Firms Cash In on Mexican Bid to Halt Pollution : Ecology: The government appears serious about cleaning up the environment. That means opportunities for business.

Mexico is a nation ripe for environmental abuse.

Economically, the country is striving to attract investment and create jobs after eight years of crisis.

Geographically, it sits next door to the United States, whose more stringent pollution regulations make Mexico a tempting destination for factories running away from environmental restrictions or manufacturers looking for a cheap, if illicit, toxic waste dump.

Against those forces are barely 100 industrial pollution inspectors and a 2-year-old law covering emissions of 12,000 substances--versus the 75,000 regulated in the United States. Then there is the classic enforcement problem that comes with underpaid civil servants and wealthy violators: bribery.

The odds would not seem to favor strict environmental regulation.

Yet, some of the shrewdest business people in Mexico are betting that the government is serious about cleaning up industrial pollution. Companies--from internationally known corporations such as Waste Management Inc., with $3.6 billion in annual revenue, to owner-operated firms--are getting into the Mexican anti-pollution business.

One of the new environmental players is Cydsa, a Monterrey-based chemical conglomerate. Last month, it decided to put $100 million--one-sixth of its annual revenue--into creating an Environmental Improvement division. Its first goal is to go after a share of the Mexican water recycling business, which Chairman Andres M. Sada estimates will reach $500 million a year by 1995.

After years on the buying end of pollution control transactions, Cydsa is now determined to enter the market as a seller, offering its 30 years of expertise in water treatment and recycling.

“The fact is, we got to clean up,” said Sada, who also is a noted naturalist and bird watcher.

“In the United States, 70% of industrial water is recycled,” he said. “In Mexico, it’s about 5%.” But he said he expects that to change as enforcement of water pollution regulations increases and water prices rise, making recycling more economical.

Sada has seen the effects of increased enforcement in his own corporation, a producer of chemicals and fibers often associated with highly polluting industrial processes. “For the last five years, at least every year we (made some) technological improvement,” he said. “Regulations are tightening.”

In 1988, Cydsa spent $1.4 million on anti-pollution equipment, 4% of total investment for the year.

Such corporate investments in pollution control products and services are the most tangible proof that the business community believes Sergio Reyes Lujan, the physicist turned government environmental enforcer, when he says, “We will not grow in a dirty way. It is unacceptable to society and unacceptable to the government.”

Reyes Lujan is ecology undersecretary of the Mexican Environmental Protection Agency. Known as SEDUE, the cabinet-level department was created in 1982 in response to growing outrage at Mexico City’s unbreathable air and the poisoning of the country’s scarce rivers and lakes.

Lake Chapala, once the home of novelist D. H. Lawrence, was shrinking and its famous whitefish dying as industries along the Lerma River, which replenishes the lake, siphoned off water and discharged pollution.

Industry was pumping over 5 million tons a year of contaminants into the air, a million tons a year in Mexico City alone. Just 70 companies--a fraction of Mexico City’s 15,000 factories--generated 85% of industrial air pollution. Anger at those problems, combined with pressures along the border, where U.S. and Mexican cities share air and water, turned ecology into a political issue.

The result was a March, 1988, environmental law that so far has produced 56 regulations. That number will double by the end of this year, said Reyes Lujan. That compares with 57 pages of U.S. regulations for factories alone. Because EPA and SEDUE standards are expressed differently, the relative strictness of the two agencies is difficult to compare.

A Mexican Commerce Department official said Mexican standards are comparable to EPA standards but not the more stringent California regulations.

“We are all concerned about the environment, but we’re not trying to be more Catholic than the Pope,” he said, speaking on the condition that his name not be used.

Reyes Lujan explained, “We cannot do everything we would like, but we are on the right track.”

As SEDUE has stepped up enforcement the past two years, 679 factories have agreed to install pollution controls and recycling systems worth $320 million. But that’s just a drop in the bucket. Reyes Lujan estimated that $25 billion dollars will be needed to correct industrial pollution problems in Mexico City alone.

Getting industry to comply with the new regulations has not always been easy, said Rene Altamirano, the agency’s general director of prevention and control of environmental pollution.

One-fourth of the factories under orders to install anti-pollution devices had to be closed down, some for three months, before their owners and SEDUE reached agreement.

Companies shut down temporarily have included international corporations, such as Nestle’s, and state-owned companies, such as a sulfur producer in southern Mexico called Compania Azufrera Panamericana.

The SEDUE agreements give companies up to three years to install anti-pollution equipment. However, Altamirano acknowledged, he does not always have an inspector available to ensure that factories are complying within the time limits set by agreements.

Reyes Lujan said plants that do not comply by the deadline will be closed permanently.

During his four years at SEDUE, Reyes Lujan has permanently closed 25 companies. But all were small firms in the state of Guanajuato and all but one--a leather tanner--agriculture-related businesses.

“We can’t put the country’s productive plant at risk, except in cases where (companies) do not want to cooperate,” he said.

Meanwhile, factories continue to pollute. Carbon dioxide, nitric oxide and, therefore, ozone levels in Mexico City still regularly exceed permissible standards. Factories contribute about one-fourth of the pollution.

“The policy of the government is to protect industry--above all, the biggest and most powerful,” said novelist Homero Aridjis, president of the Group of 100, a leading environmental organization.

The environmental law has no teeth, he said, because it does not specify punishments for violations.

