Brownsville Economic Journal (Spring 2013 issue) by Brownsville Economic Development Council

Vol. 1, No. 3 / Spring 2013

HECHO EN MEXICO ‘MADE IN CHINA’ is giving way to

United States’ neighbor to the South surpasses China in competitiveness

Guest Editorial

Thomas L. Friedman explains ‘How Mexico got back in the game’

‘Dashboard City’

The auto parts sector is a top component of the Matamoros maquiladora industry

Maritime Industry

Port of Brownsville, a vital component in the local and regional economy

Brownsville MSA

Area has potential to become an emerging region in the technology industry

Ana Lozano, BPUB Key Accounts Manager; Cesar Garza, Brownsville Independent School District Facilities/ Maintenance Administrator and Saira Muñiz, BPUB Key Accounts Representative

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Cover Design and Illustration: Jorge I. Montero

On the cover: Mexico surpasses Brazil and China in economic growth and competitiveness

Top performing metro

Brownsville MSA could become an emerging region in the technology industry

Fitch Ratings

Cameron County bridge system maintains its ‘A’ bond rating

‘More bang for your buck’

Veterans International Bridge is the only U.S. port of entry that allows the access of Mexican trucks with 30 or more tons of cargo

Port of Brownsville,

a vital component in the local and regional economy

Guest Editorial: How Mexico got back in the game

Local Industry Corner: Capitalizing on our proximity and relationship with Mexico

Marketing Corner:

SpaceX zeroing in on Cameron County

PRESIDENT’SCORNER

Mexico and the U.S.: Partners, not competitors

Jason Hilts

President & CEO

Mexico’s resurgence as an important economic market made headlines during most of 2012, and so far has done so this 2013. Stories of how Mexico has surpassed Brazil as the fastest growing economy in Latin America and how it has become more competitive than China in manufacturing costs have told the economic success our neighbor to the South has had in the past year. This economic success is well received and applauded here in Brownsville, the state of Texas, and the rest of the United States not only because Mexico is our neighbor, but because Mexico is one of our top trading partners. The United States is, by far, Mexico’s most significant trading partner. Nearly 80% of Mexico’s exports go to the United States and 50% of Mexico’s imports come from the United States. The economies of these two countries are linked in one shape or form. And analysts agree that Mexico and the U.S. are more partners rather than competitors. This economic partnership is very evident here in our Borderplex region, which includes Brownsville and Matamoros. The sister cities not only share a river, but also an economy, infrastructure, culture, and way of life that is unique to our region. If Brownsville’s economy worsens, it affects Matamoros. If Matamoros enjoys economic success, Brownsville enjoys that success as well. Both depend on each other, and for that reason, we are focusing this issue of EJ on how Mexico is emerging as a top economy in the world. We are also introducing the maquiladora industry in Matamoros, which is home to 115 companies, the majority of them from the U.S. Despite being affected by the last recession, it has maintained its competitive edge and has seen a healthy growth the last couple of years. The concept of ‘Made in China’ is now becoming secondary to a phrase we in the Borderplex region are happy to say: ‘Hecho en Mexico.’ This is now the trend. And we welcome that. EJ

Brownsville Economic Journal Spring 2013

EJ EDITOR IN CHIEF Gilberto Salinas gsalinas@bedc.com

DESIGN COORDINATOR & EDITORIAL CONTENT Jorge I. Montero jmontero@bedc.com

COPY EDITOR Sylvia Rodriguez srodriguez@bedc.com

PHOTOGRAPHY BEDC Editorial Team Brad Doherty

PUBLIC RELATIONS Michelle Lopez mlopez@bedc.com

CORPORATE CONTACT Lizzy de la Garza ldelagarza@bedc.com

EDITORIAL OFFICE Brownsville Economic Development Council 301 Mexico Boulevard, Suite F1 (ITEC Campus) Brownsville, Texas 78520 Tel. (956) 541-1183 / Fax: (956) 546-3938

VISIT US ONLINE www.bedc.com

FROM YOUR MOBILE DEVICE

CIRCULATION Sylvia Rodriguez srodriguez@bedc.com

The Economic Journal of the Brownsville Borderplex is published on a quarterly basis and distributed according to the fair-use doctrine of U.S.

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GUEST EDITORIAL

How Mexico got back in the game

Thomas L. Friedman

“Foreign Affairs” columnist for The New York Times

In India, people ask you about China, and, in China, people ask you about India: Which country will become the more dominant economic power in the 21st century? I now have the answer: Mexico.

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In India, people ask you about China, and, in China, people ask you about India: Which country will become the more dominant economic power in the 21st century? I now have the answer: Mexico. Impossible, you say? Well, yes, Mexico with only about 110 million people could never rival China or India in total economic clout. But here’s what I’ve learned from this visit to Mexico’s industrial/innovation center in Monterrey. Everything you’ve read about Mexico is true: drug cartels, crime syndicates, government corruption and weak rule of law hobble the nation. But that’s half the story. The reality is that Mexico today is more like a crazy blend of the movies “No Country for Old Men” and “The Social Network.” Something happened here. It’s as if Mexicans subconsciously decided that their drug-related violence is a condition to be lived with and combated but not something to define them any longer. Mexico has signed 44 free trade agreements — more than any country in the world — which, according to The Financial Times, is more than twice as many as China and four times more than Brazil. Mexico has also greatly increased the number of engineers and skilled laborers graduating from its schools. Put all that together with massive cheap natural gas finds, and rising wage and transportation costs in China, and it is no surprise that Mexico now is taking manufacturing market share back from Asia and attracting more global investment than ever in autos, aerospace and household goods. “Today, Mexico exports more manufactured products than the rest of Latin America put together,” The Financial Times reported on Sept. 19, 2012. “Chrysler, for example, is using Mexico as a base to supply some of its Fiat 500s to the Chinese market.” What struck me most here in Monterrey, though, is the

number of tech start-ups that are emerging from Mexico’s young population — 50 percent of the country is under 29 — thanks to cheap, open source innovation tools and cloud computing. “Mexico did not waste its crisis,” remarked Patrick Kane Zambrano, director of the Center for Citizen Integration, referring to the fact that when Mexican companies lost out to China in the 1990s, they had no choice but to get more productive. Zambrano’s Web site embodies the youthful zest here for using technology to both innovate and stimulate social activism. The center aggregates Twitter messages from citizens about everything from broken streetlights to “situations of risk” and plots them in real-time on a phone app map of Monterrey that warns residents what streets to avoid, alerts the police to shootings and counts in days or hours how quickly public officials fix the problems. “It sets pressure points to force change,” the center’s president, Bernardo Bichara, told me. “Once a citizen feels he is not powerless, he can aspire for more change... . First, the Web democratized commerce, and then it democratized media, and now it is democratizing democracy.” If Secretary of State John Kerry is looking for a new agenda, he might want to focus on forging closer integration with Mexico rather than beating his head against the rocks of Israel, Palestine, Afghanistan or Syria. Better integration of Mexico’s manufacturing and innovation prowess into America’s is a win-win. It makes U.S. companies more profitable and competitive, so they can expand at home and abroad, and it gives Mexicans a reason to stay home and reduces violence. We do $1.5 billion a day in trade with Mexico, and have been spending $300 million a day in Afghanistan. Not smart.

Spring 2013

Turn To Page 11

Brownsville Economic Journal

VIEWPOINTS

Investing in Mexico: Not a trend but a permanent momentum

Ernesto Velarde Danache

President & Founder of Ernesto Velarde-Danache, Inc. Mexican & International Lawyers

As a result of the disintegration of the Soviet Union and subsequent “independence” of the Central European countries that for decades were subjugated by the Moscow government, countries such as Romania, Hungary, Poland, the Czech and Slovak Republics, Bulgaria and others opened up their borders to direct foreign investment and became real life, formidable competitors of countries such as Mexico that for many years had been at the top of the list of investors in, primarily, the automobile and electronic manufacturing sectors. In more recent years China reached out to the world and before many realized what was happening with the “sleeping giant” China became an economic superpower and one of the most attractive destinations for foreign investors. True. Not only Central European countries and China had abundant labor force, skillful but outdated in Europe and untrained in China, workers compensation was also very low and with the incipient growth in those economies, people began to demand goods

and services formerly not available or just unaffordable. Many factors combined to make an investment in those countries desirable. One did not have to be a genius to forecast that, sooner rather than later, workers would seek and get better pay and the high demand of goods and services by the recently acquired purchasing power of the local inhabitants, combined with all those needed to build, house or supply to the numerous companies that moved in, will sensibly diminished the competing edge of all those countries. In very recent years, investors are coming to realize that they have always been better off in Mexico, a neighbor to the largest economy in the world with dozens of years of manufacturing experience, incentives, infrastructure, the NAFTA, a stable economy and not a “world” away from the consumer markets. Interestingly enough, many are now coming back. The Mexico alternative is not the result of a trend or a fashion. The momentum of Mexico is, undoubtedly, one of a permanent nature.

In very recent years, investors are coming to realize that they have always been better off in Mexico, a neighbor to the largest economy in the world with dozens of years of manufacturing experience, incentives, infrastructure, the NAFTA, a stable economy and not a “world” away from the consumer markets. Interestingly enough, many are now coming back.

Brownsville Economic Journal Spring 2013

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A MARKET

Top performing metro Brownsville-Harlingen MSA has many opportunities to become an emerging region in the technology industry

ACCOLADE

WITH POTENTIAL

Milken Institute Best-Performing Cities Index ranks the Brownsville-Harlingen MSA 29th out of 200 large metros in the country; touts the return of technology clusters as the story of 2012

Brownsville Economic Journal Spring 2013

BEDC.com

Written by Jorge I. Montero The Milken Institute ranked Brownsville-Harlingen as one of the top 30 best performing large metropolitan areas in the U.S. in its annual report, where it highlighted the return of technology clusters in 2012. The 2012 Milken Institute Best-Performing Cities Index, released on January 17, 2013, ranked the Brownsville-Harlingen MSA 29th out of 200 large metros in the country, beating out other Texas MSA’s like McAllen-Edinburg-Mission (38), Corpus Christi (44), Killeen-TempleFort Hood (63) and Beaumont-Port Arthur (116). “This ranking only shows the progress this region has made and continues to make today,” said BEDC President & CEO Jason Hilts. “If we continue this upward trend, more companies and more countries will look our way to do business,” Hilts said. The report ranked Brownsville-Harlingen first in the “5-year Relative High-Tech GDP Growth” with a score of 152.70. In the category of “5-year Wages and Salaries Growth,” Brownsville-Harlingen BEDC.com

“ ” “The technological leadership determines the status of the industry as a whole. Brownsville has the advantage of having dual technological advances both in the U.S. & Mexico”

- Hector Garza CEO of GC Telecom, LLC

ranked 10th with a score of 112.88. In the category of “5-year Job Growth,” the area ranked 7th with a score of 110.29.

