Friday, June 12, 2009

NAFTA Institute Conference: The Border is Still Open for Business

Forty three maquila purchasing managers explained their needs to about two hundred potential suppliers from Canada, Mexico, and all parts of the U.S., in formal and informal meetings during the two-day conference in the Sunshine Showroom at the Sunland Park casino. Among the maquila plants represented were Foxconn, Delphi Automotive, Toro, Sumitomo, ADC Telecommunications, and Electrolux.

I caught up to Jerry Pacheco, one of the principal planners of the conference, near the end of the conference, and asked him for his reaction to the unexpectedly large number of participants at the conference.

"In spite of the recession, the swine flu, and a spike in the violence in Juarez, interest in doing business on the border continues. Smart business people realize that times of crisis are also times of opportunity," he said. As an example, he cited the strong presence of auto parts suppliers at the conference. As GM and Ford become much smaller, auto parts suppliers are looking to diversify. "That's why Foxconn was such a big hit at this conference. Agustin (a Foxconn representative) said he got so many requests for information--240 cards--he's going to have to schedule a special meeting for those who want to follow through," he said.

Foxconn, scheduled to become the largest maquila plant in Mexico, is now operating at its new facility adjacent to the port of entry of San Jeronimo, Mexico, and Santa Teresa, New Mexico. There, it builds Dell computers. "When you build that many computers (about one million per year) that's a lot of screws, latches, plastic parts, buttons, and the like, for suppliers to provide," Pacheco said.

According to Francisco Uranga, Corporate Vice President for Latin American Operations at Foxconn,who spoke at the conference, there are 3900 persons employed there now, gearing up to 7500 jobs by October of this year. The campus at San Jeronimo includes a 40-room hotel for company executives to stay in. Another Foxconn plant operates independently at the Oscar Flores industrial park in Juarez, building Hewlett Packard computers.

Uranga explained that the decision to locate just South of New Mexico was due in part to the proximity of a population of 400,000 in West Juarez (Foxconn will be closer to this population than any other large maquila plants), the commitment by Mexican authorities to build a suitable road from Anapra to San Jeronimo to connect the plant to this source of labor, to the provision of electricity and water to the site, and the the strategic location of the plant in a Free Trade Zone next to a Free Trade Zone on the U.S. side. "Foxconn does not technically lie on Mexican soil," he said. Free Trade Zones provide tax breaks and other incentives for companies locating within them.

Another panel at the conference discussed the implications of large-scale infrastructural projects for trade in the Paso del Norte area. Curtis Spencer, President of IMS Worldwide, Inc., said the expansion of the Panama canal (a $5.25 billion project) will double it's shipping tonnage capacity, which will reduce demand for Mexican ports to transport goods to the U.S. The all-water Gulf and East Coast ports will be the main beneficiaries, not Mexican ports. On the other hand, as Mexican West Coast ports at Lazaro Cardenas and Punta Colonet expand, Mexico will be an attractive alternative--when the global economy recovers--for U.S. markets to re-route there instead of through Los Angeles-Long Beach, ports that have become highly congested. This will stimulate traffic through the Paso del Norte region as well as other U.S.-Mexico border crossings.

The Punta Colonet project to create a deep water port south of Ensenada in Baja California Norte, has been delayed and cut down in scope due to the global recession. This $3.8 billion project will be accompanied by the construction of a railroad connecting the port to the U.S. However, no decision has been made about the place the connection will be made. Farmers in Yuma flatly rejected putting the crossing into the U.S. immediately north of San Juan Rio Colorado. One of the possible options is for the railroad to go through Sonora to Cd. Juarez. Other options would include Calexico and Nogales. If it were to go through Juarez, this would greatly stimulate the growth of traffic through the border crossings in the Paso del Norte.

Locally, the decision of the Mexican government to divert rail traffic from downtown Juarez to Santa Teresa by building a spur, combined with the decision of Union Pacific to create an inter-modal facility near Santa Teresa, promises to increase the strategic importance of the port of entry at Santa Teresa-San Jeronimo. Luis Heredia, director of public affairs at Union Pacific Railway, explained that discussions with the BLM and the State Land Office are about to conclude and it is expected that by the end of this month Union Pacific will acquire the land it needs for the facility. The state of New Mexico has exempted locomotive diesel fuel from gross receipts taxes, in the interests of promoting the creation of this intermodal facility.

