Mexico - Northern Border Environment Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 12603-ME STAFF APPRAISAL REPORT MEXICO NORTHERN BORDER EIRONMENT PROJECT NAY 16, 1994 MICROGRAPHICS Report No: 12603 MX Type: SAR Country Operations I & Environment Division Country Department II Latin America and the Caribbean Regional Office This document has a resticted distibution and may be used by recipients only in the perfonnance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENT Currency Unit = Peso (Mex$) US$1.00 = 3.3 Pesos (May 1994) FISCAL YEAR January 1 to December 31 UiT OF WEIGIrS AND MEASURES Metric. British/US Equivalent 1 kilometer (km) = 0.62 mile (mi) I meter (m) = 3.28 feet (ft) I gram (g) = 0.0022 pound (lb) i klogram (kg) = 2.20 pounds Ob) 1 ton = 2,205 pounds 1 cubic meter (M3) = 6.29 barrel (bbl) 1 cubic meter (M3) = 35.32 cubic feet (ft3 or SCF) 1 cubic meter (M3) = 264 U.S. gallons (gal.)  FOR OFFICIAL USE ONLY ABBREVIATIONS AND ACRONYM BANOBRAS Banco Nacional de Obras v Serykios (National Bank of Publics Works and Services) BECC Border Environmental Cooperation Commission CETES Cerificodo de la Tesorer(a de la Federacin (Treasury Bill, Mexico) CITES Convention on International Trade in Endangered Species of Wild Fauna and Flora CNA Comision Nacional del Agua (National Water Commission) CONAPO Contut Neiconal de Poblcd6n (National Population Committee) COPLADE Comnit de Planeacion y Dsarrolo Estatal (Committee for Economic and Social Planning) CDS Conveno de Desarrollo Social (Social Development Agreement) CPP Costo Porcenual Proandi&, (Average Cost of Funds) DAF Direccion Adjunta Flciera, BANOBRAS (Offlce of the Deputy General Director for Finances) DAPPAT Direcci6n Adjunta de Planeaci6n, Promoci6n y Asistencea Tecnica, BAN.OBRAS (Office of the Deputy General Director for Planninig, Promotion and Technical Assistance) DFD Direccion de Flwanckamento al Desarrollo, BANOBRAS (Directorate for Development Financing) DGAERN Direccidn General de lnfaesrtnaura y Edpandiento, SEDESOL (General Directorate for Infrastructure and Equipment) DGDR Direccion de Desarrollo Regional, PRONASOL, SEDESOL (Regional Development Directorate) DGNA Direcci6n General de Normwevidad Ambienml, INE (Environmental Reguladons General Directorate) DGP Direccion General de Planeacidn, SEDESOL (Planning Directorate) DGPE Direcc6.n General de Planeaci6n Ecol6gica, INE (Office of the Director General for Environmental Planning) DGRF Direcci6n General de Recursos Financieros, SEDESOL (Directorate General for Financial Resources) ECU Executive Coordination Unit GIRA General Interest Rate Agreement GIS Geographic Infornation System GOFI Gerencia de Organsmos Flnancieros Internacionales, BANOBRAS (Department for International Financial Organizations) IBEP Integrated Border Environmental Plan 1992-1994 IBWC International Boundary and Water Commission ICB International Competitive Bidding ICG Intemal Cash Generation NITA Instnuo Mexicano de la Tecnolog(a del Agua (Mexican Institute for Water Technology) INAP Instituto Nacional de Admimstraci6n PNblica (National Institute for Public Administration) JNE Instintuo Nacional de Ecologfa, SEDESOL (National Institute for Ecology) IPI Impact and Progress Indicators IPIS Integrated Public Investment System lTP Integrated Transport Plan Ibhis document has a reticted dbuon and may be asd by recipie only in th performan of teir official duies. Its contents may not otherwse be disclosed without Wodd Bnlk usudwnz  JRT Inland Joint Response Team LCB Local Competitive Bidding MAP Management Action Plan MEP Mexican Environmental Project MIS Management Infonnation System MP Municipal Promotion NADRANK North Amercan Development Bank NAFTA The North American Free Trade Agreement NBEP Northern Border Environment Project