Technology leads the way

Milken’s index report highlighted the return of technology clusters as the top

story for 2012, which was the main reason why the San Jose, California, MSA ranked number one in the list. The San Jose area, known more broadly as Silicon Valley, is a powerhouse in Internet search, communications networking, semiconductor and computer design, medical technology, telecom services, and data processing. The resurgence of business investment in equipment, especially information technology and software, was the unheralded story of this recovery, the report indicated. The latest technology wave is powered by social media, mobile devices, clean tech, and “big data” analytics, in which data generated online are processed for clues to targeting customers more effectively and enhancing operations. “People expect tech to be one of the most dynamic sectors of the economy, and it was,” says Ross DeVol, chief research officer of the Milken Institute and one of the report’s authors.

An opportunity for Brownsville

Milken statistics have shown that Brownsville-Harlingen MSA lags behind in growth within the technology sector.

Spring 2013

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Brownsville Economic Journal

Top 40 under 40

ACCOLADE

Brownsville’s rising star in economic development BEDC’s Executive VP recognized by Development Counsellors International

By Staff Reports

Gilberto Salinas, BEDC’s Executive Vice President, was recently recognized as one of the top 40 economic developers under the age of 40. The award was presented by Development Counsellors International during the International Economic Development Council’s Leadership Summit held in Orlando, Florida, in January. Salinas was one of four economic developers in the state of Texas to be recognized by DCI. He was also the only one south of Houston to receive the distinction. When asked about what is the most overlooked issue facing economic development, Salinas replied: “It’s easy to overlook what I think is the most important factor driving decisions for site location – skilled workforce. Beyond infrastructure, real estate, incentives and a community’s quality of life, the availability of a labor force will dictate the longevity, health, stamina and success of a company.”

The winners in DCI’s 40 under 40 Rising Stars in Economic Development award, which will be announced every three years, were selected by a five-member selection committee from a pool of more than 150 candidates. The firm, which specializes in economic development and travel marketing, views the recipients as the industry’s top innovators, deal closers, job creators, investment attractors and marketing extraordinaires. Salinas develops marketing campaigns to promote the Brownsville Borderplex area at the global level and in turn to recruit and expand industry in the region. He also works to coordinate the best possible incentives packages as well as suitable industrial sites for prospective companies, and ensures that the community and its public projects are represented at the state level in his role as legislative affairs liaison. He lives with his wife, Lizbeth, and their three boys: Daniel, 14, Gilito, 11, and Samuel, 4. EJ

Brownsville Economic Journal Spring 2013

Staff Photo

Gilberto Salinas was one of four economic developers in the state of Texas to be recognized by DCI. He was also the only one south of Houston to receive the distinction. BEDC.com

How Mexico got back in the game Continued from Page 5

We need a more nuanced view of Mexico. While touring the Center for Agrobiotechnology at Monterrey Tech, Mexico’s M.I.T., its director, Guy Cardineau, an American scientist from Arizona, remarked to me that, in 2011, “my son-in-law returned from a tour of duty in Afghanistan and we talked about having him come down and visit for Christmas. But he told me the U.S. military said he couldn’t come because of the [State Department] travel advisory here. I thought that was very ironic.” Especially when U.S. companies are expanding here, which is one reason Mexico grew last year at 3.9 percent, and foreign direct investment in Monterrey hit record highs. “Twenty years ago, most Mexican companies were not global,” explained Blanca Treviño, the president and founder of Softtek, one of Mexico’s leading I.T. service providers. They focused on the domestic market and cheap labor for the U.S. “Today, we understand that we have to compete globally” and that means “becoming efficient. We have a [software] development center in Wuxi, China. But we are more efficient now in doing the same business from our center in Aguascalientes, [Mexico], than we are from our center in Wuxi.” Mexico still has huge governance problems to fix, but what’s interesting is that, after 15 years of political paralysis, Mexico’s three major political parties have just signed “a grand bargain,” a k a “Pact for Mexico,” under the new president, Enrique Peña Nieto, to work together to fight the big energy, telecom and teacher monopolies that have held Mexico back. If they succeed, maybe Mexico will teach us something about democracy. Mexicans have started to wonder about America lately, said Bichara from the Center for Citizen Integration. “We always thought we should have our parties behave like the United States’ — no longer. We always thought we should have the government work like the United States’ — no longer.” EJ

A version of this op-ed appeared in print on February 24, 2013, on page SR11 of the New York edition with the headline: How Mexico Got Back in the Game. BEDC.com

Brownsville-Harlingen MSA Continued from Page 9

Since 2003, the institute has placed the local MSA in the lower part of the rankings in “High-Tech GDP Concentration” and “Number of High-Tech Industries with Location Quotients (LQ) over 1.” The LQ is a measure of high-tech concentration in a metro area. A metro with a LQ higher than 1 is said to be more concentrated than the United States and vice versa. But Brownsville has many opportunities to become an emerging region in the technology industry, according to Hector Garza, CEO of GC Telecom, LLC, a company based in Brownsville that provides repair service to manufacturers of electronic devices such as cellular phones, tablets and radio systems. “The technological leadership determines the status of the industry as a whole. Brownsville has the advantage of having dual technological advances both in the U.S. and Mexico,” Garza said. He added that the University of Texas at Brownsville is an important factor for the region’s success since the academic institution has several technological programs that will educate and open technological opportunities. As far as the industry’s outlook for 2013, Garza stated that the future looks promising. “The technological innovations are far more advanced than a few years ago. We are on the cutting edge in this field. The world has yet to reach its technological capabilities,” he said. In regards to GC Telecom, Garza mentioned that his company has maintained its ground as

Spring 2013

a leader in the competitive technology industry. “GC Telecom is on the cutting edge in its field. We invest resources in research and development worldwide. We provide resources to those companies that may need assistance in the technological field. This has allowed us to stay on top of the technology field,” Garza said.

Steady success

In the past three years, Brownsville-Harlingen MSA has received high marks from the Milken Institute annual report. In 2010 the Brownsville-Harlingen MSA took a huge leap in the rankings from the 70th spot recorded in 2009 to number 13th, moving up a remarkable 57 spots. That year Milken ranked Brownsville-Harlingen MSA first in high-tech output growth, in large part driven by telecommunication services, and second in the five year period. The local MSA, whose population is approximately 414,123, dropped 15 places in the institute’s rankings in 2011 falling to number 28. Despite the drop, Brownsville-Harlingen has maintained its ranking in the top 30 for two years in a row, thanks to the steady economic growth the area has experienced recently. According to the institute’s website, the index ranks U.S. metropolitan areas by performance on economic growth, job creation, retention and sustainability. The components include job, wage, salary, and technology growth. EJ Brownsville Economic Journal

Mexico’s energy reform drawing interest in Texas OIL INDUSTRY

The Mexican ruling party's recent decision to adopt a platform that could open up the country's giant oil monopoly to private investment has caught the attention of some industry gurus in Texas, who say the move bodes well for U.S. business interests. The Institutional Revolutionary Party, or PRI, remains adamant that the state-owned company, Petróleos Mexicanos, or PEMEX, will stay under state control. But the proposal, which requires legislative approval, could mean more oil is exported from Mexico to the U.S., and that Mexico might turn to Americans for guidance on how to increase production there. “Any time you allow the private sector more free rein, you see more business,” said WorldCity president Ken Roberts. “There are examples where too much of a laissez faire attitude can run amok. But generally speaking, when the private sector gets involved, it

Brownsville Economic Journal Spring 2013

n 2012, overall refined and crude oil amounted to more than $57 billion in twoway trade between the U.S. and Mexico

tends to always look for a way to do more business.” The U.S. and Mexico traded about $494 billion in goods in 2012, according to WorldCity, a Florida-based company that uses U.S. census data to track trade patterns. Overall refined and crude oil amounted to more than $57 billion in two-way trade. Roberts said oil imports from Mexico have more than tripled in value over the last decade, peaking in 2011 at $37.15 billion. He said that despite America’s continued effort to find new sources of energy, he didn’t see oil production worldwide declining soon. “As the U.S. continues to become

extremely successful in fracking, and if there’s successes in nontraditional means of powering our vehicles, there are all sorts of factors that can change that,” he said. “But I think there’s going to be a need for lots and lots of oil for years and years to come.”

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TEXAS BROWNSVILLE

MATAMOROS MEXICO

Analysts say, however, that interested entities should view the proposal cautiously. Energy reform was one of the hallmarks of Mexican President Enrique Peña Nieto’s campaign last year, when he successfully propelled the PRI back to the capital after 12 years out of power. Duncan Wood, the director of the Mexico Institute at the Woodrow Wilson International Center for Scholars, said the effects of such a proposal, however, remain unclear. “They are talking seriously about allowing private investment in the oil sector in general, [but] they want the state to retain control. So what that actually means in reality is very tough to work out,” he said. “Because retaining control could be legislative, regulatory; it could be the dominant player. No one is quite sure what that means.” Wood added that Peña Nieto’s administration would like to put forth additional reforms, and that those could affect the political climate leading up to the PEMEX negotiations. “The PRI is fully aware that it needs to maintain a broad popular support for its agenda, and if it’s going to engage in fiscal reform, where they are talking about adding value added tax on food and medicine, that’s going to be hugely unpopular,” he said. “If they also begin talking about opening up the oil sector, then that’s possible that will cause a reaction from the base as well. And the political party that is best placed to take advantage of that is the leftBEDC.com

Discovery of new deepwater oil deposits In 2012 Mexico discovered new deepwater oil deposits with estimated reserves of more than 600 million barrels. Dubbed Supremus 1 and Trion 1, the oil wells are located in a zone situated about 111 miles off the Mexican coast and 24 miles south of the maritime border with the United States. Mexican authorities have said that these discoveries should allow Mexico to increase its annual oil production by up to a third.

