Brownsville (Texas) Economic Journal Spring 2014 by Brownsville Economic Development Council

EJ Brownsville Final Destination:

The USS Forrestal is the latest ship to arrive at the Port of Brownsville to be recycled

Vol. 2, No. 3 / Spring 2014

Perfect Location Proximity to Eagle Ford Shale attracts LNG projects

The BEDC Initiative Key guidelines help the organization achieve its mission

Model of Success Relationships, quality of work key to Nova/Link success

A DevelOPmeNT OF The GreATer BrOwNSville iNCeNTiveS COrPOrATiON

North Brownsville Industrial Park

73-ACre mASTer PlAN iNDUSTriAl PArK SiTe DeSCriPTiON:

n Concrete roads, boulevards,

n n

w 16” water line runs along

and turnarounds n 1/4 mile from Sh 550, future extension of i-69

n inaugurated in June 2011 n 73-Acre master Plan n n

ShOvel reADY CerTiFieD SiTe Paredes line road

w 8” looped water line around

the CK Technologies llC building (adjacent to park) w An existing lift station and an 8” sanitary sewer gravity line at CK Technologies building

n All utilities in place: electric,

industrial Park 9 lots remaining minutes from Port of Brownsville, Brownsville international Airport, i-69e highway, and mexico Acess to rail minutes from maquiladora industry in matamoros, mexico

water, wastewater, natural gas

n Gas supplied by Texas Gas Service n 4-inch gas line size with 125 lbs

w Capacity at 10 mGD

of pressure

n water, wastewater, electricity

n Flat topography

supplied by Brownsville Public

n Site is development ready n Shovel ready certified site

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Home of CK Technologies LLC

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AVAILABLE Lot 5 (6.6 acres)

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CONTACT:

srodriguez@bedc.com Brownsville Economic Development Council 301 Mexico Blvd. Suite F-1 Brownsville, Texas 78520 p.956.541.1183 / 800.552.5352 f.956.546.3938 www.BEDC.com

WHAT’S INSIDE

VIEWPOINTS

President’s Corner: Achieving global success

Guest editorial: Waiting for Mexico’s ‘oil boom’

Alternative Energy Offshore generation project seeks to diversify power sources

Cover Photo: Courtesy Sam Merrill

BEDC.com

EJ Brownsville

Economic Journal

Final Destination: USS Forrestal on its way to the Port of Brownsville to be recycled by All Star Metals.

Local Industry Corner: Brownsville: A city on the rise

Perfect Location Proximity to Eagle Ford Shale attracting LNG projects to the Port of Brownsville

Model of Success Relationships, quality of work keeps Nova/Link bustling after 26 years of existence

The BEDC Initiative Key guidelines help the organization achieve its mission

Maquiladora News KSM announces expansion plans in Matamoros

Spring 2014 Brownsville Economic Journal

PreSiDeNT’SCOrNer

Achieving global success

Jason hilts

President & CEO

rownsville is at this moment an exciting place to be in regard to economic development. As we move forward in making our region a global competitive community, we have seen a growing interest in developing new business ventures that could eventually become a crucial part of our local economy. We have also seen some of the well established members of our local industry achieve successful projects that help us boost our economic prosperity. In this issue, we share with our readers three stories of success that relate to three different industries – manufacturing, ship recycling and energy – all of which play a crucial part in maintaining the Brownsville-Matamoros Borderplex a global fluent community. One story is about the recent interest the Port of Brownsville has received for liquefied natural gas projects, also known as LNG. Several companies have initiated their respective plans to set up ventures that call for exporting LNG oversees. Officials from these companies have all agreed that the Borderplex’ geographical location on the outskirts of the Eagle Ford Shale and the region’s well established infrastructure, that includes a deep sea port, make it the most popular place to invest in these types of projects. Another story featured in our EJ focuses on the recent contract All Star Metals acquired from the U.S. Navy to dismantle and recycle the historic USS Forrestal, the first of the so-called “supercarriers” of the military. The ship recycling industry in the U.S. revolves around Brownsville. Five ship recycling companies call the Port of Brownsville home, and All Star Metals is one of them. To put the importance of winning the contract for the Forrestal into perspective, ASM president Nikhil Shah, said that landing the contract is “the equivalent to a football team making it to the Super Bowl.” The other story is about Nova/Link, who after 26 years in the manufacturing industry, the family owned business has achieved respect and recognition from clients and competitors thanks to the experience and success it has acquired.

eDiTOr iN ChieF

eDiTOriAl OFFiCe

gsalinas@bedc.com

Development Council

Gilberto Salinas

eDiTOriAl CONTeNT &

DeSiGN COOrDiNATOr Jorge I. Montero

jmontero@bedc.com COPY eDiTOr

Sylvia Rodriguez

srodriguez@bedc.com PhOTOGrAPhY

BEDC Editorial Team

Brownsville Economic 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 ADverTiSiNG

Jorge I. Montero

jmontero@bedc.com COrPOrATe CONTACT

Lizzy de la Garza Putegnat lputegnat@bedc.com

eleCTrONiC verSiON:

reSeArCh &

this issue is available at:

eCONOmiC iNDiCATOrS Daniela Sosa

dsosa@bedc.com

A free electronic version of www.issuu.com keyword:

brownsville economic

The Economic Journal of the Brownsville Borderplex is published on a quarterly basis and distributed according to the fair-use doctrine of U.S. copyright laws related to non-profit institutions, such as the BEDC, and for educational purposes.

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Brownsville Economic Journal Spring 2014

BEDC.com

GUeST eDiTOriAl

waiting for mexico’s ‘oil boom’

he Mexican Energy Reform is almost a reality. Last year, 2013, represented a challenge for many to adapt to the new regulations that will be implemented in Mexico. Many are reluctant to change but there is no turning back. Now, we will analyze one of the reforms that for many was seen as a betrayal to the Mexican nation, I am referring to the much talked-about “Energy Reform,” which was passed by the Mexican Senate and the House of Representatives on December 17 and 18 respectively. It was declared constitutional by the Federal Legislative Body and finally enacted by the Mexican President Enrique Peña Nieto on December 20 and published the next day on the Official Gazette of the Federation. As expected, once approved negative feelings emerged from certain social

ernesto velarde Danache

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

groups. It is no mystery who the leaders of the negativity on this reform are and moreover we know the interest that moves them. As in all, these individuals are characterized by giving a NO to everything and a YES to nothing. The recently approved energy reform represents an opportunity for economic growth for states like Tamaulipas. For many years northern Mexico has been characterized by ac-

tivities and foreign investment focused on the manufacturing sector, also known as the “maquila” industry. We are one step from becoming a part of this much anticipated ‘oil boom’ and we have an urgency to diversify and start educating ourselves on the needs of services and products that are part of the supply chain of this innovating business sector in Mexico. Mexican and foreign companies are anxiously looking forward to knowing in detail

the legal aspects of the energy reform. It is expected for the secondary laws to be disclosed and approved no later than April 19, 2014. These laws will establish the guidelines of participation for Mexican and foreign companies in the economic activities of the energy sector in Mexico. Unfortunately as of this date the outlook is still uncertain. The only thing clear is that we have the desire to be part of the present and future of the energy sector in Mexico. EJ

Achieving global success Continued from Page 4

Nova/Link is a near-shore contract manufacturer with operations in Brownsville, Matamoros and Reynosa. The company began in 1988 with about 40 operators and now boasts a labor force of about 3,000. Well established relationships and an excellent quality of work are what have kept BEDC.com

Nova/Link bustling after 26 years of existence. In the end, these three different stories, about three different industries, help us tell one bigger story, the one about how Brownsville is - and will continue to be- an active and prosperous hub for economic investments no matter the industry, no matter the size of the venture. EJ Spring 2014 Brownsville Economic Journal

BeDC

economic Development

The

Seven steps help the Brownsville Economic Development Council accomplish its goal

