-86, Feb. 24,
                      1999).




                      Page 22                                         GAOINSIAD-99-190      U.S.-Mexico Border Issues
Appendix II
Drug Enforcement




milestones for assessing progress toward achieving the objectives of the
binational counternarcotics strategy.

At the border crossings, the U.S. Customs Service is the primary agency,
assisted by INS Inspections, responsible for stopping the flow of illegal
drugs through U.S. ports of entry. In addition to conducting routine
inspections to search passengers, cargo, and conveyances 4 for illegal drugs,
Customs' drug interdiction program includes investigations and other
activities unique to specific ports. In conducting its drug interdiction role,
Customs' major challenge is to effectively carry out its interdiction and
trade enforcement missions while at the same time facilitating the flow of
persons and cargo across the border. In fiscal year 1998, Customs seized
31,769 pounds of cocaine, 830,891 pounds of marijuana, and 407 pounds of
heroin along the U.S.-Mexico border. To help deal with the drug problem at
the border, Customs is installing various state-of-the-art X-ray systems to
inspect cargo and vehicles and is evaluating other forms of new technology
in high-risk areas. Many of these efforts are being supported by the
Department of Defense and involve support of and coordination with other
law enforcement agencies. Figure II. 1 illustrates a truck exiting the truck
X-ray at the Pharr, Texas crossing.




4
 Conveyances include cars, buses, trucks, aircraft, and vessels.




Page 23                                             GAO/NSIAD-99-190   U.S.-Mexico Border Issues
                           Appendix II
                           Drug Enforcement




Figure 11.1: Truck X-Ray




                           The Border Patrol is the principal agency within INS responsible for
                           detecting and apprehending drug smugglers along the border between the
                           ports of entry. According to the Office of National Drug Control Policy, the
                           Border Patrol seized 22,675 pounds of cocaine and more than 871,000
                           pounds of :marijuana during fis6al year 1998. The INS also reports that it
                           was responsible for the arrest of more than 8,600 persons for
                           narcotics-related violations along the southwest border during this period.




                           Page 24                              GAO/NSIAD-99-190 U.S.-Mexico Border Issues
Appendix III

Illegal Immigration


                            Each year, hundreds of thousands of illegal aliens enter the United States
                            across the U.S.-Mexico border. As a result, Congress has mandated
                            increased efforts to facilitate border processing of legal entries and prevent
                            or deter illegal crossings. Jobs in the United States have been the major
                            draw for Mexican migrants.



What Is the Nature and      Mexican citizens and others who want to be admitted to the United States
                            must present documents to INS inspectors at ports of entry along the
Extent of Increasing        border. Of the 915,900 persons who were granted legal permanent resident
Immigration on the          status in fiscal year 1996, 163,572, or 15 percent, were from Mexico-an
Border?                     increase of about 82 percent from fiscal year 1995. In addition, an unknown
                            number of Mexicans, likely to exceed 1 million, come and work in the
                            United States for short periods of time and then return home, according to
                            a Brookings Institution study.'

                            INS has the dual role of facilitating legal entry into the United States and
                            stopping illegal entry. Last year, for example, an average of 960,000 entries
                            were processed daily along the border. In 1996, INS estimated that the
                            Mexican undocumented entrant population had grown by an average of
                            150,000 annually since 1988 and that 2.7 million undocumented entrants
                            had established residence in the United States. In fiscal year 1998, INS
                            made 1.5 million apprehensions on the southwest border.



What Is Being Done to       INS' Inspections and the U.S. Border Patrol, also part of INS, are the two
Address Border              components chiefly responsible for deterring illegal entry along the
               Address
                   Border   southwest border. In attempting to inhibit unlawful entrants, the Attorney
Immigration Issues?         General announced a five-part strategy in 1994 to strengthen enforcement
                            of the nation's immigration laws, including enhancing border monitoring.
                            The primary focus of enforcement efforts shifted from apprehending illegal
                            aliens in the United States to deterring their entry. Moreover, Congress
                            increased the U.S. Border Patrol's budget from $362 million in fiscal year
                            1993 to $727 million in 1997. As a result, existing resources have been
                            reallocated along the border, and border control personnel have been
                            increased. For example, the number of Border Patrol agents on the border
                            rose from 3,389 to 7,357 between fiscal year 1993 and 1998. This growth


                            'The Brookings Institution, Immigration in U.S.-Mexican Relations: A Report of the U.S.-Mexican
                            Relations Forum (Washington, D.C.: Jan. 1998).




                            Page 25                                           GAO/NSIAD-99-190      U.S.-Mexico Border Issues
 Appendix III
 Illegal Immigration




 was due largely to the 1996 Illegal Immigration Reform and Immigrant
 Responsibility Act's requirement that the U.S. Border Patrol hire 1,000
 agents annually through 2001. However, a study commissioned by the
 Office of National Drug Control Policy estimated that the U.S. Border
 Patrol would need over 16,000 agents to deter unauthorized crossings along
 the southwest border. 2 This number is more than twice the 7,357 agents
 working the border as of September 1998. We recently reported that INS is
 unlikely to meet the 1,000-agent annual hiring quota mandated by Congress,
 and the executive branch has not requested additional positions in its fiscal
 year 2000 budget.3 Figure III.1 illustrates U.S. Border Patrol agents
 monitoring the double wall dividing San Ysidro and Tijuana to deter illegal
 crossings, among other things.




2F. Bean, R. Capps, and C. W. Haynes, An Estimate of the Number of Border Patrol Personnel Necessary
to Contrnl the Southwest Border (Austin, TX: Center for U.S.-Mexico Border and Migration Research,
University of Texas, July 1998). We have not reviewed the methodology used to arrive at this figure.

3In March 1999, the INS Commissioner testified that nearly 48 percent of the Border Patrol agents had
less than 3 years of experience, and law enforcement experts had indicated that it is risky to allow an
agency's overall ratio of inexperienced officers to exceed 30 percent. Also, according to an INS official,
INS lacks adequate facilities to support the increased numbers of agents along the southwest border.
Therefore, according to INS, maintaining staffing at the fiscal year 1999 level will give INS time to
develop more experienced agents and allow INS to allocate the funds it needs to improve facilities.
Illegal Immigration: Status of Southwest Border Strategy Implementation (GAO/GGD-99-44,
May 19,1999).