Location of Supremus 1 and Trion 1 GULF OF MEXICO

wing [Party of the Democratic Revolution]. That could cease upon an upswell of popular rejection of an opening of the sector.” Foreign companies are very likely to express interest, Wood said, but he doesn't predict an instant influx. “It’s not as in we’re going to see a flood of companies in to Mexico immediately,” he said. “They are going to sit back and analyze and make sure the conditions are right.” But Texas companies have already expressed interest, highlighting their expertise in drilling and offshore production. The South Texas Energy and Economic Roundtable, or STEER, a coalition of exploration companies currently drilling in the Eagle Ford Shale that officially launched in mid-March, said private investment would bolster trade between the U.S. and Mexico. “A reform of Mexico’s energy sector has the potential to have a significant impact on the entire United States, particularly in the oil and gas region in South Texas that already enjoys strong ties with Mexico and has experienced unprecedented industry growth, enhanced modernization and technological advancements,” said STEER president Omar Garcia. Those technological advancements will be a key factor for many U.S. interests, said Scott Miller, a senior adviser at the Center for Strategic and International Studies. Despite having proven oil reserves, PEMEX has under-produced, he

said. “The capability is there, but what they need is better technology and better access to some of the more modern techniques, and this is where U.S. energy services companies — many of them located in and around Houston — would, I think, find a major business opportunity,” he said. “It’s something that oil and energy development around the world tends to benefit handsomely from U.S. know-how and U.S. technology.” Miller added that “state control” of a resource is not something to necessarily be wary of. The largest private owner of energy reserves, Exxon Mobil, owns only 2 percent of the world’s share. “Most oil resources or energy resources are in government hands, either state-owned enterprises or state-controlled enterprises,” he said. “All of Russia, all of Venezuela and Petrobras [in Brazil] and most of the Middle East. So it’s not unusual to have that. It’s really how they structure it and what access is providing for oil services. But any opening of any sort will be looked at as an important opportunity.” EJ

Spring 2013

This article was written by Julian Aguilar and appeared in the Wednesday, March 6, 2013 edition of The Texas Tribune Brownsville Economic Journal

LOCALINDUSTRYCORNER

Partnering with Mexico and capitalizing on our strategic geographic location

Lizzy de la Garza

Dir. of Business Retention & Expansion

Brownsville and its sister city, Matamoros, are at the epicenter of one of the most dynamic and fastest growing regions. Just a few years ago the two cities formed a partnership, “Brownsville-Matamoros United,” to better market the vast economic advantages of conducting business along the border. The area has become a hub for international trade and commerce due to its ideal geographic location, solid infrastructure and logistics, valuable resources, pro-business climate, a young and skilled workforce on both sides of the border, low labor costs, and the region’s overall low cost of living. Brownsville has received many favorable rankings from renowned and well-respected sources. Recently, Brownsville was named the 6th fastest growing manufacturing region in the U.S. (IndustryWeek magazine), as well as, “North America’s Best Cost-Effective City” (FDI Magazine). Not long ago, Brownsville was also ranked No. 4 in “America’s Next Recovering Job Markets” (BusinessWeek), and in January 2013, Milken Institute’s Best Performing Cities of 2012 ranked Brownsville MSA 29th out of the 200 largest metros in the U.S. based on measures of employment growth, wages/salaries, and technology performance. All the pieces are slowly coming together and we’re seeing good things coming to fruition thanks to our community’s efforts to attract industry, retain business, and improve our region. One of our goals has been to fortify our partnership with Mexico. Unfortunately, our sister city has been plagued with drug violence and organized crime for the last few years. However, while the violence has affected many industries in Mexican cities, the maquila industry has fortunately remained somewhat immune to the violence. Many of these border Mexican cities are booming despite the violence, and according to Jason Beaubien from NPR, “The duty-free maquiladora assembly plants along the border are rapidly adding jobs, and exports to the U.S. are reaching record levels.” Contrary to what most people think, the drug violence is not hindering Mexico’s economic growth, however, many small businesses are hurting and countless of Mexican entrepreneurs are gravitating north in search of business and investment opportunities, in addition to refuge. If Brownsville is able to build and promote a strong and effective organization with a sound sup-

Brownsville Economic Journal Spring 2013

port system for these Mexican entrepreneurs, our community will be able to capture many of them who are coming in to do business. Hence, the Brownsville-South Padre Island Chapter of the Asociacion de Empresarios Mexicanos (AEM) was recently formed in the latter part of 2012. The AEM is a non-profit organization dedicated to support Mexican nationals build a successful business in the US. Among the organization’s goals are to: contribute toward the professional and intellectual development of its members, help its community develop, and collaborate with partnerships between the US and Mexico. The AEM started in San Antonio in 1996, and it has spread to different communities. Marco Saldivar, the AEM Brownsville-SPI chapter president, says, “We’re in a prime and critical time to have this kind of support structure because we have many Mexican nationals coming in and investing a lot of money.” Many of these Mexican entrepreneurs have either opened their businesses already, are in the process, or they are seriously considering. Yet, many have hit road blocks due to the unfamiliarity with the U.S. legal structure, tax system, real estate, permitting, immigration, and just running/doing business on the U.S. side. They know their business and how to operate it better than anyone else, but operating in the U.S. is different. Having a local AEM chapter is a win/win situation. If we are able to help Mexican entrepreneurs understand the process, navigate through the system, and effectively start their business here, they will win. At the same time, if we are able to retain them, we win too because they will be creating jobs, offering more diverse products/services to our community, living here, and therefore contributing to the tax base. The AEM local board works together to coordinate breakfast meetings and workshops, in which they bring professional speakers to present on topics of high interest and value. The AEM board also organizes mixers that create an environment conducive to networking and exploring opportunities. The AEM Brownsville-SPI Chapter Board of Directors includes: Marco Saldivar, Ignacio Torteya III, Diana Bakalem Villarreal, Lizzy de la Garza, Gerardo Gonzalez, Rafael Chacon, Adriana Contreras, and Connie Hensley. For more information on the AEM please contact Marco Saldivar at msaldivar@aem-usa.org or visit www.aem-brownsville.org. EJ BEDC.com

Cargo transport

LOGISTICS

Veterans International Bridge is the only U.S. port of entry that allows the access of Mexican trucks with 30 or more tons of cargo

‘More bang for your buck’

he Borderplex region has an international bridgeunique in its kind – that services the port of Brownsville from the city of Matamoros, Mexico. The Veterans International Bridge is unique in that there is no other international bridge in the United States that permits the entry of Mexican trucks whose cargo exceeds 30 tons, 10 tons more the legal limit imposed on other international ports of entry along the U.S.-Mexico border.

More for less

The tomato grower in the Mexican State of Sinaloa, located near the Pacific Coast, loads his trucks with 30 tons of the fruit, instead of the 20 permitted, when he ships his cargo thru the Nogales, Arizona, border or the McAllen, Texas, border. A truck from

ith the extra 10 tons of cargo on board, access thru the Port of Brownsville can save Sinaloa produce growers 50% in transportation costs.

Sinaloa can enter the U.S. legally thru Brownsville, where by way of the easily accessible Texas highways, he can make the short trip of 8 miles to the Port of Brownsville and unload its 30 ton shipment of tomatoes. With the extra 10 tons of cargo on

board (50% more of the usual shipment) the access thru the Port of Brownsville can save them 50% in transportation costs, compared to the costs of shipments entering the restrictive international bridges in Arizona and the West Coast. In other words, it is like shipping 10 tons of the product with no transportation costs.

Photo by Brad Doherty

Brownsville Economic Journal Spring 2013

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From ‘Devil’s Backbone’ to engineering marvel

This will be possible once the construction of the Mazatlan-Durango superhighway is completed. The new roadway will substitute the infamous highway known as the ‘Devil’s Backbone’. This incredible engineering marvel includes the highest suspension bridge in North America, 63 tunnels, and countless of other high bridges. Known also as the “Interoceanic Highway”, since it will connect the Pacific coast with the Atlantic coast, this highway has cost the Mexican government more than $1.2 billion, and will eventually connect Brownsville with the productive tomato industry of Sinaloa.

Saving time and money

This is only the beginning of a series of opportunities. Why send tomato shipments to the Northwest by way of Arizona instead of Texas? Once in Brownsville, the Sinaloa tomatoes will be at the center of the continent, 528 miles closer to Washington, D.C. and the East Coast market than if they would have entered the U.S. thru Nogales. This in turn will save an additional $925 per shipment. But produce growers can still save more. Mexico’s Northwest is one of the least populated regions in the world. As a result of this, Nogales reports little activity in cargo shipments to Mexico, with only a handful of American trucks returning South with cargo. The empty trucks have to travel from Los Angeles, about 186 miles away, or other places where they unloaded their shipments. This could add an additional $978 to the costs of moving the cargo. In total, the potential savings add up to $1,903 in transportation costs in the U.S., in addition to whatever amount the exporter from Sinaloa saved in moving his cargo in Mexico.

Location, Location, Location!

The Veterans bridge, or more commonly known on the Mexican side as “Los Tomates”, is the closest U.S. bridge to Mexico City, and located only about 186 miles from the city of Monterrey. So, contrary to the remote city of Nogales, Brownsville sees a great amount of traffic in cargo transport to the South, which genBEDC.com

Interoceanic Highway

The Federal Highway 40 stretches across seven states in Mexico. Once complete, it will reduce from 20 to 12 the hours it takes to travel the 750 miles from Mazatlan, in the state of Sinaloa, to Matamoros/Brownsville.

UNITED STATES

TEXAS

BROWNSVILLE MONTERREY

TORREON

SALTILLO

DURANGO

MEXICO

MAZATLAN

erates a high volume of empty trucks looking for cargo to take back to the East. This helps reduce the transportation costs to the North, to cities like Chicago, or to the East Coast, in comparison to isolated Arizona. Why pay more for the transportation of light cargo from Sinaloa to the East Coast of the U.S. (thru Arizona, a state without a coastline)? For less money one can ship 30 tons of cargo to the center of the continent and to an international deep water seaport. The same is applied to other Mexican states such as Michoacan, Nayarit, Guerrero, Morelos, Jalisco and even Sonora.

Potential client for the Port of Brownsville

Add to the potential savings of $1,903 per cargo shipment in the U.S. a 50% savings in transportation costs in Mexico and Brownsville will become the favorite port of the Sinaloa exporters. With more than 20,000 trucks a month transporting agricultural products during Winter thru Arizona, Sinaloa could become the Port of Brownsville’s top client. Only in 2012, more than $2.7 billion in fresh products crossed to America in Arizona. Maybe the majority of the cargo was destined to Chicago, New York and other cities East of the Sun State; only a small portion of the products destined to California cross in Arizona, since Sinaloa uses the international bridges in Calexico/Mex-

MATAMOROS

icali or the Port of Mazatlan to move cargo to the West Coast. As a result, the majority of the goods crossing in Arizona end up in the East Coast in the U.S.; and because of that, they should be transported thru Brownsville ports of entry. Also, the transport of grains, animal feed, fertilizer, steel, wood, paper and other goods of the Texas market will be more affordable to the Sinaloa importer.

