Monday, January 22, 2007
Along the U.S.-Mexico Border
W. P. Carey School of Business, Arizona State University
political storms rage on both sides of the U.S.-Mexico border, everyday business goes on and will continue, albeit at a slightly
subdued pace, according to experts at the W. P. Carey School of Business.
North of the border, much furor continues over the presence of an estimated 7.2 million Mexicans who are illegally
in the U.S. workforce. South of the border, controversy lingers over the paper-thin election victory of the conservative Mexican
President Felipe Calderon over progressive candidate Manuel Lopez Obrador.
a longstanding economic relationship continues to grow all along the 1,952-mile U.S.-Mexico boundary and its 14 sister cities.
At least 10 million people live along the border, and its twin cities share common airsheds and watersheds. The U.S.-Mexico
border is the world's busiest, with an estimated 250 million legal crossings from Mexico each year. More than a million undocumented
Mexican workers are apprehended in the United States each year. Pushed east by stepped-up security in the San Diego-Tijuana
area, hundreds of Mexicans trying to cross the nearly 300-mile Arizona-Sonora border have died in recent years.
despite the immigration debate in America and presidential controversy in Mexico, residents of the U.S.-Mexico border area
often have more in common with each other than they do with their own nations. The area, usually described as extending about
60 miles north and south of the border, constitutes it own economic region.
Economic interests redraw the border
Well-publicized anti-immigrant issues aside, southern California, Arizona, New Mexico and Texas have strong, cooperative
economic ties with Mexico. U.S. businesses utilize predominately legal Mexican labor north of the border and depend on "maquildoras"
-- plants near the U.S. border that employ Mexicans and assemble finished goods out of U.S.-supplied parts and resources.
Americans along the border also enjoy consumer goods unavailable in other U.S. states. Increasingly sophisticated maquildoras,
once focused mainly on low-skill assembly operations, now produce electronic, metal, petroleum, transportation and medical products.
Economically, the six northern states of Mexico have more in common with southern Californians, Arizonans,
New Mexicans and Texans than with Mexico City and the rest of Mexico.
Politically, this gulf is especially pronounced. National Action Party candidate Calderon outpolled Revolutionary
Democratic Party candidate Obrador by about a half-percent of the vote nationally, but in Sonora, Calderon beat Obrador by
a ratio of nearly 2 to 1: 468,288 votes (50.12 percent) to 240,114 votes (25.70 percent), according to official returns (other
parties accounted for the rest of the vote).
in Mexico, politics and economics are more openly intertwined than in the United States. Calderon ran as a free trade, pro-globalization
candidate while the anti-poverty Obrador questioned two decades of free-market reforms, advocated job-creating infrastructure
projects and defended welfare benefits.
the final report of the European Union election observer in November defended the official result of the July 2, 2006, election,
resentment remains and all the major political parties generally agree that election reforms are needed.
"With the problems over the election ... business concerns have taken a back seat,"
says Dawn McLaren, a research economist at the W. P. Carey School of Business and editor of the school's México Consenso de Pronósticos
Económicos (Mexico Consensus Economic Forecast). "Forecasts
for economic performance have been pulled back somewhat."
Deregulation and market-oriented changes are largely on hold as the new president sticks with the status quo.
"I think that the politics are too volatile right now for any new proposals to be put into effect, especially
those seen as coming from the political right," McLaren says. "Putting policies into place that are from the right might fan
W. P. Carey economics Professor Jose A. Mendez, who is the faculty director of the W. P. Carey MBA Mexico City program, said Calderon has
wisely reached out to address some of the social issues advocated by the progressive side.
is encouraging to me is that he's beginning to announce programs to address the poorest of Mexico," Mendez says, pointing
to proposals to make young children eligible for the Mexican equivalent of Medicaid and Social Security benefits. "He recognized
he's going to have to deal with this big schism that exists."
Mendez credits Calderon for launching a drug interdiction campaign and says Calderon has the potential to build
on past national accomplishments.
had a lot of success in market reforms and reducing regulations, but there's still much to do."