From Staff reports

ince its creation in 1992, the Brownsville Economic Development Council has concentrated its efforts in achieving the organization’s main mission of leading, facilitating, and promoting the economic and industrial development for the Brownsville-Matamoros region, also known as Borderplex, and convert it into a global competitive community. The BEDC, a publicly-funded organization, strives to build economic prosperity, enhance community sustainability, and create employment opportunities in the region by utilizing the resources and expertise of public/private institutions in collaboration with the Greater Brownsville Incentives Corporation, entity created to encourage and promote economic development initiatives in

Brownsville Economic Journal Spring 2014

BOrDerPlex reGiON

initiative Brownsville. Brownsville’s ideal geographical position, on the U.S.-Mexico border and at the epicenter of the Americas, along with its highly developed infrastructure, which includes a deep sea port, industrial corridors and access to national and international roads, make it a top city for global trade and an ideal place for Foreign Direct Investment. Recently, Brownsville was recognized as one of the best places for international and domestic business. Its foreign direct strategy has helped Brownsville become one of the “Cities of the Future” by fDi Intelligence magazine. Brownsville is also ranked number 3 on the list of “Top 10 Cities on the Rise,” put together by nerdwallet.com, and number 21 on the list of “Top 25 Cities for Global Trade” by Global Trade Magazine. These accolades are testament of

the great business climate and opportunities prospective companies see in Brownsville while looking for the best place to establish their economic endeavors. To identify, contact, and help prospective companies in their decision to invest in Brownsville, the BEDC works with 7 different processes that involve economic research, marketing, public relations, site selection, prospect development, finance and incentives and business retention and expansion. The last two processes are done once the company has finally selected Brownsville for its economic endeavor. The process also includes guidance in acquiring permits and zoning, identifying potential suppliers, making contacts with other businesses and setting appointments with the appropriate community leaders.

BEDC.com

BOrDerPlex reGiON

The economic research involves velopment includes customized messelection process. Once a potential site is identified, further analysis of labor sages via e-mail, cold calls, letters, and identifying prospective companies for force, logistics, transportation, key ecofollow-up calls. These lead to appointtrade missions or target industries. nomic indicators, utility rates, among ments made for meetings, qualified The BEDC concentrates on the deother assessments, is done to produce a leads that show genuine interest and are velopment and reinforcement of seven comprehensive report on a candidate kept in continued dialogue, suspect target clusters identified as having the site. leads that identify a potential interest greatest impact on the economy of the Once the successful meetings have and are also kept in continued dialogue, Borderplex: heavy manufacturing, light been accomplished and the site selection manufacturing, automotive, medical, in- or companies that show no interest in has led to a company identifying the Brownsville. ternational logisideal site, both tics, food parties begin processing the process of he BeDC concentrates on the and research ironing out and developthe details of development and reinforcement of a finance and ment, and the incentives space and aviseven target clusters: heavy package. ation industry. manufacturing, light manufacturing, The Once BEDC does those goals automotive, medical, international logistics, its due diliand objectives gence, makfood processing and r&D, and the space and have been ing a financial identified, the aviation industry. review, an BEDC creates economic ima large list of pact analysis about 100 The marketing aspect of the process and presents proposal for review to the prospective companies, weeding out the includes the collection of data, comIncentives Committee, BEDC Executive non-contenders to produce a final smart bined with creative writing for prospect- Board, BEDC Board of Directors and list of 20-plus companies. From these, ing activity. The data and information GBIC Board. about 10-15 are identified as “best-bet collected is presented in visually engagIf the proposal for incentives is decompanies,” and the BEDC begins ing designs and distributed throughout nied, the company is notified and the reaching out to them with the mission to the BEDC’s various marketing tools firm decides to choose another site or set up face-to-face meetings with represuch as the Economic Journal, website, opts to stay in Brownsville regardless. sentatives from each of those compasocial media, E-blast campaigns, and If the proposal is approved, the comnies. other marketing tools. The goal for the pany is notified, the incentives program Before those face-to-face encounmarketing process is to establish a is executed and a public announcement ters, the BEDC provides all the ecobranding for the Brownsville Borderplex of the deal is made. nomic data related to the Borderplex and make the region recognizable to After the company confirms it has that is needed to present to potential prospecting firms. chosen Brownsville, and begins the firms. The public relations process also process of establishing its operations, In the prospect development process, calls for the collection of data that is the business retention and expansion leads come from proactive and reactive combined with accurate and balanced process begins. sources. Proactive leads are created by reporting of news and information in This final process of recruitment in-house done by BEDC, expert consult- both, a proactive and reactive approach. ants, site selector network, or the differThe proactive approach includes cre- concentrates in creating a long term relationship between the BEDC and the ent organizations the BEDC works in ating the news and distributing on a planned schedule to different media out- new company or enterprise. collaboration such as Port of The Business Retention and Expanlets. The reactive approach includes Brownsville, City of Brownsville, City making unannounced or non-planned re- sion Program assists companies in conof Matamoros, to name a few. sponses to the media. necting with the local industry and The reactive sources are the GoverAnalyzing key business drivers, establishing relationships that help the nor’s Office, inbound calls, website inhuman capital, logistics and geographic new firms or enterprises grow and sucquiries, and inquiries from other outlets. location are all part of the important site ceed in the Borderplex. EJ The outreach phase in prospect de-

BEDC.com

Spring 2014 Brownsville Economic Journal

Optimal location

eNerGY SeCTOr

Port of Brownsville set to become center for LNG export plants

Strategic geographic location Proximity to Eagle Ford Shale attracting LNG projects Written by Jorge i. montero

rownsville’s strategic location is helping it attract yet another industry, this time in the energy

sector. Port of Brownsville Director and CEO Eduardo Campirano revealed that there are at least five potential projects being proposed for liquefied natural gas (LNG) export terminals at the Port. LNG is natural gas that has been cooled to the point that it condenses to a liquid. Liquefaction reduces the volume of natural gas by approximately 600 times, making it more affordable to transport. This process helps transport natural gas over long distances making it available to

Brownsville Economic Journal Spring 2014

places where pipelines are neither economical nor feasible. Five companies have submitted applications to the U.S. Department of Energy (DOE) for four proposed LNG projects at the Port of Brownsville: Gulf Coast LNG Export, EOS LNG, Barca LNG, Annova LNG, and Texas LNG LLC. EOS and Barca are working on a joint project. Campirano said that a fifth project, being proposed by Next Decade LNG, is pending submittal of an application to the DOE. DOE records show that Gulf Coast, EOS and Barca have won approval to export domestically produced LNG to Free Trade Agreement (FTA) countries. Their applications to export to non-free trade agreement countries are still under review. Annova and Texas LNG await the DOE’s approval on their respective applications. The U.S. currently has free trade agreements in force with 20 countries. A recent article published by the LNG Journal identifies Brownsville as “the most popular location for LNG export projects” in the U.S. and the companies

looking to set up here said the reason behind that is Brownsville’s excellent strategic location. Besides having a logistical advantage with an international airport, a deepwater sea port, a federal highway that is part of the country’s interstate network and international crossings for trucks and rail, Brownsville is located near the Eagle Ford Shale, the most active shale play in the world. The shale is a significant source of both oil and natural gas and holds an estimated 3.4 billion barrels of oil. Gas production more than doubled from 2010 to 2011, with 2011 production at 271,831,688 mcf (thousand cubic feet). According to a report titled “Economic Impact of the Eagle Ford Shale,” released in 2012 by the Institute of Economic Development at the University of Texas at San Antonio, a moderate estimate of 25,104 new oil and gas wells is projected to be built between 2012 and 2021. In 2021, the report projects the production of gas to be 864,923,000 mcf. BEDC.com