Unlimited potential to satisfy the demand

Europe demands fresh produce with good quality during the winter months. The savings in transportation costs is not everything in the tomato, papaya, avocado, and mango industries, or any other produce harvested during Sinaloa’s winter season – it is also about quality control and freshness. And Sinaloa has unlimited potential to increase its production and satisfy this demand. If the Sinaloan exporters work with Brownsville, they will not only reduce transportation costs, but will also drastically improve the quality of their fresh products, by cutting the time of delivery. EJ Joseph Linck is a former Director of the Port of Brownsville and expert broker in consumer goods

Spring 2013

Brownsville Economic Journal

MARKETINGCORNER

Zeroing in on Cameron County

Michelle Lopez

Dir. of Public Affairs & International Development

The rumors swirled around for months before anyone publically announced that Brownsville was one of several sites Space Exploration Technologies, better known as “SpaceX”, was looking at for their new rocket launch site. Fast forward about 14 months, and Cameron County couldn’t be in a better place. Right now, South Texas is the leading candidate for the project, beating Florida, Georgia and Puerto Rico; however, the deal is far from being done. On March 6th, State Representative, Rene Oliveira, filed House Bill 2623 that would give Cameron County and the General Land Office the authority to temporarily close a beach for launches and space flight activities. “This is an important tool to bring the company to Cameron County, but it also protects citizens’ access to the beach in times of peak summer use,” said Oliveira. Two days later and along with Oliveira, SpaceX founder, Elon Musk, appeared before the Texas House of Representatives Appropriations Committee in Austin where he explained to committee members what his company was about and what he intended to do. “It all seems to be progressing pretty well,” Musk said. “We are optimistic about making this work in Texas in the Boca Chica area.” The launch site SpaceX wants to build would be the first commercial orbital launch site in the United States. Other sites like Cape Canaveral, Florida, are government launch facilities. “This would kind of be the commercial version of Cape Canaveral. That is what we are thinking about establishing near Brownsville,” Musk said. During the hearing, Musk mentioned the public hearing held last May in Brownsville, where more than 500 peo-

Brownsville Economic Journal Spring 2013

ple showed up in support of the project. “It’s an environmental review where you invite people normally to raise objections. I don’t know if there were people who wanted to object, but they didn’t get a chance to because people kept coming up to the mic (microphone) and voicing their support (for SpaceX),” he said. “In fact, I don’t think I have ever seen an environmental hearing like that before.” Musk’s comments came just days after the second successful resupply mission of his Space X Dragon spacecraft from Cape Canaveral to the International Space Station. This flight is the second of at least 12 SpaceX cargo resupply missions to the space station through 2016. The proposed area SpaceX is eyeing is a privately owned land. It’s located at the eastern end of State Highway 4, about three miles north of the Mexican border on the Gulf Coast and about five miles south of Port Isabel and South Padre Island. The Brownsville Economic Development Council, Governor Rick Perry’s office, city and county officials have been working with SpaceX for about two years. The project was kept under wraps for more than a year until last April when details of the project surfaced in a document from the Federal Aviation Administration (FAA) detailing an environmental review needed to be completed before any construction is done. According to the Federal Register, SpaceX proposes to build a vertical launch area and a control center to support up to 12 commercial launches per year. The vehicles launched include the Falcon 9, Falcon Heavy and smaller reusable, suborbital launch vehicles. A second public hearing is tentatively scheduled for the latter part of April. EJ BEDC.com

Among the best

ACCOLADE

Matamoros Mayor receives worldwide recognition Alfonso Sanchez Garza named among the top ten mayors in the world

Written by Jorge I. Montero

he City Mayors Foundation, an international think tank for local government, named Matamoros, Tamaulipas, Mayor Alfonso Sanchez Garza one of the top ten mayors in the world. The accolade, announced in December of 2012, is part of the foundation’s World Mayor Project, which awards the World Mayor Prize to mayors with great vision, passion and abilities that help make their respective cities good places to live, work and visit. The recognition is given every two years. Mayor Sanchez Garza was ranked 10th in the list based primarily on the number of votes received, achievements done during his term as mayor, and the quality of testimonials the foundation received on his behalf by Matamoros citizens. One testimony states that while in office, Sanchez Garza “has allocated resources to restore parks, improve the city traffic by remodeling the main streets of Matamoros, implemented free wireless internet in some of the most visited places in the city, rebuilt the local police force, created job opportunities for the people and even reduced the violence in the city compared with previous administrations”. The City Mayors Foundation considers Sanchez Garza a rising star in Mexican politics. The World Mayor Project was created BEDC.com

Courtesy photo

The City Mayors Foundation considers Mayor Alfonso Sanchez Garza a rising star in Mexican politics.

to raise the profile of mayors worldwide and to honor those who have served their communities well and who have made contributions to the well-being of cities nationally and internationally. More than 205 thousand individuals and organizations nominated a total of 912 mayors worldwide for the 2012 World Mayor Prize, which has been awarded since 2004. The organizers considered only those nominations that were accompanied by supporting testimonials. A list of 98 official candidates included 17 may-

ors from North America, 14 mayors from Latin America, 34 mayors from Europe, 21 mayors from Asia, five mayors from Australia and seven mayors from Africa. A shortlist of 25 finalists was largely compiled based on mayors’ accomplishments detailed in the testimonials. The shortlist included five mayors from North America, four from Latin America, seven from Europe, five from Asia, two from Australia and two from Africa. The list concluded with the Top 10 finalists. Sanchez Garza is the only mayor from Mexico and Latin America to appear in the Top 10 list. The winner of the 2012 World Mayor Prize was Iñaki Azkuna, Mayor of Bilbao, Spain. According to its website, the City Mayors Foundation was established in 2003 and consists of professionals working together in Europe, North and South America, Asia and Africa to promote strong and prosperous cities as well as good local government. It encourages city leaders from across the world to develop innovative and sustainable solutions to long-standing urban challenges such as governance, society, housing, transport, education and employment. Matamoros is located south of Brownsville, across the Rio Grande River. The sister cities make up the Borderplex region, which includes the Port of Brownsville, 13 industrial parks, four international bridges, one international rail bridge, two airports, and access to main highways in the United States and Mexico. EJ

Spring 2013

Brownsville Economic Journal

ECONOMIC RESURG

Cover story

Written by Jorge I. Montero Design and Illustration: Jorge I. Montero

GENCE

Mexico surpassing Brazil, China in economic growth and competitiveness razil is no longer Latin America’s top story on economic growth. Neither is China’s success story on labor costs.

Now it is Mexico’s turn to be on the spotlight of the economic world, growing faster than Brazil and beating China in the low cost manufacturing game to the extent that “Made in China” is giving way to “Hecho en Mexico.” The Aztec country, Latin America’s second-largest economy, is outpacing Brazil through export-led growth and sound macroeconomic management. It is one of the most open of the world’s leading economies, with a network of 44 free-trade agreements. “Not only is Mexico doing better, macroeconomically speaking, than the false

stereotypes would have us think, Mexico is actually doing better than the United States,” said Richard Fisher, president of the Federal Reserve Bank of Dallas, in an interview with The Washington Post in September of 2012. Also, Mexico has become more competitive now than China. Earlier in 2012, China lost its factorywage advantage over Mexico. Rising Chinese labor costs are pushing companies to “reshore” production back to Mexico and the United States, where transportation costs are lower, too, The Post reported. Reasons to be optimistic about Mexico’s economy include domestic momentum for reform and diminished competition from China, according to an editorial written by Kay Granger, John D. Negroponte, and Charles Shapiro published in the San Diego Union Tribune.

Cover story

TRADE FACTS WITH U.S.

$500 billion

of total trade in U.S. goods and services with Mexico in 2011

$224 billion of exports

$277 billion of imports

$53 billion

the U.S. goods and services trade deficit with Mexico in 2011

No. 3

Mexico is currently our 3rd largest goods trading partner with $461 billion in total (two ways) goods trade during 2011.

DID YOU KNOW?

In 2011, Mexico was the second-largest importer of U.S. goods, purchasing billions in electronics, transportation equipment and machinery — and a lot of jewelry, beer and cheese. At the end of the year, U.S. businesses had exported about $198 billion in merchandise, a 10year high.

Courtesy Nissan

Nissan subsidiary JATCO recently announced investment of $220 million to build its second automotive parts plant in Aguascalientes, Mexico, beginning operations in the summer of 2014.

Granger, a Republican congresswoman from Texas, is chairwoman of the House State and Foreign Operations Appropriations Subcommittee. Negroponte, a former deputy secretary of state and former U.S. ambassador to Mexico, is chairman of the Council of the Americas. Shapiro, former U.S. ambassador to Venezuela, is president of the Institute of the Americas, a public policy think tank at the University of California, San Diego. The editorial explains that rising wages and higher transport costs make Chinese exports more expensive, playing to Mexico’s geographic advantage as companies seek to cut costs through near sourcing.

The reasons for success

The Schwab Center for Financial Research reported that geographical proximity to end markets, or “near-shoring,” is becoming more desirable for two reasons: The rising price of oil has driven global transportation costs higher in recent years, and manufacturers want to be able to adapt quickly to market changes. Near-shoring has helped Mexico’s manufacturing sector, helping grow the country’s market share in goods that are expensive to ship because of their bulk or weight, such as televisions, major household appliances and automobiles. Another factor contributing to Mexico’s growing market share, according to the Schwab Center, is its workers’ advances in areas that require higher skills, such as cars, telecom equipment and aerospace. The Washington Post reported that trade analysts have watched Mexico move from

farm work to assembly plants to the highskill manufacturing necessary to make airplanes and satellites. Many U.S. goods, including metalworking machines, agricultural processors, and car parts, are shipped to Mexican factories, as the country grows as a manufacturing hub, helped by the North American Free Trade Agreement and lower transportation costs and wages, The Washington Post added. The labor-cost equation is also favoring Mexico, according to the Boston Consulting Group. In 2000, Mexican factory workers earned more than four times as much as Chinese workers. Due in large part to China’s double-digit wage increases in recent years, by 2010, Mexican workers earned only 1.5 times as much. BCG estimates that by 2015, the fully loaded cost (including benefits, taxes and indirect costs) of hiring Chinese workers may be 25% higher than hiring Mexican workers.

Trade with U.S.

In 2012, Mexico became the second largest export market for the U.S., with a 9.1 percent growth, totaling a record $216.3 billion, according to statistics from the International Trade Administration, an arm of the U.S. Department of Commerce. Mexico’s economic resurgence helped edge out China as America’s second largest trading partner after Canada. The Economist reported that Mexico is already the world’s biggest exporter of flatscreen televisions, BlackBerrys and fridge-

TRADE FACTS WITH U.S.

Top exports

Electrical machinery ($32.3 billion), machinery ($31.5 billion), mineral fuel and oil ($23.6 billion), vehicles ($18.1 billion), and plastic ($12.7 billion).

$198.4 billion U.S. goods exports to Mexico in 2011

Nissan’s manufacturing plant in Aguascalientes, Mexico, assembles diesel fueled motors.

freezers, and is climbing up the rankings in cars, aerospace and more. The doorway for those imports is the 2,000-mile U.S.-Mexico border, the world’s busiest. Roughly 80% of Mexico’s exports went to the United States in 2011, and exports constitute more than 30% of Mexican gross domestic product (GDP),which means that the United States generates a quarter of Mexico's economic activity. Over the past two years, the United States has been a good export market because its economy has been one of the most stable globally, revealed the Schwab Center for Financial Research. Trade with the United States has increased sixfold since NAFTA went into effect in 1994, according to Bank of Mexico and U.S. Department of Commerce data. The trade agreement eliminated tariffs for goods and made it easier to invest across the border. “Before NAFTA, we had a slight trade deficit with the United States,” Daniel Chiquiar, a Bank of Mexico statistician, told The Washington Post. “Now we have a huge trade surplus.” Some analysts are viewing Mexico and the United States more as partners, rather than competitors. And that partnership leads to economic success for both countries. “Mexico and the United States are no longer competitors, where one country wins and the other loses. They are partners,” Christopher Wilson, of the Mexico Institute in Washington, told The Washington Post. “The Mexican and U.S. economies are now

Courtesy Nissan

as deeply integrated as any on Earth.”

