Summary

A review of six new U.S.-majority-owned maquiladora plants in Mexico discovered that each began operating without complying with the Mexican government's environmental regulations, an occurrence that is reportedly widespread among many sectors of the Mexican economy. The Mexican government considers these environmental controls, mainly environmental impact appraisals and operating permits, critical to Mexico's ability to handle environmental issues arising from the potential U.S.-Mexico free trade agreement. This report: (1) assesses whether a sample of six U.S. maquiladora companies that built plants in Mexico prepared environmental impact appraisals and obtained operating permits before starting up; (2) provides information on needed improvements in these environmental controls; (3) discusses Mexico's limitations on the public's participation in approving environmental impact appraisals and operating permits; (4) identifies Mexico's budget for its environmental protection program and other efforts to strengthen environmental protection; and (5) discusses the extent of U.S.-Mexican cooperation to beef up environmental impact appraisal compliance.

GAO found that: (1) Mexican regulations require owners or operators of companies to submit impact appraisals before construction if their operations would adversely affect the environment or violate federal environmental regulations or standards; (2) owner/operators of new companies must also obtain applicable environmental permits before operating; (3) none of the six companies submitted the required appraisals or received an exemption from the requirement, and all were operating without final operating licenses; (4) noncompliance with environmental regulation is not limited to U.S. maquiladoras; (5) the appraisal process could be strengthened by specific guidance on which companies must do appraisals and other studies, by increased enforcement of the requirement, and by a system to identify noncomplying companies; (6) Mexico is developing the specific guidance needed, and has stopped issuing provisional operating permits in six border states; (7) current Mexican law and regulations allow for public participation in the process only after approval and not at all in operating permit decisions; (8) Mexico is developing a new system to ensure earlier public participation prior to approval; (9) Mexico has increased its staff for the process; (10) Mexico has also increased its funding for these and other environmental protection programs, but future funding is not certain; and (11) U.S. and Mexican agencies have recently agreed to cooperate on improving Mexico's appraisal guidance and training.