Down the road from Tucson lies the gateway to extraordinary economic opportunity.
Sixty miles from our back door, Mexico offers a platform for the region to emerge from recession as a stronger, more vibrant center of international trade.
For decades, United States companies owned manufacturing operations in Sonora and northern Mexico. In the 1990s, however much of that business dried up as manufacturing moved across the world to Asia.
Mexico is now experiencing a resurgence of business as U.S. companies are returning from China, seeking opportunities in “nearshoring” that allow for lower-cost manufacturing that is closer to home.
Once known more for manufacturing low-cost, low-value products, today clusters of high-tech industry are growing in northern Mexico – including aerospace & defense and automotive. These growing industries add to farming, mining, ranching and other economic staples that have been part of Mexico’s fabric for generations.
That business growth brings a significant economic impact to Arizona. Last year, $26 billion flowed through the Arizona-Sonora border in imports and exports.
As improvements of more than $200 million to the Nogales port of entry near completion, allowing for greater and more secure movement of goods and people, Arizona is poised to become a leader in international
trade.
Facilitating that growth is the Arizona-Mexico Commission. Since 1959, this public-private entity has brought together stakeholders from both sides of the border with a united goal – strengthen the bonds between the two nations by promoting a cooperative relationship with Mexico and Latin America through advocacy, trade, networking and information.
The commission builds on longstanding generational relationships between the states, both familial and economic.
“The majority of people don’t understand how important Mexico is to us in regards to our economy,” said Arizona Gov. Jan Brewer, who chairs the commission. Also on the commission is Sonora Gov. Guillermo Padres Elias.
“Mexico is our number one trading partner, bringing billions of dollars into our state,” she said.
Brewer credits AMC, which meets twice a year, with bringing together people on both sides of the border to solve problems and strategize a robust economic future.
The creation of a Transportation and Trade Corridor Alliance was announced at the commission’s plenary session in Rocky Point in February. The alliance will study border infrastructure, border entry capacity and competitiveness in Arizona and Sonora.
“It’s a big operation – Mexico and Arizona, working together,” Brewer said. “It boosts the prosperity of the citizens on both sides of the border when the economy is good and everyone is working. Together we want to improve the safety, security and the prosperity of the border region.”
Padres said success of both states depends on collaboration.
“Together we make the economy work,” he said. “We cannot talk about two separate states. We are a region.”
Padres said Sonora is experiencing its highest rate of growth, due in part to a cooperative relationship with Arizona and the growth of high-tech manufacturing.
“We have created 45,000 new jobs in the last two years, and the impact of those jobs benefits people in Arizona,” Padres said.
Margie Emmermann, executive director of the nonprofit Arizona-Mexico Commission and policy advisor to Mexico and Latin America for Brewer, said the commission helps Arizona compete against California and Texas in cross-border trade.
“We are a small state competing against giants,” Emmermann said. “The Arizona-Mexico Commission helps us make sure we are doing the right things and keeping our eye on the ball.”
Larry Lucero is serving as the first Tucson president in the history of AMC. He said the work of the commission is more important now than ever.
“There is greater urgency today than there ever has been because of the economic situation we find ourselves in,” said Lucero, senior director of customer programs and services for UniSource Energy Corporation and Tucson Electric Power.
The work of the commission is seen in clusters of high-tech industry that have formed in northern Mexico, Lucero said. Critical issues of transportation, safety, public health and education must be tackled. “These issues must be addressed for an active, secure and prosperous region,” Lucero said.“It all works together.”
AMC was born during the Cold War climate of 1959, as suspicion was closing trade between nations. Then-Arizona Gov. Paul Fannin envisioned the possibility of expanding cultural and trade relations in Arizona and Sonora that could lead to mutual prosperity.
AMC has 15 working bi-national committees that act as industry and community advocates to grow cross-border trade, business and networking.
So how does creating economic growth in Mexico help Southern Arizona?
“The more wealth that is generated in Mexico translates into more dollars pumped into Arizona,” Emmermann said.
“Ideally we wish the jobs were going to happen in the United States, but offshoring is going to happen one way or the other, and it is much more beneficial to Arizona to have it take place in Mexico,” she said. “People cycle their money back to Arizona. For jobs that aren’t going to stay in the United States, the best place for them to go from an economic perspective is Mexico.”
Jaime Chamberlain, chairman of the Fresh Produce Association of the Americas and president of J-C Distributing in Nogales, Ariz., said collaborative efforts through the commission are vital.
“We need to get together as a state and protect the business we have and expand the incredible opportunities that exist across the border,” he said.
Bruce Wright, who directs the University of Arizona Research Parks, said impeding trade with Mexico has a devastating economic impact on Arizona.
“If the university closed its doors or Davis-Monthan Air Force Base went away, what a huge negative impact it would have on our economy,” he said. “When we frustrate trade with Mexico, it has a similar huge impact.
“It is an existing industry that is creating opportunity and wealth in Southern Arizona, just like the UA or Raytheon or Davis-Monthan,” Wright added. “We need to hold on to it and defend it and support it.”