Page 26                                             GAO/NSIAD-99-190        U.S.-Mexico Border Issues
Appendix III
Illegal Immigration




Figure 111.1: U.S.-Mexico Border at San Ysidro, California, and Tijuana, Mexico




One method the United States is using to enhance and expedite
enforcement efforts at border crossings is increasing the use of biometric
technology, whereby biometric identifiers, such as photos and fingerprints,
can be digitally scanned and read by a computer. INS has developed
IDENT, an automated system that catalogues apprehended illegal aliens'
fingerprints, which can help identify the number of aliens apprehended
while attempting to reenter the country. The State Department is also
currently phasing in another identification system to speed processing


Page 27                                   GAO/NSIAD-99-190 U.S.-Mexico Border Issues
    Appendix II][
    Illegal Immigration




 times for legal entry of Mexicans who frequently cross the border into the
 United States. The border crossing cards that had previously been used are
 now being replaced with laser visas, new high-tech biometric cards that
 include photos and fingerprints.

 One area of current concern in U.S. border enforcement efforts is a U.S.
 Congress-mandated 4 automated entry/exit control system at land and
 seaport points of entry that will collect arrival and departure data on every
 non-U.S. citizen crossing the border. Critics of the mandate, fearing huge
 bottlenecks at the border, want a system that balances law enforcement
 and trade facilitation. The system was to be established by September 30,
 1998, on both the Mexican and Canadian borders. However, Congress has
 extended the deadline to March 31, 2001.

While the United States and Mexico are willing to work together on some
border issues, there are some differences in emphases: the United States
wants to reduce the level of unauthorized migration, while Mexico wants to
protect its citizens. The United States' present policy is to immediately
deport illegal immigrants who are apprehended, unless they might have a
legitimate claim to asylum or have committed a crime. Mexico's focus
emphasizes actions the United States should take, particularly better
protection of the human rights of migrants and avoidance of abrupt
changes to immigration policy. In particular, the Mexican government is
concerned that the 1996 Illegal Immigration Reform Act will (1) result in a
concerted effort to identify and deport undocumented workers and some
documented workers and (2) make it more difficult for Mexican nationals
living illegally in the United States to acquire legal status.

In another effort to deal with border entry issues, the U.S. and Mexican
governments established a Border Safety Initiative in June 1998 to prevent
injuries, deaths, and violence along the border. With increased
enforcement at border entry points, aliens have shifted their crossing
patterns to more dangerous river and desert crossings. This initiative
warns potential illegal aliens through various media of the dangers in
crossing the border at particular routes and targets search and rescue
operations in hazardous areas. At a February 1999 meeting in Merida,
Mexico, the United States and Mexico agreed to a memorandum of
understanding on combating border violence.


4
 Section 110 of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (P.L104-208,
Div.C).




Page 28                                           GAO/NSIAD-99-190      U.S.-Mexico Border Issues
Appendix IV

Cross-Border Transportation


                         As commercial and private vehicle traffic associated with growing
                         economic integration has increased, it has put stress on the local
                         infrastructure. Long lines at some crossings impede local traffic
                         movement, contribute to air pollution, and can raise business costs if
                         merchandise and parts are delayed. Traffic congestion is caused in part by
                         inadequate infrastructure at some crossings, resource management issues,
                         as well as how the ports of entry are managed. Another major factor
                         affecting congestion is the need to facilitate commerce and the movement
                         of people across the border while at the same time protecting the nation
                         against illegal immigration and contraband goods.



What Is the Nature and   The growing volume of trade between the United States and Mexico has
 ExtentExtent
        of the
        of the
                         placed pressure on the local transportation infrastructure of border
                          communities. Total trade between the United States and Mexico has
Cross-Border              increased from $75.8 billion in 1992 to $157.3 billion in 1997, and that year
Transportation           just under 10 percent of total U.S. imports entered the country from
                          Mexico. Approximately 75 percent of U.S.-Mexico trade (measured by
Problem?                 weight) crosses the southwest border by truck. According to the U.S.
                          Customs Service, in fiscal year 1998 approximately 3.9 million trucks
                          entered the United States from Mexico, a 30-percent increase from fiscal
                          year 1996. At some ports of entry, such as Laredo, Texas, and Otay Mesa,
                          California, as many as 2,500 commercial vehicles a day enter the United
                          States. Commercial and passenger traffic volume can also be seasonal.
                          For example, Nogales, Arizona, handles a high volume of fresh vegetables
                          during the winter months. Cross-border passenger traffic generally
                          increases around major holidays, particularly Christmas and Easter. The
                          number of passenger vehicles entering the United States from Mexico also
                          rose 12 percent during the 1996-98 period, from 76 million to 85.4 million.
                          Currently, there are 45 ports of entry along the U.S.-Mexico border,
                          according to the State Department;1 however, the number is not.static. A
                         new port of entry recently opened in Brownsville, Texas, and new bridges
                          are scheduled to open in Eagle Pass this year and Laredo, Texas, next year.
                         The value of imports that crossed the U.S. border from Mexico in 1997 was
                          $75.5 billion-Customs statistics show that SouthTexas district ports of
                          entry processed $38.8 billion, the West Texas district handled $14.7 billion,
                         the Arizona district processed $8.5 billion, and Southern California handled




                         'This includes two bridges currently under construction.




                         Page 29                                            GAO/NSIAD-99-190   U.S.-Mexico Border Issues
Appendix IV
Cross-Border Transportation




$13.5 billion.2 These numbers illustrate the burden placed on the
transportation infrastructure of the different communities along the
border. Figure IV. 1 illustrates trucks waiting for paperwork in the U.S.
import lot in Laredo; the trucks on the bridge are heading into Mexico.


Figure IV.1:: Commercial Traffic in Laredo,Texas




Traffic associated with southwest border ports of entry has led to
congestion of both commercial and passenger vehicles at some crossings,
particularly older crossings that were built in downtown areas. This traffic
has taxed the local and regional transportation infrastructure, and the
resulting lines of traffic, which can run up to several miles during peak
periods, are associated with air pollution caused by idling vehicles. Federal
and local officials have also expressed concerns about how congestion
affects safety around the ports of entry. Congestion can also have a
negative impact on businesses that operate on a just-in-time schedule and
rely on regular cross-border shipments of parts, supplies, and finished
products. Custom brokers and local trucking companies also have an
effect on the flow of traffic because their work is part of the process of
moving goods across the border. Custom brokers process paperwork for


2The U.S. Customs Management Centers on the southwest border are South Texas, West Texas, Arizona,
and Southern California.




Page 30                                         GAO/NSIAD-99-190      U.S.-Mexico Border Issues
Appendix IV
Cross-Border Transportation




exporting and importing goods; and trucking companies ship goods across
the border.

