October 26, 2000

(Published by the Interhemispheric Resource Center’s Border Information and Outreach Service (BIOS) the borderlines UPDATER is an ezine intended to promote online discussion and debate regarding key issues related to the U.S.-Mexico cross-border relationship. The IRC is committed to dialogue and debate in the spirit of cross-border cooperation. As a result, IRC has opened the UPDATER to views that are not exclusively their own. Only articles authored by IRC staffers represent their views.)

CYTRAR PARENT FIRM FILES WORLD BANK COMPLAINT AGAINST MEXICO

By Talli Nauman

(Mexico)  A Spanish firm is the most recent in the mounting number of waste management companies to file cases against Mexico at the World Bank's Washington, DC-based International Center for the Settlement of Investment Disputes (ICSID). The Madrid-based Técnicas Medioambientales S.A. is seeking an undetermined amount of compensation from Mexico’s

government for investment lost when the business' wholly owned Mexican subsidiary, Técnicas Medioambientales de México S.A. de C.V. (TECMED), was denied permission to operate the CYTRAR hazardous waste confinement in Hermosillo, capital of the border state of Sonora.

ICSID registered the complaint on Aug. 28, the same day that a three-judge panel of the international tribunal signed a ruling

requiring Mexico to pay $16.7 million to Newport Beach, California-based Metalclad Corp. for investment lost in a toxic waste site it was unable to open at Guadalcazar in the central state of San Luis Potosí.

Two previous cases filed with ICSID by U.S. entrepreneurs disputing lost investment over municipal waste management contracts in Acapulco, Guerrero, and Naucalpan, Mexico State, were settled in favor of Mexico.

TECMED legal representative Enrique Diezcanedo says the simultaneous occurrence of the Metalclad decision and the registration date of the Spanish investors' case is pure coincidence. He said Técnicas Medioambientales S.A. notified the court in July that it would pursue the litigation under the terms of the binational Accord for the Promotion and Reciprocal Protection of Investments between the Kingdom of Spain and the United Mexican States. However, he added, the outcome of the Metalclad case gives TECMED higher hopes of a settlement in its favor. For its part, Metalclad management deems the decision on Guadalcazar gives its firm a green light for another complaint against Mexico over an industrial waste site it was unable to finish building in El Llano in the central state of Aguascalientes.

TECMED's parent company submitted an administrative complaint to the Mexican Trade and Industrial Development Secretariat (Secofi) after the National Ecology Institute denied a renewal of its annual permit to operate the CYTRAR confinement in November of 1997. The company proceeded to international arbitration after the secretariat's failure to resolve its request to continue operating, according to Diezcanedo.

The operators of CYTRAR were met with sit-ins by local residents protesting the site’s technical viability and lack of public participation in decisions regarding the hazardous waste confinement, as well as legal questions regarding CYTRAR’s proximity to Hermosillo.

Like the three other foreign companies unable to open waste dumps in Mexico during the Zedillo sexenio due to community resistance, TECMED asserts that opposition to the sites by non-governmental organizations masked the hidden agenda of protecting Mexico’s one existing hazardous waste storage facility, located in Mina, near Monterrey, Nuevo Leon. The residents and activists who opposed the CYTRAR site, however, disavow any links with the RIMSA industrial waste confinement site in Mina, which is operated by a domestic firm.

In addition, CYTRAR was the subject of a finding by the private, non-profit International Court of Environmental Arbitration and Conciliation (ICEAC) to the effect that the United States should be required to finance repair of damages caused by lead residues deposited there after being illegally shipped to Mexico from the United States. The finding, last year, followed a citizen's complaint to the North American Commission for Environmental Cooperation (CEC) in August 1998 alleging that Mexican authorities broke the law by allowing operation of the confinement site within six kilometers of Hermosillo.

The CEC secretariat, established by the environmental side accord to the 1994 North American Free Trade Agreement, is reviewing the complaint, filed by the Academia Sonorense de Derechos Humanos A.C, to determine whether the case warrants a full investigation.

The Mexican government's July 1999 response designates one section as confidential. The secretariat is urging Mexico to provide a summary of the confidential information and an explanation of the confidentiality claim.

In a related matter, Secofi claims it will seek annulment or revision of the ICSID's Metalclad ruling on the grounds that the decision ignores the municipality of Guadalcazar's constitutionally guaranteed right to local sovereignty in its decision to deny a construction permit to the U.S. firm.

Ironically, the ICSID's finding that Mexico failed to assure Metalclad a transparent and predictable business climate, as required by NAFTA's Chapter 11, adds fuel to the flame of the torch carried by civil society protesting the plans of companies like Metalclad and TECMED. Essentially, now both sides of the controversy have established that a clear, transparent, and systematic process for siting and opening toxic waste confinement facilities is nonexistent in Mexico.

U.S. law requires an opportunity for citizen review and comment on drafts of environmental impact statements (EIS) for proposed hazardous waste disposal sites, allowing the community input in the process before the final EIS is issued. In general, community pressure on the U.S. side of the border has made it difficult to site new hazardous waste facilities--forcing companies to look for ways to reduce waste at the source.

In Mexico, however, public participation does not begin until the final EIS has been promulgated. Oftentimes, that comes late in the game, EISs are incomplete, or distribution of the document is not widespread.

Community pressure against proposed hazardous waste facilities in Mexico has become more widespread in recent years. Industry and government complain that such community-level resistance scares off foreign-based investors seeking to establish themselves in Mexico’s environmental services market, and prevents the development of an adequate hazardous waste disposal infrastructure. But if the siting process were more transparent and involved community education at an earlier stage, say environmentalists, this dynamic could change.

The Mexico City-based NGO, Emisiones Espacio Virtual del Programa LaNeta, with support from the CEC, is championing an effort to achieve an obligatory nationwide registry of hazardous industrial waste for Mexico, pursuant to an agreement to that effect made with the other two NAFTA nations. The obligatory registries in the United States and Canada have given the public access to information about the nature, amounts, and locations of industrial waste, prompting a decline in toxic outputs and residues.

The availability of similar information for Mexico could lay the groundwork for informed decision-making on ways to reduce the use of hazardous materials in production, types of recycling facilities needed, and the realistic demand for confinement siting. The benefit would be for authorities, as well as industry and the general citizenry.

Meanwhile, the tons of hazardous residues temporarily stored at Guadalcazar and Hermosillo remain a health and environmental menace for which no one currently has remediation responsibility. And countless more tons are being clandestinely disposed of as Mexico's regulatory, monitoring, and enforcement capabilities are surpassed by industries' activities.

Talli Nauman has worked as a foreign correspondent in Mexico since 1987.Under the auspices of the MacArthur Foundation, she initiated the six-year-old Journalism to Raise Environmental Awareness project, of which she is co-director.