Michael S. Hammond is president and managing shareholder at locally owned PICOR Commercial Real Estate, which does business in Mexico. “I tell my friends, you either need to get on board or you are going to get left behind,” he said.
“This is the future – Mexico and the United States working together.”
Building stronger ports
Five years ago, the Mariposa Port of Entry in Nogales – the commercial gateway to the U.S. for much of Mexico – had become a parking lot.
Trucks carrying produce, goods and high-tech components that were headed to the U.S. and Canada were stuck at the border, waiting as long as 24 hours to cross.
“We were losing market share to Texas and New Mexico,” said AMC Border Coordinator Luis Ramirez Thomas, president of Ramirez Advisors Inter-National in Phoenix, who works with businesses in the U.S. and Mexico.
AMC led an effort to secure funding for improvement to border infrastructure that would allow for safe, efficient crossing for legal, vital commerce. More than $200 million was secured from economic recovery funds, and the Mariposa expansion is expected to be complete by 2014.
“One of the huge success stories is the fact that it was done largely through the leadership of the Arizona-Mexico Commission, to mobilize a response to those infrastructure requirements,” said UA’s Wright. “Major improvements are taking place. Are they sufficient? Probably not, but they are a huge step forward.”
Creating a border that efficiently lets in commerce but keeps our nation safe from illegal activity is the most critical piece of building the bi-national economy, said AMC president Lucero.
“For us to be successful, we have got to put in place the infrastructure that allows us to attract business,” he said.
Making sure the borders are running efficiently requires sufficient staffing, an issue the commission remains involved in. The border has long struggled with insufficient staffing.
“States like California and Texas are actively luring companies to transport goods through their ports,” Ramirez said. “We cannot be left behind. We must continue to improve our ports of entry, and the commission has been one of the principle
leaders in this.”
Emmermann said efficient ports translate to more jobs in the U.S. Produce, for example, requires warehousing and distribution jobs on this side of the border.
“It is extremely important for us to remain the port of choice,” she said. “It keeps Americans employed.”
Recent developments in Guaymas are expected to impact the region as the port is now processing container traffic, allowing more goods to be shipped in and out of the region.
Gail Lewis, director of international affairs for the Arizona Department of Transportation, said transportation infrastructure is critical in getting goods to where they are going.
“The ports of entry are crucial and the roads that connect to the ports are just as crucial,” Lewis said. “More than $200 million is being spent on expanding the port – but no money is attached to improving the road to the Mariposa port. That needs to be addressed.”
These issues and others are hashed out at AMC plenary sessions, she said. “I can’t imagine how hard it would be to work on infrastructure issues if we didn’t have that connection,” Lewis said.
Mexico for decades has offered an opportunity for Arizona farmers to produce crops through migrant workers.
Kevin Rogers, president of Arizona Farm Bureau Federation, said the ability to feed America would benefit from strong, secure borders that provide for a worker program.
“We need a good worker program so that hard-working people who want to come work here can,” said Rogers, a member of AMC.
“It’s the lifeblood of our industry to have reliable labor to help us manage all levels of our operation,” Rogers said. “You can’t grow crops without labor, and we have made it difficult for good hard-working people to come do these jobs. We are raising our kids to do other types of work, and we are in need of good,reliable labor so we can continue to feed ourselves.”
Growing business
From aerospace & defense to produce and renewable energy, Mexico is ripe for growth.
Wendy Vittori, president and co-founder of Arizona-Sonora Manufacturing Initiative in Scottsdale and an AMC member, previously worked at Motorola, one of the early companies to use the maquiladora trade program to manufacture products in Mexico.
She witnessed the decline of manufacturing in Mexico as companies moved to Asia. She now sees companies – like Motorola – returning.
Bolstering high-tech manufacturing on both sides of the border “is the engine of the economy,” Vittori said.
“If a company is considering a location outside of the U.S. for manufacturing, there are tremendous opportunities in Sonora and Mexico,” said Vittori, whose company assists businesses considering making the move.
“The Arizona-Mexico Commission is one of the leaders in bringing attention to the needs and has worked hard to bring in the investments needed,” she said. “We need a safe and secure border for Arizona and we need to embrace the concept of working collaboratively.”
Ramirez, of Ramirez Advisors Inter-National, said U.S. companies first opened production facilities in Mexico in the 1960s.
“They started flocking to China because companies were focused on the cost of labor in China,” he said. “But when companies look at the overall cost of providing products or components, we see that Mexico is a good alternative.”
Luis Felipe Seldner, co-founder, president and CEO of The Offshore Group, a Tucson-based company that provides Mexico outsourcing solutions, said there are unexpected costs and huge time delays that come with dealing with China.
“And what goes to China, very little comes back as far as trade,” Seldner said. “With Mexico, the trade is back and forth, and the impact to all of Arizona and the United States is tremendous.”
Among international companies that have expanded operations into Mexico is B/E Aerospace.
Doug Rasmussen, vice president and general manager of B/E Aerospace in Tucson, said the company’s manufacturing facility in Nogales, Son., allows for easy collaboration between engineers on both sides of the border.
