IT may not be glamorous, but the sewage plant in the Mexican resort city of Cuernavaca is an example of a new opportunity created for United States companies by the North America Free Trade Agreement (NAFTA).
Cuernavaca owns the plant, but United States Filter Corporation of Palm Desert, Calif., paid for and built it. U.S. Filter has a concession - the first granted to an American company - to operate the plant for 13 years.
Sewage fees collected in the city of 500,000 will allow the company to recover the cost of its investment and make a profit. ``It's almost like we have a franchise on sewage in Cuernavaca,'' says Richard Heckmann, chairman of U.S. Filter.
``It's an enlightened approach,'' comments Jesus Hinojosa, a professor of urban and regional planning at Texas A&M University in College Station, Texas. ``If it's a good agreement, it would include training local personnel.''
The Cuernavaca plant treats 13.8 million gallons a day of sewage that had been flowing into the Apatlaco River. It is also Mexico's first plant to compost sludge. The resulting fertilizer will substitute for forest humus that was being removed illegally from the Mexican National Forest.
Heckmann points out that the concession arrangement between a city and a municipal facility builder/investor is not limited to Mexico. Countries all around the world are allowing similar relationships, including in the US.
``Municipalities are out of money,'' Heckmann says. Mexico and Latin America are large markets for similar finance/build/operate deals because their infrastructures lag so far behind their needs. ``A concession lets them get caught up without spending billion and billions of dollars,'' Heckmann says.
``The whole story here is a NAFTA dream come true,'' Heckmann says. Without the treaty, U.S. Filter would never have risked investing in Mexico. NAFTA clarified the issue of legal redress of grievances.
Before the ratification of NAFTA last fall, critics of the treaty charged that it would cause US jobs to flee south. But Cuernavaca's $20 million water treatment plant incorporates equipment made in union plants in the US and shipped to Mexico for assembly.
Construction and operation of the Cuernavaca plant created 600 jobs in Mexico and at least 45 new jobs in the US, the company says.