Public Meeting of the Board of Directors December 3, 2014 Washington, D.C.

Transcription

1 Border Environment Cooperation Commission and North American Development Bank Public Meeting of the Board of Directors ORIGINAL ENGLISH VERSION MR. FLORES: Good afternoon, everyone. I m going to respectfully ask that everyone begin to take their places, and I m also going to apologize in advance for my breaking voice throughout the afternoon. I think a lot of people are suffering from head colds and sore throats in this weather. My name is Juan Antonio Flores. I am the Associate Director of Public Affairs for the North American Development Bank, and I am honored to be your master of ceremonies for today. Welcome everyone. Twenty years ago, the Border Environment Cooperation Commission and the North American Development Bank were created by the Governments of the United States and Mexico in a joint effort to help preserve, protect and enhance the environment of their shared border region in order to advance the well-being of the people of both countries. BECC, located in Ciudad Juarez, Chihuahua, and NADBank, located in San Antonio, Texas, over the years have constituted an innovative, binational approach to infrastructure development and financing in the border region between the two countries. A lot has been accomplished over the last 20 years. Today, we re not only conducting the official business of the Board of Directors, which met this morning, but we also celebrate this 20th anniversary, and we thank and congratulate all of you here that have been a part of the challenges and the successes that these institutions have endured over the last 20 years. And so, thank you, and I m going to ask that all of you give yourselves a round of applause, please. [ APPLAUSE ] To begin with our program, we will have special welcoming remarks from the two leading members of the respective delegations from Mexico and the United States. And it is my distinct honor and pleasure to introduce first Dr. Fernando Aportela. Dr. Aportela is the Undersecretary of Finance and Public Credit of Mexico. He has served in this role since December of Prior to this he was the Executive Director of Investment Banking of Evercore Mexico until November of In 2004 he joined Protego, which subsequently merged with Evercore to become Evercore Mexico. Before this he was Undersecretary of Finance for the State of Veracruz, Mexico. He has served as the Director of Economic Research in the central bank of Mexico, as Deputy Director of the Team of Economic Advisors to the President of Mexico, and as a member of the Team of Economic Advisors to the Ministry of Finance and Public Credit of Mexico, Hacienda. Mr. Aportela received a bachelor from ITAM and holds a doctorate from the - 1 -

2 Massachusetts Institute of Technology. 1 Please help me welcome Dr. Fernando Aportela. DR. APORTELA: Good afternoon everybody. First of all, thank you very much for hosting us. Thanks a lot, Marisa, for the hospitality. We had this meeting in Mexico a few months ago, celebrating the 20th anniversary of NADBank and BECC. I also want to salute Henry Cuellar, Dr. Carlos Rubinstein, Ambassador John Negroponte. Juan Carlos Belausteguigoitia, I don t know if he is here. Juan Carlos, thank you. Juan Carlos was my professor of Economics I at ITAM. And so he s the reason that I like micro instead of macro better. [ LAUGHTER ] I won t say who was my first macro teacher. I also would like to thank Gerónimo Gutiérrez I don t know where is Gerónimo and Maria Elena, thank you very much for everything. Well, as you know, we have a very important relationship, Mexico and the U.S. I would like to give you some numbers since NAFTA. 2 The U.S. is the first Mexico trading partner with 79 percent of exports and 50 percent of imports. With NAFTA, bilateral trade rose from 71 billion dollars to 225 billion between 1994 and Mexico is the U.S. third largest trading partner after Canada and China. And bilateral investment flows are also strong. Foreign direct investment by U.S. companies in Mexico stands at more than 100 billion dollars. Mexican investment in the U.S. is 17.6 billion dollars and grew 35 percent over the last five years. Our governments, and I have to say this, it has been very important and we have had a very good relationship working in Hacienda with the Treasury. I think Marisa and myself, we believe that we are partners in the things that we try to promote and the policies that we try to achieve in benefit for the two countries and for the region as a whole. And I have to say this, the relationship between Secretary Lew and Secretary Videgaray is also an excellent relationship, and we believe and we feel that the U.S. Treasury is a strategic partner of Hacienda in Mexico. We have worked in the financial chapters of the TPP, and we have been successful on that. 3 One other thing that we were very successful in implementing was the pari passu clauses and the collective action clauses that helps to have a better contract in terms of the international debt that we have. Some professor at Georgetown, she mentioned that the new clauses of the Mexican contracts in terms of, in the debt contracts were the iphone 6 of debt contracts. [ LAUGHTER ] 1 Instituto Tecnológico Autónomo de México (ITAM). 2 North American Free Trade Agreement (NAFTA). 3 Trans-Pacific Partnership (TPP)