Government officials reply that the law is designed to encourage compliance rather than punish offenses.

Generally, offenders are closed until they develop a plan that meets government standards. In other cases, said SEDUE’s Altamirano, creative punishments are arranged.

For example, an inspector in Ciudad Juarez, on the Texas border, received a complaint that two young men had fainted after catching a whiff of the contents of two metal drums in the municipal dump.

After examining the drums, she deduced which factory in the area used the toxic chemical they contained. The culprit, a U.S.-owned export company, admitted the illegal dumping.

The factory was closed for 48 hours, said Altamirano, until the company agreed to dispose of chemicals at appropriate sites in the United States in compliance with agreements between the United States and Mexico. As a punishment, the factory paid for some long-needed repairs at the municipal dump.

Aridjis is skeptical that stories about other polluters have had such happy endings.

“We suspect that there are arrangements, bribes,” he said. “Industry would rather bribe an inspector than install anti-pollution equipment.”

Altamirano countered that SEDUE is taking all precautions possible to avoid bribes. He personally signs all inspection orders the night before inspections are scheduled. That way, he said, officials cannot make arrangements in advance with polluters.

The biggest problem, Altamirano said, is not corruption but understaffing.

Still, that shortfall can be overcome by making examples of polluters to encourage other companies to comply with the law, he said.

He also relies on citizens to report violations. “That gives us 40 million additional inspectors,” he said, referring to the adult population.

Another major problem is lack of proper disposal sites for toxic and hazardous waste.

To date, eight waste sites--five of them commercial--eight recycling plants and three incineration plants--only one commercial--are in operation. Just one commercial waste dump and one recycling plant are located away from the U.S. border, even though most of the country’s industrial capacity is in central Mexico.

Mexico City, which generates 400,000 tons of toxic and hazardous waste a day--enough to fill eight ships the size of the Queen Mary--has no disposal site.

“When you don’t know where it’s going, it’s going into the rivers,” said Manuel Arango Arias, who heads Universo 21, a foundation that has published an eight-volume report on Mexican environmental issues.

For that reason, SEDUE officials have been receptive to proposals from a subsidiary of Oak Brook, Ill.-based Waste Management Inc. to build a controlled waste site on a dry lake bed near the city.

Environmentalists have been less enthusiastic.

Aridjis said he objects because “this will assure that toxic industries will remain in the Valley of Mexico,” the mountain basin where one-fourth of the country’s population lives.

Instead of building waste dumps, the government should be working to move industry out of the area, he said. Current government policy is to discourage new industries from locating in the Mexico City area, but it does not roust those already there.

Such sniping at policy impedes government efforts to encourage the private sector to provide the means for solving pollution problems, industrialists charged.

“Waste Management Inc. is doing something necessary and getting a lot of flak,” said Sada. “That’s a difficult business to be in. You don’t want to tarnish your good name.”

Besides dealing with its own pollution problems, Mexico often faces environmental worries resulting from its proximity to the United States.

On one hand, California, with the tightest air quality restrictions in the nation, presses Mexico to protect the air and water that border cities share. On the other, some companies see Mexico as an alternative to complying with U.S. pollution and waste disposal laws.

Manufacturers have taken advantage of the porous U.S.-Mexico border to dump toxic and hazardous wastes covertly in Mexico. On Thursday, U.S., state and Los Angeles County law enforcement officials announced the first federal felony indictments under the environmental law--a case involving the smuggling of toxic wastes from California into Mexico.

Serious problems also have occurred in the border manufacturing plants, known as maquiladoras. The factories, located in Mexico, use U.S. components and Mexican labor to produce goods for export to the United States.

When they export the goods, they also are supposed to export any wastes. However, toxic wastes, expensive to dispose of in the United States, sometimes never make it across the border.

Until last year, maquiladoras could sidestep the requirement to re-export wastes by donating them to a Mexican charity. The law was written to benefit legitimate charities that could make use of industrial scraps. However, it was not always used for that purpose.

“There were a lot of phony charities set up to take advantage of the regulations as a way to dump trash in the first ditch they came across,” said Altamirano.

The law was repealed last year, and SEDUE and the EPA set out to catch illegal dumpers. SEDUE officials visited Houston to learn how their EPA counterparts conduct inspections. Today, EPA and SEDUE teams conduct maquiladora inspection visits together.

Based on production figures, they determine how much waste a plant is generating and ask the manager where wastes are being sent. The EPA team then checks with the U.S. dump sites the manager names to ensure that the sites are receiving as much waste as the factory generates.

The EPA-SEDUE inspections are part of a general crackdown on maquiladora polluters, said Altamirano.

Since November, 1988, he has met with maquiladora operators in 14 cities, explaining the new anti-pollution regulations and negotiating agreements to bring factories into compliance, he said. “Now we have finished the negotiation phase and begun the enforcement phase,” he said.

To date, seven maquiladoras , including two in Tijuana, have been temporarily closed and ordered to clean up.

“We used to be afraid that the maquiladora industry would leave (if anti-pollution laws were enforced),” Altamirano said. “Now, international awareness demands that, wherever they go, they must comply with environmental regulations.”

The next step, said Arango Arias, is increasing consumer awareness of the environmental costs of the products they use. When consumers refuse to buy products made through polluting industrial processes or that contribute to environmental problems--such as Styrofoam cups--industry will stop making them, he said.

“By producing more efficient products and goods,” he said, “business can be the biggest part of the solution.”