eNerGY SeCTOr “With our proximity to the Eagle Ford shale and multiple state pipelines, we are poised to be the ideal provider to those customers looking to buy in the range of 0.5 mtpa (millions of tons per annum) to 1.0 mtpa,” said Annova’s CEO David Chung. His company filed an application to the DOE to receive authorization to export domestically produced LNG to FTA countries from its proposed facility at the Port of Brownsville. The project calls for the production of 2.0 mtpa and is expected to be in-service by mid-2018. Michael Smith, principal owner and CEO for Gulf Coast LNG Export, LLC, also highlighted Brownsville’s ideal location in a statement released after the Port of Brownsville Board of Commissioners approved a lease option agreement with the company for 500 acres. The agreement was made in 2012. “We believe the Port of Brownsville is in a strategic geographic location to assure the success of this project, and we envision this to be a long-term relationship with the Port,” Smith said. Gulf Coast LNG plans to construct one of the country’s largest LNG exporting facility, exporting about 2.8 billion cubic feet per day (Bcf/d) of natural gas to other countries. The Houston based company wants to develop, own and operate the LNG facility and export terminal at the Port of Brownsville. According to the project, the Brownsville terminal will include four trains capable of liquefying up to 2.8 Bcf/d of natural gas, a marine berth, full containment LNG storage tanks, a pipeline connection to natural gas transportation lines, and associated utilities. “The huge amount of natural gas reserves developed in the United States in recent years, and the significant international demand for LNG, will allow for the development of multiple LNG export terminals in the US. The United States is now believed to have more natural gas than it can use in a century,” Smith said. The project is expected to be operational in 2018 and is forecasted to bring thousands of jobs during the construction BEDC.com

QUiCK FACTS:

what is lNG? Liquefied natural gas, or LNG, is natural gas in its liquid form. When natural gas is cooled to minus 259 degrees Fahrenheit (-161 C), it becomes a clear, colorless, odorless liquid. LNG is neither corrosive nor toxic. Natural gas is primarily methane, with low concentrations of other hydrocarbons, water, carbon dioxide, nitrogen, oxygen and some sulfur compounds. During the process known as liquefaction, natural gas is cooled below its boiling point, removing most of these compounds. The remaining natural gas is primarily methane with only small amounts of other hydrocarbons. LNG weighs less than half the weight of water so it will float if spilled on water.

what countries import lNG? There are 60 LNG receiving terminals located worldwide. Japan, South Korea, the United State and a number of European Counties import LNG. how is lNG transported? LNG is transported in doublehulled ships specifically designed to handle the low temperature of LNG. These carriers are insulated to limit the amount of LNG that boils off or evaporates. This boil off gas is sometimes used to supplement fuel for the carriers. LNG carriers are up to 1000 feet long, and require a minimum water depth of 40 feet when fully loaded. There are currently 136 ships which transport more than 120 million metric tons of LNG every year.

Source: University of Houston IELE, Introduction to LNG.

phase and hundreds of jobs once the facility is operational. EOS LNG and Barca LNG recently won approval from the DOE to export LNG from a proposed floating liquefaction unit and storage tanker at the Port of Brownsville to nations with a FTA with the United States. The two companies each won authorization to export liquefied natural gas in a

volume equivalent to approximately 584 Bcf/yr of natural gas, from its proposed LNG terminal at the Port for a 25-year term.

Innovative concept Texas LNG’s project is taking a more innovative approach in the industry. The Houston-based company plans to export up to 2 mtpa of LNG to free trade agreement and non-free trade agreement markets. This project involves a liquefaction barge to be fabricated offsite by an experienced and qualified shipyard. At the Texas LNG site, the barge will be permanently “grounded” so that it will no longer be a floating vessel. LNG would be offloaded from tanks contained in the hull of the barge structure onto conventional LNG carriers berthed alongside the facility. Offthe-shelf technology will be used for the liquefaction process as well as the gas treatment plant that will be built on site to treat pipeline feed gas by removing any remaining natural gas liquids and other nonmethane products before the liquefaction process, the company said. In December, Texas LNG signed a lease option agreement with the Port of Brownsville, acquiring a 51 acre site located along the port's deepwater channel. “The Port of Brownsville is pleased that Texas LNG has selected our Port to develop its innovative LNG export project,” Campirano said. “Texas LNG's project highlights the Port of Brownsville's strategic position, given its close proximity to the massive shale and conventional gas resources in South Texas and its deepwater ship channel which can accommodate most LNG export ships.” “The Port of Brownsville's strategic geographic location as one of the closest ports to the Panama Canal will facilitate our efforts to source feed gas from South Texas gas fields such as the Eagle Ford, where large volumes of gas are currently flared and vented, thereby providing both a positive environmental and economic benefit to the region,” Vivek Chandra, CEO of Texas LNG, said. EJ Spring 2014 Brownsville Economic Journal

Additional Storage Space San Antonio-based company works to construct liquid bulk storage facility

POrT OF BrOwNSville

liquid storage project boosts capacity at Port Construction of a 21-tank, 225,000barrel liquid bulk storage facility is underway at the Port of Brownsville, compliments of San Antonio-based Howard Energy Partners. The company, formed in 2011, was drawn to the area partly because of the wide variety of imported and exported liquids — including but not limited to petroleum products — that cross the border here. So says Mark Helmke, HEP’s senior vice president of terminals and transportation. “There are also non-petroleum, specialty chemicals that move back and forth across the border with Mexico, so there are a lot of bigger opportunities to develop and grow a bulk liquid business, because of that diversity in the marketplace,” he said. Another factor was Helmke’s history with the port: he was a shareholder with a private company that owned three liquid terminals at the port, which were merged into TransMontaigne in 1997. Helmke ran TransMontaigne, growing it from a $2 million-a-year business to a $25 million-a-year business over a period of 12 years. He left the company four years ago and worked as a consultant before joining HEP two years ago. “When I met with the Howard folks we talked about developing a terminal business,” Helmke said. “Because I knew so much about (the Brownsville market) we said let’s try to develop one in Brownsville first.” Opportunities for the company have expanded further with the recent deregulation of Mexico’s energy market, a development likely to spur even more liquid bulk activity on the border, he said. The Brownsville project, along with an “off-spec” liquids stabilizer facility HEP is building near Three Rivers, are the com-

Brownsville Economic Journal Spring 2014

Courtesy Photo

Construction of a 21-tank, 225,000-barrel liquid bulk storage facility is underway at the Port of Brownsville, compliments of San Antonio-based howard energy Partners.

pany’s first foray into liquid handling, according to HEP President Brad Bynum. HEP owns and operates more than 500 miles of pipeline, which handles oil production from Eagle Ford, Escondido, Olmos, Pearsall and other South Texas oil formations. The Brownsville facility is scheduled to start limited operation Feb. 1 and ramp up to full operations on May 1, Helmke said. The project is in the peak construction phase and currently employs roughly 150 people. Five full-time employees will be required to operate the facility once it’s up and running. Port Director and CEO Eddie Campirano said the jobs creation is welcome. While the HEP project is relatively small, it nevertheless adds much-needed liquid bulk storage capacity and will generate additional revenue for the port, he said. A company called Deep South Texas is

also building liquid storage capacity at the port, and two more liquid storage projects have been proposed, though HEP and DST are farther along, Campirano said. Helmke said another reason HEP chose Brownsville is that the business climate was in all ways hospitable. “Probably one of the most important things is we started the business ... in the Port of Brownsville because of the business friendly environment down there — not just working with the port authority, but also with the end users and importers and exporters of bulk liquid products in South Texas and in northeastern Mexico,” he said. This article was written by Steve Clark and appeared in the Friday, January 17, 2014 issue of The Brownsville Herald BEDC.com

wind farm

Baryonyx looks to erect a 200-turbine wind farm on 41,000 acres fives miles offshore