3 That probably summarizes everything that I want to say about the two clauses. Those were very good. And that was a joint effort with the Treasury, also with the G20 countries and with the International Markets Capital Association. The border also, as you know, it s a very important relationship. Together, the border states have a population of more than 100 million people. It is the worst fourth largest economy. And I have to say that in Mexico the border states generate 35 percent of GDP, of national GDP. Obviously we have some challenges there. There are disparities in development, deep poverty in income distribution persists in Mexico and also in the border states. In some parts of the border states we have infrastructure gaps. And there are sustainability and environmental issues that are also important and so that s some of the, specifically, the work of BECC and NADBank that they have been doing very well over the last 20 years. We believe that to achieve development we need a robust financial sector. A sector that is inclusive. A sector that provides funds to infrastructure projects with high social value and that sometimes are often profitable after a long time but not immediately, so that s where development banks efforts is very important. And also there are positive externalities that without the use of development banks won t be developed. Also we need a financial sector that is flexible and innovative. That s something that actually has been discussed over the last two days in our meetings. And also a financial sector that maintains what is good, what has been achieved in Mexico and is also true in the U.S. In Mexico it has been achieved after a long period, which is to have a proven, sound and properly monitored and generally in line with best international practice, our financial sector. That s something that we did with our financial reform. And the financial reform has been a very important one in Mexico. It was enacted in January of this year, and it has some basic principles, but one very important principle is to promote competition in the financial sector in Mexico. Also to have more better and much more good financial instruments and also to maintain a robust financial sector. But one key piece of the financial reform is to have a more robust and a more flexible use of the development banks that we have. They, by law and by the definition in the law, they were very prudent, more prudent than the commercial banks. So imagine that in a development bank that is supposed to take more risk, to promote a specific, to promote some sectors that are not really in the market or that the market does not provide. So that was something that fortunately was fixed with the financial reform and with the support and guidance of Secretary Videgaray. In terms of development banks, I believe that the work of NADBank and BECC clearly shows one of the most important bilateral efforts that we have done, that Mexico and the U.S. have done, over the last 20 years. Let me give you some numbers. BECC and NADBank, for example, working together, have certified and financed over 200 projects along the border in 2014 alone, 200 in Total financing by NADBank, including grants, in 2014 were almost 280 million dollars. Obviously, we see the numbers but the numbers also have an important multiplier effect. Funding by NADBank covers at most 85 percent of the cost of the project, but often is less than that. Financing provided at the end of September 2014, by NADBank, total approvals were 2.4 billion supported projects with a total value of 6.8 billion, which is a factor of more than two and three-quarters of a multiplier factors of what have been done over time

4 It has a lot of advantages, NADBank and the BECC. And to have two dedicated institutions to provide financing and to look for the environment in the borders obviously over time creates a lot of value. First of all, there is a high quality expertise in many areas. Some of the things that were discussed this morning specifically related to that. Of how some specific projects really want to have NADBank as part of the syndicate, not because of the dollars it provides, which are important and low cost as was mentioned in the morning, but most of all because of the expertise that NADBank provides and the endorsement to the project that BECC and NADBank actually gives when they are willing to put their money into the projects. There are also successful experiences and best practices. We saw some of the measurements this morning of how this changes the reality of people in municipalities. How water treatment, to have, to get rid of the latrines and the cesspools with very small loans but with a lot of follow-on and with a lot of expertise and a lot of hard work actually changes the reality of the communities that they serve. And also that it has a lot of comprehensive view that can take advantage of synergies between complimentary projects in the border. So it is much easier for NADBank and BECC to identify this type of opportunities. For example, I just came from the high economic dialogue that we are having between the U.S. and Mexico. And one key component of what we have been doing is a lot of NADBank and BECC. Identifying, for example, the low-hanging fruit that we can have to have a better border. In Mexico we are having a very important structural transformation over the last, now, two years. President Peña has been able to pass 11 deep structural reforms that will change the capacities of the Mexican economy to increase growth over the long and medium term. The government is devoted to the implementation of that structural reform agenda. We are working on having on time, for example, the implementation of the energy reform, TELECOM, financial reform. We have just approved the last regulations at the CNVB, the Mexican supervisory authority of banks. 4 So we have already done that. We are working on the implementation and through implementation. And we have been able to differentiate with other emerging economies in terms of having good public finances, in terms of having flexible exchange rates, in terms of having high international reserves. We just took up the renewal of the flexible credit line by the IMF. 5 This package of good behavior in terms of public finances and this commitment with having decreasing deficits and to have sustainable debt over time is what makes the differentiation of Mexico among other emerging economies in view of what is going to happen next year here in the U.S., for the good reasons, which are the good reasons that the U.S. economy is growing. So these 20 years of NADBank and BECC, as I mentioned in Mexico a few months ago, these have has been very good years, very impressive in terms of what all the team have achieved and all the members that have been at NADBank and BECC over the years that these institutions have been there. And I m totally sure that with the aim and the efforts that the management is doing, the Board is doing, the two governments are doing, I m sure that the next 20 years will be excellent and we ll have the institutions, 4 Comisión Nacional Bancaria y de Valores (CNBV), the Mexican National Banking and Securities Commission. 5 International Monetary Fund (IMF)