A change of direction

The change in presidency and the return of the Institutional Revolutionary Party (PRI) to power has also helped the country’s economic climate change from somber and negative to brighter and positive. The PRI and Mexico’s new president Enrique Pena Nieto have shown support for structural, pro-market, reforms. U.S. Representative Henry Cuellar, DLaredo, is optimistic that Pena Nieto will help strengthen economic ties between both countries, something that would bring tremendous benefit to the border region, especially the Borderplex, which is comprised of Brownsville, Port of Brownsville and Matamoros. Cuellar told local online newspaper The Rio Grande Guardian that he was satisfied with what Pena Nieto had said when he met with President Obama and congressional leaders during a visit to Washington, D.C., in late November of 2012. “When President-elect Pena Nieto talked with the congressional leadership he started with a very different message to the one I have heard from past presidents of Mexico. Usually, Mexican presidents talk about immigration, guns, security, drugs,” Cuellar told The Guardian. “He answered questions when it came to those issues but his real emphasis was economics. How do we enhance the economic relationship between the U.S. and Mexico?

No. 2

Mexico was the United States’ 2nd largest goods export market in 2011.

Top imports

Electrical machinery ($54.3 billion), vehicles (cars, trucks and parts) ($45.8 billion), mineral fuel and oil (crude) ($43.9 billion), machinery ($38.6 billion), and precious stones (gold and silver) ($9.8 billion).

$262.9 billion U.S. goods imports from Mexico in 2011

SOURCE: Office of the United States Trade Representative

Cover story

TRADE FACTS WITH TEXAS

$86.63 billion

exports of goods to Mexico in 2011

Main export

Computers and electronics

DID YOU KNOW?

Computers and electronics generated $19.6 billion and were 23 percent of total exports sent to Mexico.

More than 70 percent of the chickens Texas ships beyond its borders go to Mexico

“ ” Courtesy Presidencia de la Republica de Mexico

Mexico’s new President Enrique Pena Nieto has shown support for structural, pro-market reforms.

How do we maximize this relationship to make the border region more efficient? He emphasized the importance of the border region. I think that is good news,” said Cuellar to the online newspaper. The Guardian’s interview was done before Pena Nieto was officially sworn in in early December of 2012. “Pena Nieto talked about foreign investment and oil and gas in Mexico, not to give it away but to bring in more technology and develop partnerships. He talked about the oil and gas in the Gulf of Mexico. So, his emphasis was economics, economics, economics,” Cuellar added. In March, the PRI took a step toward opening its state oil company, Petroleos Mexicanos (Pemex), to foreign investment. In what is considered an important accomplishment since he took office, Pena Nieto was able to persuade his party to change its bylaws to clear the way for changes at Pemex. Pemex is the top source of tax revenue for the Mexican government. But its production of oil has been declining dramatically and the company is in dire need of outside expertise for deep-sea exploration, the Los Angeles Times reported. “It’s a win-win situation” for Mexico and the U.S., Fadel Gheit, a senior energy analyst at Oppenheimer & Co., told the L.A. Times. “The Mexican government finally realized that banning international companies

“The Mexican government finally realized that banning international companies from participating in this sector (oil) was very illadvised because they lack the technology, they lack the expertise, and they don’t have enough money to put up the capital needed to grow production”

- Fadel Gheit senior energy analyst at Oppenheimer & Co.

from participating in this sector was very illadvised because they lack the technology, they lack the expertise, and they don’t have enough money to put up the capital needed to grow production.” EJ

‘Dashboard City’ The auto parts sector, a top component of the Matamoros maquiladora industry

Written by Jorge I. Montero

Michigan has its “Motor City”, California its “Silicon Valley”, and the Borderplex the “Dashboard City”: Matamoros. “The auto parts sector encompasses 35% of all the maquiladora industry in Matamoros. Practically all the parts that create a dashboard in a vehicle are manufactured in Matamoros,” said Roberto Mattus Rivera, Executive Director for the Matamoros Maquiladoras Association (AMMAC), giving the reason why this community earns the title of “Dashboard City.” .he Matamoros maquiladora industry, that has serviced the area for 48 years, is comprised of different sectors such as BEDC.com

metal mechanics, plastics, construction material, textile, service suppliers, chemicals, electronics, and auto parts, the most prominent sector of the industry. The main clients of the auto parts industry in the city are GM, Ford, Chrysler, Honda, Toyota and Volkswagen. Brownsville’s sister city, located south of the Rio Grande, is home to115 companies, the majority of them from the United States. These companies together generate approximately 65,000 direct and more than 15,000 indirect jobs to Matamoros. The electronics industry is another important asset of this border town. Electronic tablets, capacitors, power sources, and delicate fiber optic systems are some of the items manufactured here. “The industry’s output surpasses the $1 billion per year and a potential market of

millions of dollars exists in the buying of materials for the process of fabrication,” Mattus said. Matamoros’ eight industrial parks are home to highly respected companies such as Delphi, Kemet, GE, Inteva, Autoliv, Trico, Universal Lighting, among others. Such companies help make this city of 500,000 people a competitive place to do business.

Bright forecast

Analysts have stated that Mexico is already the world’s biggest exporter of flatscreen televisions, BlackBerrys and fridge-freezers, and is climbing up the rankings in areas that require higher skills, such as cars, telecom equipment and aerospace.

Spring 2013

Brownsville Economic Journal

Courtesy photo

From left to right: Manuel Garcia Garza, Secretary of Economic and Employment Development for the city of Matamoros; Jason Hilts, BEDC’s President and CEO; Bryan Kerrick, AMMAC’s President; Alfonso Sanchez Garza, Mayor of Matamoros; Rolando A. Gonzalez, CEO for Gobar Systems Inc.; Jorge I. Montero, BEDC’s Marketing and Design Coordinator; Gilberto Salinas, BEDC’s Executive Vice President; and Roberto Mattus Rivera, AMMAC’s Executive Director. The different economic development entities work together to bring business opportunities to the Borderplex region.

And Mexico’s success in the automotive industry reverberates in the “Dashboard City”. “In Matamoros the heart of the maquiladora industry is the auto parts, electronics and metal mechanics sectors”, Mattus said. “The markets that our companies reach out to foresee a positive outlook and growth according to sales projections for 2013.” He also added that Mexico “is transitioning towards a reforming government that gives us hope for a greater economic stability, and above all, legal certainty for foreign investment based on labor and education reforms that are already in place and also the energy reform that is soon to come.” In 2012, China lost its factory-wage advantage over Mexico. Rising Chinese labor costs are pushing companies to “reshore” production back to Mexico, where transportation costs are lower, too. Because of that tendency, at least 10 companies have established in Matamoros in the last couple of years. “Some 10 factories that had operations in China have decided to relocate to Mexico, particularly in Matamoros due to the proximity with the U.S. market and competitive costs available here,” Mattus said. He stressed that in order to bring companies and attract foreign investment to the Borderplex area, AMMAC is working alongside the Tamaulipas State Government, the City of Matamoros Government and the Brownsville Economic Develop-

Brownsville Economic Journal Spring 2013

ment Council. “(BEDC) is the first agency contacted by American investors who are seeking information about the economic conditions of this region, which is one of the most solid in attracting foreign investment in the country and offers a large skilled manufacturing labor force,” he said. Such collaboration has led to new investments in the maquiladora industry. Mattus pointed out that one of the most recent investments in Matamoros has been done by Overhead Doors, which has established full operations in one of the city’s eight industrial parks. The company is in the metal fabrication industry and manufactures residential and comercial overhead doors. The AMMAC Executive Director added that at least eight companies are expanding their operations in Matamoros thanks to the success in their respective markets. In 2011, Matamoros was ranked the No. 9 Cost Effective City for Foreign Direct Investment by North American Cities of the Future. The city boasts an ideal climate for investment and doing business in an easy, fast and flexible manner; offers an excellent and capable labor force and human capital at the level of engineers and technicians; competitive prices, and most importantly more than 45 years of success among the foreign companies that continue working here and that are backed by modern infrastructure and more than 1,000

local suppliers. “Matamoros has a deeply rooted business culture similar to other foreign companies’ business philosophies that gives this city another advantage in productivity and success among its competitors,” Mattus said.

Peaceful climate

The state of insecurity that surrounded the city of Matamoros in the last couple of years has gradually began to dissipate. The city now lives in a peaceful and positive climate that has brought back tourism and investments to the area. “The best example (of the positive climate) is that of the more than 1,000 foreigners, the majority of them Americans, that live in the Rio Grande Valley and that cross the border on a daily basis to work in Matamoros in the factories. To this date, there have been no reports of particular cases where foreigners have been victims of violent situations,” Mattus said. Federal, state, and local agencies have also been coordinating to reinforce security and ensure that the city’s citizens and companies operations are not at risk. “Companies have taken the necessary precautions (to protect themselves from the state of insecurity), but I insist in saying that the violent climate is gradually dissipating and we now see a climate of confidence and security that helps people concentrate more on their jobs. This in turn helps with productivity and companies become more competitive,” he said. EJ BEDC.com

Greater competitiveness

INFRASTRUCTURE

Projects will help fuel economic opportunities and growth within the maquiladora industry

Investments to benefit the Port of Matamoros

Courtesy photo

The infrastructure projects will benefit the city of Matamoros and the Port of Matamoros. It will also help expand the city’s maquiladora industry and help the region gain a competitive edge.

By Staff Reports

Tamaulipas State and Matamoros officials announced a series of investment projects that will benefit the infrastructure of the Port of Matamoros and help expand the city’s maquiladora industry. The announcement was made during Tamaulipas Governor Egidio Torre Cantu’s visit to Matamoros in January, where he revealed that the investment for the projects totaled about $300 million. The Governor said that one of the short-term projects contemplated is the rehabilitation of the existing infrastructure at the Port of Matamoros. This will help activate the port’s terminal required by the Mexican national oil company Petroleos Mexicanos (Pemex) to support their exploration activities in the Perdido Fold Belt in the Gulf of Mexico. BEDC.com

The estimated cost for the project is $112 million. “The project includes the dredging of the canal and dock area, the northern and southern extension of the jetties, rehabilitation of the dock area, construction of a railroad yard, storage facilities, and access to the main roadway that leads to the port,” Torre Cantu said. In 2012 Mexico discovered new deepwater oil deposits with estimated reserves of more than 600 million barrels. Dubbed Supremus 1 and Trion 1, the oil wells are located in the Perdido Fold Belt, a zone situated about 111 miles east of Matamoros and 24 miles south of the maritime border with the United States. Mexican authorities have said that these discoveries should allow Mexico to increase its annual oil production by up to a third. Matamoros Mayor Alfonso Sanchez

Garza thanked Governor Torre Cantu for his support to help develop the Borderplex region and highlighted other infrastructure endeavors that are near completion such as the international railroad bridge and the extension of the Veterans International Bridge. These projects, the Mayor said, will help create a modern and competitive commercial and industrial corridor that will not only benefit Matamoros and Tamaulipas, but Mexico as well. Governor Torre Cantu also took part in the groundbreaking of “Proyecto Espejo 1” at the Los Palmares Industrial Park. The project will create four industrial units at the park with a total investment of more than $30 million. Both ambicious projects will help fuel economic opportunities in the region and growth within the maquiladora industry. EJ

Spring 2013

Brownsville Economic Journal

Fitch Ratings

LOGISTICS

County bridge system maintains its ‘A’ bond rating

Commercial traffic picks up at local international ports of entry

Despite competition from bridges farther up the Rio Grande Valley and a drop in border crossings, the Cameron County international bridge system is in solid shape financially. That’s according to Fitch Ratings, which in January affirmed the “A” rating and stable outlook on the county bridge system’s $6.3 million in revenue bonds. The same goes for $13.9 million in outstanding debt to the county — the bridge system’s share of bonds the county issued in 2005, 2008 and 2011. Pete Sepulveda, county administrator and bridge system director, said Fitch’s latest report leaves the bridge system’s status unchanged from last year, which is a good thing. “Annually they review our financials and see where we’re at, and then make a determination whether to leave us with the same rating or change our rating,” he said. “The way the economy has been the last couple years I doubt that any government entity has improved their credit rating only because of the whole situation nationwide. So to be able to maintain your rating and a stable outlook, that’s positive.” Most of the bond money is used for capital improvements to the bridge system, Sepulveda said. The biggest project, which began 18 months ago and is complete, is the construction of additional commercial truck lanes at Veterans International Bridge at Los Tomates. Wait times at the bridge will be reduced substantially when the project is finished in early March, Sepulveda said. The county also operates Gateway International Bridge in Brownsville and the Free Trade International Bridge at Los Indios.

