Government and business representatives from along the Arizona-Mexico border met at the Fresh Produce Association of the Americas in Nogales, Ariz., Friday to discuss commerce-related concerns for the region.
“What I really want… is to learn what we need to do specifically — when it comes to Nogales, when it comes to Douglas, when it comes to our border communities — to make sure that we’re doing everything possible so that this region can continue to prosper,” said Glenn Hamer, president and CEO of the Arizona Chamber of Commerce and Industry.
“This whole area is an incredibly vibrant community,” Hamer said. “It’s leading the way for the state of Arizona.”
State infrastructure, especially in the border region, has been of prime concern for Arizona Gov. Doug Ducey, said Juan Ciscomani, senior advisor for regional and international affairs at the governor’s office.
“He respects and appreciates this area; that’s why he’s been here quite often,” said Ciscomani, who also serves as vice chair of the Arizona-Mexico Commission (AMC) board.
Ducey included funding in his fiscal year 2020 state budget plan for a cold storage inspection facility on the border in Nogales, he said.
“The relationship overall with Mexico has been a key priority for the governor, and [the AMC has] been saying and demonstrating that for now almost five years,” Ciscomani said.
Guillermo Valencia, chairman of the Greater Nogales and Santa Cruz County Port Authority, started off the discussion by describing the interconnected nature of the Nogales communities on each side of the Arizona-Mexico border.
“As a community, Nogales, Arizona, doesn’t stand by itself,” Valencia said. “Nogales, Sonora, is a very important part of our community.”
“Our students go to school there; your students come to school here,” he said. “We go to church there; they come to church here. They come to our parks here; they come to our stores here. We go to the dentist over there; we go cut our hair over there. There’s a big synergy that goes on between both communities, and we depend a lot on each other.”
Friday’s discussion focused on issues affecting businesses that depend on cross-border trade for success, specifically the produce and manufacturing industries.
The Tomato Suspension Agreement, a 23-year-old trade agreement between the United States and Mexico that kept tomato supply high and prices low, ended May 7, resulting in a 17.5 percent tariff on tomatoes.
“We’re now facing down duties this week,” said Lance Jungmeyer, president of the Fresh Produce Association of the Americas. “A typical tomato company in Nogales… could be facing $500,000 in cash deposits per week just to stay in business. So, you multiply that over the course of a year, and you can see that it’s very difficult for companies to remain in this business.”
On the other hand, there are new opportunities on the horizon, Jungmeyer said, such as the proposed cold storage inspection facility in the governor’s budget.
“That’s an opportunity to bring in items that we’re not touching at all right now,” Jungmeyer said. “We barely bring in any berries at all, and that’s one of the fastest-growing items out of Mexico. There are other temperature-sensitive items that don’t come to Nogales at all. That’s going to open up a huge opportunity, so it’s a small investment that could pay off for years and years and years, and so that gives us opportunities to promote the corridor and the wait times and system improvements.”
The local port authority in Nogales follows the business community’s lead to determine what the most important challenges are, said Bruce Bracker, vice-chairman of the board for the Greater Nogales-Santa Cruz County Port Authority and supervisor for Santa Cruz County’s third district.
First and foremost, Nogales ports of entry — DeConcini for vehicles and Morley Gate for pedestrians — are extremely shorthanded, leading to long delays crossing the border into the U.S. from Mexico, Bracker said.
“Both of these ports of entry just are not equipped to deal with the needs of today,” Bracker said. “They were built 20, 30 years ago… they’re a floodplain, they don’t have enough passenger vehicle lanes, they don’t have enough pedestrian lanes, and it’s choking our downtown.”
Nogales is losing retail business on both sides of the border because residents don’t want to risk an excessive wait to cross, Bracker said.
“They don’t know what they’re going to get when they walk up to the border — whether it’s going to be a 15-minute crossing, a 20-minute crossing or a two-hour crossing,” he said.
Another issue is that the International Outflow Interceptor (IOI) — the sewer line from Nogales, Sonora, to the Waste Treatment Facility in Rio Rico, Arizona — needs to be upgraded. Misael Cabrera, director of the Arizona Department of Environmental Quality, is seeking funding to improve the line, Bracker said.
“We’re a great community; we’re a clean community,” he said. “Our air is clean, and our water is great. We just need to make sure that we protect our infrastructure so that it stays that way.”