5 we ll preserve the institutions with the quality and inspiration that has achieved so many results in favor of all the people along the two borders and across Mexico and the U.S. Thank you very much. MR. FLORES: Thank you very much, Dr. Aportela. It is now my pleasure to introduce our host for today s events. Ms. Marisa Lago serves as the United States Department of the Treasury s Assistant Secretary for International Markets and Development. In this position Ms. Lago is responsible for leading Treasury s role on the Committee on Foreign Investment in the United States. She also directs Treasury s portfolio on international financial services regulation, trade, banking and securities, development, technical assistance and climate finance. Prior to joining the administration, Ms. Lago served as the president and CEO of Empire State Development in New York where she oversaw several very important infrastructure projects. Immediately prior to joining the New York State government, Ms. Lago spent five years as the global head of compliance for Citigroup s Corporate and Investment Bank. Before joining Citigroup Ms. Lago headed the Office of International Affairs for the U.S. Securities and Exchange Commission. She has a long and distinguished career, which makes her very suitable for the position she holds now. She earned her JD cum laude from Harvard Law School, and has a BS in physics from Cooper Union. Please everyone help me welcome Assistant Secretary Marisa Lago. MS. LAGO: Well, welcome to all, and special thanks to our distinguished guests who are going to be on the panel. And to you, Congressman Cuellar, for taking time to address us a little later this afternoon. I also want to thank Fernando. We deal with each other we have the pleasure, I ll say of dealing with each other in multiple settings and frequently they are multilateral settings, whether it s in the context of the TPP negotiations that Fernando mentioned or at the Inter-American Development Bank. But I think we both have a particular warm spot in our hearts for the NADBank and BECC, which is just one manifestation of the strong bilateral relationship between our countries. So Fernando gave a general arc of the relationship, the accomplishments of the NADBank. I thought for our guests who were not present at the Board meeting this morning, I d give you a little rundown on what happened in this room earlier today when the NADBank Board met. As usual, the Board went through and approved a host of different projects that had been prepared ably by management, seven different projects on both sides of the border. They included the Monterrey VI Aqueduct and also several wastewater treatment facilities. This is the bread and butter of the NADBank and BECC, projects that help residents in northern Mexico meet their water needs in a safe and sustainable manner. And I ll put a special emphasis on the word sustainable, which again is a hallmark of this institution. Now, as Juan Antonio noted, over the past two decades NADBank and BECC have worked closely together to improve the lives of some of both of our countries poorest citizens by financing investments of this type in environmental infrastructure. And the - 5 -

6 results speak for themselves. If one just needs to look at the millions of citizens enjoying cleaner water, air and energy because of the investments made by these institutions. And the reason that I emphasized sustainability is that these institutions do more than just provide bricks and mortar. It s important to provide bricks and mortar, but they go beyond by providing training, technical assistance to the border communities. And so, by doing this, they are investing in the longer term beyond even the life of the physical projects that they create. I think it s this combination of project finance and knowledge products that has given these two institutions a well-deserved reputation for being strong and effective partners in development, partners of choice for the communities that they serve. Now, this morning s Board meeting was not just any old board meeting. I m pleased to let folks know that this morning the Board approved an historic resolution in favor of integrating BECC and NADBank into one organization. This decision reflects a lot of careful consideration by management in putting forward the proposal. It was a unanimous decision by the Board, and the decision very much benefitted from the input from the affected communities, which helped shape the form of the merger. It s precisely because these two institutions share a common mission that we think that we have the potential, by merging them, to be even more effective. We think that some of the benefits, to list just a few, simplifying and speeding up the process for getting projects from concept to implementation; operational efficiencies so that the funds that NADBank and BECC have can go that much further; and also forging a common culture and a culture that is dedicated to efficient delivery, but also sustainable impact. Now, there s one point that can t be stressed often enough, which is that the environmental mandate of the institution is going to remain unchanged under the merger. While a lot of progress has been made along the border, we know that the work remains unfinished. And so that s why we are pleased that this merger will strengthen and help sustain the institution. We believe that the merged NADBank and BECC are ideally suited to help minimize the environmental risks that are associated with the rapid growth along the border by investing in sustainable solutions like green energy, green transportation and energy-efficient housing. In the coming months we re going to be working closely with management to assure a smooth, a successful integration, and that will allow the Bank sometimes we think of it as the little engine that could to operate even more effectively. Now, in closing, I want to give a special shout out to Gerónimo and Maria Elena. This could not have happened without your leadership. I also want to join Fernando in congratulating NADBank and BECC for their success over the 20 years. This shared commitment that we have with Mexico is, I think, underlying the success of the Bank, an expert staff, involved communities, external Board members, and I do want to recognize our two border members who ground truth us on the Board. The NADBank and BECC, they may be small, they may not be known to many folks outside of the border region, but they are not just effective, they are much cherished institutions. Thank you