Brownsville Economic Journal Spring 2013

Brownsville bridge border crossings Vehicle crossings

2011

2012

2013

Total

Northbound Southbound

3,709,400 4,487,407 317,403* 8,514,201 3,846,507 3,276,389 402,051* 7,524,947

Northbound Southbound

2,109,895 2,104,561 156,735* 4,371,191 1,928,719 1,850,098 272,754* 4,051,571

Pedestrian crossings

Truck crossings

Northbound Southbound

177,986 187,714

190,204 191,526

Not available

32,020*

368,190 411,260

Northbound Southbound

39,398 45,246

43,044 53,608

3,482* 3,347*

85,924 102,201

Rail crossings

SOURCE: Texas Center for Border Economic and Enterprise Development *Figures for 2013, where available, are as of March 15

The Fitch report said that overall traffic on the county’s bridges declined for a sixth consecutive year — down 2.5 percent in fiscal year 2012 — to 5 million total crossings annually. However, Sepulveda said that while passenger traffic has been flat, commercial traffic has picked up — almost 5 percent in fiscal year 2012, according to Fitch. Passenger vehicle traffic constituted 58 percent of revenues in fiscal year 2012, compared to 26 percent for commercial traffic, according to the report. The increase in commercial traffic is in part due to the stable and growing maquiladora industry, while security problems have also become less of an issue,

Fitch said. “We went through a period of time where we would get bomb threats and we would have to shut down the bridge,” Sepulveda said. “It’s been a while since we had one, so it’s kind of calmed down.” To counter declining revenue from crossings, bridge system management has instituted several toll increases. Tolls from fiscal year 2012 were up 3.6 percent from the previous year to $15.1 million, Fitch noted. EJ

This article was written by Steve Clark and appeared in the Monday, February 11, 2013 issue of The Brownsville Herald BEDC.com

BUSINESS&ECONOMICBRIEFS

Expanded truck lanes on U.S. side of Veterans bridge complete

Commercial trucks crossing Veterans International Bridge at Los Tomates will now have their own travel lanes into the United States from Mexico. The commercial traffic lanes at the bridge opened in February after nearly two years of construction. The $6 million project funded by the Federal Highway Administration’s Coordinated Border Infrastructure Fund is complete on the U.S. side, Cameron County Judge Carlos H. Cascos said. Officials said the project on the Mexican side is 60 percent complete and the entire expansion is scheduled to open this summer. “This will allow for an increase in legitimate trade and travel through the port of entry,” Cascos said. “With the completion of the Mazatlanto-Matamoros highway in the next year, this will be a viable option for the produce industry,” he said. Cameron County formed a partnership with The Texas Department of Transportation and the FHWA to fund and construct the project.

tional Airport, Harlingen Industrial Park and Airpark, NAFTA Industrial Park and FINSA Industrial Park at Los Indios. Zone status is available to any of the Port’s properties. “It’s gratifying to see Texas as the number one state in Foreign Trade Zone activity and that the Port of Brownsville is leading Texas ports in FTZ export activity. FTZ designation is just another tool we can utilize to attract more industry and manufacturing to our area,” said Port Director and CEO Eduardo A. Campirano. The Port of Brownsville is a leading in-transit port and major importer of steel in the United States. The Port is guided by its vision to create quality jobs, attract private and public investment, increase its cargo handling capacity and promote the common good of the region by strategic economic development of its land holdings.

BPUB reveals deal for major generating facility

This article was written by Steve Clark and appeared in the Tuesday, February 26, 2013 issue of The Brownsville Herald

Port of Brownsville a leader in foreign trade exports

According to the Foreign Trade Zone (FTZ) Annual Report, the Port of Brownsville ranked Number 4 of the Top 25 Foreign Trade Zones in the nation and Number 2 in Texas. The Port exported commodities valued over $750 million. The top three commodities moved were petroleum products, steel, and lubricating oils. The 2011 Annual FTZ report can be accessed through the NAFTZ Association and the FTZ Board. The Port of Brownsville is the Grantee for Foreign Trade Zone No. 62 and offers sites at the Port of Brownsville, Brownsville-South Padre Island InternaBEDC.com

Courtesy photo

The Tenaska power plant will be located along the FM 511 corridor.

Brownsville Public Utilities Board officials announced in January plans for a massive power generation project they say will not only secure the city’s electricity needs well into the future but energize the local economy as well. The city-owned utility company signed a development-and-purchase agreement with Tenaska Inc., an independent energy company based in Omaha, Neb., to buy an ownership interest in an 800-megawatt, natural gas-fired power plant that Tenaska plans to develop on 270 acres at FM 511 and Old Alice Road. BPUB’s ownership interest would enti-

tle it to 200 megawatts of capacity from the Tenaska Brownsville Generating Station, enough to meet the electricity needs of roughly 100,000 Brownsville area homes, officials said. The plant would use water — converted into steam to drive turbines — from BPUB’s Robindale wastewater treatment plant. Under the agreement, BPUB is responsible for building a water pipeline from the wastewater plant to the power plant, a distance of roughly five miles, as well as a gas pipeline from Edinburg — about 50 miles — to supply the power plant with fuel.

Trico partners with TSC for job training grant

Trico Products has partnered with Texas Southmost College to provide job training using a $364,133 Skills Development Fund grant from the Texas Workforce Commission (TWC). The grant will be used to help workers increase their skills in molding and production, as well as to increase employees’ capacities to eliminate waste and streamline processes, ultimately helping the company remain competitive. Under this grant, 242 incumbent workers will be trained, including material handlers, industrial technicians and machine operators. Upon completion, the trainees will earn an average hourly wage of $16.52. “The Skills grants deliver customized training solutions that help Texas employers and workers succeed in the marketplace,” said TWC Chairman Andres Alcantar. “This investment builds not only employee skills, but the capabilities of our community colleges to the benefit of employers and the community. We are pleased to make this investment.” From the program’s inception in 1996 through 2012, Skills Development Fund grants have created or upgraded more than 286,000 jobs throughout Texas. The grants have assisted 3,901 employers with their customized training needs. The Legislature appropriated $48.5 million to the Skills Development Fund for the 2012-13 biennium. EJ

Spring 2013

Brownsville Economic Journal

UNITED STATES

U.S. goods and services exports reach all-time record in 2012

Gross Domestic Product Real gross domestic product the output of goods and services produced by labor and property located in the United States - increased at an annual rate of 0.1 percent in the fourth quarter of 2012 (that is, from the third quarter to the fourth quarter), according to the “second” estimate released by the Bureau of Economic Analysis.

U.S. goods and services exports reached an all-time record in 2012, totaling $2.2 trillion. Export records were seen across the board, including in: capital goods, automotive vehicles, parts, and engines; consumer goods; travel and tourism. This announcement follows the release of the 2012 U.S. International Trade in Goods and Services data by the Commerce Department’s Census Bureau and Bureau of Economic Analysis. In December 2012, exports of goods and services grew by $3.9 billion to $186.4 billion, which included increases in industrial supplies and materials and travel and tourism. Imports also decreased by $6.2 billion to $224.9 billion. As a result, the trade deficit decreased to $38.5 billion in December, down from $48.6 billion in November. “The administration’s efforts to promote U.S. exports are paying off, with export levels reaching a record $2.2 trillion in 2012,” said Deputy Secretary Blank. “We’re continuing to make historic progress toward the president’s goal of doubling exports. As part of this effort, the National Export Initiative has helped U.S. companies by leveling the playing field and providing access to new markets. Not only did exports outpace the growth in imports for the first time since 2007, but exports have helped support the

0.1%

Trade in Goods and Services

Total January exports of $184.5 billion and imports of $228.9 billion resulted in a goods and services deficit of $44.4 billion, up from $38.1 billion in December, revised. January exports were $2.2 billion less than December exports of $186.6 billion. January imports were $4.1 bil- -$44.4 lion more than December im- billion ports of $224.8 billion.

Construction Spending Construction spending during January 2013 was estimated at a seasonally adjusted annual rate of $883.3 billion, 2.1 percent (±1.3%) below the revised December estimate of $902.6 billion. The January figure is 7.1 percent (±1.8%) above the January 2012 estimate of $824.7 billion.

-2.1%

Private construction Spending on private construction was at a seasonally adjusted annual rate of $614.2 billion, 2.6 percent (±1.2%) below the revised December estimate of $630.9 billion. Public construction In January, the estimated seasonally adjusted annual rate of public construction spending was $269.0 billion, 1.0 percent (±2.1%) below the revised December estimate of $271.7 billion.

Brownsville Economic Journal Spring 2013

2012 HIGHLIGHTS Record level of exports: U.S. exports set another record in 2012, growing $92.6 billion and reaching $2.2 trillion despite significant economic headwinds from abroad. Exports outpaced imports: Growth in exports of goods and services outpaced the growth of imports of goods and services both in dollar value and percent change for the first time since 2007, with exports growing by $92.6 billion or 4.4 percent. America’s trade deficit declined: The U.S. trade deficit improved by $19.5 billion in 2012, from the $560 billion recorded in 2011, and is well below the pre-recession high of $753 billion recorded in 2006. In fact, it is at the lowest level since January 2010. EJ SOURCE: U.S. Department of Commerce

Import and Export Price Indexes

Employment

Total nonfarm payroll employment increased by 236,000 in February, and the unemployment rate edged down to 7.7 percent. Employment increased in professional and business services, construction, and health care.

creation of over six million private sector jobs over the past 35 months. This work is more important than ever—particularly with global economic headwinds affecting the rate of export growth across the board—so we will continue to help American workers by removing trade barriers and increasing market access.”

7.7%

The price index for U.S. imports increased 0.6 percent in January, following declines of 0.5 percent and 0.7 percent the previous two months. The January upturn was primarily led by higher fuel prices. U.S. export prices rose 0.3 percent in January after declining 0.1 percent in December and 0.6 percent in November.