AlTerNATive eNerGY

Project seeks to diversify power sources

hen the principals behind Austin-based Baryonyx Corp. first hatched the notion of building a wind farm off South Padre Island, natural gas wasn’t nearly as cheap as it is now. This has complicated things. An additional challenge now for Baryonyx is to bring the cost of generating electricity via its proposed offshore wind project in line with that of gas-fired power plants and onshore wind farms. Otherwise it won’t be able to compete on the wholesale electricity market. Heather Otten, chief development officer for Baryonyx, said the company is making progress on that score. “Yes, right now we all acknowledge that offshore is more expensive than onshore,” she said. “What we’ve been doing in the past year or more is working on our design, trying to bring our cost down, and we’ve been very, very successful in bringing our cost down.” Otten, a wind industry veteran who joined Baryonyx in April, said no one anticipated that natural gas prices would fall so much. Nonetheless, the project is “within striking distance” of where it needs to be in terms of production cost, she said. “If you can make it work in Texas with the power market we have you can make it work anywhere,” Otten said. “With natural gas setting the power prices so low we have a much taller task.” Baryonyx’s long-term goal is to erect a 200-turbine wind farm on 41,000 acres the company is leasing offshore from the General Land Office. The turbines would be located five miles offshore, though still visible from South Padre Island. The Siemens six-megawatt turbines Baryonyx wants to use would stand 613 feet above mean sea level at the highest point of the rotor blades, Otten said. One year ago, in order to jump start BEDC.com

offshore wind in the United States, the Department of Energy awarded grants to Baryonyx and six other wind energy companies to develop offshore pilot projects. Baryonyx is using the $4 million it received for environmental and feasibility studies and front-end engineering on a three-turbine demo project capable of producing 18 megawatts, or 18 million watts. The company has dubbed the project “GO Wind,” for “Gulf Offshore Wind.” Baryonyx is partnering with Keppel AmFELS; the turbine manufacturer Siemens AG; Offshore Design Engineering Ltd.; and Texas A&M University, the lead partner of the project’s academic group, which also includes Texas Tech and the University of Texas (Austin and Brownsville). Depending on the results of the various pilot projects, three companies will receive additional DOE funding — up to $47 million each — to develop full-scale commercial wind farms. The other contenders are on Lake Erie and in New Jersey, Oregon and two in Maine. GO Wind is the only offshore project on the Gulf coast. Baryonyx CEO Ian Hatton noted last year that the company’s principals are the only ones among the various contenders who have actually pulled off an offshore wind project: the Ormonde project now operating in the Irish Sea. Otten said the DOE, in deciding which projects get additional funding, will be looking for low-cost power production, innovation and applicability of the technology used to other projects. Even if Baryonyx is passed over for extra funding it won’t be the end of GO Wind, she said. “The project would not be over,” Otten said. “This project makes sense — provided we get the right results on the avian studies that we’re doing, and we can build it responsibly given the turtles and everything. The project will go forward. What will happen is it will take longer.”

Baryonyx began its bird and bat migration studies this fall. The approach has three tiers: analysis of existing NEXRAD (radar) data; high resolution aerial photography and ATOM (Acoustic Thermographic Offshore Monitoring) of avian species, Otten said. “That is actually offshore and on a buoy right now,” she said. Baryonyx’s hypothesis is that migrating birds and bats five miles offshore fly at an altitude well above the height of the turbines. If this proves not to be the case and too many animals would be killed, the project won’t move forward, Otten said. The goal is to have two full years of avian studies in hand, she said. Go WIND’s Environment Impact Statement probably won’t be complete, nor the project permitted, until 2015, Otten said. Further public input will be sought as part of the process. The end of 2016 is the earliest the pilot project would be operational, Otten said. Ideally, after a year of studying the pilot project construction the commercial phase would begin, she said. According to preliminary results of a socioeconomic study being conducted by UTB, Baryonyx’s pilot project alone would create approximately 70 jobs with an average annual salary of $44,000 and inject $10.2 million into the local economy, Otten said. The economic impact would be exponentially higher with a full-scale commercial operation, she said. “Texas is the leader in onshore (wind energy),” Otten said. “It seems like it’s natural to be first in offshore.” This article was written by Steve Clark and appeared in the Thursday, November 21, 2013 issue of The Brownsville Herald Spring 2014 Brownsville Economic Journal

Final Destination

COver STOrY

Photo by Brad Doherty

The USS Forrestal arrives at the Port of Brownsville two weeks after it left the U.S. Navy’s inactive ship facility in Philadelphia. The aircraft carrier will be recycled by All Star metals, who will handle the task of dismantling the ship and sell it as recycled material.

Ship recycling companies find a niche at the Port of Brownsville Written by Jorge i. montero

Hundreds of people gathered along the jetties at South Padre Island and Boca Chica Beach on a foggy morning in February to witness the arrival of the historic USS Forrestal to the Port of Brownsville. The decommissioned aircraft carrier departed the U.S. Navy’s inactive ship facility in Philadelphia February 4 and embarked on its final voyage en route to Brownsville, where All Star Metals will work on the task of dismantling the ship and sell it as recycled material. The Navy awarded a $0.01 delivery order to All Star Metals in October for the towing, dismantling and recycling of the

Brownsville Economic Journal Spring 2014

aircraft carrier. The price of the delivery order reflects the net price proposed by the company, which considered the estimated proceeds from the sale of the scrap metal to be generated from dismantling. All Star Metals president, Nikhil Shah, said his company would take about 18 months to dismantle the Forrestal. “This is the largest ship that we’ve ever dismantled, and the largest ship the U.S. government has ever awarded to be dismantled. It’s a very big job to us,” he said. According to the company’s website, Navy personnel will be on site full time to monitor the company’s performance during the dismantling. All Star Metals, a subsidiary of Scrap Metal Services, has been operating as a li-

censed ship recycling and environmental remediation contractor since 2003. Over the years, the company has grown from its small shipyard to a full blown ship recycling and metal processing center, and today ranks as one of the largest ship recycling facilities in the United States. The Port is home to five companies that especialize in ship recycling, making Brownsville the country’s top ship breaking hub. A committed and trained workforce, port infrastructure and land availability, as well as a logistical advantage since the region is in close proximity to main steel processing plants in Mexico and the U.S., are what make this Texas city an excellent place for a ship recycling endeavor. BEDC.com

“ 5 ” The easiest way for anyone to understand what my team and i feel today is equivalent to a football team making it to the Super Bowl

- Nikhil Shah All Star Metals President

“Brownsville has a lot of the dynamics that other ports don’t have. We have a deep water port. The weather is great yearround, coupled with a full-on labor force that has the ability to meet our requirements in the recycling space,” Shah said. Brownsville is where the vast majority of the nation’s federal ships end up being broken apart and recycled. The region’s workforce boasts an important number of trained welders, giving the area the advantage when it comes to a skilled labor pool compared to other parts of the nation.

“Going to the Super Bowl” All Star Metals has had its share of recycling Navy vessels, but none have been as big as the Forrestal. And to understand the importance of landing the contract for his company, Shah compared it to a football team playing at the Super Bowl. “The easiest way for anyone to understand what my team and I feel today is equivalent to a football team making it to the Super Bowl,” he said. “The journey and dream is achieved, the hard work begins now – we look forward to working with the United States Navy to safely and successfully recycle the aircraft carrier, ex-Forrestal. Our team has worked tirelessly to get ready for a job of this magnitude and we are ready to see this come to fruition.” BEDC.com

By the numbers

he scrap metal business is a very lucrative endeavor for the Port of Brownsville. According to yearly statistics, 2,208,643 metric tons of steel products and other metals were moved by the port via vessel in 2013. Since 2011, close to 6 million metric tons of steel and other metals have been handled at the port facilities.

ship recycling companies are located at the Port of Brownsville

56,000

The USS Forrestal

Tons of scrap metal is expected to be produced from the former “supercarrier”

Activity at the Port of Brownsville

2,208,643

220,836.60 78,155 6 million

Metric tons of steel products (slabs, coils, billets and other metals) were moved by the Port of Brownsville via vessel in 2013 Metric tons of steel scrap (structure, shredded, and cut) were moved by barge in 2013

Metric tons of steel scrap (structure, shredded, and cut) were exported by rail in 2013

Metric tons of steel and other metals have been handled at the Port since 2011 Source: Port of Brownsville

Spring 2014 Brownsville Economic Journal

To undertake the monumental task, Shah said his company will need an additional 200 people. Currently, the company has about 300 employees. The Forrestal is expected to produce over 56,000 tons of scrap metal. The scrap will be sold to steel mills, most of them located in the United States, which will melt this material to make new steel, ships, automobile parts, appliances, among other consumer goods. Well before All Star Metals was awarded the contract, the company worked diligently with Port authorities to create a plan for the project. “The Port of Brownsville has been very supportive to All Star Metals,” Shah said, adding that his company designed a new area within their facility for the project. The scrap metal business is a very lucrative endeavor for the Port of Brownsville. According to yearly statistics, 2,208,643 metric tons of steel products and other metals were moved by the port via vessel in 2013. Since 2011, close to 6 million metric tons of steel and other metals have been handled at the port facilities.