Issues such as outdated infrastructure and extended wait times at the border impact the region’s economy in both seen and unseen ways, Valencia said.
“There are people that say, ‘I won’t go. I won’t use it… I won’t cross the border,’” Valencia said. “And they eliminate that from their plans, so that hurts.”
Workforce shortages and border wait times are affecting the local manufacturing industry as well, said Joshua Rubin, account manager at Javid, a Nogales, Arizona-based maquiladora founded in 1983.
Mexican maquiladoras are unique to other manufacturers in that they operate under preferential tariff programs established to lower production costs for U.S. manufacturers. Production equipment can enter Mexico duty-free, and finished products can be exported to the U.S. from Mexico at lower tariffs than from other countries.
“The maquila industry, we’re growing,” Rubin said. The industry is expanding, and Javid is seeing more clients than ever before, he said.
There are about 3,000 vacant jobs in the maquiladora industry now, even with an employment increase of 4,000 employees in the past year, Rubin said. As the industry continues to grow, the need for a larger workforce supply grows, too, he said.
“One of the big things that we’re noticing is that a lot of the U.S. companies are seeing the talent that there is here in Mexico,” Rubin said. “It’s a little bit cheaper to be able to manufacture down here, so we have customers that are sending a lot more of their product line down here.”
One of Javid’s clients is even closing down its Pennsylvania facility in favor of having 100 percent of its operations in Mexico, he said.
“The population growth is at a lower pace than the demand for new employees of the maquiladora industry right now,” said Humberto Ramírez, vice president of Javid. “We do need the regional increase of people coming up from out-of-state to come to the borders to look for better-paying jobs, especially now that the minimum wage at the border line increased to double, and it’s a lot higher than it is in the rest of the country, so we can compete salary-wise with the rest of the country.”
One unintended consequence of Mexico’s increased minimum wage near the U.S. border — the result of sweeping economic changes by the country’s current presidential administration — is that lower-wage jobs are now approaching or even surpassing the wages of entry-level manufacturing jobs, Ramírez said.
“The Oxxos, the supermarkets that were paying way below the industry — because of this minimum wage increase, all of a sudden they were at the same level,” he said. “They’re competing with us, which created a spiral of turnover… so we’re just adapting to those [changes].”
Now, the maquiladoras want to hire migrant workers from other parts of Latin America, Rubin said.
Companies are hiring, and migrants want to work, but it is difficult for migrant workers to obtain work visas because they are often undocumented and do not have the necessary identification, he said. Many migrants also hope to move on to the U.S. rather than stay in Mexico, he said.
The mayor of Nogales, Sonora, is “100 percent in support” of maquiladoras hiring migrants, but the industry — which makes up about 55 percent of the GDP in Nogales, Sonora — needs Mexican immigration services to get involved so workers can obtain visas, he said.
In total, there are about 100 to 120 maquiladoras employing more than 42,000 workers in Nogales, Sonora, Ramírez said.
Kevin Adam, rural transportation liaison for the Rural Transportation Advocacy Council, said infrastructure — statewide and at the border — needs immediate improvement.
“We’re under-investing by more than a billion [dollars] a year statewide, and that is no more evident than at the border,” Adam said. “Douglas has a plan; they need the funding for it to go. San Luis — same thing.”
Adam said he fears the issue will not be addressed until the state sees a noticeable loss of revenue, which could create “tremendous problems” for the border region.
“At the same time, [there is] tremendous opportunity for economic development if in fact you do see the positive changes,” he said. “We need the infrastructure down here to be a selling point for trade; we don’t need to be shooting for minimal standards.”
Adam and Jungmeyer pointed to State Route 189, which will see significant upgrades this year, as an example of much-needed infrastructure improvement projects.
It took seven years to “cobble together” funding for SR-189, said Gail Lewis, director of the Office of P3 Initiatives and International Affairs at the Arizona Department of Transportation (ADOT).
Luis Pedroza, finance director for the city of Douglas, said his city suffers from many of the same issues as Nogales.
“The city of Douglas, we’re running out of space; we need more space,” Pedroza said. “That’s why we’re asking for a new port of entry. Those are our issues plaguing us.”
Mexico is Arizona’s largest trading partner, with two-way trade of $16.6 billion in 2018, and visitors from Mexico contribute 60 to 70 percent of sales tax revenue in Arizona border communities, according to the Arizona-Mexico Commission.