7 MR. FLORES: Thank you very much, Ms. Lago. It is now my honor and pleasure to introduce the Honorable Henry Cuellar. Growing up in Laredo, Texas, Congressman Henry Cuellar was very familiar with the economic and cultural relationship between the U.S. and Mexico at a young age. It was with this background that Congressman Cuellar pursued an education in international trade and a career in public service. The most degreed member of Congress, with five advanced degrees, Dr. Cuellar earned among these degrees are included a Master s Degree in International Trade from Texas A&M International University. Dr. Cuellar served seven terms as a Texas State Representative before being appointed the 102nd Texas Secretary of State. In 2004 Congressman Cuellar was elected into the United States Congress. As a member of Congress, Dr. Cuellar serves on the Homeland Security and State and Foreign Operations Subcommittees of the influential Appropriations Committee, where he helps direct federal funding to the Department of Homeland Security and the State Department. Representing South Texas along the border with Mexico, Congressman Cuellar has been a major proponent of trade between the two countries. This is why Dr. Cuellar has worked hard to develop bilateral relations between the two governments. He has successfully initiated federal and state policy that has enhanced U.S.-Mexico cooperation on border security, international trade and commerce and energy development. Congressman Cuellar represents a large portion of the Eagle Ford shale reserves, one of the most productive natural gas fields in the United States, creating 61 million dollars in economic impact in supporting 116,000 full-time jobs across South Texas in 2012 alone. With the Eagle Ford shale being such an economic boon for South Texas, Congressman Cuellar has worked hard to promote energy independence, as well as facilitate international trade with Mexico and other countries. Congressman Cuellar has a longstanding relationship with multiple Mexican officials, including President Enrique Peña Nieto. It has long been a priority of the Congressman to facilitate trade between the United States and Mexico, and his record in Washington demonstrates this. Dr. Cuellar serves as an advisory board member for the Center for U.S. and Mexico Law at the University of Houston Law Center, and as an advisory board member for the Georgetown University Center for Latin American Studies. Please help me welcome the Congressman from my hometown, Laredo, Texas, Henry Cuellar. MR. HENRY CUELLAR: Juan Antonio, thank you so much and thank you for your kind words. And we really appreciate the work that you and the folks have done along the border. And I certainly want to thank you so much. Secretary Lago, again, thank you for your leadership again. And certainly, Secretary Rodriguez also. My best to Luis. In fact, Peña Nieto had just won and Luis Videgaray was up here, and the first time we sat down we were talking about what we can do with NADBank and what we can do with this, and hopefully this is the direction that we re all moving forward on that. So please send Luis my best. Ambassador, where are you? Ambassador, again, it s always a pleasure. You ve been a leader in the relationships with Mexico and the United States, and we really appreciate everything you ve done and you re going to continue doing. Carlos, water what did we say last night? Mark Twain said that water, I mean, said liquor is for fighting and water no, no, liquor is for drinking and water is for fighting. But - 7 -

8 again, on the border we understand that we re going to work together with the mexicanos and make sure that we drink water together, maybe a little tequila once in a while there, too, again. Denise. Denise and I were in the state legislature when we started this, getting the state legislature involved, and we were the chairman and the vice chair. And then when I became Chair, Governor Perry put me as secretary of state, so I left that. But, again, it s Denise, it s also a pleasure. Where are you, Congressman? Again, it was a pleasure being with you yesterday. We had a pleasure, spent a little bit of time understanding one of the original magna cartas that we saw last night and the civil rights. And it was a pleasure working with you and, of course, with our countries, because, again, I ve always said the Rio Grande or the Rio Bravo does not divide us as two countries, but actually unites us as two countries. And I think this is what we need to understand. And this is certainly in the last 20 years, what you all have been doing is certainly the right direction. You know, we ve got to go beyond this thinking that, when we think about the U.S. and Mexico, all we think is about drug cartels, all we think about is border violence, all we think about is immigration. But there is a lot more, a lot more to this relationship. And as long as we, you know, as long as we break that type of thinking and look at what it means, the promise between these two great countries called the United States and the Republic of Mexico, then I think we can get to that part. And I think we can with folks like you that have this thinking that it is more than just security and immigration. And this is why it s so important. If you look at it, I mean, think about this. Let s stop thinking about immigration by the way, I support full immigration reform, and I think it s the right thing to do. But, you know, if you look at it let s first talk about trade and commerce. Every day there is at least 1.3 billion dollars of trade between the U.S. and Mexico. Every day. Every day. And if you look at it, you know, the trade between the U.S. and Mexico has increased by 506 percent between 1993 and last year. And if you look at, not only that, look at the one million crossings that we have every single day. And think about the potentials that we can see on this. We ve been talking about, Congressman, as you know, we were looking at this, about the high speed train that we re talking about between San Antonio, Laredo, Monterrey. Think about what that means connecting countries that, you know, that we re looking at. And not only that, and I have to bring up the energy on that, because, as you know, being from Texas, energy is a little important to us. And think about what s happened in the Eagle Ford, and you mentioned that a few minutes ago. Think about what s happening there. And imagine what could happen in the Burgos Basin on the other side, on the Mexican side. Think about the jobs that have been created on the U.S. side. Think about the economics that we re seeing, and I think that what President Peña Nieto and the other folks have done there, the historic and I called this Congress, and I said that to you last night, Congressman and what President Peña and the Congress has done, this is an historic moment, what they re doing: education reform, telecommunication, financial reform, and etc., etc., plus the energy reform. So there s a transformation that s happening right across the Rio Grande. A transformation. But a lot of us, a lot of us not in this room but a lot of us are just seeing one thing. They re seeing one dimension. They are not seeing this transformation that they re seeing. You know, they keep talking about immigration and people coming - 8 -