Processing the high volume of commercial and passenger traffic while
interdicting illegal contraband and immigrants and ensuring commercial
vehicle safety presents a challenge for the multiple agencies working on the
border. Customs and INS are the main, frontline agencies at the ports of
entry that have contact with the public. Customs is the lead agency that
processes commercial traffic, and its inspectors are responsible for
searching vehicles for illegal drugs, illegal imported goods, and illegal
immigrants. INS primarily focuses on processing pedestrians and
passenger vehicles while also looking for contraband and immigration
violations. Other agencies that may be at the ports of entry, depending on
the goods imported, are the federal and/or state departments of
transportation, the Food and Drug Administration, the Agricultural Plant
and Health Inspection Service of the Agriculture Department, and the U.S.
Fish and Wildlife Service. Customs subjects commercial vehicles entering
the United States to a mandatory primary inspection. Inspectors check
shipping documentation, track the truck's and driver's recent crossing
history, and review vehicle and driver permits. At some ports of entry,
Customs staff, assisted by National Guard staff, examine vehicles using
canines, tools, and scopes. Trucks may then be selected for additional
secondary examinations, such as full truck X-rays. There are also other
inspections that may take place, such as a hazardous materials check or
inspections by the Departments of Transportation and Agriculture, or the
Food and Drug Administration. The result is that inspection facilities can
be crowded during peak periods as trucks are off-loaded and inspected, or
drivers wait for paperwork to be approved. At some ports of entry,
Customs officials said that insufficient staffing also impedes the crossing
process and leads to backups because not all available primary entry lanes
can be opened to let trucks into the inspection compound.

A recent binational study published by the JointWorking Committee
quantified costs associated with trade-related traffic between the United
States and Mexico. The study estimated that wear on the U.S. border state
highway systems was $113 million in 1995, while wear on U.S. nonborder
highway systems was estimated at $62 million.




Page 31                               GAO/NSIAD-99-190   U.S.-Mexico Border Issues
                        Appendix In
                        Cross-Border Transportation




What Is Being Done to   The U.S. and Mexican governments have several binational mechanisms to
Address the             coordinate port of entry activities. These mechanisms take place at the
                        national, state, and local levels. The primary binational mechanism at the
Cross-Border Traffic    national level is the U.S.-Mexico Binational Group on Bridges and Border
Problem?                Crossings. This group works out agreements for existing and potential
                        bridges and border crossings and is coordinated by the U.S. State
                        Department and its Mexican counterpart. The Joint Working Committee is
                        another group that works on transportation planning at the local and
                        national levels, with representatives from U.S. and Mexican states and
                        federal governments. The Border Governors' Conference, which
                        represents the four U.S. and six Mexican border states, focuses on
                        addressing issues and opportunities of the border region, and promoting
                        initiatives to improve the region's quality of life. The Western Governors'
                        Association works on issues that affect the four U.S. border states, such as
                        border congestion and air pollution, among other issues. At the local level,
                        the Border Liaison Mechanism is coordinated by U.S. and Mexican
                        consulates, and we have learned of informal U.S. and Mexican counterpart
                        port of entry committees.

                        Perspectives differ on cross-border traffic problems. Mexican and U.S.
                        federal and state government officials have told us they believe existing
                        ports of entry should be used to their full capacity throughout the day
                        before new ones are built. However, in both the United States and Mexico
                        there is local interest in building new ports. In Texas, for example, toll
                        revenues from bridges that cross the Rio Grande River provide a key
                        source of revenue for local communities, counties, and private owners.
                        The potential for receiving crossing revenue has, according to some
                        observers, led to interest in building new crossings. According to local
                        officials, rural areas and small cities have fewer resources to cope with the
                        effects of cross-border traffic flow problems but may derive economic
                        benefits from a port of entry.

                        Within the federal agencies at ports of entry, there are programs to improve
                        interdiction efforts as well as port of entry management and operations. A
                        recent undertaking is the Border Coordination Initiative, which is designed
                        to increase cooperative interdiction efforts between Customs and INS.
                        Some ports of entry also have instituted Port Quality Improvement
                        Committees that bring together all agencies responsible for facilities and
                        operations. In addition, some ports of entry have tried extending hours and
                        opening more lanes to improve the flow of traffic as staffing and operating
                        budgets have permitted.



                        Page 32                               GAO/NSIAD-99-190   U.S.-Mexico Border Issues
Appendix IV
Cross-Border Transportation




Federal and local funding have been earmarked for various border
infrastructure projects. Congress established the Southwest Border
Stations Capital Improvements program in 1988 and appropriated $361
million for it, nearly all of which has been spent. Recently, the
Transportation Equity Act for the 21st Century (TEA-21) authorized funding
for border infrastructure projects as well as for high priority corridors,
which may include border projects, totaling $140 million for each of fiscal
years 1999 through 2003. 3 In Texas, a position was created for an assistant
executive director for border trade transportation, along with a new border
transportation initiative.

While many groups have reported on these problems and potential ways to
solve them, and mechanisms are in place to serve as tools for coordinating
operations along the U.S.-Mexico border, problems that have existed at the
border crossings continue. In 1991 and 1997, we reported that private
sector groups and federal, state, and local government officials were
concerned about the adequacy of inspection facilities to accommodate
increased commercial traffic expected with NAFTA, as well as with the
adequacy of border-related road and highway infrastructure. 4 In 1994, the
Border Infrastructure and Facilitation Task Force made short- and
long-term recommendations for changes to bring about operational,
infrastructure, institutional, and regulatory/legislative improvements. In
addition, the binational Joint Working Committee issued its report in 1998,
covering a wide range of border infrastructure issues and including an
inventory of capacity estimates for ports of entry and analysis of the
economic impacts of U.S.-Mexico trade on border communities. The
Border Trade Alliance, a public-private coalition of individuals conducting
business across U.S. borders, has also compiled a Southwest Border Port
Capital Improvements Report for Fiscal Year 2000 that identifies potential
port of entry capital improvements. Finally, the Western Governors'
Association recently released a study on border congestion. The study's
potential solutions to border congestion problems include better
monitoring and staffing of vehicle inspection lanes at border crossings,
 adding additional inspection lanes where deficient, establishing average
maximum queue times as an official goal, establishing a unified port of
 entry management system to coordinate efficient and rule-compliant


3
    P.L. 105-178, secs. 1101, 1118-19.
4
 See U.S.-Mexico Trade: Survey of U.S. Border Infrastructure Needs (GAO/NSIAD-92-56, Nov. 27, 1991)
and Commercial Trucking: Safety Concerns About Mexican Trucks Remain Even as Inspection Activity
Increases (GAO/RCED-97-68, Apr. 9, 1997).