A historic super carrier The first of the “supercarriers,” the USS Forrestal was launched December 11, 1954, by Newport News Shipbuilding and Drydock Co., and commissioned September 29, 1955. The aircraft carrier was decommissioned Sept. 11, 1993, after more than 38 years of service. On June 16, 1999, the Navy announced the ship would be available for donation to an eligible organization for use as a museum or memorial. However, no viable applications were received and the vessel was removed from donation hold in December 2003 and redesignated for disposal. On July 29, 1967, the ship was rocked by a series of apocalyptic explosions when a massive fire broke out on the flight deck, resulting in the

“ ”

Brownsville Economic Journal Spring 2014

Although the ship is being towed to Brownsville, Texas to be physically dismembered, her legacy, the bonds forged and memories created among shipmates will live forever

- John McCain, U.S. Senator from Arizona

tragic death of 134 crew members. The fire nearly killed then-Lt. Cmdr. John McCain, who was a Navy pilot serving aboard the ship at the time. He was waiting to take off when his plane was struck by a rocket from the aircraft in position behind him. “I will never forget when that Zuni rocket hit my A-4 Skyhawk after it was accidentally fired from across the flight deck, rupturing the fuel tank and setting that horrific, costly fire,” McCain, now a senator from Arizona, said in a statement the day after the former supercarrier began its tow to Brownsville. “Although the ship is being towed to Brownsville, Texas to be physically dismembered, her legacy, the bonds forged and memories created among shipmates will live forever,” McCain said. “I bid her a final ‘fair winds and following seas,” he said in the statement. EJ

COver STOrY

Courtesy photo by esco marine

The federal government will be paying esco marine, located at the Port of Brownsville, nearly $797,000 to dismantle the former USNS Shoshone, a 56 year old super tanker that was part of the Suisun Bay reserve “mothball” Fleet in California.

esco marine to recycle former navy super tanker Staff reports

sco Marine acquired a contract from the federal government to dismantle the former USNS Shoshone, a 56 year old super tanker that was part of the Suisun Bay Reserve “Mothball” Fleet in California. The federal government will be paying the company, located al the Port of Brownsville, nearly $797,000 to dismantle the vessel. Esco Marine is a 88 acre full service marine yard and recycling operation that specializes in recyclable metals and the proper disposal of obsolete maritime vessels. The company has recycled the USS Des Moines, a heavy cruiser built near the end of World War II, as well as many other military ships. EJ BEDC.com

A city on the rise lOCAliNDUSTrYCOrNer

lizzy de la Garza Putegnat Dir. of Business Retention & Expansion

BEDC.com

rownsville, Texas, – a city on the rise. But don’t just take it from us, let the experts tell the story. In 2013, Forbes ranked Brownsville No. 10 on their “Top 10 Best Cities for Future Job Growth” as they looked at cities expected to have the fastest job growth through 2015. According to economic research firm, Moody’s Analytics, Brownsville is projected to have an annual job growth rate of 3.1%. NerdWallet, a company founded in August 2009 by former Wall Street analyst Tim Chen and former JPMorgan Chase option trader Jacob Gibson, named Brownsville as one of the “Top 10 Cities on the Rise.” According to their 2013 report, the following three factors were used to determine the growth of the cities: 1) Growth in working-age population: They looked at the growth in percentage of the city’s working-age population (16 years old and over). 2) Growth in income: They looked at the growth in median income for workers. 3) Growth in airport passenger traffic: They gauged how many travelers, especially business travelers, were coming to the city to find industry and business opportunities. By tracking passenger movement in the cities’ airports, they approximated how popular the cities were. Based on these metrics, they recognized Brownsville as one of the fastest growing areas in the U.S., showing a 1.3% growth in employment, a 17.8% growth in median income, and a 0.2% growth in passenger traffic at the Brownsville/South Padre Island International Airport. But wait, that’s not it… Last year Global Trade Magazine ranked Brownsville No. 21 on their “Top 25 Cities for Global Trade.” Their report took a close look at the 25 metro areas that posted the largest export volume increase in 2011. According to the report, Brownsville’s total exports in 2011 amounted to $6 billion. The city’s exports increased $2.1 billion since the previous year in 2010, showing a growth rate of 52.3%.

Adding on to Brownsville’s accolades, last year FDI Magazine recognized Brownsville with an award as one of the” Top 10 Small Cities for Best FDI (Foreign Direct Investment) Strategy.” Brownsville is a growing city with so much potential that it has reached the radar of renowned global companies, and there are many other sets of data that point towards positive growth and further development in the region. According to the U.S. Census Bureau, Brownsville’s population has grown 111.9%, compared to Texas and the U.S. which have grown 83.1% and 39.9%, respectively, between 1980 and 2013. In addition, Brownsville has a great advantage in that it has a young population with a median age of 28.6. If we look at employment figures, based on the Texas Workforce Commission, Brownsville MSA employment increased 24.7% between 2000 and 2013 (values represent total nonfarm, not seasonally adjusted jobs). Average annual unemployment rates in Brownsville have been dipping. The unemployment rate in 2011 was 12.3%, in 2012 it was 11%, and in 2013 it was 10.6%, closing the year in December 2013 with a 10.2% unemployment rate. Though the unemployment rate is still high, the good news is that it is decreasing. Another positive trend points to the Port of Brownsville’s yearly exports and imports trade activity. The Texas Center for Border Economic and Enterprise Development reported that between 2011 and 2013 there was a nearly 4% increase in total trade. In 2011 total trade amounted to $15,235,999,414 and in 2013 it was $15,826,131,755. In regards to housing, according to the Real Estate Center Texas A&M University, Brownsville’s home sales also showed an upward shift between 2011 and 2013. Total home sales increased by 10.4% (701 homes sold in 2011 and 774 in 2013) and the total dollar volume of home sales increased 21.8% (2011’s dollar volume was $81,255,810 and 2013 was $98,965,940).

Turn To Page 19

Spring 2014

Brownsville Economic Journal

mANUFACTUriNG iNDUSTrY

m del of success

Relationships, quality of work keeps Nova/Link bustling after 26 years of existence Written by Jorge i. montero

he game plan for Nova/Link is simple – concentrate on qualitative output, provide good customer service and build relationships. In turn, the traditional means of wordof-mouth keeps the company busy with activity. “Quality of our work and the relationships, that’s what has built Nova/Link for the past 25 years,” said René Xavier González, who along with Brad Wolfe, Jason Wolfe and their executive team run the near 500,000-square-foot operation,

Brownsville Economic Journal Spring 2014

which has major operations in Matamoros, Reynosa and warehousing in Brownsville. Nova/Link is a near-shore contract manufacturer located in the BrownsvilleMatamoros Borderplex region that provides a complete package of customized manufacturing services to help clients in the transition of bringing their manufacturing operation to Mexico. Contract manufacturers also are referred as shelter operations, which is similar to an industrial incubator of sorts. In 1988, René González (René Xavier’s father) and Bill Wolfe (Brad and Jason’s father) created Nova/Link to assist

and facilitate manufacturers with the relocation of their operations into Mexico. Using their combined experiences with companies such as FINSA Industrial Parks and General Motors, René and Bill were able to assist and facilitate the partial and total relocations for several Fortune 500 companies such as 3 divisions of General Motors, Magnetek Mitsubishi, and Trico. And after 25 years in the industry, the family owned business has achieved respect and recognition from clients and competitors thanks to the experience and success the company has achieved within the manufacturing industry. Currently René Xavier González and Brad and Jason Wolfe run the operations with the same intention of providing quality service and maintaining successful relationships with clients. BEDC.com

mANUFACTUriNG iNDUSTrY Photos courtesy of Nova/Link

The company has facilities in matamoros (pictured below) and reynosa with a combined manufacturing space of roughly 490,000 sq. ft. Additionally, their 80,000 sq. ft. distribution center located in Brownsville (pictured left) provides full distribution for some of their clients.