9 across and all that. And I had to say this, I was at Homeland Security I have to say this because we ve got to go beyond this. Some of the folks were saying, you know: People are coming across. People are coming across. We ve got to stop them. We ve got to stop them. So I raised my hand and I said, Well, look. I got a letter here also that talks about this border official that he s talking about these people are coming across the river, and he s saying we got to stop these people from coming over because they are taking over our lands. They re doing this. They re doing that. And then, you know, I could see the heads of people saying, oh, yeah, that s correct, that s correct. I said, but the only problem is, this letter was written around 1830 and it s in español. And it was Mexican Coronel Diaz talking about central Austin, talking about these Americans that were crossing the Red River and doing this. So, I mean, look, we ve been talking about immigration reform, we ve just got to be sensible on how we deal with that issue. So it s not only the people that we re dealing with, but we certainly have to talk about the infrastructure, and this is where you all come in. You know, we ve done some parts, some changes. You know, the environment is very important. You know, we ve done some changes, you know, on the border. We ve added 2,000 new CBP officers, the men and women in blue. 6 Because, as you know, for many years Congress would only put the men and women in green, which is border patrol. That s good. But you need the men and women in blue to make sure that we move that traffic and people coming in. The other thing is that we added that money in, and they re in the process of hiring that. And even not it s only the personnel, but it s how we treat our mexicanos and how we treat ourselves crossing over. If you go to the border, you will hear that one of the most common complaints that we have is how CBP treats people coming across. And again, we got to find that balance between trade and tourism. But why the heck do we have to treat mexicanos like all of them are criminals, and it s wrong. It s wrong. So we re now changing that, even though we had to put some language in the appropriations to get CBP to do that. But I think even the way we treat mexicanos, with a little respect and dignity, is important. So we ve got the personnel issues. We re looking at also now the infrastructure. And one of the things that we added that it was interesting because I was trying to get my Republican friends and sorry, I don t mean to get political but we re trying to do the public-private partnership end. And they were saying they were having trouble. I said, Hold it. Me Democrat, you Republican, you re supposed to like this public-private partnership. So let s get together and let s do it. Because we need that type of infrastructure, and if the federal government can t do everything or it takes a little bit of time to do it, then allow the private sector to come in so we can work it together, with the rules and all that, I understand that. And that s in the process, and that s been accepted, and we re just working on the rules. Finally, the last thing I want to talk about this before I talk about NADBank a little bit more, is this thing. Oh, and Ambassador, I think you re familiar with this. If you look at what Canada has with the U.S., I think they call it Beyond the Border. Why can t we do the same thing with the mexicanos? Why is it that things are so different in the north and so different in the south? If you look at Beyond the Border, if you haven t seen that report, there are a lot of things there that we can apply on the southern border. I m talking about expediting, looking at, you know, the at-risk cargo, how we move things a 6 Customs and Border Protection (CBP)