OASP Ofcina de Andlisis y Seguinmento del Programa de la Frontera None, SEDESOL, (Office for the Analysis and Follow-up of the Northern Border Program) 03 Ozone PFPA Procuradwra Federao de Proteccidn a! Ambiente, SEDESOL (Attorney General for Environmental Protection) PHRD Population and Human Resources Development (Japan) PI Indice de Marginalidad (Poverty Index) PIAF Programa Integral Ambiental Fronteizo (Environmental Border Program) PM-10 Particulate matter less than ten micrometers in size. PRONASOL Prograrna Naclonal de Solidaridad, SEDESOL (National Solidarity Program) PVT Programa de Vialidad y Itraporte Urbano para Ciudades Medias RCRA Resource Recovery and Conservation Act (USA) (Urban Transport Program for Medium-size cities) SARH Secretarfa de Agiciultura y Recursos HidrWdicos (Ministry of Agriculture and Water Resources) SECOGEF Secretarfa de Contralorta de la Federacidn (Generl Comptroller Ministry) SEDESOL Secretarfa de Desarrollo Social (Ministry of Social Development) SHCP Secretar(a te Hacienda y Credito Pib!ico (Ministry of Finance and Public Credit) SMI Smzll and Medium Sized Industry SOEs Statement of Expenditures SPAA Szbprvcuradufa de Auditoria Ambental, PFPA (Office of the Deputy Attorney General for Environmental Audits) SPPSQ Subprocuradura de Participacidn Social y Quejas, PFPA (Office of the Deputy Attorney General for Community Participation) SPVN Subprocuradur(a de Ve.niJkaci6n Normativa, PFPA (Office of the Deputy Attorney General for Inspection and Enforcement) SW Solid Waste TA Technical Assistance TOR Terms of Reference TS Technical Specifications TrU Transportable Treatment Unit USEPA US Environmental Protection Agency UT Urban Transport VOCs Volatile Organic Compounds WB World Bank WSS Water Supply and Sanitation WU Water Utility  MEXICO NORTHERN BORDER ENVRONNMENT PROJECT STAFF APPRAISAL REPORT TABLE OF CONTENTS LOAN AND PROJECTSUMM4ARY ....*........................... I L BORDERA Bc RONd. .ENTAL COND.... ....... . m . o . ... ..... . ..el. . 1 B. Key Environmental Tses and Problems ... .......... . .. .. .. . .... . 5 W Supply and Sanitation ............................. S M cipfiSolid Wat ................. 7oo..o. o - . ... . PublicHeadth .. ... . ........ .. .............. 7 Air Polution and UIban Transport .... . 7 IndustrialPollution ...... 9 Loss of Biological Diversity . ... ............. 11 C. The Lepg and i ol Framework ..o.o.o.o.o..............oo. 12 L.egislat0ion andReguladons .. ooo .......... 12 Thentu aSetting .......... ... ......1.......... 13 Binmaonal Cooperion and Iniatives . ........... .......... 15 D. The Integated Border Envlronnental Pan . ... o.. ..... ........o 16 PreiminaryResultsofFirstStaep(1992-1994)) ... o .... .... .o.o. 17 Plans for the Second Stage . ... o ........... .. - ..... 18 E. Rationale for Bank Involvement .... ....... .. . ..... . .. . . 18 F. Leons fromExperience *0****.* o *.......a . . . . . *.......... 19 EL TH ROJECT . . ,o. o. o ............. 20ooo A. Orgnof the ProJed *.......... o .......... .20 B. ProjectObJetives . ........... 20 C. ProjectDescription ........................e o....o * .. .o21 Institutional Strengthening . ..... ..... ......... ..... 22 Environmen Srvicesnp ement ........................ 23 D. Project Fnuancing *ragnet . . . . 24 D. Pr3a~~~~~~~~***000AoaemeS .......... ........... Relending Ternns and Grants .. . . .24 On-Lending Aangements ............................. 24 E. ProJect CostandFlnanc . ........ *.....o... . 27 F. Environmental unpact .................ooo ............... 28 G. Project adn t Mna t . .... . . .. ... . .... . . 29 Imnplenientation .....Respcmsibii. .. .. . . . . . . . . .29 Tmnpimenintation Procedures .... ... .......... 31 Reporting and Project Suprvision ... . -... ...... . .. .. . . . . 