July 2010
Drug violence has escalated, U.S. National Guard troops are being deployed and bi-national political tensions are rising. But even against that backdrop, the dangerous city of Juarez — 2,600 murders in 2009; 5,200 in the past 28 months; and over 1,000 so far in 2010 — led Mexico in commercial real estate absorption in 2009.
Juarez continues to see hiring by large U.S. firms at its maquiladoras, and continues to issue new operating permits for new facilities. Another positive sign for that region and other borderzone city pairs came in February, when the federal Bureau of Transportation Statistics reported the value of cross-border trade at US$23.2-billion, up 28 percent from February 2009.
“In the first quarter of 2010, we were seeing a 26-percent jump in truck volume versus last year,” says Bob Cook, president of El Paso Regional Economic Development Corp., in a region whose ports of entry account for about 15 percent of the $300 billion in annual trade between the two countries. Cook is in the midst of a national media blitz to counter possible misperceptions about the region with “an interesting strategy called 'honesty,' ” he says.
“Juarez is this city of competing realities,” says Cook. “One reality is the cartel-related violence. At the same time, Juarez continues to be one of the leading industrial cities in Mexico. Going back to the beginning of 2009, it has outperformed every other city but Mexico City. It's very difficult, without someone coming here firsthand, to describe how those two realities co-exist, but they are.”
Fresh from briefing a medical device firm on these exact issues, Cook says it's important to point out what the violence affects and what it does not. “What the data clearly show is the legitimate industrial community is not a target for this violence,” Cook says.
Foxconn's new 7,000-worker complex rising near Juarez is one example of that community, which comprises some 1,100 manufacturing operations. Cook says, “We're talking to multiple suppliers to Foxconn about moving operations into the region to support that massive and growing manufacturing complex. The activity is so recent that we don't have deals we can talk about.” Other electronics and aerospace activity is also on the rise.
Among the deals that are unfolding in El Paso/Juarez are projects from Keytronic, MCS Industries and Wistron on the Mexican side and CEVA Logistics, Global Alternative Fuels and dairy processor Sarah Farms on the Texas side in 2009.
In early June, ProLogis noted three major second quarter leases signed at its properties in the borderzone, including an expansion by a paper products company in Reynosa, and locations in Juarez from foam manufacturer and fabricator Fagerdala-Singapore Pte, Ltd. and metal stamping and forming company PK-Tool and Manufacturing.
Sometimes the projects are not a complete win-win, as with the recent closure of a Siemens plant in El Paso and consolidation by the company in Juarez.
Jose Quinonez, foreign trade zone manager for El Paso International Airport, says one 2009 highlight was the location of Honeywell's security control division distribution center in close to 100,000 sq. ft. (9,290 sq. m.) of foreign trade zone space. He says the operation employs more than 100 people.
“It's a global operation, and was a good project to put together because their supply chain was optimized with the addition of the FTZ,” he says. “It allowed them to cut some of the logistics costs, some due to freight, and some due to customs brokerage. It helped them streamline paperwork and freight costs, and therefore the company is saving hundreds of thousands of dollars.”
Foreign Trade Zone No. 68 in El Paso boasts 3,400 acres (1,376 hectares) throughout the community. Quinonez says much of the activity the FTZ sees is usually in the automotive industry, though he's working two projects right now in the textile sector, each of which would employ more than 100 people if they come to fruition.
“Most textile goods are now manufactured overseas — say 90 percent of everything you wear is offshore,” he says. “The only things we have left here are distribution centers, which are cost centers [for the companies]. How do we keep them operating? They look at the Foreign Trade Zones as a logistical solution to reduce those operational costs.”
Quinonez says the zone may soon pursue an “alternative site framework” that would allow grantees to start up a company in a much shorter time than the currently typical one year. Meantime, he says his zone is seeing a slight activity increase driven by goods going south
“We figure if there's an increase in goods coming out of the zone into Mexico, then obviously on the finish side when they're coming out of Mexico, that's a very good sign,” he says. “And the gradual increase shows signs we are recovering as an economy.”
An expansion with a different but volcanic impact is the $5-billion expansion of Fort Bliss, which the U.S. Army says will increase the main post population in El Paso by 300 percent by 2012. That's now in economic development terms, and activity reflects the urgency. After all, it means 24,000 more soldiers and an expected 66,000 more of their family members.
Some spinoff from that growth may occur at the airport's new 150-acre (61-hectare) Global Reach Science and Technology Park. In addition to $10 million worth of infrastructure investment there, about a mile away the airport has invested $60 million in an air cargo complex featuring two 144,000-sq.-ft. (13,378-sq.-m.) buildings.
“Most inquiries are defense-related, because of its relation to Fort Bliss,” says Art Dahlberg, economic program analyst for the airport, about the new park. “There has definitely been an increase in passenger traffic, and we have had inquiries about leasing land, hangar space and cargo space that are related to the increase at Fort Bliss.”
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