Page 33                                          GAO/NSIAD-99-190      U.S.-Mexico Border Issues
 Appendix lV
 Cross-Border Transportation




movement of goods and people across the border, and encouraging users to
cross the border at off-peak times.




Page 34                            GAO/NSIAD-99-190 U.S.-Mexico Border Issues
Appendix V

Environmental Infrastructure and Public
Health

                         Environmental problems and their impact on public health have been a
                         long-standing concern in the border region. The United States and Mexico
                         have not been able to keep pace with the growing environmental
                         infrastructure' needs associated with the expansion of the border region's
                         economy and population. While most incorporated border communities on
                         the U.S. side have an environmental infrastructure, in places it is in need of
                         repairs, upgrading, and/or expansion. The need for an environmental
                         infrastructure is far greater on the Mexican side of the border, where many
                         communities lack a clean and safe drinking water supply and proper
                         sanitation facilities. Inadequate infrastructure on either side, however,
                         creates health concerns on both sides of the border. Unsanitary living
                         conditions are a leading cause of gastrointestinal and other diseases that
                         are prevalent on the border. Moreover, there is a serious shortage of water
                         in some locations. Many communities lack the resources and human
                         capital to deal with these problems.



What Is the Nature and   Communities on both sides of the border face environmental problems
                         associated with water and wastewater treatment, solid and hazardous
Extent of the            waste disposal, and air pollution. During the 1993 debates over NAFTA, it
Environmental            was estimated that as much as $8 billion would be needed to meet the
Infrastructure and       border region's environmental infrastructure needs during the next 10-year
Public Health            perod.
Problem?

Water and Wastewater     A diminishing supply of clean and safe drinking water supply and
Treatment                inadequate water distribution systems, as well as untreated wastewater,
                         pose serious health risks for communities on both sides of the border. In
                         Mexican border cities, about 12 percent of the population does not have
                         access to drinking water, according to Mexico's National Water
                         Commission. In addition, while 69 percent of the population live in
                         residences connected to sewage collection systems, some of which are
                         very old and have exceeded their useful life, the wastewater treatment
                         plants in Mexican border cities treat only 34 percent of wastewater in the
                         aggregate. In some areas, raw or insufficiently treated wastewater


                         'Environmental infrastructure refers to the infrastructure designed to protect human health and the
                         environment along the U.S.-Mexico border by preventing and/or reducing the pollution of air, water, and
                         soil.




                         Page 35                                            GAO/NSIAD-99-190 U.S.-Mexico Border Issues
Appendix V
Environmental Infrastructure and Public
Health




eventually flows into surface and drinking water sources that are shared by
both countries. Sewage disposal has been a particularly severe problem at
Ciudad Juarez and Matamoros, cities with combined populations of well
over 1 million residents, where no wastewater treatment capability
currently exists. However, Ciudad Juarez is currently building wastewater
treatment facilities.

On the U.S. side of the border, the vast majority of U.S. municipalities have
EPA-approved, publicly owned wastewater treatment plants. In some
communities, however, water and wastewater systems are at or near
capacity amd will need to be upgraded or expanded in the future. The
colonias, however, face significant environmental infrastructure problems.
These colonias, located mainly inTexas and New Mexico, typically have
substandard housing and inadequate roads and lack access to clean
drinking water and wastewater disposal systems. These problems are
particularly severe in Texas, which has an estimated 1,200 colonias.

Agricultural runoff and irrigation return flows are a source of pollution in
some U.S. border communities. The New River, which flows through
Mexicali, Baja California, and the Imperial Valley of California before
emptying into the Salton Sea, is one of the most polluted rivers in the
United States. The pollution is caused in large part by runoff from farms in
the Imperial Valley. Figure V.1 illustrates an irrigation canal polluted from
agricultural runoff.




Page 36                                   GAO/NSIAD-99-190 U.S.-Mexico Border Issues
                            Appendix V
                            Environmental Infrastructure and Public
                            Health




                            Figure V. 1: Agricultural Runoff Near Where the New River Enters the Salton Sea




                            Population and industrial growth also threaten the water supplies in arid
                            regions along the border. For example, San Diego/Tijuana, according to
                            some studies, will face serious drinking water shortages early in the next
                            century. Authorities from the two cities hope to meet future needs with
                            transfers of Colorado River water from agricultural areas in California's
                            Imperial Valley and Mexico's Mexicali Valley. They are tentatively
                            discussing the joint construction of an aqueduct for this purpose. In E1l
                            Paso/Ciudad Juarez, the anticipated water shortages are related to the
                            inadequate source of water. E1l Paso and Ciudad Juarez depend on the
                            same aquifers for water, and these aquifers are rapidly being depleted. A
                            binational study of the depletion of the aquifer is now underway, with a
                            view toward taking corrective action.



Solid and Hazardous Waste    Many communities in the border region, particularly in Mexico, lack the
Disposal                     infrastructure for collecting and properly disposing of solid waste.
                             Mexican border cities often have waste management institutions that are
                             beset with administrative deficiencies and lack adequate legal authority to
                             regulate and collect user fees for services. These institutions often have
                             too few reliable trucks to collect all the garbage. As a result, only 86
                             percent of household waste is collected, and only 53 percent of what is
                             collected is deposited in sanitary landfills. In some Mexican communities,



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                    Environmental Infrastructure and Public
                    Health




                    waste is incinerated in the open, impairing visibility and diminishing air
                    quality. In Nogales, Sonora, the burning of manure in the stockyards has
                    posed a serious health risk to residents on both sides of the border.

                    In the U.S. border region, solid waste disposal problems are mainly
                    restricted to the colonias, where solid waste collection is often inconsistent
                    and inadequate. While officials of some U.S. border communities recognize
                    the significance of the problem, they are concerned that extending solid
                    waste collection to colonias may strain the capacities of current landfills.

                 Hazardous waste disposal is a growing problem in the border region. In
                Mexico, maquiladora plants generate the most hazardous waste in the
                border region. The Mexican government has required that this waste be
                returned for proper disposal to the country of origin of the raw materials,
                which is usually the United States. However, there are concerns about the
                proper disposal of hazardous waste generated by Mexican businesses.
                Mexico currently has only one hazardous waste disposal facility. The
                Mexican Secretariat for Environment, Natural Resources and Fisheries has
                identified. several hazardous waste disposal problems in Baja California,
                including a lack of treatment, neutralization, or incineration systems for
                hazardous and toxic waste. The Secretariat has made the development of a
                hazardous waste infrastructure throughout Mexico a priority.