10 lot faster. I added a little bit of that in the appropriations, but I think the best way of doing this and I talked to Ed Royce yesterday, the Chairman of Foreign Affairs, Engel also and I said, you know, we just passed, we re working on this partnership between Israel and the U.S., and we do this, you know, every other year we do something like that. That s good. Why can we not do this with our border friends, our neighbors on that? Why can we not have a partnership? Plan Merida, I supported that. But why not a U.S.- Mexico partnership on infrastructure, on bonding, on issues that we can move trade a lot faster? And, guess what. I think we are going to be working on some legislation. Senator Carper and I were just talking this morning. I said, Senator, can we work on this next year, on something. Because every time we talk about Mexico, what is it? Plan Merida. Plan Merida. Plan Merida. Which I support as security, but we ve got to look at the economics. I m hoping that there we can look at some of the things, Juan Carlos, that we had talked about, some of the flexibility that we need to look at. And I think if we go beyond that thinking, and we get Congress to do that, and let NADBank and BECC, and as you merge together, and again, quite honestly, if you get some efficiencies and a little bit more speed, accuracy, but speed on the work that you do, I think this will be something that we can all support. I also, just to highlight one more thing in the appropriations, cause I sit on the Appropriations, and one of the subcommittees I sit in is the State Foreign Operations. This gives me a flexibility to add some language in there. And there I provided the language to work with you on what you ve been doing, is to get more of the infrastructure, I mean more of the capital, to put more money, put more resources on this. The last time I was in Mexico, just recently, I was talking to the Chief of Staff to the President. I try to meet with him every time I m there. And that is one area that we need to look at. I know that s what Luis and I had talked about back, I think it was about a week before the swearing in of President Peña Nieto on December 1st of that year, 2012, I believe it was And this is one area that I certainly want to be supportive of you. Whether we do it in stacks, you know, put a little bit here and a little bit, but we ve got to get to that goal on that. So, bottom line is, I really appreciate the work that you all are doing. I appreciate the work that the feds, the state folks are doing, and of the local folks who are going to do it, because, if we re all not working on silos because we all have a tendency of working on silos. Everybody has their own silo. We ve got to get away from that. You know, one of the easiest ways, if we can coordinate and communicate, which is a very simple concept, but if you try to add that in reality, it s very, very hard. But if we get away from silos and start working together and look at it multidimensional, I think we can get a lot of this work done. So, again, all I want to do is just be a friend, a friend that you might have in the appropriations on these issues, and I think if we can do this working together, I see a lot of potential. So the potential that people just don t see right in front of the face, called the Republic of Mexico, is something that we ve just got to pay attention to. So again, to all of you all, thank you, thank you, thank you so much for being here. And again, I appreciate all of the good work you ve been doing for so many years. I know some of you all have been looking at this for 20 years or longer itself, but I think it s a lot it s a lot of effort, but it s something that has to be done. So again, thank you for being here, and God bless you. Thank you so much

11 MR. FLORES: Thank you very much, Congressman. And I want to commend your staff. They stayed in touch with me about every ten minutes today, letting me know how your schedule was going. That was very considerate of them. There are votes happening in the Congress right now, and it s always a tricky thing for a Member of Congress to slip away in the middle of votes to come and address a group like this, so it s very much appreciated, Congressman Cuellar. I do want to just a quick housekeeping. I ll remind everybody we will have a reception this evening immediately following this event. We are expecting Treasury Secretary Jack Lew to be with us and to address the audience, and so we hope that you will stay with us. And I also do want to quickly point out to all of you that you ve each received, as a memento of our 20th anniversary, this post card that has a commemorative stamp on it. There is a photo of a very important piece of art work, which adorns the lobby of the NADBank. Those of you that have been to the Bank have seen this. And it s an image representing, it s a restored map of San Antonio de Béjar. And again, it s in our lobby. The original image dates to 1767, from which this was drawn. And the map symbolizes man s capacity to organize natural resources and reap the economic benefits: river water controlled by ditches; land distributed in parcels; space set aside for government, security, defense, social life, and living quarters. All of the themes that we as institutions work on together. So we felt it was a very fitting and appropriate image to share with you as a memento. We now are at the part of our program where we begin our panel discussion on infrastructure, environment and the U.S.-Mexico relationship. I m going to ask our distinguished panel to please come up. And as you re moving toward the dais, I m going to begin introducing you, if you will, please. Ambassador John Negroponte is the Chairman of the Americas Society and the Council of the Americas. He joined McLarty Associates as Vice Chairman in 2009, following a distinguished career in diplomacy and national security. Ambassador Negroponte held government positions abroad and in Washington between 1960 and 1997, and again from 2001 to He has been Ambassador to Honduras, Mexico, the Philippines, the United Nations and Iraq. In Washington he served twice on the National Security Council staff, first as Director for Vietnam in the Nixon Administration and then as Deputy National Security Advisor under President Regan. He has also held a cabinet level position as the first Director of National Intelligence under President George W. Bush. His most recent position in government was as Deputy Secretary of State where he served as the State Department s Chief Operating Officer. While in the private sector from 1997 to 2001, Ambassador Negroponte was executive vice president of the McGraw Hill Companies, with responsibility for overseeing the company s international activities. During those years he was also chairman of the French-American Foundation. In 2009 Ambassador Negroponte began a part-time position at his alma mater, Yale University, as a distinguished senior research fellow in grand strategy and as a lecturer in international affairs. Ambassador Negroponte has received numerous awards and

