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1 1 (January 10, 2020)

handle is hein.crs/govbczx0001 and id is 1 raw text is: The North American Development Bank The North American Development Bank (NADB) is a binational financial institution created and funded by Mexico and the United States. The NADB provides loans and grants to public and private entities for environmental and infrastructure projects on both sides of the U.S.-Mexico border. Modeled after the multilateral development banks (MDBs), such as the World Bank, the NADB has a unique environmental focus and is the only development bank that also finances projects in the United States. The NADB was created under the auspices of the North American Free Trade Agreement (NAFTA) in 1994, through a binational side agreement between the United States and Mexico. It was created to address some policymakers' concerns that NAFTA could worsen environmental conditions in the border region as economic activity increased. The NADB's financing activities initially focused on projects related to water supply, wastewater treatment, and municipal solid waste disposal. In recent years, the NADB expanded its financing activities to include air quality, such as financing the development of wind farms for the generation of electricity. NADB-eligible projects must be located within 100 kilometers (about 62 miles) north of the U.S.-Mexico international boundary in the U.S. states of Texas, New Mexico, Arizona and California, or within 300 kilometers (about 186 miles) south of the border in Mexico. Projects beyond these limits may be deemed eligible under certain conditions and subject to approval by the NADB's Board of Directors. In January 2015, then-President Obama and Mexican President Enrique Pefia Nieto agreed to support a doubling of the NADB's capital base, from $3 billion to $6 billion, subject to the necessary legislation and availability of appropriations. The proposed capital increase requires an additional $450 million in paid-in capital and $2.55 billion in callable capital, split equally between both countries. Both countries have pledged to take their individual paid-in capital to a total of $450 million by 31 December 2022, however, only Mexico has made an initial contribution of $10 million. Mexico's total paid-in capital was $235 million, while the U.S.'s total paid-in capital was $225 million as of December 31, 2018. Like other MDBs, callable capital may be called if and when required to meet the Bank's debt or guarantee obligations, subject to certain procedural requirements, and may not be used to make loans. The NADB leverages its position by issuing debt in international capital markets. - mmm, go mppm qq\ , q I as 11LIANJILiN, Updated January 10, 2020 The capital increase is motivated by the Bank's substantial increase in lending over the past five years, which has strained its capital adequacy ratios. Additionally, a change in credit rating agency methodology requires the NADB to maintain higher capital adequacy ratios than other MDBs. NADB financing is also more concentrated than other MDBs, because, by mandate, projects are geographically constrained to the border region and targeted in specific sectors. The proposed capital increase has also raised policy debate about the future of the NADB more broadly. Some analysts question the continuing need for NADB financing two decades after NAFTA was created, and whether it is crowding out private sector financing. Other analysts argue that the NADB is critical to supporting needed environmental and infrastructure projects in the border region that would not be otherwise funded by private investors. Some analysts further call for the NADB to expand its activities beyond the border region and to all of Mexico. During the Bank's early years, much of its lending capacity was underutilized. In the Bank's first decade (1994-2004), outstanding loans remained below $100 million. In 2000, the NADB Board expanded the range of projects that the NADB could invest in beyond water and solid-waste management into a wide range of environmental infrastructure projects. In 2004, President George W. Bush signed legislation (P.L. 108-215), that authorized the NADB to expand its geographic jurisdiction and make grants and non-market rate loans out of its paid-in capital resources with Board approval. Figure I. NADB Outstanding Loans: Over Time and By Sector Millions N E v i o r m e n . .. ... iiiiiiiiiiiii iiiiiiiiiiiii iiiiiiiiiiiii iiiiiiiii..........iiiiiii 2011 2012 20B3 2014 2015 2O1 2017 2018 Source: Created by CRS from NADB Annual Reports. :!K.:$:OOK~2$' ~dN

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