Air Pollution   Air quality is also a major concern in the border region because many
                residents of border cities are exposed to health-threatening levels of air
                pollution from a variety of sources. According to a 1996 Border XXI
                report, 2 13 border cities exceeded or are expected to exceed at least one of
                the ambient air quality standards set by their respective federal
                governments. Rapid urbanization and industrialization are responsible for
                most of the air pollution problems in the border region. The citizens of El
                Paso, Texas, nearby Sunland Park, New Mexico, and Ciudad Juarez have
                long been exposed to high levels of air pollution. According to a local
                binational task force for improving air quality, 3 the sources of this pollution
                are emissions from the increasing vehicular traffic in the area, dust from
                unpaved roads and the surrounding desert, open burning, fireplaces and


                2See p. 43 for a description of Border XXI.
                3
                 The Paso del Norte Air Quality Task Force was established in 1993 as Appendix I to the 1983 La Paz
                Agreement, with a mission to implement projects and promote policies to improve air quality in the
                area




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                        Environmental Infrastructure and Public
                        Health




                        wood-burning stoves, and industrial activity. The region's arid climate and
                        high elevation also contribute to the problem. In addition, the cities occupy
                        a mountain pass known as the Paso del Norte, which is surrounded by
                        mountains on three sides, forming a natural amphitheater that traps the
                        pollution.


Obstacles Communities   Initiating and sustaining needed environmental infrastructure projects have
Face in Addressing      long been problems for Mexican border communities as-they face financial,
Environmental Needs     administrative, and institutional obstacles. Local communities on the
                        Mexican side of the border are dependent on a revenue-sharing system
                        from the federal and state governments to finance infrastructure projects.
                        However, the revenue available to most communities is uncertain because
                        it is dependent on allocations made annually by legislative decree.
                        Communities can turn to Mexico's National Bank of Public Works and
                        Services as a source of credit for environmental infrastructure projects;
                        however, the interest rates are too high for most communities.
                        Municipalities do not have the option of raising capital outside of Mexico's
                        domestic market, as the Mexican Constitution prohibits states and
                        municipalities from incurring financial obligations in foreign currencies
                        and/or with foreign creditors. This status is changing; for example, the
                        Mexican Ministry of Finance assisted the North American Development
                        Bank (NADBank) in establishing a nonbank financial subsidiary through
                        which the NADBank is able to lend directly to municipalities in dollars. 4
                        Mexican border communities' strong dependence on the federal
                        government has also limited their ability to gain the experience necessary
                        to plan, develop, and manage public works projects. Further, when the
                        local administration changes every 3 years, personnel in key management
                        positions are removed and the institutional capacity that is developed is
                        lost as well. As part of a federal effort to decentralize governmental
                        decision-making, communities are now expected to assume more
                        responsibility for planning and providing public services to their residents.

                        On the U.S. side, colonias also face financial and institutional obstacles to
                        environmental infrastructure development. Since colonias are
                        unincorporated settlements, they lack the basic financial and institutional
                        mechanisms available to U.S. cities. Therefore, they do not have the tax
                        bases and credit sources needed to borrow money. Further, jurisdictional


                        4
                            NADBank is discussed on p. 41.




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                         Environmental Infrastructure and Public
                         Health




                         disputes about service areas among cities, counties, and rural water
                         districts have left the colonias without basic services.


Linkage Between the      Contamination of air, water, and soil by solid waste, raw sewage, and
Environment and Public   untreated wastewater, which facilitates the growth of parasites, bacteria,
Health                   and other pollutants, is suspected to be a key factor contributing to the
                         presence of certain diseases in border populations. These include
                         respiratory diseases, elevated blood lead levels in children, cancer,
                         hepatitis A, and infectious gastrointestinal diseases. An outbreak of a
                         disease on one side of the border poses a potential threat to both countries
                         because of the daily flow of people back and forth between the United
                         States and Mexico. The high level of poverty in the border region is also a
                         likely factor in the high level of diseases found in the region.

                         According to the Interhemispheric Resource Center, 5 about one-third of the
                         U.S. tuberculosis cases reported for the first 10 weeks of 1998 were from
                         the four U.S. border states. During that same period, Mexico's border
                         states, representing about one-sixth of Mexico's population, accounted for
                         about 61 percent of the country's new tuberculosis cases. Health officials
                         of both countries have been particularly concerned about the increased
                         number of multi-drug-resistant tuberculosis cases in the border region.

                         Further, according to Texas officials, neural tube birth defects, which affect
                         the brain and spinal column, occur more frequently in the Texas border
                         region than in the rest of the United States. Examples of these birth defects
                         include anencephaly, or babies born with partial or missing brains; and
                         spina bifida, a severe deformation of the spinal cord. Also, between 1994
                         and 1997, cases of hepatitis A, a gastrointestinal virus borne by
                         contaminated food and water, occurred on the U.S. side of the border at
                         rates from 2 to 5 times the national average.

                         In addition, on the Mexican side of the border, communities have been
                         confronted with a disproportionately high level of intestinal infectious
                         diseases which are extremely rare in the United States.




                         5
                          The Interhenmispheric Resource Center is a nonprofit organization in New Mexico that was founded in
                         1979. This information on tuberculosis was reported in the May 1998 issue of its monthly bulletin, titled
                         Borderlines.




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                        Environmental Infrastructure and Public
                        Health




                        Many people who live on the U.S. side of the border also lack access to
                        affordable healthcare. This situation contributes to the lower rates of
                        immunizations of children on the U.S. side of the border. The rate for
                        measles is 50 cases per 100,000, versus a U.S. national average of 11 per
                        100,000. The rate for mumps has been documented as high as 41 per
                        100,000, versus a U.S. national average of 2 per 100,000. The U.S. side of the
                        border also has a shortage of healthcare providers. In 1998, 27 of Texas' 43
                        border counties were designated as Health Professional Shortage Areas for
                        primary medical care.



What Is Being Done to   The United States and Mexico have created institutions to deal with
                        environment and health issues. The oldest of these key institutions is the
Address                 International Boundary and Water Commission, created in 1889, which is
Environmental and       responsible for maintaining the boundary between the United States and
                        Mexico and managing issues involving the waters of the Rio Grande and
                        Colorado rivers.7 The Commission's responsibilities also include designing,
Problems?               constructing, operating, and maintaining certain wastewater treatment
                        facilities along the border. In recent years, the Commission has
                        participated in the development or expansion of three treatment plants,
                        one serving Tijuana, Baja California; one serving Nogales, Arizona, and
                        Nogales, Sonora; and one serving Nuevo Laredo, Tamaulipas.