Mendez said the border region's culture is symbolized by the popularity of baseball instead of soccer in many
northern Mexican twin cities. Soccer rules the roost elsewhere in Mexico. He also points out that many managers of maquildoras
live in the United States and commute south of the border to their plants.
There are about 2,500 maquildoras in Mexico, about 1,600 of them along the U.S.-Mexican border; more than
a half-million of the approximately 800,000 maquiladoras jobs are in that border region.
"Their interests are very, very linked," Mendez says of the 14 sets of twin cities. Employment at maquildoras
had sagged early in this decade because of even-cheaper workers in China, but the trend has turned slowly back upward
for Mexican workers.
Mexico's potential economic reforms under the new president is the streamlining of border security.
trade has been hampered by border security, which is why they have been working on more efficiency at the ports of entry,
including fast lanes and new procedures," McLaren says. "One of the problems with NAFTA [the 1994 North American Free
Trade Agreement] is that the NAFTA paperwork turned out to be more cumbersome than the old quota system paperwork, so complaints
have come from businesses in international trade saying that they rely on the old system instead of NAFTA even today."
Also, businesspeople involved in international trade don't seem to be as worried about border security and terrorism
as much as some U.S. politicians are.
just seems like it's blown out of proportion," Mendez says. "Surveys in Arizona show Arizonans want more security but favor
normalization through a guest-worker program. Every single terrorist that has come through, even the ones that bombed the
World Trade Center in 1993, came in legally. I don't think it [entry from Mexico] is something they're considering. There
are so many other ways to come in."
trade and interaction can be good for our security if the border system is made more effective, realistic and smart.
broken system is never good for security, as it breeds an underground economy," McLaren says. "By a broken system, I mean
when the transaction cost becomes too high or that the transaction is unable to be completed because of bureaucracy. A broken
immigration system, one that makes low-skilled Mexicans wait 15 years to get a visa to work here legally, has bred an underground
economy of illegal immigration and human smuggling."
businessmen view all this attention given to it [border security] as creating a negative atmosphere," Mendez says." Stirring
up xenophobia on the U.S. side makes business deals less likely."
one believes that NAFTA just needs to be fine-tuned, or that it should be completely overhauled, most agree there is room
are a net importer and we depend upon Mexico for a great deal of our imported goods," McLaren says." They are one of our top
trading partners. Increasing the ease of trade can only serve to help the economies on both sides of the border. NAFTA was
to do that in theory, but it appears that it didn't ease trade as much as most people thought it would."
Regardless of borders and trade pacts and immigration and politics, an economic entity exists along the border
-- a separate reality that transcends conventional thinking.
McLaren puts it in specific regard to Arizona: "We are too used to thinking of the region as split by the international boundary,
Sonora as part of Mexico and Arizona as part of the U.S., rather than as a unified region with qualities making it unique
in comparison to the countries of which they are a part."
- The area north and south of the U.S.-Mexico border is a unique region that
is economically distinct from the rest of the United States and Mexico.
- U.S. trade exports to Mexico totaled $120.4 billion in 2005; $110.8 billion
in 2004; $111.3 billion in 2000; and $13.6 billion 20 years ago in 1985.
- Mexican trade exports to the United States totaled $170.1 billion in 2005;
$155.9 billion in 2004; $135.9 billion in 2000; and $19.1 billion in 1985.
- The lingering controversy over the Mexican presidential election will slow
down the new president and the progress his free-trade approach promises, but it also seems to be making his governing approach
more accommodating to all sectors of Mexican society.
- Improvements in trade agreements and border security are among the improvements
that should not be ruled out in the mid- to-long term.
- Millions of Mexicans and Americans cross the border every workweek,
depend on each other for their livelihoods, breathe the same air and live and work over the same watersheds.
This article was originally published in Knowledge@ W.P. Carey (01/17/07), a publication of the W. P. Carey School of Business at Arizona State University. Reprinted with permission from Knowledge@ W. P. Carey.