0.6%

SOURCES: U.S. Census Bureau; U.S. Bureau of Economic Analysis BEDC.com

MEXICO

Forecast by Banco de Mexico During 2012, Mexico’s economic growth led activity levels to continue in an orderly manner the convergence towards the productive potential of the country, in a context in which no demand-related inflationary pressures were observed and in which inflation resumed its downward trend, once the effects of the temporary shocks affecting it dissipated. The balance between the income from productive factors and the absorption in the economy, reflected in the country’s external accounts, allowed them to persist at reduced and fully fundable levels. The national financial system has supported economic growth in a sound manner, i.e., without accumulating imbalances in the referred sector. This favorable performance is largely due to the adequate macroeconomic policy stance. Particularly, the strengthening of public finances and the monetary policy aimed at reaching the 3 percent permanent inflation target are noteworthy. The fact that the abovementioned economic phenomena took place in an international environment of persistent signs of weakness emphasizes the benefit of maintaining a strong macroeconomic framework in Mexico. The macroeconomic scenario foreseen by Banco de México is the following:

Growth of the Mexican Economy: Considering U.S. industrial production growth in 2012 and the performance of the Mexican economy throughout the year, the annual GDP growth in Mexico is calculated to have been around 4.0 percent in 2012. For 2013, the interval for the expected GDP growth rate in Mexico announced in the last Inflation Report remains unchanged, so that GDP growth is estimated to be located between 3.0 and 4.0 percent. For 2014, the GDP growth rate of Mexico is foreseen to lie between 3.2 and 4.2 percent, in line with the expectation of a stronger U.S. economic expansion for that year. Employment: For 2013, considering the anticipated economic activity growth and the recent approval of the labor reform, the forecast for the increase in the number of IMSS-insured workers is revised upwards from an interval of 500 to 600 thousand workers stated in the previous Inflation Report to an interval of 550 to 650 thousand insured workers. For 2014, an increase of between 700 to 800 thousand workers is expected. EJ The complete report is available at www.banxico.gob.mx. It includes information available as of February 11, 2013

Employment

SOURCE: Federal Reserve Bank of Dallas BEDC.com

Formal employment—jobs with government protections and pensions—expanded at an annualized rate of 3.9 percent in November (month over month) after growing 4.9 percent in October. On a quarterly basis, employment grew 4.8 percent in the third quarter, similar to its pace in the first half of the year.

Global Economic Activity

Consumer Price Index

4.8%

Inflation declined significantly in the last three months of 2012. Although headline inflation is still running slightly above the Central Bank’s target of 3 percent, it fell to 3.5 percent in December, its lowest reading since April.

3.5%

The Global Economic Activity Index, a monthly proxy for Mexico gross domestic product, rose 1.1 percent in November after edging up 0.4 percent in October. Service-related activities (including trade, transportation and government) expanded 1.7 percent.

1.1%

Exports

Exports bounced back in November, growing 2.6 percent after falling for three consecutive months. Exports trended down in 2012, suppressed by falling oil exports. Oil exports were down 6 percent in the first 11 months of 2012 over the same period in 2011, while manufacturing exports grew 5.6 percent.

2.6%

Industrial Production

Industrial production (IP) grew in November, increasing 0.9 percent month over month after falling 0.9 percent in October. Mexico IP follows on the heels of U.S. IP, which grew in November and December. Mexico’s IP typically tracks U.S. IP, due in part to the U.S. automotive industry’s large presence in Mexico.

0.9%

Peso/Dollar Exchange Rate

After losing a little ground against the dollar in November, the peso resumed strengthening in December. The exchange rate averaged 12.9 pesos per dollar during December, down from 13.1 in November. The peso has appreciated 8.1 percent since June, when the peso reached its lowest value of 2012 at 13.9 pesos.

Spring 2013

12.9

pesos per dollar

Brownsville Economic Journal

TEXAS

Texas registers a new oil boom

Employment

Texas gained 12,000 jobs in December after adding 23,500 jobs in November. Texas employment grew by 2.9 percent in 2012, adding 305,000 jobs. Current Texas employment stands at 10.98 million. The unemployment rate edged down to 6.1 percent in December from 6.2 percent in November. The Texas rate remains lower than the U.S. rate, which was 7.7 percent in February.

The oil industry in Texas doubled its production in one year, pushed by newly found deposits located South of the State and now produces 1.5 million barrels of petroleum a day, 50 percent more than in 2011. Christi Craddick, Texas Railroad Commissioner in charge of managing the subsoil resources, said that Texas now represents a quarter of the total production of crude oil in the United States. The oil boom that Texas is seeing “is evident not only in the numbers of production, but also in the number of jobs being created and the taxes that this industry brings,” Craddick said. The Commissioner added that the oil industry was responsible for creating 427,000 new jobs in Texas in 2011 and contributed to the state about $9 billion in taxes. “We are finding new resources with innovative technology and pioneer techniques,” she said. “I think we have the potential to satisfy

6.1%

Quarterly Exports

Quarterly Texas exports increased 0.7% in the fourth quarter of 2012. The fourth-quarter level of exports was 2.9% higher than a year earlier. Exports to Mexico, Texas’ largest trading partner, increased by 2.1%, while exports to Asia fell 2.2% in the fourth quarter. Exports to 0.7% China rose sharply by 22.2% after three quarters of decline.

Production IndexTexas Manufacturing Texas factory activity expanded in February, according to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, came in at 6.2, suggesting growth continued but at a slower pace than in January.

6.2

Crude Oil Prices The West Texas Intermediate crude oil price rose 0.7 percent to $95.32 per barrel in February but was down 6.8 percent year over year.

0.7%

our energy needs in North America, so we can stop depending on oil produced in hostile nations,” she added. Craddick said that today about 18.5 million barrels of oil are consumed each day in the U.S. and that 12 million barrels a day are imported to the country. “Some analysts predict that the oil imports could be reduced to six million barrels per day in 2014,” the Commissioner said. EJ Information provided by Mexican news agency Notimex

Natural Gas Prices

Texas Rig Count

Natural gas prices edged up to $3.34 per million Btu in February, a 0.3 percent increase from the January level. The price was 33.1 percent higher than in February 2012.

The Texas rig count rose to 833 in February from 821 in January, the first increase in 8 months, but was down 8.9 percent year over year.

Brownsville Economic Journal Spring 2013

0.3%

833

SOURCE: Federal Reserve Bank of Dallas BEDC.com

BROWNSVILLE BORDERPLEX

Brownsville home sales see modest growth in 2012

After a small bump in sales in 2012 over the previous year, realtors in the Brownsville and McAllen areas are cautiously optimistic about continued growth in the market in the near future. The two markets saw increases in annual sales of 2 percent and 7 percent, respectively, after a down year in 2011. But sales have yet to reach levels seen even after the recession. Larry Jokl, former president of the Brownsville-South Padre Board of Realtors, said Cameron County saw a small uptick in 2012 home sales because more people are moving to the area. “You’re seeing the expansion of industry, both here and across, and so many people are coming in,” he said. “It’s basically across the board.” But for now that growth translates to a housing sector only treading water, he said. “We’ve got a market that’s just slowly coming back financially,” Jokl said. “I think the market will improve dramatically

BEDC.com

but that’s going to take a while.” Area Realtors are hopeful 2013 will bring consistent, if modest, growth. “We’d like to think that the market is starting to recover,” said Lee Jinks, association executive at the Greater McAllen Association of Realtors. “We’re pretty pleased with the way the market is going.” Jinks said although area home sales haven’t matched numbers from 2007 or 2008, “those weren’t necessarily normal markets” at the peak of the housing bubble. University of Texas-Pan American business professor Steven Lovell said much of the Rio Grande Valley is seeing flat growth because of the large number of foreclosed homes. “That is kind of depressing some of the prices at the top end,” he said. The area, meanwhile, has not added enough new jobs to fuel significant new home sales, he said. Much of the increase in sales is being driven by standard population growth.

Harlingen stood out last year as the fifth-highest growth area of the state. Lovell attributed the success in the local market to both the city’s geography at the juncture of Expressways 77 and 83 and to new retail such as the 145,000-square-foot Bass Pro Shop. “The one good thing is there’s a recognition now, especially with the business community ... as far as retail is concerned, the Valley is an area that is going to be growing,” he said. “More and more companies are going to be looking at us from that point of view.” EJ This article was written by Andrew Kreighbaum and appeared in the Friday, February 8, 2013 issue of The Monitor

Spring 2013

Brownsville Economic Journal

Port of Brownsville

MARITIME INDUSTRY

Study shows job and revenue impact of Port in local, regional, and state economy

A vital component in the local and regional economy Photo by Jorge I. Montero

According to the report, the vessel and cargo activity at the marine cargo facilities and ship repair/oil rig maintenance operations generated 21,590 jobs in Texas in 2011. Of these 21,590 jobs, 11,230 jobs directly impact the local and regional economy.

ort of Brownsville officials had solid proof on hand of the maritime industry’s economic value to the city, region and state when Texas legislators visited the entity in late January. That proof came in the form of a recently finalized report by Pennsylvaniabased Martin Associates/ John C. Martin Associates, one of the world’s top port industry economic analysts. Among the key findings is that vessel and cargo activity at the Brownsville

Brownsville Economic Journal Spring 2013

port’s marine cargo facilities and ship repair/oil rig maintenance operations generated 21,590 jobs in the state in 2011. Of that number, 11,230 jobs directly impact the local and regional economy, while business revenue related to the handling of marine cargo generated an estimated $925 million in local economic impact in 2011, according to the report. Overall, maritime operations at the port produced a total of $2 billion in economic activity in the state, said Martin Associates. In addition to overall jobs and economic impact, the amount of income

and local expenditures generated is estimated at $771.3 million for 2011, generating $134 million in local and state taxes. The report, commissioned as a companion to a Martin Associates study of ports’ impact statewide, covers only maritime activities at the Port of Brownsville and not the economic contributions of non-maritime port tenants. It includes offshore drilling rig fabricator Keppel AmFELS and the port’s various ship recycling companies, said Eddie Campirano, port director and CEO. BEDC.com

KEY FINDINGS

21,590

state jobs generated in 2011 from vessel and cargo activity at the Brownsville port’s marine cargo facilities and ship repair/oil rig maintenance operations

11,230

jobs directly impact the local and regional economy

$925 million

local economic impact generated in 2011 by business revenue related to the handling of marine cargo

$2 billion

economic activity in the state produced by maritime operations at the port

$771.3 million

of income and local expenditures generated for 2011, generating $134 million in local and state taxes A 2006 study took into account all port activities, maritime and otherwise, and showed an impact of around 12,000 in terms of jobs, he said. In comparison, the new study shows more than 11,000 jobs created by maritime activities alone. “You can see that we obviously have a big economic impact in the region and how that economic impact compares to the state as well,” Campirano said. According to the statewide study, commissioned by the Texas Ports Association, waterborne cargo operations at Texas’ public ports totaled $277.6 billion in 2011. The study covered 16 public ports in Texas. Houston is the “800-pound gorilla” among Texas ports, Campirano said. The state’s maritime industry is second only to California, he noted. Texas ports move 20 percent of all the goods that enter the United States, Campirano said. The Panama Canal, which is undergoing a massive expansion project to BEDC.com

allow larger, next-generation container ships to use it, is a hot topic of discussion among legislators because of the increase in cargo it could bring to the Gulf of Mexico. A report from the Panama Canal Stakeholder Working Group looks at what ports need to do to capitalize on opportunities presented by an expanded Panama Canal, which is expected to be complete in 2014. The report makes recommendations for Texas, including “providing for a vibrant climate for port investment,” Campirano said. Despite the regional and statewide economic benefit from ports, Texas does not help fund port infrastructure improvements unlike other Gulf ports that get support from their respective states, he said. “That’s something we don’t do in Texas,” Campirano said. “This is all generated by ports and port users. This is strictly private sector investment.” The Port of Brownsville is self-sustaining when it comes to paying for its operations, pouring some of the revenue it generates into capital improvements. The only tax money it receives is a 4.5 cent ad valorem tax for retiring old debt. While Houston, the biggest container port on the Gulf Coast, stands to benefit the most from the Panama Canal expansion, smaller ports, including Brownsville, will benefit in other ways, Campirano said.