1988 First project launched building airport shuttle vans 1988 Nova/Link expands operations and leases first 50,000 sq. ft. building 1989 Nova/Link adds additional 50,000 sq.ft. 1989 Nova/Link breaks into electronics, building car alarms 1991 Nova/Link opens first facility in Reynosa 1992 Nova/Link begins long history of textile manufacturing with Fruit of the Loom as first customer 1994 Nova/Link begins proprietary trucking services 1999 Nova/Link re-opens operations in Reynosa 2009 Nova/Link begins first full package program 2010 Nova/Link moves into new SIDEE facilities 2013 Nova/Link celebrates 25 years in business

“Nova has been an integral part of the community. Both my father Bill Wolfe and René’s father, René González, have been a crucial part of the community in establishing many maquiladoras here, starting with GM and Trico and bringing Toyota to the area,” Jason Wolfe said. “It’s been 26 years of aggressive growth and thousands of resulting jobs in the area. It’s been a good ride for us, we continue to grow, we continue to plan to grow, and be one of the pivotal employers in the area.” This philosophy is evident in their website, where the company has incorporated a section reserved exclusively for “testimonials” from some of their clients, who share comments about the successful working relationships they have built with Nova/Link. “Amerex Corporation and Nova/Link have enjoyed a very successful partnership for the past six years. Nova/Link provides a trained, reliable and quality conscience workforce that always meets our schedBEDC.com

uled requirements efficiently and effectively,” wrote Ken Bowen, Vice President of Operations for Amerex Corporation, a manufacturer of fire extinguishers for commercial and industrial purposes purposes Doug Freeman, Vice President of Global Supply Chain & Product Development for Patagonia, an outdoor apparel giant based out of California, mentioned that “Patagonia has worked closely with Nova/Link over the past 10 years to develop a reliable, smooth running, and long-term partnership. Over the past 5 years, we initiated several changes within our supply chain that included moving away from cut-make-trim purchasing to full package sourcing, evolving our ERP system to Microsoft A/X, and introducing the Tradecard payment platform. All of these changes represented unique challenges to our suppliers, but Nova/Link consistently responded with high degree professionalism, helping Patagonia reach new heights in delivering quality product,

consistently on-time.”

The evolution Nova/Link started out with roughly 15,000 sq. ft. of space and 30-40 operators. Over the years the volume of business has transformed the company and created the growth to its current size, Wolfe said. Today, the company has presence in Matamoros and Reynosa with a combined manufacturing space of roughly 490,000 sq. ft. Additionally, their 80,000 sq. ft. distribution center located in Brownsville provides full distribution for some of their clients. Depending on seasonality, the company boasts a labor force of between 3,000 and 3,200 employees. The industries Nova/Link services primarily are automotive, aviation, electronics, textile and medical. In their 26 years of existence, they have manufactured products like hospital beds, apparel, air bags, seat belts, airplane seats, among other goods. Spring 2014 Brownsville Economic Journal

mANUFACTUriNG iNDUSTrY

“For the most part, the automotive sector seems to be the dominant industry right now that we are courting and from where companies have looked for us,” González said, stressing the fact that it is not the only industry they concentrate on or rely for business. Recently, Nova/Link has been working with companies in the technology field, since market trends point to the direction of that industry. “The market dictates what kinds of products are manufactured, and all are leaning towards the technical side. That’s where I like to see it go,” González said. “Our primary industries were auto and textile and as the years have gone on we have been able to indulge in different kinds of products that are more technologically oriented.” Wolfe mentioned that being a family business gives Nova/Link a unique advantage that puts them ahead of their competitors. “Being a family business, we are obviously able to shortcut a lot of the corporate cultural mentality of some companies and we are able to fast track programs. Since we make the decisions we are able to make decisions and strategies that allow for us to take on continued growth,” he said. “We’ve been able to diversify our business to the point where we are in the automotive, aviation, medical, textile industries. We’ve seen the evolution from the old days 26 years ago of making a high labor content, but low value content product that you made in mass to a product now that is very high in value and is much more responsive to the market.” Wolfe sees Matamoros as an area with great potential for the manufacturing industry, and the benefits of establishing operations in this border city go from a qualified and experienced labor force to excellent logistical advantages. “We have had operations in various places in Mexico and being in Matamoros is one of the most manufacturing friendly environments to be in because of the set up that we have here with the maquila industry and the interaction with Brownsville and Matamoros,” Wolfe said.

Brownsville Economic Journal Spring 2014

Taking part in the “reshoring movement” From Staff reports

growing number of American companies are taking part in the “reshoring movement,” establishing their manufacturing facilities along the U.S.-Mexico border as they look for better costs in manufacturing and transporting their goods to their final market destination, in many cases the United States. These companies have been repositioning their assembly lines on the Mexican side of the U.S.-Mexico bor-

Bumps along the road As part of their efforts to keep up with the ever changing market tendencies and try to remain relevant in a highly competitive industry, Nova/Link revamped its shelter manufacturing model to offer more options to companies looking to expand or that are looking to improve the quality of their products. “We have developed our model from providing relatively straight forward shelter manufacturing services to a model that includes startups shelter operations and full package operations,” Wolfe said. But like any other corporation, Nova/Link has experienced its share of challenges, and Wolfe said their business model is what has helped them manage those challenges that have presented along the road, like the global recession that hit in 2008 and 2009. “You look at the challenges that have come at us over the years and certainly the recession hit us very hard just like it did a lot of people,” Wolfe said. “Our business model has been key to our success.” “The beauty of our model is that we are flexible for our clients. Our clients are

der from Tijuana to Matamoros. In Matamoros, companies such as Nova/Link have been helping these companies set up shop in Mexico, offering various services under the same roof. These services include manufacturing and logistical needs. Other companies especializing in reshoring or shelter operations in the Brownsville-Matamoros Borderplex include: Tricar Maquila and Logistics, ORC Industries, Consulting Point, Inc., SGC Manufacturing, IAI Brownsville, COIMA, and MLT International Consultants. EJ

not stuck with the overhead costs of their own administrative staff down here, they’re not stuck with leasing a facility that is larger than what they need and if they had to reduce in volume they had to continue to bare that overhead, they were able to flex down with us just like they’re able to flex up for growth. So their cost was mitigated, many of our clients survived that period of time just like some others did, but in the recovery period, they were able to actually grow beyond where they were at because they were taking and absorbing the manufacturing requirements of the rebound when some of their competition was not able to survive that period. They survived because they had an operation here with us, and the flexibility that we provided them helped with that process of survival,” Wolfe said. Wolfe added that another element that helped them weather the storm during the recession was the company’s diversity. “When the automotive industry was down, the textile industry may have been up, or the medical industry may have been up. So our diversity certainly helped us survive that period of time,” he said. EJ BEDC.com

BUSiNeSS&eCONOmiCBrieFS

A city on the rise Continued from Page 15

KSm expands operations, will open plant in matamoros International company KSM recently announced it will invest $1.5 million in the construction of a manufacturing plant in Matamoros. Tamaulipas State authorities announced that the plant, which will manufacture electric harnesses for the automotive sector, will start operations in the third quarter of 2014.

