Phoenix City Council votes to close Mexico trade offices

In a baffling vote, Phoenix City Council members voted 6-3 to shut down the city’s two Mexico trade offices while the awarded contract is being protested.

The city currently contracts with public affairs firm Molera Alvarez to provide trade development consulting services to facilitate economic activity between Phoenix and Mexico in Mexico City and Hermosillo, Sonora. The contract is set to expire this year, and Molera Alvarez was recommended by the scoring committee for the new contract. Yet, on June 17, the city received two protests, including one from law firm Ballard Spahr, of the award recommendation.

City staff recommended the council extend the current contract for 60 days while the new award is being protested. According to the council summary presented last week, the extension request was made “to avoid any lapse in these important economic development consulting services.”

The summary stated that “without this extension, trade development activities conducted by the consultant will cease, and the City will no longer have contract staff in the Mexico City and Hermosillo offices.”

Councilwoman Thelda Williams made a motion to approve the request for extension, but Councilman Michael Nowakowski made a motion to amend, asking the council not to approve the extension.

Mayor Kate Gallego, Vice Mayor Jim Waring and councilmembers Sal DiCiccio, Carlos Garcia and Betty Guardado voted in favor of Nowakowski’s motion to deny extension. According to Nowakowski, his motion was an effort to protect contract protests even though the offices will be closed for the duration of that process.

“The council decided that it was in the best interest of taxpayers to not grant an extension to the current contract holder of our city’s Mexico Trade Office while the process of contract protests play out,” Nowakowski said. “If the contract were extended over the summer, the current contract holder would be allowed to use taxpayer dollars to host staff and officials and possibly sway the outcome of the protests. To be fair to all parties involved, we decided to let the contract expire while the protests work their way through the proper channels.”

The agenda item presented to the council stated the contract extension would not have an impact to the city’s general fund. It would have been funded by the Downtown Community Reinvestment Fund, which collects lease payments from developers.

According to city staff, the offices have never been closed. Reconsideration is not an option, because it is less than 24 hours before the next council meeting, which is scheduled for tomorrow morning at 10:00 a.m.  The only remaining way to keep the offices open is for the mayor to call a special council meeting.

Leaders from across the state, including business and tourism organizations, expressed disappointment and confusion at the council’s decision, considering the amount of effort by the City of Phoenix and state leaders to develop a strong relationship with the Arizona’s number one trading partner in recent years.

Earlier this year, Gov. Doug Ducey and the Arizona Legislature doubled down on expanding Arizona’s presence in Mexico by adding two trade offices in Chihuahua and Guanajuato. These offices, along with the two operated by the City of Phoenix, show the potential for further collaboration and investment between Arizona and Mexico.

“The City of Phoenix trade offices have been a positive development between the city and Mexico,” said Mike Huckins, vice president of public affairs for the Greater Phoenix Chamber. “It would be unfortunate to shut down these offices during such a crucial time in the bilateral relationship. We urge the council to reconsider its action and keep the trade offices running at this critical juncture.”

The purpose of the trade offices is to help Phoenix-based companies access the Mexican market and attract more foreign direct investment. In the past two years, the Phoenix trade representatives in Mexico have identified 105 trade leads, including Phoenix companies with export opportunities in Mexico, and Mexican companies looking to invest or source products in Phoenix. They have also attended 29 trade shows, conferences, and summits in key sectors such as aerospace, manufacturing and energy. Without the offices in Mexico, that work comes to a halt.

“At a time when we’re on the verge of passing the best trade agreement in the history of our country, the USMCA, and increasing trade with Mexico, it’s a big error to close the trade offices for our state’s largest city,” said Glenn Hamer, president and CEO of the Arizona Chamber of Commerce and Industry. “Phoenix has been a model for cross-border leadership. It would be a shame to squander it. The major statewide and regional business and tourism groups support keeping the offices open.”

Earlier this year, the City of Phoenix celebrated the two-year anniversary of the trade office in Hermosillo with a delegation of education, business and city leaders. During the celebratory event, Mayor Célida López Cárdenas of Hermosillo touted the strong working relationship between her city and Phoenix.

“The economy in Phoenix and Hermosillo is very strong, but we need to improve more relations between business,” Cárdenas said. “This office is very important because [businesses] can find advice about opportunities [in Phoenix].”

The temporary closure will impact existing projects with Arizona and Mexico businesses and community organizations including new trade, tourism and direct foreign investment opportunities.

“It is deeply concerning that the Phoenix City Council has decided not to extend the current contract for the trade offices in Mexico,” said Steven G. Zylstra, president and CEO of the Arizona Technology Council. “This temporary closure will impact dozens of current projects involving technology companies in both Arizona and Mexico and is detrimental to cross-border collaboration.”

According to city staff, if the companies who filed the protest continue to exhaust the appeals process, it could be 12 to 20 weeks until a final decision is made. Without further council action, the Mexico trade offices will remain closed the entire time.