32 imL AGREEMENTSREACED AND RECOMMENDATIONS .............. 38  LIST OF TABLES Table 1.1 1990 Population and Projected Popuation Growth of Major Border Munsc ip alities Table 1.2 Occupational Distribution of Employed Persons at the Northern Border Table 1.3 Distribution of Maquaora Plants in Major Sister Cities Table 1.4 Volume of Hazardous Waste Received in US from Medco Table 1.5 Disposal of Hazardous Waste Geneted in the Meican Northern Border Area Table 1.6 Prqected Total Inestment Needs of the Integated Border Environment Plan for the Maeico-U.S. Border Area, 1995-2000 Table 2.1 Cost Sharing for Water Investments Table 2.2 Cost Sbaring for Solid Waste nvestmts Table 2.3 Cost Sharing for Air Quality and Urbn Tnsport Investments Table 2.4 Project Cost Summary Table 2.5 Project Financing Plan Table 2.6 Implementing Agencies Functions and Responsibilities Table 2.7 Summary of Procurement Arrangements Table 2.8 Initial AUocation of Loan Proceeds Table 2.9 Estimated Bank Disbursement LLST OF FIGURES Figure 1.1 Proportion of Employed Population on Northern Border Employed in Maquiladoras Figure 1.2 Distrbution of Incomes of Employed Population on the Northern Border Figure 1.3 Distribution of Maquiladora Plants in. Major Border Cities LIST OF MK PS Map IBRD 25228R Border Cities Population - fap IBRD 25-229R Location of Maquiladora Plants Map IBRD 25292R River Basins Map IBRD 25230R Existng or Planned Environmental Infrascture Map IBRD 25231R Location of Border Protected Areas Map EBRD 25240R Map of Border Area Ths rport has been peprted joinly by the Mecican Govwem and the Wodd BanR It is based on th find;ngs of t World Bak msions which visited Mexico fiom November 7 to 24, 1993 and fiom Febray 7 to 11, 1994. The missions were composed of Meurs./Mmes. Cung Phiin (Tak Mana), Cad H. Mumme, Violeta Rosthal, Giso Mohadjer, Julia Buchal, Victor Vergra, Lily Franchni, Olgp Corles, Caulos Quintea LA2Cl); Tim Campbell, Sara Freedbeim, (LATAD); Nigd Smi, (LATE; Rodrigo Vargs, Jean-Claude Sallier, Joost Daisma, aLA2MX); Lomine Auilar, Livia Bawvides, Edwad Camena, Philip Comwell, Adrian Demsyo, Edgardo Dabex, David Moreil, Joseph Peon, Suitbetus Van der Meew, David Wlk, (Consunts). Mr. David do Feantim Division Chief (LA2C1) also patcipaded im both nms. Ihe Dep nt Director is Mr. Edilbert Segua. The Mexican team was coposed of oficials fmm PFPA, INE, CNA, BANOBRAS, SHCP and SEDESOL. Ms. Mara Ele Eastavillo and Mr. Max Diener Sala of SEDESOL's Ecomic and Social AnDysis Unit, participated in he draftig of this repolL~~~~~~~~~~~~  MEXICO NORTHERN BORDER ENMRONNT PROJECT LOAN AND PROJECT SUMMARY Borrower: Banco Naional de Obras y Servicios Publicos (BANOBRAS) Guarantor: United Mexican States Exect Agencies: BANOBRAS, Secretarfa de Desarrollo Social (SEDESOL), Instituto Nacional de Ecologia (INE), Procuraduria Federal de Protecci6n al Ambiente (PFPA); and Comision Nacional del Agua (CNA). Beneficiaries: PFPA, the States of Baja Caonia, Chihuaha, Coahuila, Sonora, Nuevo Leon and Tamaulipas, participating border municipalities, and private small and medium industnes (SMIs) Amount: US$368 million equivalent. Terms: Repayment in 15 years, including five years of grace, with interest at the Banl's standard variable rate. Rlebding Terms The Guarantor would relend US$239.5 million equivalent at the and Grants: CETES (Treasury Bill) rate to BANOBRAS which would relend these funds to participating border cities in Mexicaui pesos at the CETES or CPP rate, whichever is higher, plus two percentage points (CETES plus one percentage point in the case of state and municipal finance strengthening subcomponelt), with maturities up to 15 years, including grace periods up to three years. The Guarantor would make available the remaining US$128.5 million on a grant ("paricipaci6n