12 recognitions for his more than four decades of public service, including the State Department s Distinguished Service Medal on two separate occasions, the highest award which can be conferred by the Secretary of State. And on January 16, 2009 President Bush awarded Ambassador Negroponte the National Security Medal for his outstanding contributions to U.S. national security. We have invited Ambassador Negroponte today to lead off the panel discussion and give us, as we discussed, Ambassador, maybe the 30,000-foot perspective on the issues that you re familiar with, having served as ambassador to Mexico at the time that NAFTA was negotiated, and over the years as you have observed the border economy evolve. And we ll start with Ambassador Negroponte and then I ll proceed to introduce the other panelists, if that s okay. Ambassador. AMBASSADOR NEGROPONTE: Thank you very much, Juan Antonio. And thank you to our hosts, the Treasury Department and to both the Border Environment Cooperation Commission and the NADBank for inviting me to attend this meeting. It is really heartening and you heard some of the results summarized by Dr. Aportela the results of the NAFTA negotiation. It was a big idea in our time, and we pushed hard for it. And we obviously and against certain odds. I see former Congressman Jim Colby here. He was one of those who fought for the ratification of the approval of the agreement in the Congress. And it was by no means a certainty, although I was always impressed that Bill Clinton and Al Gore fought, I think, as hard or harder for the NAFTA than George Herbert Walker Bush would have done had he been reelected. I just was amazed at the enthusiasm they put into it. And I guess the sort of turning point was the Ross Perot/Al Gore debate, which was won rather decisively by Al Gore. And of course the rest is history. But quintupling the levels of trade between our two countries is no small thing, it s no mean feat. Turning to the border, when I was ambassador there, that was always a very important part of our responsibilities. Because if you actually looked not so much at 30,000 feet, but let s go down a little bit to maybe 500 feet or 1,000 feet where most of the activity happened in the relationship was precisely there. It was on the border, whether it had to do with legal, or not so legal activity, whether it had to do with border crossings. The communities on both sides of the border, we had I can t tell you how many visits we had to the American Embassy in Mexico City from all the border governors, all the U.S. border governors, from countless mayors and other local officials. We had border conferences of all kinds, border attorneys general. I remember going to one of those. We had the Border Governors meeting every year, which were always very important. So, I think that if you do a sort of a time-motion study as to where does the greatest concentration of activity happen in the United States-Mexico relationship, it s on the very border itself. So it was fitting that the Commission and the NADBank were created for a whole variety of reasons. But I think one of them, and I think it needs to be emphasized, is that even though this was a strategic agreement I mean, Henry Kissinger refers to it in one of his books as perhaps the most significant strategic accomplishment of the last years so it had a high level significance and consequence. But I think NADBank and the Border Environment Cooperation Commission are a way of demonstrating that we

13 also cared about the people and communities that are actually on the border. So it was a way, I think, of the two national governments showing a real interest and concern for the people on the border. Now that s always existed, but I think this was an excellent way of symbolizing it. And if you look at the very good work that s been done to deal with the various problems on the border, I think it s a very positive story indeed. So, I mean, that s to be encouraged. And I think I can only assume that this merger idea that you discussed in the Board meeting today is going to be positive and is not going to represent a diminished commitment to this process. But I d like to think it s the reverse; that it s going to mean an even, a reinforced commitment to the important work that you ve already been doing. Those are my comments as former United States Ambassador to Mexico. I would like to mention just one thing in regard to the position I have as the non-executive chairman of the Council of the Americas and the Americas Society, which is located in New York and is one of the network of organizations that was created with the support of the Rockefeller family about fifty years ago. The Council of the Americas has about 200 corporate members, and they re mostly people interested and companies interested in doing business throughout the hemisphere. And one of the programs that I ve initiated there since I became chairman is to hold meetings, from time to time, on the border to emphasize exactly what Henry Cuellar said here; that, you know, a lot of people who don t pay that much attention to the news just think of Mexico-U.S. relations as, you know, drugs and thugs, you know, it s that problem. And of course there s just such a rich diversity of issues and activities, and I thought between us, and I thought one of the ways of highlighting that would be to hold a series of meetings on the border. So we ve done one with the great support of Henry Cuellar and of the Commission and the NADBank. We had one in Laredo. We had one in San Diego. And we had one in El Paso. And then we did visits across to the other side of the border as well. And I m hoping that we ll have at least one such meeting in the year ahead. But this has been a modest, but I think meaningful contribution by the Council of the Americas and the Americas Society to this aspect of our relationship and a reflection of our commitment to these border issues. So, I my voice is about to give out on me so I think this is a very good time to end my brief remarks. Thank you. MR. FLORES: Thank you very much. Thank you, Ambassador. And just to clarify the format, I will proceed here. We will have each of the panelists make their introductory remarks. I, as the moderator of this panel, have a few prepared questions, some softballs, some maybe not so soft. And then we ll open up the dialogue to questions from the audience. So it is my pleasure to next introduce Carlos Rubinstein. I still call you Commissioner. Do we is it okay to still call you Commissioner or? MR. RUBINSTEIN: You can call me Carlos