Rafael Angel Ortiz Salazar, Deputy Secretary for Investments and Promotions of the Ministry of Economic Development of the State of Tamaulipas, said that at least 70 jobs will be generated when production starts at the plant, in addition to the indirect jobs the venture will also create. EJ

New Sh 550 entrance to Port of Brownsville inaugurated Port officials and a host of local and county dignitaries held a ribbon cutting ceremony in February to celebrate what officials have called a major development for Cameron County: the Port of Brownsville’s new primary entrance the State Highway 550 connector entry. SH 550, formerly known as FM 511, is an alternate route between the Port of Brownsville and Interstate 69. Port Director and CEO Eddie Campirano said the Chemical Road entrance will close and the Foust Road entrance, currently the primary entryway to the port, will operate five days a week from 6 a.m. to 8 p.m. BEDC.com

“And on any given day, we may have as many as 500 trucks in and out of the Port of Brownsville,” Campirano said from inside the SH 550’s new entrance booth. “The whole idea of it is to facilitate that commercial truck traffic.” Truckers coming from the ports of Houston or Corpus Christi can now reach the Brownsville port without ever having to leave I-69, he said. “We do hope and anticipate increased direct access by truck traffic to the Port of Brownsville,” he said.

The complete article can be found at www.brownsvilleherald.com

Moving on to the city’s tax revenues, the Texas Comptroller of Public Accounts reported a 5.74% increase in Brownsville’s local sales and use tax revenue between 2011 and 2013 (2011 generated $31,943,876 and 2013 generated $33,778,110). The City of Brownsville also reported an upward shift of 4.5% in property tax roll between fiscal years 2011 and 2013, reaching its highest value of $5,580,529,052 for fiscal year 2013 since 2001. Shifting gears to education, our higher education institutions have also shared positive trends. Last fall semester (2013), the University of Texas at Brownsville said enrollment exceeded their original estimate of 7,500 students, reporting a total enrollment of 8,420 students and a total of 8,601 when counting students in the Brownsville Early College High School and the Math and Science Academy. With the merger of University of Texas at Brownsville and the University of Texas Pan-American, student enrollment numbers will surely skyrocket at the new University of Texas Rio Grande Valley. Texas Southmost College also recently reported promising news announcing that their 2014 spring semester enrollment at TSC increased 15.6% from last fall’s semester. In addition, more than 1,000 of those students are dual-enrollment students this spring semester compared to the 650 students who were dual-enrollment last fall semester. TSC expects both dual-enrollment and total enrollment figures to increase this coming fall semester as the community college continues to reestablish itself. The Brownsville community has a lot to be proud of. We may not be right where we need to be yet, but we are sure making progress and taking steps in the right direction. EJ Spring 2014 Brownsville Economic Journal

UNiTeD STATeS

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 3.2 percent in the fourth quarter of 2013 (that is, from the third quarter to the fourth quarter), according to the “advance” estimate released by the Bureau of Economic Analysis.

economy grows at 3.2 percent rate in Q4

The U.S. economy grew at a 3.2 percent annual rate in the October-December quarter on the strength of the strongest consumer spending in three years, an encouraging sign for 2014. The fourth-quarter increase followed a 4.1 percent growth rate in the July-September quarter, when the economy benefited from a buildup in business stockpiles. For 2013 as a whole, the economy grew a tepid 1.9 percent, weaker than the 2.8 percent increase in 2012, the Commerce Department said Thursday. Growth was held back last year by higher taxes and federal spending cuts. With that drag diminished, many economists think growth could top 3 percent in 2014. That would be the best performance since the recession ended in mid-2009. The expansion in the final three months of 2013 was fueled by a 3.3 percent growth rate in consumer spending, a significant acceleration from 2 percent spending growth in the third quarter. It was the best spending pace since the fourth quarter of 2010. Consumer spending is particularly important because it accounts for about 70 percent of the economy. Government spending fell at a 4.9 percent rate last quarter. State and local government activity rose at a scant 0.5 percent

3.2%

Trade in Goods and Services

Total December exports of $191.3 billion and imports of $230.0 billion resulted in a goods and services deficit of $38.7 billion, up from $34.6 billion in November, revised. December exports were $3.5 billion less than November exports of $194.8 billion. De-$38.7 cember imports were $0.6 billion more than November billion imports of $229.4 billion.

U.S. international Transactions The U.S. current-account deficit — the combined balances on trade in goods and services, income, and net unilateral current transfers — decreased to $94.8 billion (preliminary) in the third quarter from $96.6 billion (revised) in the second quarter. The deficit decreased to 2.2 percent of current-dollar gross domestic product (GDP) from 2.3 percent in the second quarter. The decrease in the current-account deficit was more than accounted for by an increase in the surplus on income.

$94.8 billion

Brownsville Economic Journal Spring 2014

Source: The Associated Press

import and export Price indexes

employment Forecast Total nonfarm payroll employment rose by 113,000 in January, and the unemployment rate was little changed at 6.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment grew in construction, manufacturing, wholesale trade, and mining.

rate, but federal government spending tumbled at a 12.6 percent rate. The 16-day partial government shutdown in October cut fourth-quarter growth by about 0.3 percentage point, the government said. The strength in consumer spending reflected gains in purchases of durable goods such as autos and nondurable goods such as clothing. Spending on services also rose strongly. Businesses invested in more equipment last quarter. There was also strength from a shrinking trade deficit. But housing construction declined. The 3.2 percent estimated growth rate for the economy last quarter was the government's first of three projections of gross domestic product for the October-December quarter. The GDP measures the economy's total output of goods and services. This year, economists think the economy will get a lift from continued gains in hiring. Further steady job growth would give more households money to spend and help lift consumer spending, which accounts for about 70 percent of economic activity.

6.6%

unemployment rate in U.S.

U.S. import prices rose for the second consecutive month in January advancing 0.1 percent, after a 0.2 percent increase in December. In January, higher nonfuel prices more than offset declining fuel prices. U.S. export prices also rose in January, increasing 0.2 percent following a 0.4 percent advance in December.

0.1%

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

mexiCO

Global economic Activity

economy continues growth

exico’s economy expanded well into the fourth quarter as the monthly proxy for gross domestic product (GDP) increased in October and November—a continuation of growth following a third-quarter rebound. Other recent data are generally consistent with continued expansion. Industrial production, employment and retail sales grew, although exports edged down. Inflation turned up, and the peso reversed course and lost some ground against the dollar in January.

Output grows Mexico’s global economic activity index (IGAE), the proxy for GDP, grew 0.4 percent in November after rising 0.3 percent in October. Service-related activities (including trade and transportation) expanded 0.6 percent, while goods-producing industries (including manufacturing, construction, utilities and mining) grew 0.1 percent. Agricultural output fell 6.5 percent. The most recent consensus forecast indicates that the economy grew 1.3 percent in 2013 and that it will grow 3.4 percent in 2014.

Industrial Production Recovering Industrial production (IP) grew 0.1 percent month over month in November after expanding 0.4 percent in October. Three-month moving averages show improvement in total IP, while manufacturing output shows some slowing. Meanwhile, U.S. IP grew 0.3 percent in December after rising 1.1 percent in November. Mexico’s industrial production typically tracks U.S. IP, due in part to the U.S. automotive industry’s large presence in Mexico.

Inflation ticking up Inflation spiked in December, and prices were up 4 percent year over year, their highest level since June 2013. The increase was due to higher gasoline prices, combined with a rise in fresh fruit and vegetable prices. Prices excluding food and energy were up 2.8 percent year over year, which is still below the central bank’s long-term inflation target of 3 percent. The central bank lowered its policy rate to 3.5 percent in October over concerns that the economy was continuing to slow. It was the third monetary policy easing this year. EJ SOURCE: Federal Reserve Bank of Dallas

employment

SOURCE: Federal Reserve Bank of Dallas BEDC.com

Formal-sector employment—jobs with government benefits and pensions—increased at an annualized rate of 3.1 percent in December, below November’s 4.2 percent but above the average monthly rate of 2.9 percent for the year. Formal-sector employment grew 4.6 percent in 2012.