                        Concern about the environmental impact of increased industrial
                        production and transportation led to a NAFTA environmental side
                        agreement. This agreement established two binational organizations-the
                        Border Environment Cooperation Commission (BECC) and NADBank--to
                        promote the planning and financing of environmental infrastructure
                        projects in the border region. These organizations were created to help
                        border communities develop and finance environmental infrastructure
                        projects that will address hazardous human health and environmental
                        conditions.




                         6
                          The U.S. Department of Health and Human Services defines an area with fewer than one primary care
                         provider for every 3,500 residents as a federal Health Professional Shortage Area if physicians are not
                         within a reasonable distance. The designations may apply to primary medical care, dental services, or
                         mental health services.
                         7
                          This organization was known as the "International Boundary Commission" until it was reconstituted as
                         the International Boundary and Water Commission on February 3, 1944.




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 Environmental Infrastructure and Public
 Health




BECC's primary purpose is to certify that project proposals meet criteria
for technical and financial feasibility and sustainability. In establishing the
scope of projects to be considered, the board of directors limited the types
of projects to water, wastewater, and solid waste based on guidance in
BECC's charter. BECC emphasizes the importance of sustainability
because, in the past, projects have been built in poor border communities
with grants and other assistance but then could not be properly maintained
due to the communities' limited financial resources. BECC also provides
technical assistance to border communities with project development
activities, including devising plans, creating project designs, and
performing environmental assessments. As of May 1999, BECC had
approved over $11 million in technical assistance grants to border
communities. BECC also works to ensure public support for projects.

The Border Utility Management Institute, a new program of NADBank, is
directed at addressing the problem of the municipalities' limited
experience in undertaking public works projects by providing funding for
the development of the financial and administrative capacities of utility
managers and their staffs. NADBank is also directing its technical
assistance grant monies to address the problem of turnover in local
administration management, with over 90 Institutional Development
Program projects in the region.

Projects certified by BECC qualify to be considered for financial assistance
through NADBank and/or other funding sources. NADBank's primary role
is to facilitate financing for the development, execution, and operation of
enviromnental infrastructure projects that have been certified by BECC.
The United States and Mexico have agreed to provide $225 million each to
capitalize NADBank, which can be used to make loans and loan guarantees
to border communities for border infrastructure projects. NADBank also
administers EPA's funds through its Border Environment Infrastructure
Fund, which provides grant money for water and wastewater
enviromnental infrastructure projects. The EPA grant funds may be used
for projects on the Mexican side, within 62 miles of the border, if there is a
transbountmdary impact of the infrastructure deficiency.

As of June 1999, BECC had certified 27 projects. NADBank has been
involved in providing construction funding for 14 of these projects.
NADBank's participation has been mainly in the form of loans and Border
Environment Infrastructure Fund grants. According to NADBank, it has
provided loans to 7 projects, for a total of $11.1 million, while providing a
total of $119.3 million in Border Environment Infrastructure Fund



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Appendix V
Environmental Infrastructure and Public
Health




construction grants. For example, NADBank provided a $4.6 million loan
and $11.1 million in a Border Environment Infrastructure Fund
construction grant for a $31.2 million wastewater treatment plant in Ciudad
Juarez, Chihuahua. The loan for this project accounts for 41 percent of the
total NADBank funds used for loans. These amounts represent a small
percentage of the billions needed to meet the border area's environmental
infrastructure needs.

Border environmental infrastructure development involves many federal,
state, and local agencies. EPA has played a central role as a source of grant
funds for environmental infrastructure projects on both sides of the border.
Other federal agencies, including the Department of Housing and Urban
Development and the Department of Agriculture, provide grants for
environmental projects in poor and rural areas such as colonias. Border
State governments also provide loans and grants for environmental
infrastructure development through state revolving funds and tax-exempt
municipal bonds for environmental infrastructure financing. 8

Coordination efforts between the United States and Mexico under the La
Paz Agreement have involved EPA and the Mexican Secretariat for
Environment, Natural Resources and Fisheries. In 1992, the two
governments issued the Integrated Environmental Plan for the Mexican
Border Area, which linked long-term economic growth and environmental
protection. The United States and Mexico subsequently developed an
expanded planning and coordination mechanism known as Border XXI.
Border XXI is intended to be a comprehensive program designed to achieve
a clean environment, protect public health and natural resources, and
encourage sustainable development. It emphasizes three strategies:
(1) public participation in project development; (2) decentralized
environmental management and building the capacity of local and state
institutions to deal with environmental problems; and (3) interagency
cooperation to maximize available resources, avoid duplicative efforts on
the part of government and other organizations, and reduce the burden that
coordination with multiple entities places on border communities. The
U.S.-Mexico Binational Commission also has a Working Group on the
Environment and Natural Resources.


8
  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 at or below market interest rates to local governments, and, as
loans are repaid, the funds are replenished.




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Environmental Infrastructure and Public
Health




Border public health issues are being addressed by a number of
organizations. For example, the U.S.-Mexico Binational Commission's
Health Working Group provides an annual forum for reviewing progress on
priority health issues. The Pan American Health Organization, an arm of
the World Health Organization, convenes and oversees the U.S.-Mexico
Border Health Association, which was created in 1943. The Association is a
mechanism for health professionals along the border to foster
communication on both sides of the border, identify local health needs, and
recommend ways to meet those needs.

In addition, Congress authorized the establishment of the U.S.-Mexico
Border Health Commission in 1994 (P.L. 103-400). The Commission's goals
are to (1) institutionalize a domestic focus on border health and (2) create a
venue for binational discussion to address public health issues and
problems that affect U.S.-Mexico border populations. Congress
appropriated $800,000 in fiscal year 1998 to assist in the creation of the U.S.
Section of the Border Health Commission. The 13 U.S. Commissioners
have been selected, but 8 remain to be appointed by the President. 9 Efforts
are underway to explore the potential for Mexico's eventual participation,
with the goal of making the Commission a binational forum.

Another binational effort is the Ten Against TB [tuberculosis] Campaign,
led by the 10 border state health officers in the U.S. and Mexico. It is
addressing the problem of tuberculosis on the border, working with federal
and nongovernmental partners. The Ten Against TB Campaign has
developed a four-part strategy to improve surveillance and epidemiology,
laboratory analysis, health promotion, and case management. In addition,
at a meeting on February 15, 1999, in Merida, Mexico, Presidents Clinton
and Zedillo signed a Memorandum of Understanding on Cooperation in
Prevention and Control of Tuberculosis, recognizing that the reemergence
of tuberculosis is a major threat to global health.

Finally, tlhe U.S.-Mexico Binational Surveillance Project has been
implemented to develop a more comprehensive binational surveillance
system for public health problems. Funded by the National Center for
Infectious Diseases and the Centers for Disease Control and Prevention,
the project targets three partner city units: San Diego-Tijuana, El Paso/Las
Cruces-Ciudad Juarez, and McAllen-Reynosa.


