Arizona-Mexico Trade

Aug. 9, 2010

Transcript:

Ted Simons:
Securing the border between Arizona and Mexico. It's a major topic of late, but it doesn't mean targeting legal traffic. Arizona "Counts" on visitors from Mexico who spend nearly $3 billion in our state annually. And Mexico is Arizona's biggest trading partner. In 2008, Arizona's exports to Mexico totaled $5.9 billion. More on that in a moment. But first, here's what a couple of experts had to say about improving the benefits of trade with Mexico.

Erik Lee:
Arizona needs to take a broader view of the Mexican economy and the dynamics that are occurring within Mexico's economy. Sonora is a border state. It's the state we've had very close relationship with for 51 years now. But the Mexican -- Sonora is not the Mexican economy. Sonora is part of that equation, but the main concentration of wealth in Mexico's economy is really in the three largest cities and those are Mexico City, Monterrey and Guadalajara in the south. That's where the wealthy are and that's where the deals need to be made.

Margie Emmermann:
I think we need to continue working on expanding our trade opportunities. That's one of the things that few organizations like ours, the Arizona Mexico commission and chamber of commerce and all the trade organizations, we need to recognize what things like the can mex corridor are and what infrastructure is being developed along that corridor that really can benefit our economy and take advantage of that. There's a great project that's happening in Mexico. Punta colonet, really understanding what that will mean nor Arizona and how that can be met. And banding together and making sure what will be the benefit for us and how can we develop Mexico so the situation with immigration can really benefit from all of that.

Ted Simons:
Joining me to talk about trade with Mexico are Wendy Vittori, the president of the Arizona-Sonora manufacturing initiative, an effort to make the region's manufacturing sector more competitive. And Luis Ramirez, the president of Ramirez Advisors, a firm dedicated to international business and government affairs. Good to have you both on "Horizon." Thanks for joining us.

Wendy Vittori:
Thank you.

Luis Ramirez:
Thank you.

Ted Simons:
Mexico is Arizona's number one trading partner. Give us some numbers here.

Wendy Vittori:
As you heard, there are a tremendous amount of exports that go into Mexico from Arizona. In fact, about a third of our exports are headed toward Mexico. And so that is a really key opportunity for Arizona businesses to grow and expand their sales in the Mexican market.

Ted Simons:
These leading industries in that trade.

Wendy Vittori:
Computers and electronics products are the leading ones. Followed by machinery, then we have electrical, appliances, things like that, plastics, rubbers and finally in the top five, primary metal manufacturing.

Luis Ramirez:
Hang on. That's something that is more determined just on the value. We also have a huge sector that crosses the border which is produce, fresh produce. In terms of volumes, the produce industry actually imports more fresh produce from Mexico through Nogales, Luis and Douglas. In terms of volumes, the number of trucks coming in. That's the largest product coming in from Mexico.

Ted Simons:
Is that product, is that trade increasing over the years?

Luis Ramirez:
We've seen it increase. It's been a positive, one of the few positive messages in terms of international trade that's continued to definitely not lose but actually grow. We're now importing some four billion pounds of fresh produce from Mexico worth about 2 to $3 billion. Most of that comes from the Port of Nogales.

Wendy Vittori:
Luis makes a good point. Our trading relationship is bilateral. I was looking at it. I think the largest single item is tomatoes.

Luis Ramirez:
Absolutely.

Ted Simons:
Interesting. We heard on the taped piece a project and it's a deepwater port project south of Tijuana. Talk to us about this and how this might impact trade involving Arizona and Mexico.

Luis Ramirez:
It will actually impact North American trade with Asia. It's a deep seaport conceived when Long Beach, the two largest ports really in the entire North America were saturated and they were looking for alternatives. How are we going to get that merchandise to and from Asia in and out of North America. Just about 100 kilometers south of Ensenada they're now looking at a major deep seaport. Originally they were talking in the capacity of almost as much of 6 or 7 TEUs. It's going to require not only the deep seaport but a rail connection from 200 miles south of the border all the way to the U.S. border connecting to the U.S. railroad system.

Ted Simons:
Promising.

Wendy Vittori:
Absolutely. The number one opportunity that we have is the exports in terms of building our businesses in Arizona. We today have an opportunity that we're not taking full advantage of. If you look at -- it sounds like a lot, around $5 billion of exports. If you look at the total picture of exports to Mexico, it's only about 4%. So if you think about it, a state like Texas which has a GDP five times that of Arizona, has twelve times the amount of exports to Mexico. So there's a big opportunity there and I think we can start to take advantage. This kind of logistics and infrastructure building is one of the things that are critical to our success in the future through all of the exports.

