US Companies See Green In Mexican Pollution Push
MEXICO is one of the ripest countries in the world for pollution-solution products. And environmental entrepreneurs are flocking here from the United States and Europe.
"There's a tremendous market opportunity here now. We're trying to expand our staff of Mexican engineers to meet the demand," says David Robinson, director of marketing for ABC Estudios, a new Mexico City subsidiary of Jones and Neuse, Inc., an environmental engineering firm based in Austin, Texas.
Jones and Neuse estimates that the environmental control industry will swell to $5 billion to $7 billion in the next few years. It is one of dozens of firms jumping into a market flush with the political will and the funds to combat ecological degradation.
At the height of a smog emergency in March, President Carlos Salinas de Gortari issued a series of ultimatums, including giving the 220 worst industrial polluters in Mexico City 18 months to clean up or ship out.
The popularity of environmental measures is illustrated in a recent Gallup survey. When given the choice between protecting the environment or stimulating the economy, a remarkable 72 percent of Mexicans polled chose the environment despite Mexico's economic challenges. The 22-nation survey taken between January and March also showed that 29 percent of Mexicans consider pollution the most important problem compared to 11 percent of US residents. Mexico ranked fourth (behind Germany, Korea, and Poland) wi th 67 percent classifying pollution problems as "very serious." Government closes plants by decree
Mexico's Secretariat of Urban Development and Ecology (Sedue), now being reorganized, is continuing a recent crackdown on violators. In April, Sedue shut down 44 facilities in the Mexico City area. Fifteen were closed permanently.
"In some ways, enforcement in Mexico is stricter than in the US. In the US, it could take years of hearings and court trials to just impose a fine. Sedue can close a plant by administrative decree. That's gotten the attention of a lot of companies," Mr. Robinson notes.
Last week Mexico's largest cement company, Cementos Mexicanos (Cemex), announced it would invest $35 million in its Monterrey plant as part of a $100 million pollution-control program for all factories over the next three years.
Most multinationals, such as Cemex, have their own lines of financing. But for others, the government's development banks, Nacional Financiera and Banobra, are offering low-interest, long-term loans to purchase antipollution devices. The World Bank, which granted Sedue a $50 million loan last month, will chip in another $200 million by July to be spent primarily on reducing air pollution by vehicles in Mexico City. Huge market in auto-pollution devices
World Bank officials here say Mexico will receive about $1.5 billion this year, and about 35 percent of the World Bank-funded projects in Mexico are pollution-related programs.
Capitalizing on their years of meeting US emission standards, firms such as Olson Engineering, based in Huntington Beach, Calif., see huge potential profits in Mexico. Olson just won a contract to provide exhaust-gas recirculation (EGR) devices to Mexico Olimpio, a Mexican firm converting delivery vans to use natural gas instead of gasoline.
But there is a still-larger market waiting to be tapped: an estimated 5 million pre-1991 model cars with no pollution-control devices. "If we started putting EGR devices on cars now, we could have 80 percent of those cars producing 37 to 55 percent less pollution in two years at a cost of less than $100 per car," says Donel Olson, president of Olson Engineering.
He says EGRs are a far more economically viable solution than requiring the installation of catalytic converters, which cost $600 to $800. But he does not expect Mexicans to purchase EGRs without mandates or incentives. He is talking to Sedue officials now about easing car-use restrictions for Mexico City residents who install an EGR device.
Jones and Neuse was drawn here by multinational corporations and government agencies seeking the expertise the firm has acquired in the US market. But the Texas firm discovered that to be competitive it needed a local subsidiary. Last month, it bought ABC Estudios y Proyectos, a Mexican engineering firm.
"We couldn't compete in Mexico using US engineers at US rates," Robinson explains. The firm now brings in a US engineer to lead a team of Mexican engineers. "We've just completed the designs for first landfill in Mexico that will meet both Mexican and US Environmental Protection Agency standards," he says.