9
 Five of the commissioners are mandated by statute: the Secretary of Health and Human Services as
chair, plus the four border states' Border Health Officers.




Page 44                                          GAO/NSIAD-99-190      U.S.-Mexico Border Issues
Appendix VI

Current and Emerging Challenges to
Economic Development in the Border Region

                         In addition to the existing problems of relatively high unemployment and
                         poverty on the U.S. side of the border, large projected population growth,
                         internal migration within Mexico, and a change in the rules governing the
                         Mexican maquiladora industry could potentially affect economic
                         development challenges already existing on the border. Efforts to address
                         job dislocations due to NAFTA trade shifts and to alleviate the high level of
                         poverty in the border region are already underway, including regional
                          economic development initiatives. To what extent they address border
                          development is not yet clear. In addition, the changes in the maquiladora
                          industry rules in 2001 could potentially change business incentives to
                          locate in the border region.



Initiatives to Address   Although the United States as a whole has made great economic progress
                         in the past few years, some communities in the border region have not
Unemployrment and        shared in this prosperity. For example, unemployment in the U.S. border
Economic                 region between November 1997 and November 1998 was 7.4 percent,
Development              compared with 4.8 percent for the United States as a whole. Approximately
                         24 percent of the population living in U.S. border counties lived in poverty
                         in 1996,1 and only about 61 percent of the population 25 years and over held
                         a high school diploma. Moreover, the population of the U.S.-Mexico border
                         region, which in 1997 was 10.5 million, is expected to double in the next 20
                         years.

                         The U.S. government is addressing worker and job dislocations in the
                         border through programs such as the NAFrATransitional Adjustment
                         Assistance Program and the U.S. Community Adjustment and Investment
                         Program administered by NADBank. The NAFTA Transitional Adjustment
                         Assistance program was designed to assist workers in companies affected
                         by U.S. imports from Mexico or Canada or by shifts in U.S. production to
                         either of those countries. The program provides cash payments, job
                         training, or allowances for job search and relocation expenses.

                         Another program designed to deal with the job dislocation effects from
                         NAFTA trade is the U.S. Community Adjustment and Investment Program.
                         This program helps stimulate financing by providing loans, loan guarantee
                         fees, and grants to create or retain private sector jobs in communities


                         'Poverty rate estimates are our calculations based on Census data The Census data has a 90-percent
                         confidence interval.
                         2
                          As reported by the Southwest Border Region Partnership, January 20, 1999.




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 Appendix VI
 Current and Emerging Challenges to
 Economic Development in the Border Region




evidencing significant job losses due to changes in trade patterns with
Canada or Mexico after the passage of NAFTA. Authorizing legislation and
a fiscal year 1999 appropriation provide up to $32.5 million to fund the
program'. There is a similar program in Mexico. While the Community
Adjustment and Investment Program is not directed at the border alone,
program. officials report that all U.S. NADBank border counties are now
eligible for the program (a total of 43 eligible border counties). As of May
1999, the Community Adjustment and Investment Program, including its
agency program with the Small Business Administration, had facilitated 88
loans or guarantees for border communities, totaling $20.1 million. In
addition, the program had approved one direct loan in El Paso, Texas,
amounting to $1 million. The program's pilot grant project was located in
Dona Ana, New Mexico, and granted $600,000 to the New Mexico Border
Authority to aid in the reemployment of displaced workers in the region.

The U.S. Department of Housing and Urban Development and the U.S.
Department of Agriculture also have efforts underway to deal with border
poverty: the Empowerment Zone and the Enterprise Community program.
This program provides tax and regulatory relief to attract businesses to
distressed urban and rural communities. Several border communities in all
four states have been designated Empowerment Zones or Enterprise
Communities. For example, the Arizona Border Region Enterprise
Community developed a plan that addressed economic, environmental, and
education/training improvements for its community. 3 In Texas, the Rio
Grande 'Valley Empowerment Zone reports that it has already achieved
several objectives, including business development activities such as
providing loans, a high-skills training program serving over 866 individuals,
and eight waste/wastewater projects.4

Organizations such as the Border Trade Alliance, and the Texas
Comptroller, have called for a unified approach to solving the region's
problems. Specifically, the Border Trade Alliance supports the Southwest


aThe Arizona Border Region Enterprise Community includes the counties of Cochise, Yuma, and Santa
Cruz.

4The Rio Grande Valley Empowerment Zone includes the counties of Cameron, Hidalgo, Starr, and
Willacy. In a review of the progress of six Empowerment Zones, including the Rio Grande Valley
Empowerment Zone, we reported that the Rio Grande Valley Empowerment Zone had initiated action
on all 10 of the economic development activities planned. See Community Develooment- Progress on
Economnic)evelopment Activities Varies Among the Empowerment Zones (GAO/RCED-99-29, Nov. 25,
1998). For more information on other border region rural and urban Empowerment Zones and
Enterprise Communities, see the Departments of Agriculture and Housing and Urban Development
websites, respectively, at http://www.ezec.gov and http://www.hud.gov/cpd/ezec/ezeclist.html.




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                       Appendix VI
                       Current and Emerging Challenges to
                       Economic Development in the Border Region




                       Border Region Partnership, a grassroots organization proposing to resolve
                       regional problems through economic and community development
                       strategies. The recommended objectives of the Partnership are to (1)
                       develop a strategic plan, including benchmarks, that addresses the five
                       major development issues: infrastructure, economic development,
                       education, health, and the environment; (2) create a community
                       development bank and community development fund for revolving loans
                       and grants for business and infrastructure; (3) increase job creation and
                       retention opportunities; (4) provide technical assistance, capacity building,
                       and leadership training to communities; (5) actively seek partnerships and
                       investment; and (6) become sustainable within 5 years.

                       On May 25, 1999, the White House announced the launching of the
                       Southwest Border Economic Development Initiative, which includes the
                       formation of an Interagency Task Force on the Economic Development of
                       the Southwest Border. The mission and goal of the Task Force reflect the
                       need to coordinate the federal and local economic development efforts to
                       raise the living standards and overall economic profile of the southwest
                       border region on a sustained basis.

                       The Interagency Task Force will include members from numerous relevant
                       federal agencies, such as the Departments of the Treasury, Agriculture,
                       State, Labor, and Housing and Urban Development. It will seek to mobilize
                       a more integrated, rapid response by federal agencies to community
                       economic development strategies by (1) analyzing existing programs and
                       policies of member agencies; (2) consulting and coordinating activities
                       with state and local authorities, community leaders, Members of Congress,
                       and other stakeholders; (3) developing short- and long-term options for
                       promoting sustainable economic development; and (4) integrating
                       executive branch initiatives and programs into concrete, effective actions.
                       According to the announcement, the first step in implementing these
                       efforts will be to establish demonstration projects in pilot communities.