Ted Simons:
Is that kind of infrastructure, though, especially a rail line through Arizona, is that in jeopardy because of something like 1070? How is that coloring this debate?

Luis Ramirez:
That type of infrastructure is many years in planning all the way through seeing a rib won cutting of a first train or a truck pulling through. What is having a greater impact on those projects is really the economic slowdown that is happening not only in North America but globally. That is -- when I started mentioning very large projects that is going to be paired down and developed in phases, that's because of the flow, the trade flows between Asia and the United States. That's had a much bigger, deeper impact than any piece of legislation has had.

Ted Simons:
Is that what you're seeing as well? This topic, we just can't escape this thing. It seems relationships between certain parts of Arizona and certain parts of Mexico are strained. How does that impact? What are you hearing as far as impact in trade?

Wendy Vittori:
I think when people think about the export opportunity, of course they look at the total business environment. We need to be thinking about that as we look at different legislative initiatives. I think the opportunity here is to kind of shift some of that attention away from problems and on to opportunities. What can we do to help Arizona businesses? Particularly small and medium size businesses. Over 80% of these exports are manufacturing exports and small companies participate in that. We have over 4,000 manufacturing firms in Arizona. And so if we start to get more of our fair share, again, I go back to $130 billion of exports, that's to Mexico. As we look at raising Arizona's percentage from 4%, could it be 6%? Right now, just to quantify that, about 85,000 -- the estimate is about 85,000 jobs in Arizona are related to the export economy. So think what it would mean if we could raise that number by only a couple of percent.

Ted Simons:
And the market, the Mexican market, a lot of folks don't seem to realize that there's an expanding middle class in Mexico and that's prime material right there, isn't it?

Luis Ramirez:
And actually, my own firm has seen a tremendous amount of renewed interest towards Mexico as the U.S. economy has slowed. People are looking to diversify their markets. Mexico for us, it's an obvious first step. Close, you know, you can drive to, Sonora you can drive into Mexico and be there two to three hours. It becomes easier from a logistics perspective, yet you're doing business internationally. Mexico has a population of 12, 13 million people so there's disposable income available. Mexico finances are better than they've been in a long time. The national reserves in Mexico has exceeded 100 billion which now exceeds Mexico's foreign debt. They're actually better than the U.S.

Ted Simons:
Real quickly. What is a maquiladora.

Wendy Vittori:
That's a special kind of factory set up in Mexico. There's special legislation in Mexico that permits that. Essentially goods can go to that factory and be assembled and then be shipped back to the United States and now on to other locations. In fact, it's a good point here. Mexico has been very aggressive in establishing trade agreements. They have them now with over 40 different countries. And so those include places like Japan. So that a company that is actually producing a product in Mexico has the opportunity to ship it to many other countries from there.

Ted Simons:
As far as jobs as well, some critics will say jobs in Mexico, jobs with the maquiladoras equals a job lost in America. Is that a zero sum gain? Is that what goes on here?

Wendy Vittori:
We don't really think so. Obviously if you look at an individual situation, there could be that situation. But if you look in aggregate, our real opportunity is to provide exports which are growing and they're creating over six million jobs in the United States today. This is why President Obama, for example, has announced the export initiative as one of his key initiatives for this year. And for Arizona, again, we are sort of underperforming the growth of many other states, states like Connecticut, states like South Carolina, not just Texas in terms of growing our exports. So it's a big opportunity for us. It's not just the Mexican market. There are global markets that need that exact same product.

Ted Simons:
Last question, quickly. What do we do? What does Arizona do to get higher up on the list?

Luis Ramirez:
I think, this is one of the focuses that I pay a lot of attention to, one of the main things we can do is improve our ports of entry. I actually believe, you know, we can talk about immigration, we can talk about new laws. The thing that is impacts most, how many people cross the border, how many trucks cross the border is the bottleneck of the border. How long is a person standing, waiting in a car, how long is a truck idling in order to cross the border? I think that is one thing we can work on, is the border infrastructure that it facilitates for Arizona's perspective. Some 25, 26 million crossing Arizona's Port of entry on an annual basis. That's northbound traffic. That's 25 million people coming in legally into this country through Arizona every year.

Ted Simons:
We have to stop it right there. Great conversation. Thank you very much.

Wendy Vittori & Luis Ramirez:
Thank you.