Consumer Price index

3.1%

Inflation spiked in December, and prices were up 4 percent year over year, their highest level since June 2013. The increase was due to higher gasoline prices, combined with a rise in fresh fruit and vegetable prices. Prices excluding food and energy were up 2.8 percent year over year, which is still below the central bank’s long-term inflation target of 3 percent.

Mexico’s global economic activity index (IGAE), the proxy for GDP, grew 0.4 percent in November after rising 0.3 percent in October. Service-related activities (including trade and transportation) expanded 0.6 percent.

0.4%

exports Exports fell 0.2 percent in December but closed the year slightly up. In 2013, total exports grew 0.8 percent, held down by oil exports, which declined 7.5 percent. Manufacturing exports increased 2.6 percent.

0.2%

industrial Production Industrial production (IP) grew 0.1 percent month over month in November after expanding 0.4 percent in October. Three-month moving averages show improvement in total IP, while manufacturing output shows some slowing.

0.1%

Peso/Dollar exchange rate

The exchange rate averaged 13.2 pesos per dollar in January, a depreciation of 1.4 percent from December, when it averaged 13. The peso appreciated 0.6 percent in December. Higher 13.2 pesos U.S. interest rates and a per dollar spike in Mexico inflation may be helping push up the dollar relative to the peso.

Spring 2014 Brownsville Economic Journal

TexAS

manufacturing picks up again

employment The unemployment rate declined to 6 percent in December from 6.1 percent in November. The Texas rate remains lower than the U.S. rate, which was 6.7 percent in December. Texas gained 21,400 jobs in December after adding 16,100 jobs in November. Texas employment stands at 11.31 million.

exas factory activity increased for the tenth month in a row in February, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 7.1 to 10.8, indicating output grew at a slightly stronger pace than in January. Other measures of current manufacturing activity also reflected a pick up. The capacity utilization index edged up to 9.1, with a quarter of manufacturers noting an increase. The shipments index rose again in February, coming in at 13.3. The new orders index continued to indicate demand growth and was 9.5, down from 14.4 in January but above the levels seen toward the end of last year. Perceptions of broader business conditions were not as positive this month as they were in January. The general business activity index fell to zero after eight positive readings in a row. The company outlook index also declined, from 15.9 to 3.4, hitting its lowest reading since last spring. Labor market indicators reflected continued employment growth and longer workweeks. The February employment index edged up for a third consecutive month, rising to 9.9. Eighteen percent of

6.0%

monthly exports Texas exports rose 0.9 percent from October to November after rising 4.5 percent from September to October. November exports were 12.1 percent higher than at the same time last year.

0.9%

Production indexTexas manufacturing Texas factory activity increased for the ninth month in a row in January, according to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, edged up from 6 to 7.1, indicating output grew at a slightly stronger pace than in December.

7.1

Crude Oil Prices The West Texas Intermediate crude oil price decreased 3.2 percent to $94.64 per barrel in January and was down 0.1 percent year over year.

3.2%

firms reported net hiring compared with 8 percent reporting net layoffs. The hours worked index shot up from 3.4 to 12, reaching its highest level in more than two and a half years. Upward pressure on prices and wages continued in February. The raw materials price index fell to 21.9 but remained high relative to what it was for most of 2013. The finished goods price index held steady at 11.2, a level well above the average over the last couple of years. Looking ahead, 43 percent of respondents anticipate further increases in raw materials prices over the next six months, while 33 percent expect higher finished goods prices. Compensation costs increased at a slightly stronger pace this month. The wages and benefits index rose from 21.6 to 25.8, hitting a six-year high. Expectations regarding future business conditions remained optimistic in February, although most indexes of future activity fell from their January levels. The index of future general business activity moved down but posted a still-robust reading of 15.2. After hitting a three-year high last month, the index of future company outlook fell 12 points to 20.6. EJ SOURCE: Federal Reserve Bank of Dallas

Natural Gas Prices

Texas rig Count

Natural gas prices rose to $4.69 per million Btu in January, a 10.6 percent increase from the December level. The price was 40.8 percent higher than in January 2013.

The Texas rig count fell to 836 in January from 843 in December but was up 1.8 percent year over year.

Brownsville Economic Journal Spring 2014

10.6%

836

SOURCE: Federalâ&#x20AC;&#x2C6;Reserve Bank of Dallas BEDC.com

BrOwNSville BOrDerPlex

Unemployment rate drops

he Brownsville-Harlingen metropolitan statistical area saw the largest decline in unemployment among the state’s nine major MSAs from November to December, according to a new report of seasonally adjusted employment rates from the Federal Reserve Bank of Dallas. At the same time, job growth continues to be weak, according to an economist with the Dallas Fed. The unemployment rate dropped from 10.1 percent to 9.8 percent during the period. According to data from the Dallas Fed, the decline in the Brownsville-Harlingen unemployment rate follows a trend that began in late 2011 and early 2012. This trend came on the heels of a sharp increase in the unemployment rate that began in early 2008 and peaked at more than 12 percent in the last quarter of 2010, as the effects of the recession trickled down to the Rio Grande Valley. Unemployment in the Brownsville-Harlingen MSA fell steadily from mid-2003 until 2008. The jobless rate was around 5.5 percent in 2008 before it began to climb again, Dallas Fed data show. But Keith Phillips, senior economist with the Dallas Fed, said unemployment rates are volatile month to month and don’t

necessarily tell the whole story. In fact, job growth in the BrownsvilleHarlingen MSA was only .4 percent, and it didn’t break 1 percent anywhere in the Valley, he said. Noting the large number of federal jobs in the Brownsville-Harlingen MSA, Phillips said the anemic job growth last year is largely due to cuts in federal spending, which fell 13 percent nationwide last year. Employment in home health was hit hard due to a reduction in federal support for the sector, he said. Still, there were some positive signs for job growth late in 2013, Phillips said. “There was some improvement in the final quarter, but I think overall you got hit pretty hard by the federal government (cuts),” he said. “Month to month that unemployment rate can swing, and the smaller the region, the more volatile it is. “I think federal government cuts are going to be a lot smaller this year, and that’s good news coming into the new year.”

This article was written by Steve Clark and appeared in the Thursday, January 29, 2014 issue of The Brownsville Herald.

Construction

Civilian Labor Force: 164,800

Residential Building Permits: $60,374,626

Employed: 149,200

Commercial Building Permits: $60,522,051

Unemployed: 15,600 9.5

Total Permits: $120,896,677

Revenue Landed Weights American Airlines: 4,134,400* United Airlines: 4,271,408* Other: 2,667,432* Total: 11,073,240* Cargo Weights (lbs) Cargo Enplaned: 136,633* Cargo Deplaned: 53,114* Total: 189,747* *Data for January 2014

Annual total for 2013 Landings & Takeoffs: 36,938 Passengers: 197,935 Revenue Landed (lbs): 140,968,023 Cargo Weights (lbs): 1,941,263

Border Crossings Rail Northbound: 43,632 Southbound: 41,981 Truck Northbound: 177,008 Southbound: 190,815 Vehicle Northbound: 4,784,585 Southbound: 2,544,864 Pedestrian Northbound: 2,117,807 Southbound: 1,781,808

Unemployment rate: 9.5%

BEDC.com

Landings & Takeoffs Enplaned Passengers: 7,622* Deplaned Passengers: 8,379* Total Passengers: 16,001*

Source: Brownsville South Padre Island International Airport

employment

Brownsville-Harlingen MSA data for December 2013 Source: Texas Workforce Commision

Brownsville South Padre island international Airport

Data is annual total for 2013 Source: Rio Grande Valley Partnership

Data is annual total for 2013 Source: Texas Center for Border Economic and Enterprise Development

Spring 2014 Brownsville Economic Journal

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

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