Environmental Exports to Latin America

By Madeo, David | Law and Policy in International Business, Spring 1994 | Go to article overview

Environmental Exports to Latin America


Madeo, David, Law and Policy in International Business


The passage of the North America Free Trade Agreement has focused attention on methods for the United States to increase its exports to its southern neighbors without also losing U.S. jobs to new competitors. The market for environmental goods and services in Latin America presents a prime opportunity for U.S. investment and trade. The Overseas Private Investment Corporation (OPIC) expects the South American market, estimated at more than $2 billion today, to expand by up to thirty percent per year over the next decade as nations privatize their energy sectors and impose strict environmental laws and enforcement mechanisms.(1) OPIC, a U.S. government agency, promotes foreign and domestic economic growth by providing insurance and financial services to U.S. firms that invest in developing nations and emerging market economies. OPIC will provide at least $1.7 billion this year in financing and political risk insurance to support U.S. investment in Latin America, up from $1.4 billion last year.(2)

OPIC's involvement in the Latin American environmental goods and services market is part of a larger effort by the Clinton administration to promote U.S. exports. In response to President Clinton's April 21 Earth Day speech, the U.S. Department of Commerce formed the Interagency Working Group on Environmental Exports. The working group found Mexico to be the most promising foreign market for environmental goods and services.(3) Technologies that are in demand in Mexico include water pollution control, water treatment, air monitoring, and environmental engineering and consultation. Canada, Southeast Asia, and Eastern Europe are also prime markets for U.S. environmental exports. The United States has "an overwhelming advantage" over other nations in environmental technology since U.S. companies have much more experience, especially with the remediation of contaminated sites.(4) In 1990 the United States had a $4 billion trade surplus in the environmental sector.(5) The annual international market for environmental goods and services is currently $270 billion and is expected to reach $600 billion by 2000.(6) Over the past several years, OPIC has assisted about fifty projects involving the export of environmental technology, generating U.S. exports of $618 million and 2300 U.S. jobs.(7)

In August 1993, OPIC President Ruth Harkin presented the agency's three-pronged program on the environment.(8) First, OPIC will aggresivesively identify new investment opportunities for U.S. environmental firms in developing nations, the former Soviet Union, and Eastern Europe. Second, OPIC is improving its screening and monitoring of the projects it finances to ensure that they do not adversely affect the environment. Third, OPIC is seeking to develop its Environmental Investment Fund, which will be used to invest in environmentally beneficial projects worldwide.

OPIC's policies have begun to reflect the fact that Latin America accounts for forty percent of the agency's activities. Compared with much of the agency's portfolio, such as the former Soviet Union and the Gaza Strip, "this region begins to look stable," Harkin said.(9) Since OPIC expects less demand for insurance coverage but more for loan guarantees, the agency will shift emphasis from insurance toward loans. An increase in the amount of loan guarantees available per project(10) will enable OPIC to support large projects such as the Argentina-Chile gas pipeline.

OPIC is paying particular attention to the Southern Cone countries of Argentina, Brazil, and Chile, where the environmental market exceeds $1.7 billion. In November 1993, Harkin led an OPIC environmental investment mission to Buenos Aires, Sao Paulo, and Santiago. The mission included eleven U.S. companies, offering environmental services in waste water management, water purification, river dredging, solid and hazardous waste, renewable and wind energy, oil spill cleanup, and soil decontamination. …

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