Mexico is facing a growing mountain of hazardous waste, despite an environmental accord with the US and a continental trade deal that were supposed to discourage further environmental degradation. The North American Free Trade Agreement (NAFTA), in force since 1994, is a relatively "green" trade treaty. It recognizes the need to prevent development of "pollution havens" in Mexico and to increase Mexico's capacity to track and handle hazardous wastes.
Moreover, NAFTA's environmental provisions were expected to support the aims of the La Paz Agreement, a 1983 US-Mexico environmental co-operation accord with specific provisions to discourage hazardous waste dumping in Mexico. Despite these policy safeguards, Mexico's hazardous waste imports have doubled, and waste-producing maquiladora factories have proliferated in recent years.
Mexico has few adequate hazardous waste management facilities, and the result is an increasing threat to environmental integrity, water quality and human health. And there are indications that things could get worse in the next few years.
The first troubling development is the doubling of hazardous waste imports into Mexico since 1994. Most of this waste comes from the US. The Texas Center for Policy Studies has reported that the US-to-Mexico waste flow increased from 143,800 tonnes in 1995 to 230,865 tonnes in 1999.
These imports, including electric arc furnace dust (EAD), lead acid-batteries, containers from hazardous waste, and accumulators, have come primarily from the US and are destined for recycling operations in Mexico. Trade liberalization has also made the cross-boundary movements easier, despite NAFTA's explicit intent to improve the hazardous waste management situation in Mexico.
A second post-NAFTA development that affects hazardous waste burdens in Mexico is the sizeable increase in the number of maquiladora plants. These primarily US-owned factories were set up in the 1960s to produce goods for export to the US under a special program that gave them reduced import duties for parts processed in the plants.
The number of such plants in Mexico increased from 1704 in 1990 to 3297 in 1999. The reason for this is not so much the introduction of NAFTA, but rather the devaluation of the peso in 1995, which made investment in such plants extremely attractive for US manufacturers. An estimated 60 percent of maquiladoras - increasingly concentrated in the chemicals, electronics and furniture industries over the past decade - generate hazardous waste in significant quantities. More of these plants therefore inevitably means more toxic waste being generated in Mexico.
Around 15-2 0 percent of all hazardous waste generated in Mexico can be attributed to the maquiladoras. Under the 1983 La Paz Agreement on US-Mexico Environmental Co-operation, and under Mexico's 1988 General Law for Ecological Equilibrium and Environmental Protection, wastes generated in these foreign-owned firms must be returned for disposal in the country where the raw materials originated, typically the US. But in actual practice, less than three percent of firms bound by the La Paz Agreement actually returned their wastes to the US before the mid- 1990s.
The requirements for return of hazardous waste by foreign-owned maquiladoras were upheld under NAFTA, at least through its first phase to 2001. To improve the effectiveness of waste management along the border, the US and Mexico also set up the 1993 US-Mexico Integrated Border Environmental Plan, which included the establishment of a computer database of hazardous waste movements between the US and Mexico.
While this system has improved data reliability, gaps and inconsistencies remain. According to Mexican government estimates, only about 12 percent of the hazardous waste generated in Mexico is properly managed. Recent fignres indicate that around 25-3 0 percent of maquiladoras now return their toxic waste to the US, but this is still far below what is necessary to ensure proper management of hazardous wastes generated in Mexico.
A third development, resulting more directly from NAFTA itself, threatens to reverse progress and discourage export of hazardous waste back to the country of origin from maquiladora plants. NAFTA called for a cut in import duties starting in early 2001, reducing the incentive for firms to operate under the maquiladora program. Many environmentalists and trade experts fear that a significant number of foreign-owned maquiladoras will change their legal status and become Mexican-owned firms to avoid the requirements to return hazardous wastes to the country of origin (as called for under the La Paz Agreement). This will leave even more toxic waste to be managed within Mexico.
Currently, Mexico has limited capacity to handle this waste in an environmentally sound way. There are relatively few state-of-the-art hazardous waste disposal facilities in Mexico, and experts say much of the waste is dumped illegally along the border." In the mid-1990s analysts expected that Mexico's market for environmental services, including hazardous waste management, would reach a value of US$ 600 million per year by the turn of the century.
And due to a fourth development - a crucial court case - foreign investors who were initially keen to capitalize on the growing hazardous waste treatment market in Mexico, are now less enthusiastic. The case involved a NAFTA Chapter 11 suit filed against Mexico in 1997 by the US waste management corporation, Metal-clad. Chapter 11, which sets out investors' rights under the trade agreement, allows corporations to sue governments when they believe their investments have been expropriated or when actions "tantamount to expropriation" harm their profits.
In the early 1990s, Metalclad had acquired a waste disposal facility from a Mexican firm and began to construct a new facility on that same site. Metalclad claimed that the local municipality unfairly refused to issue a permit for its operation when the federal government had given it the go-ahead. The local municipality argued that the facility was not environmentally sound and stated that it was only trying to protect its population from environmental and health hazards linked to the waste site.
Environmentalists were up in arms about this case because if won by Metalclad it would set a precedent whereby a foreign corporation could sue a government if it did not like the local environmental rules. In August 2000, after three and a half years of deliberations, the dispute panel ruled in favour of Metalclad. Mexico promptly appealed, but was unsuccessful and was ordered to pay Metalclad US$ 15 million in damages.
The ruling could have two negative implications for hazardous waste management in Mexico. First, it will likely result in a "regulatory chill" discouraging Mexico from imposing new regulatory standards for hazardous waste treatment facilities. The case also seems to have contributed to an investment chill on the part of foreign corporations that might have otherwise invested in such facilities in Mexico. If this turns out to be the case, the end result will be doubly bad for hazardous waste management in Mexico.
Shortly after the Metalclad decision was announced last spring, the three NAFTA countries announced that they will develop a "North American Approach" to dealing with hazardous wastes.
What this plan will look like, in a context where data are sparse and infractions many, especially in Mexico, remains to be seen. What would be best from the standpoint of all three NAFTA partners is a concrete North American plan for promoting clean production and pollution prevention, rather than simply an expansion of hazardous waste treatment facilities.:
