3 min read February 2024 — John Beckham, managing director of North American Development Bank, sits down with Invest: to discuss their important role in U.S. – Mexico relations, plans looking ahead as the region evolves and grows, and more. “We will always be located in San Antonio and owned by the U.S. and Mexico,” he says. “There is a certain clarity in our sense of mission as a result that is unchanging, which is our strength.”
How does population growth impact your investment strategy?
First, we must take care of what we have. This infrastructure does not maintain itself. We have to make sure our borrowers and public utilities, since much of our infrastructure is publicly owned, have the maintenance and preservation to continue to provide services for our border communities. This requires constant capital expenditure, some of which can be planned, and others may be more extraordinary. This growth will continue because the population and economic activity have substantially increased in the past several years.
The other half of our approach is that the idea of being a green bank 30 years ago did not exist. That is not the case today. There is a great opportunity and downside risk if we do not invest in environmental sustainability, and that starts with having the right infrastructure. That means we will continue to invest in clean energy, but it does not just mean more wind farms, although that is a piece of it. Another question we are addressing is working with efficient mobility. When it comes to border crossing, how do we lower wait times? In some communities, we are looking for ways to increase the number of border crossing sites and customs facilities to more efficiently manage the supply chain involving international trade. Additionally, it is about figuring out how we can create a cleaner transportation fleet that emits less contamination and greenhouse gas emissions. That is the new challenge we are facing: creating a greener economy that does more with less.
What are the most pressing infrastructure challenges today, and what projects or initiatives are currently underway to combat them?
The market of infrastructure has to be divided in order to address this question. Water management, for instance, is a public activity. There is a need to attract more capital for that investment. That is a delicate balance, given people’s sensitivity to water loss. We are trying to maximize grant-based financing with more commercially-structured financing in order to maximize the dollar amounts and solution based on the economics of that utility. Certain municipalities have more financial capacities than others.
Another factor we are working on is marrying knowledge with money. Many of these utilities, especially in smaller communities, can benefit from knowing improved operational techniques and capacities so they have less water leaks, higher efficiency ratios, lower energy spending, and more. By making those improvements, you can improve overall financial operations, which creates a cash flow that will put your best foot into the future.
Sometimes utilities understand that their rates have a one-size-fits-all approach with one rate for everyone. That is not a very strategic way of going about this because there are segments that are heavier and others lighter in water usage. There are also lower income communities that need water with a rate that is not necessarily the same for a commercial enterprise. We are assisting with rate studies for this reason. There are many unique aspects of this segment.
In the energy sector, it is mostly on the generation side through private enterprise. We take advantage of investment tax credits associated with the Inflation Reduction Act to bring more private money and accelerate the investment into renewable energy of all types. Everyone thinks Texas is Dallas and the Ewing family in oil and gas, but Texas is the renewable energy state as well. We are deeply involved and have done many projects in Texas and other border states to invest in renewable energy spaces.
What partnerships are key to your operations?
We are all about partnerships. The principal partnership that is foremost is the U.S. and Mexico binational relationship. The governments of both countries are our shareholders. More importantly, the bank was designed to nurture that relationship where it physically meets the border region. There is so much more to what is going on in the border region than what you read in the headlines. Mexico is the largest trade partner of the United States in a given quarter. When the borders were shut, who suffered the most? Our border communities. It is all one area; people come and go. That interchange is part of the strength, resilience and fountain of creativity that makes me want to invest here. That is the first partnership we take care of and promote.
What is next for North American Development Bank?
North American Development Bank is based in South-Central Texas, and this is all we do. We will always be located in San Antonio and owned by the U.S. and Mexico. There is a certain clarity in our sense of mission as a result that is unchanging, which is our strength.
There is a big agenda to come. Our five-year strategy was just approved by our Board of Directors. It is ambitious. We want to move from a $1 billion investment in our infrastructure portfolio to $1.5 billion. That is a substantial growth rate, and it is not just for the sake of growing. The region requires it. The water issue will not improve on its own. The geopolitical realignment of supply chains will create more environmental service demand for infrastructure, including cleaner energy and better transportation systems.
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