Having facilities an hour’s drive away in the same time zone makes all the difference when production issues arise, he said.
Key to increasing bi-national collaboration is improved education on both sides of the border. The Sonoran government is investing in education and is training engineers to work in manufacturing operations. UA’s Wright said schools in Mexico are becoming proficient at training high-caliber engineers who work for half the cost of engineers in the U.S.
Internship and education programs between universities on both sides are needed to provide hands-on learning to engineering students so they are ready to work in the aerospace field, Rasmussen said.
Another area of potential growth for Arizona and Sonora is renewable energy.
“We have an emerging solar energy industry in Southern Arizona, but all of the production is going to China,” said UA’s Wright. “Companies are having huge problems – their products are delayed and they are not meeting their deadlines. There is a perfect argument to be made that it all ought to be made in Mexico. We have an economy that needs to find higher-wage jobs and these are the kinds of jobs we need.”
With businesses that span the border comes the need for professional services, including legal.
Snell & Wilmer opened an office in Los Cabos, Mexico, in 2009. “We look at where our clients are doing business, and clients are U.S. developers doing real estate development in Mexico,” said Curt Reimann, a partner in the Tucson office.
“We help them work through the legal process in Mexico,” he said.
Snell & Wilmer, licensed by the Bureau of Foreign Investment to operate as a law firm in Mexico, has helped developers with projects, including El Dorado Golf & Beach Club in Los Cabos.
D. Michael Mandig, an attorney with Waterfall, Economidis, Caldwell, Hanshaw & Villamana in Tucson, has been handling cases in Mexico for nearly 20 years.
The firm assists clients with international commercial transactions. Mandig is helping a grower of table grapes in Mexico license plant varieties, and works with a Mexican produce company that opened a distribution center in Arizona.
He said AMC helps him grow his business.
“It serves as a way for me to maintain social connections with people and provide more visibility,” Mandig said.
Prosperous partnership
With higher-wage jobs comes prosperity on both sides of the border.
Prosperity in Mexico benefits Arizona through tourism and increased investment in the U.S.
Wright, of UA Tech Park, said of the 40 homes in his foothills neighborhood, about a dozen are owned by Mexican nationals.
As their companies grow, they buy homes here and sometimes expand business here. Among the Mexican businesses that have opened operations in Tucson is La Costeña, which produces canned beans in what was once the Slim Fast Foods plant.
When the middle class grows and there is more prosperity, Mexican residents spread the wealth here.
Many send their children to school here – at the University of Arizona, Pima Community College, Salpointe Catholic High School, St. Gregory College Preparatory School and other schools. They buy products here that they cannot find in Mexico, or ones that are far more expensive in Mexico.
“If the economy is thriving in Mexico, they will spend their money here,” said J. Felipe Garcia, VP of community affairs and Mexico marketing at the Metropolitan Tucson Convention & Visitors Bureau. He serves as the co-chair of AMC’s tourism
committee.
MTCVB opened a tourism office in Hermosillo in 2005 called Vamos a Tucson – Let’s Go to Tucson. Visitors can buy tickets to Tucson concerts, find out about special events or book Tucson hotel rooms. In 2011, the office
booked more than 1,000 hotel rooms here.
“If you think you are not impacted by Mexican visitors, well yes, you are,” said Garcia, explaining that taxes generated support schools, libraries and a host of services.
Having safe, effective borders is a key to tourism spending. “I don’t want people waiting in line at the border,” Garcia said. “I want them waiting in line at the cash register.”
Life on the border
One of the goals of AMC is to improve life along the border. Health, education, arts and culture and other topics are priorities for AMC.
Carol Sanger, southeast regional director of the Arizona Community Foundation, said philanthropy is addressing societal challenges that come with cross-border trade.
“Education, environment, health and the arts, to a certain extent, know no borders,” Sanger said.
Her agency works to improve wellness along the border. AMC supports the development of the Douglas Boys & Girls Club.
“Work on the border can be complicated but we are all people who love this area and we all have an opportunity – as is seen in the vision of the Arizona-Mexico Commission – to be good neighbors,” Sanger said.
Will Humble, director of Arizona Department of Health Services, serves as co-chair of AMC’s health committee. The committee recently helped set up protocol to aid in identifying people with tuberculosis crossing the border, and has been instrumental in assisting doctors in Sonora in diagnosing valley fever.
Another focus is helping Sonora develop a regulatory system for assisted-living facilities in Mexico that will attract U.S. residents.
“The folks from Sonora are my most pleasant stakeholder group,” Humble said. “It is just a pleasure to work with them.”
Looking toward the future
While AMC continues to work on weighty issues, “the outlook is very positive,” said Lucero, AMC president.
“We have learned as much from our colleagues in Mexico as we have shared,” he said. “There is still a lot of work to do, but we are moving in the right direction.”
Said Hammond of PICOR, “The past has been strong, but the future is even brighter. The growing middle class in Mexico is impacting business coming from Mexico to the United States. We need to make it easier for the legal business to come into Arizona.
It is the key to our future.”