Pending Changes in     The Maquiladora Decree that governs the maquiladora program was
                       revised by the Mexican government to accommodate new rules established
.iaqullauora Rivules   by NAFTA in 1994. The maquiladora rule changes, which will be fully
                       implemented by 2001, may affect business incentives to locate in the
                       border region. NAFTA provides for the gradual elimination of restrictions
                       limiting maquiladora production sales into the domestic Mexican market




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 Appendix VI
 Current and Emerging Challenges to
 Economic Development in the Border Region




by 2001. 5 NAFTA also provides for the phased elimination of U.S. import
duties on maquiladora products, provided those products meet the NAFTA
rules of origin. In the year 2001, Mexico will restrict the duty preferences
available to maquiladoras for raw materials originating outside NAFTA
countries used in the manufacture or assembly of finished products.6
Changes brought about by NAFTA and Mexican law, which together
eliminate virtually all restrictions on foreign investment in the
manufacturing sector, will make it unnecessary to establish a maquiladora
facility to assemble goods in Mexico. 7

Observers of the border economy, such as the Federal Reserve Bank of
Dallas, the Texas Comptroller's Office, and the U.S. Department of
Commerce, agree that several scenarios involving the maquiladora industry
are possible as a result of the changes brought about by NAFTA. These
changes range from a virtual elimination of the maquiladora program to
modifications to business practices. For example, expected elimination of
duty preferences for non-NAFTA suppliers to the maquiladora industry
could make U.S. and Canadian suppliers more competitive with the
existing non-NAFTA suppliers, possibly leading to a shift in trade. In
anticipation of Mexico's policy change on duty relief, maquiladora
producers have encouraged non-NAFTA suppliers, such as Asian suppliers,
to relocate to North America in order to guarantee that duty-free treatment
would remain unchanged. However, it is too early to predict what the
effects of the changes in the maquiladora law will be for the border region.




5
 Provided that certain Mexican customs and other requirements are met For example, products sold
into the Mexican domestic market must also satisfy nontariff requirements, such as Mexican official
standards, and must be of the same quality as the finished products produced for export.
6
Currently, maquiladora companies may obtain duty-preferences on inputs obtained from any supplier
country. After 2001, maquiladora companies will only be able to receive duty-preferences on inputs
from NAFTA countries.
7
Although maquiladoras will no longer exist under NAFTA as a separate sector, production-sharing will
likely continue due to Mexico's comparative advantage in low-wage labor.




Page 48                                          GAO/NSIAD-99-190 U.S.-Mexico Border Issues
Appendix VII

Objectives, Scope, and Methodology


               Concerned about the U.S.-Mexico border area's ability to deal with a variety
               of issues associated with the increased economic integration with Mexico
               and the ability of the area to access federal funding, members of the House
               Congressional Border Caucus asked us to undertake a broad review of
               border issues. As agreed with the requesters' offices, the objective of this
               interim report is to present an overview of major border issues.
               Specifically, we identified (1) the nature of major issues faced at the border,
               and (2) the U.S. and Mexican efforts underway to address them.

               To obtain information on the nature of major issues faced at the border, and
               the U.S. and Mexican efforts underway to address them, we conducted an
               extensive literature search and reviewed a variety of government studies
               and documents, including State Department information on U.S.-Mexico
               relations. Based on this preliminary review, we selected the following five
               major issues as a focus for this work: (1) drug enforcement, (2) illegal
               immigration, (3) cross-border transportation, (4) environmental
               infrastructure and public health, and (5) economic development. To
               establish the nature of the issues and the efforts being made to address
               them, we relied heavily on the results of related past GAO studies that
               addressed specific U.S. programs and activities. We also interviewed
               agency officials and/or reviewed documents from the Departments of
               State, Agriculture, Commerce, Defense, Health and Human Services, and
               Housing and Urban Development; and Drug Enforcement Administration,
               INS, and the Office of National Drug Control Policy, as well as numerous
               state and local agencies and private sector organizations. The information
               on foreign laws in this report does not reflect our independent legal
               analysis, but is based on interviews and secondary sources.

               Our ongoing detailed evaluation of the transportation and environmental
               infrastructure issues also included interviews with officials and review of
               documents from the Departments of Agriculture, State, and Transportation;
               EPA; INS; U.S. Customs Service; Food and Drug Administration; General
               Services Administration; and state, local, and private sector officials. We
               also attended various conferences on border environment and
               transportation infrastructure issues and visited Mexico City, where we
               interviewed U.S. embassy and key Mexican government officials, including
               officials in Mexico's Secretariat for Foreign Relations. In addition, we
               obtained and analyzed data on activities at major border crossings and
               environmental infrastructure projects during case studies at key sister
               cities along the border, including San Diego-Tijuana, E1l Paso-Ciudad
               Juarez, Laredo-Nuevo Laredo, Nogales-Nogales, Brownsville-Matamoros,
               Calexico-Mexicali, and Douglas-Agua Prieta. At these locations, we met



               Page 49                                GAO/NSIAD-99-190 U.S.-Mexico Border Issues
 Appendix VII
 Objectives, Scope, and Methodology




with U.S. and Mexican federal, state, and local governmental officials; a
variety of officials representing the private sector and nongovernmental
organizations; and representatives from various U.S.-Mexico coordinating
mechanisms. The meetings with U.S. and Mexican consuls general and
consuls at the key sister cities provided excellent perspective on the wide
range of border issues. As we continue our in-depth case study analyses of
transportation and environment issues, we plan to identify potential
strategies to overcome the institutional and programmatic challenges that
impede improved conditions on the border.

We performed our review from February through June 1999 in accordance
with generally accepted government auditing standards.




Page 50                               GAO/NSIAD-99-190 U.S.-Mexico Border Issues
Appendix VIII

GAO Contacts and Staff Acknowledgments



GAO Contacts      Elliott C. Smith, (214) 777-5700
                  John Hutton, (202) 512-7773



Acknowledgments   In addition to those listed above, Patricia Cazares-Chao, Allen Fleener,
                  Phillip Herr, Jeff Kans, J. Lee Kaukas, Leyla Kazaz, Ed Laughlin, Patricia
                  Martin, Rona Mendelsohn, Miguel Salas, Patricia Sari-Spear, Larry Thomas,
                  and Linda Kay Willard made key contributions to this report.




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