“We all have our niches,” he said. “I think our opportunities are going to come from ‘transloading’: Big vessels going into big ports will parcel out the cargo, and smaller vessels will take it to other Gulf ports. That’s where I believe the Port of Brownsville has the greatest chance of being able to participate in that business.” Campirano said the port’s goal is to “be an economic engine for the region and create good-paying jobs,” and that the Martin Associates report is evidence that the port is meeting that goal. It also shows that the port is recovering from the bleak period during the global economic crisis and the Gulf drilling embargo, enacted as a result of the 2010 Deepwater Horizon spill. Though steel is king, much of the bulk cargo the Port of Brownsville handles is petroleum based such as gasoline and diesel. “We’ve fared fairly well,” Campirano said. “If we would have done this study in 2008 at the peak of our activity, you kind of wonder what it would have looked like.” He said the port “hit rock bottom” economically speaking during the recession, but that if cargo and jobs continue their current upward trajectory things will be fine. EJ This article was written by Steve Clark and appeared in the Wednesday, January 23, 2013 issue of The Brownsville Herald

Spring 2013

Brownsville Economic Journal

Port of Brownsville

Federal authorities tour port facilities after TIGER grant approval

MARITIME INDUSTRY

Maritime administrator tours Brownsville facility Federal authorities from Washington braved gusting winds and billowing dust for a dockside tour of the Port of Brownsville on a Monday morning in early March. Eddie Campirano, port director and CEO, led the tour, which included David Matsuda, maritime administrator for the U.S. Department of Transportation, and U.S. Rep. Filemon Vela, D-Brownsville. Herman Deutsch, director of the Maritime Division of the Texas Department of Transportation, was among other officials on hand. The occasion for the visit was a $12 million TIGER grant awarded to the port for construction of a second marine dock. Port officials said the new, 600-foot-long dock will enable the port to significantly boost its freight volume, making it more competitive with domestic and Mexican ports on the Gulf. TIGER stands for Transportation Investment Generating Economic Recovery, a DOT discretionary grant program created under the American Recovery and Reinvestment Act of 2009. Brownsville’s $12 million is part of $500 million in TIGER grants announced in June. The port was passed over for TIGER funds three times before but succeeded with its fourth application. It will contribute $14 million of its own funds for the dock project, which Campirano said should start this June and take 18 months to complete. Matsuda said he was in Brownsville to demonstrate the DOT’s commitment to ports — all ports. “When the president talked about ports and infrastructure in the (Feb. 12) State of the Union address, he wasn’t just talking about the big mega ports on the coast but also places like Brownsville, Texas, here,” he said. “Ports of all sizes are economic engines. They really help generate jobs and help the economy.” According to Brownsville port officials, the port generates $2 billion in eco-

Brownsville Economic Journal Spring 2013

Photo courtesy Maritime Administration

Maritime Administrator David Matsuda, center, toured the Port of Brownsville facilities along with U.S. Rep. Filemon Vela, D-Brownsville, Eddie Campirano, port director and CEO, and other local, state and federal officials.

nomic activity annually for the state and 11,000 direct and indirect jobs that impact the local and regional economy. To help improve the nation’s port infrastructure, the DOT has made it possible for the first time for ports around the country to compete for federal grants, Matsuda said, adding that he might sign Brownsville’s grant agreement as early as this week. “It’s a good project,” he said. “We wouldn’t have funded it otherwise.” Deutsch, head of TxDOT’s Maritime Division, said ports are extremely important for Texas, generating nearly 25 percent of the state’s gross domestic product and more than a million jobs. “We have 28 ports in Texas, and Brownsville is a very good example of a medium-sized port,” he said. “It’s very important for us, there on the border. They have all this domestic cargo but also international cargo. We’re big advocates of Brownsville and support all these initia-

tives.” Deutsch said his office is working with all the state’s ports and the Texas Port Association “to have one voice in Congress and one voice in Austin.” Vela, elected in November to represent the state’s newly created 34th Congressional District, said the Obama administration’s focus on infrastructure and jobs is crucial to the regional economy. Vela said part of his role as congressman is to do whatever he can to support those efforts. “I think what we see here is a good reflection of how — if you get the federal and the state and the local government to work together — you can really make things happen,” he said. EJ

This article was written by Steve Clark and appeared in the Tuesday, March 5, 2013 issue of The Brownsville Herald. BEDC.com

Bipartisan coalition

INFRASTRUCTURE

Congressional lawmakers look to fund projects that would facilitate trade

Legislators back new mechanism to fund port improvements

A bipartisan coalition of congressional lawmakers has filed legislation that would allow private and local money to be used for port infrastructure and to hire additional officers at the nation’s international bridges. U.S. Reps. Michael McCaul, R-Austin; Pete Gallego, D-Alpine; Henry Cuellar, DLaredo; Beto O’Rourke, D-El Paso; Filemon Vela, D-Brownsville; and Blake Farenthold, R-Corpus Christi, announced March 13 that they filed House Resolution 1108, the Cross-Border Enhancement Act, which would allow U.S. Customs and Border Protection to enter into public-private partnerships to raise funds for projects that would facilitate trade. The agency, a division of the U.S. Department of Homeland Security, is charged with overseeing the legal movement of trade and people across ports. Under the measure, it would partner with either local governments or private entities to pool money for improvements, new projects and additional staff. It is a companion bill to a measure filed in January by U.S. Sen. John Cornyn, R-Texas. Cornyn filed the same measure in 2012, and in addition to the partnerships, his 2013 bill would also require the General Services Administration to review additional financial proposals. The movement by the U.S. House members comes just weeks after the federal budget cuts known commonly as sequestration forced the government to begin furloughing CBP employees, as many as 2,750 across the country, for weeks at a time. BEDC.com

“Because of the crucial role CBP plays in supporting the efficient and effective flow of goods between our two countries, we must leverage every available resource to make sure that CBP has the tools it needs to do its job well, keep lines short and move goods and people across the border efficiently,” Cuellar, who sits on the House Appropriations Committee, said in a news release. Mexico is Texas’ largest trade partner and the United States' third-largest overall. In 2012, more than $229 billion and $86 billion in trade passed through the Laredo and El Paso customs districts, respectively, according to U.S. census data analyzed by WorldCity, a Florida-based company that uses U.S. census data to track trade patterns. “Our land ports of entry must be secure and they must provide for the free flow of commerce,” added McCaul, the chairman of the House Homeland Security Committee. “Allowing CBP to partner with local governments and private stakeholders will maximize the value of limited taxpayer resources, and it will enable the private sector, which drives our economy and creates jobs, to proactively improve the efficiency of cross-border operations.” But while the news is being greeted as positive step forward, some border officials are wanting more and wanting it sooner. Days before the legislation was filed, the Texas Border Coalition, a group of elected officials and private-sector leaders that advocates for additional resources at the nation’s land ports, lamented a U.S. Senate financing measure it said fell short

of immediate relief needed on the border after budget cuts took place March 1. “The Senate version of HR 933, the continuing appropriations bill, provides short-term funding for no fewer than 21,775 CBP officers, far short of the new hires needed to facilitate legitimate trade and travel,” Monica Weisberg-Stewart, the chairwoman of the TBC’s immigration and border security committee, said in a news release. “As far as we can tell, the bill provides no short-term relief that would minimize or eliminate the anticipated furloughs, such as by directing that current staffing levels be maintained on the front lines,” she added. The appropriations measure includes a mechanism that allows the Department of Homeland Security to pilot similar funding partnerships as those suggested in Cornyn and the representatives’ bills, which Weisberg-Stewart lauded. But, she added, the cuts are sure to have a negative impact on trade and commerce. “The current budget landscape, including implementation of the automatic sequestration spending cuts, has already thickened the legal border crossing points between the U.S. and Mexico,” she said, adding that according to DHS officials, wait times at land ports could exceed five or six hours. EJ

Spring 2013

This article was written by Julian Aguilar and appeared in the Wednesday, March 13, 2013 edition of The Texas Tribune Brownsville Economic Journal

North Brownsville Industrial Park

SITE DESCRIPTION:

LOGISTICS n 1st manufacturing zoning n 5 miles from Port of Brownsville n Rail access by Union Pacific, Burlington North and Brownsville Rio Grande Railroad n Public transportation by Brownsville Urban System n 8 miles from Brownsville South Padre Island International Airport n 1/4 mile from SH 550, future extension of I-69

UTILITIES n Electricity supplied by Brownsville Public Utilities Board n 1,500 feet from substation with 20 MVA n Gas supplied by Texas Gas Service n 4-inch gas line size with 125 lbs of pressure n Telecommunications by AT&T n No height restrictions n Flat topography n Site is development ready

n Water supplied by Brownsville Public Utilities Board: w 16” water line runs along Paredes Line Road w 8” looped water line around the Titan property (adjacent to park) w Water comes from Rio Grande and underground brackish water plant n Waste water service by Brownsville Public Utilities Board w An existing lift station and an 8” sanitary sewer gravity line at Titan property (adjacent to park) w Capacity at 10 MGD

“Texas is a state where a dream can be put to work.” - Texas Governor Rick Perry

dĞǆĂƐ tŝĚĞ KƉĞŶ ĨŽƌ ƵƐŝŶĞƐƐΡ ŝƐ ŵŽƌĞ ƚŚĂŶ ũƵƐƚ ŽƵƌ ŵŽƩ Ž͘ It’s a commitment to create and sustain an environment that fosters business and entrepreneurship, trains the workforce of the future, and helps ƚƵƌŶ Ă ĚƌĞĂŵ ŝŶƚŽ Ă ƌĞĂůŝƚǇ͘ EŽ ŵĂƩ Ğƌ ǁŚĂƚ ƚŚĞ ŝŶĚƵƐƚƌǇ͕ ǁĞ ĂƌĞ ĐŽŵŵŝƩ ĞĚ to your growth and success͘ Come to Texas, we’re Wide Open for Business͘ dŽ ůĞĂƌŶ ŵŽƌĞ ĂďŽƵƚ ŽƉƉŽƌƚƵŶŝƟ ĞƐ ŝŶ dĞǆĂƐ ǀŝƐŝƚ

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