In a second phase, Union Pacific will build an intermodal ramp, with up to 30 tracks, to allow the building of trains. And in a third phase, Union Pacific will build a facility to simplify train-truck transfers. As these come on line, downtown El Paso will be able to rebuild one of the least distinguished areas in the entire Paso del Norte region.

The conference, now in its 16th year, was sponsored by various entities, including the International Business Accelerator (Jerry Pacheco is executive director); the North American Institute, headed by Dr. Jon Amastae, of UTEP; the City of Juarez; Western New Mexico University; the New Mexico Small Business Development Network; the Mesilla Valley Economic Development Alliance; and the New Mexico Economic Development's Office of Mexican Affairs.


Anonymous said...

Why could we not get those Foxconn jobs in the southern valley of New Mexico. We need jobs here in Berino and Vado, not Mexico.

Anonymous said...

Thats the role of MVEDA to bring jobs for us in the valley. I have yet to hear of them creating any jobs. They do create jobs in santa teresa but its safe to say 95% of those workers are texans.

Anonymous said...

Is this Border Director crazy with his comments- Dr Garcia give us your insight-

Sun News
LAS CRUCES - One New Mexico border official said the U.S.-Mexico security agreement reached Monday could have positive implications for the state's international trade, though the specific impacts are yet unclear.

Border Authority Director Andrew Moralez said cross-border trade has taken a hit recently because of the recession, the swine flu and the recent violence in Mexico, but "this agreement seems like it's in line to address all those issues."

The agreement doesn't include many specifics, but calls for more cooperation between Mexican and U.S. customs officials on issues of border trade and security, including the creation of binational port security committee and better information sharing. It's part of a larger plan to reduce drug and weapons trafficking.

Moralez said similar efforts already take place in New Mexico. For instance, he said, Sen. Jeff Bingaman, D-N.M., has promoted the Border Security Task Force, a group of residents that makes recommendations to the state's congressional delegation. And, each month the Border Authority hosts a ports-of-entry advisory panel meeting to address issues of border trade.

"What they're doing is taking it to the next level," said Moralez of Monday's agreement. "What I'm gathering from this letter of intent is they want to take it a step forward and make it more official. it's an agreement between two nations that would be binding."Do-a Ana County Sheriff Todd Garrison said he wasn't yet aware of the agreement, but said he has noticed improvements on the parts of both federal governments to address border-related crimes.
"I do think I've seen a lot more coming from Mexico and Mexico's government, toward wanting to fix and get the problem taken care of than I ever have before," he said. "I think it's going to take an effort from both of our sides; it's going to definitely take an effort with all of us working together to make it happen. And I definitely feel we're a lot closer to that than we've ever been."

Garrison said he believes the spike in violence in Mexico was a result of that government's increased attention to the problems.

Gov. Bill Richardson, in a released statement, said he has "consistently pushed for greater collaboration with Mexico on security, trade, economic development and health issues, and I am pleased the Obama administration is taking steps to increase cooperation on a national level.

"Combining efforts is critical to increasing safety on both sides of the border and is key to developing new trade, economic development and tourism opportunities here in New Mexico," Richardson said.

New Mexico has three ports of entry, in Santa Teresa, Columbus and Antelope Wells.

Moralez said last week's NAFTA conference, held in Sunland Park, had a record attendance, an indication there's still strong interest in cross-border business. He said his office recently has been talking with Mexican officials about conducting trade missions and promoting tourism in both Mexico and New Mexico.

"The bottom line is that New Mexico is in a good place; we've already been working on this, but it's going to add more support to our already safe borders we have in New Mexico," he said.

Diana M. Alba can be reached at; (575) 541-5443

Jose Z. Garcia said...

Trade between the U.S. and Mexico is affected by the state of the economy, the NAFTA agreements, and deals between businesses. Agreements on the security front between government officials on both sides are not designed to stimulate trade, but belong to a much broader binational agenda.

Right now U.S. officials, concerned about the spill-over of violence from Mexico to the U.S., are willing to bargain with Mexico over their number one security concern, which is the traffic of guns into Mexico from the U.S. But there is little that is likely to come of this, since the gun lobby in the U.S. has been extremely effective over many decades in intimidating Democratic legislators interested in gun control. But a lot of discussion about this issue will ensue and there will be an appropriate amount of hand-wringing on the part of U.S. officials, while many other issues, some of which really do affect trade, will also be discussed, such as the trucking issue within NAFTA, technical details about CT-PAC and other trade-related security issues, etc.