NADBank Blog

Prime Minister Trudeau, President Biden and President López Obrador met a year ago this month in Mexico City for the North American Leaders Summit. The objective of these meetings has been to strengthen the broad and deep relationship among Canada, the United States and Mexico. After the summit these leaders expressed their renewed commitment to continue economic cooperation and integration based on the current opportunity provided by the nearshoring of supply chains in a post-pandemic world. That commitment also reflects important trends and opportunities within the U.S.-Mexico border region that can have a positive impact on the binational relationship that supports the ongoing economic integration of North America.

Why is the border region an important area to examine? As the Ambassador of Mexico, Esteban Moctezuma, stated during the 2022 Border Environmental Forum of the North American Development Bank (NADBank), “if we want to build a more competitive, more innovative and more humanitarian North American region, the border region is where rubber hits the road.” It is a shared region, home to more than 26 million people, where the communities of both countries interact on a daily basis. Since the ratification of the North American Free Trade Agreement (NAFTA) in 1994 and the subsequent United States-Mexico-Canada (USMCA) Treaty in 2020, the U.S.-Mexico border region has enjoyed dynamic economic, social and cultural growth. According to the U.S. Census Bureau, bilateral trade between the two countries increased from US$173 billion in 1994 to US$779 billion in 2022, generating thousands of jobs.

This success has been beneficial for U.S.-Mexico relations in general and has laid the foundation for improving the well-being of border residents through access, for the first time, to basic services, such as safe drinking water, as well as to better environmental conditions and economic opportunities.

The recent enthusiasm for North American supply chains is a new chapter in a decades-long story. The necessary investments can be the springboard for generating new opportunities for the citizens of all three countries. But long-term success requires greater commitment and investment in environmental sustainability along the U.S.-Mexico border. By leveraging the current drive for investing in nearshoring, sustainable investment can accelerate and preserve the long-term prospects of the border region and North American integration.

Three intersecting opportunities

Although economic integration is a complex undertaking, there are three intersecting areas that help focus and organize priorities. Tackling these three issues will provide a strong foundation for the integration and shared prosperity of the border region and North America.

Greener economy

Simply building more factories in the region with its arid and semi-arid climate is a recipe for an unsustainable future. However, failing to invest in an economy that will produce good jobs for local communities ignores the vitality of the region and could strain the binational relationship and communities. Thus, the governments have the opportunity to lead and invest in green and resilient infrastructure, as well as promote cleaner transportation, more efficient use of water and energy, and better urban planning. These government initiatives should drive the participation and support of a vibrant private sector that will create well-paying jobs. For their part, private enterprises could invest in facilities that meet Leadership in Energy and Environmental Design (LEED) or Excellence in Design for Greater Efficiencies (EDGE) standards. They should also use technology and engineering that will allow them to do more using less resources. Finally, with the right regulatory framework, recycling and the productive reuse of waste materials could create business opportunities for a more circular, greener economy.

Water

Regardless of how efficient or resourceful new investments are, there is no escaping the naturally arid conditions and current drought in the region. Therefore, a greener economy needs to be built upon water infrastructure and management that prioritizes conservation, effective sanitation and reuse, and diversification of water resources. Since 1995 the region has been successfully investing in water infrastructure. Although there are still a few communities without access, 96% of the population on the Mexican side of the border has drinking water service, while on the U.S. side it is nearly universal. But preserving those gains means maintaining and adapting the infrastructure to accommodate population growth. Although only an estimate, NADBank has received grant requests for investments totaling about US$770 million. Money alone is not sufficient. Water sustainability requires the engagement of all levels of government, local communities and private enterprises. Meeting water needs over time also requires reinforcing the institutional capacity and human capital of local water authorities.

Energy

There is no denying that water is life; however, clean and reliable water requires energy. It is the single largest cost for treating and supplying water to any community. Energy is also essential for the economy. It supports production, mobility, education and healthcare. The source of energy is key to long-term sustainability. Here the border region has a significant advantage. It has an abundance of wind and solar resources with substantial investments already made in power generation. According to the U.S. Energy Information Administration (EIA), between 2017 and 2021, power generation from clean resources tripled in Mexico and grew 60% in the United States. Ongoing investment in renewable energy generation—both distributed and utility scale—and in storage systems is essential to meet water needs in the region and power a greener economy.

None of this will be achieved quickly or easily, but the border region is approaching this opportunity having made great strides over the past 25 years. Additionally, new investments can benefit from binational knowledge, technologies, partnerships and forums that support both sustainability as well as economic growth. As a result, today, the border, where the U.S. and Mexico come together, has the capacity to become a linchpin for the economic integration of North America.

Post Categories: U.S..-Mexico BorderSustainable Development