14 MR. FLORES: Dr. Rubinstein. Carlos Rubinstein was appointed chairman of the Texas Water Development Board by Governor Rick Perry on September 1st of His term will expire February 1, Carlos Rubinstein served as a commissioner of the Texas Commission on Environmental Quality (TCEQ) from 2009 to He is the Texas representative to the Western States Water Council and the Border Governors Conference, Sustainable Development Work Table. Mr. Rubinstein is a former member of the Texas Environmental Flows Advisory Group; the Governmental Advisory Committee that advises the EPA administrator on environmental concerns regarding NAFTA, the North American Agreement on Environment Cooperation and the Commission for Environmental Cooperation; 7 and on the Good Neighbor Environmental Board, an independent federal advisory committee that assists the President and Congress on environmental infrastructure needs along the U.S. border with Mexico all of you are familiar with the Good Neighbor Environmental Board. He has also served as deputy executive director of TCEQ and as the Rio Grande Water Master, which is the capacity you served in Carlos when I first met you and I was doing government relations work for SAWS, if you remember that. 8 He is the past Texas representative to the Border Governors Conference Water Work Table and a former City Manager for the City of Brownsville. He s obviously somebody that is very familiar with the border region. Mr. Rubenstein received a bachelor s degree in biology from Pan-American University. Please help me welcome Carlos Rubinstein. MR. RUBINSTEIN: Thank you all very much. As I m sitting up here and listening to the very important and kind words from the Ambassador, I look across the audience and I see so many familiar faces. And in each one I recall the commitment that all of us share for improving the lives of those of us that were fortunate enough and are fortunate enough to live along the border. And for that I thank you. If you ll allow me, in particular, though, I do want to commend and recognize the great work that Gerónimo and Maria Elena have done. It s always been a pleasure to first refer to both of you as friends, but also as colleagues in advancing, in bettering the lives of those that we have pledged to serve along the border. Commissioner Drusina, it s always a pleasure to see you, sir, as well. So, again, thank you all very much for the opportunity to address you regarding the value and the need for water infrastructure along the Texas-Mexico border area. The Water Development Board, the BECC and the NADBank have a long and positive history of focusing on these needs and in finding effective financing structures to assist local communities in moving from unmet needs to project development to the delivery of service for the constituents and more sustainable environment. Specific to Texas and my agency, the Water Development Board, I am proud to highlight our long history of work along the border. In 1989, the 71st Texas Legislature created the Economically Distressed Areas Program or as we call it, EDAP to finance construction of basic water and wastewater services to correct immediate public health and safety concerns in economically distressed areas of Texas, particularly on the border. At the same time it created the financing mechanism, the Legislature established what we call Model 7 U.S. Environmental Protection Agency (EPA). 8 San Antonio Water System (SAWS)

15 Subdivision Rules or MSRs. These empower local county and city governments to prevent additional unauthorized substandard development from happening. We must end that, obviously. The EDAP, the Economically Distressed Areas Program, cannot fund any projects where MSRs, or model subdivision rules, are not enforced. So local counties and EDAP-eligible communities must also do their part in both adopting and subsequently enforcing these rules. Since the inception of the program in 1989 through just this year, fiscal year 2014, the EDAP program alone has committed more than 759 million dollars in grants and loans statewide for planning, design and construction of much needed basic water and wastewater infrastructure for Texas residents. Because of these projects, an estimated 293,000 people today have adequate basic service available and an estimated 50,000 more will have service once existing project construction is completed. Throughout the history of the program, the Water Development Board has worked in collaboration with projects funded by other sources, internal or external, to leverage the greatest possible public benefit from each of the projects. We have provided and taken advantage of opportunities to coordinate funding with NADBank and BECC and the United States Department of Agricultural Rural Development, the Texas Department of Agriculture, city and county governments, water and wastewater utilities and non-profit groups. Our goal is the same: to provide comprehensive financing packages for these projects. The Water Development Board also provides assistance through other programs, such as our new SWIFT, State Water Implementation Fund for Texas; the Water Development Fund; the Rural Water Assistance Fund; and the federally capitalized Clean and Drinking Water State Revolving Funds. From all of these combined sources, the Water Development Board has committed more than 1.72 billion dollars to more than 290 projects serving areas defined as colonias or economically distressed areas within 150 miles of the Texas-Mexico border. In just the last four years, the Water Development Board has committed more than 320 million dollars to finance water and wastewater infrastructure improvements in these very same areas, within 150 miles of the Texas- Mexico border. The Texas-Mexico border area has benefitted greatly from decades of targeted infrastructure development assistance, but much remains to be accomplished. Many communities still lack adequate water and/or sewer service, and drought conditions have caused some water systems to have concern over the security and reliability of their supplies. Unfortunately, continued lack of compliance with the 1944 Treaty as it relates to deliveries to the Rio Grande only exasperates the lack of reliability and predictability of water supplies to those that depend on the Rio Grande for their health and their livelihood. In 2013 Texas A&M University published a report that highlights the negative impacts to the Rio Grande Valley of Texas due to lack of water, in particular the lack of irrigation water. The report highlights that these conditions endanger up to 4,840 jobs annually and cause a negative economic impact to agricultural production in the lower Rio Grande Valley of Texas in excess of 394 million dollars every year. Augmenting the need for effective infrastructure development for water treatment and supplies for the Texas border area is the projected growth that the area will see in the coming decades. Our state water plan we develop a state water plan every five years