Not much - yet: compared with Arizona, California and Texas, New Mexico's trade with Mexico is minuscule, but a change in the wind

New Mexico Business Journal, Sept-Oct, 1999 by Debra O'Hara

Compared with Arizona, California and Texas, New Mexico's trade with Mexico is minuscule, but a change is in the wind

New Mexico's largest export market isn't Mexico. It's the Philippines; Mexico only comes in sixth, down from fifth last year. The state's exports to all of Mexico decreased overall by 35 percent over those of 1997. Sharing a border does not automatically make for strong trade, but why is our share of trade to Mexico so small?

"We have all of the things that the other states have, particularly if you are comparing the border states. The problem is we have less of them," said Roberto Castillo, director of the trade division on the state's Economic Development Department. He pointed to the obvious, "We are not a smokestack state and we are not as big as California, Arizona or Texas."

Those states have pursued trade to Mexico energetically for the last 40 years, Castillo said, but it hasn't been a focus for New Mexico until the last three or four years. This is partly because New Mexico companies wanted to avoid becoming entangled in Mexico's economic troubles.

When the peso was devalued after NAFTA was signed, "we got scared, and, as the new kids on the block, we got out," Castillo said. Besides, when the Mexican economy is squeezed, its companies will purchase supplies from the cheapest source, currently Asia.

Jim Coleman, director of the New Mexico Border Authority, agreed, saying one of the reasons our trade is low is New Mexico suppliers don't produce a large volume to begin with, so they look for the most dependable buyers for their goods. "Given that the market went fiat in Mexico, our suppliers turned their resources in other directions."

But now New Mexico's roving eye has again turned to its southern neighbor. Steve Givens, Mesilla Valley Economic Development Association assistant director, described the situation, "Mexico is a world-class trading partner at our doorstep. If we don't start trading with them, Mexico will begin trading with other countries in the world that are waiting to step in."

They already have. European and Asian companies have spent billions in Mexico to set up factories to comply with NAFTA regulations, which require products be made for the most part in the region in order to receive tariff benefits. And New Mexico's border state competitors continue to expand their Mexican trade efforts. California, Arizona, and Texas have no representatives in Chihuahua (New Mexico does), but do have offices in Guadalajara, Hermosillo, and Mexico City. "Generally their budget and numbers are far greater than ours. California probably has half a million dollars and a considerable staff," Castillo said. New Mexico's Trade Department annual budget is $765,000. Of that, about $100,000 goes to developing trade with Mexico.

Each of the border states will "cozy up" to a partner city in Mexico, he explained. New Mexico's sister state, Chihuahua, for example, at the government and private sector level, is eager to collaborate with New Mexico in doing business and promotion of the region - a looking outward, rather than inward.

Mark Lautman, general manager of Santa Teresa Real Estate Development Corporation, explained the potential benefits of such cooperation. "What makes this economy special and insulated from the rest of the world, what makes the economy so powerful and gives it so much velocity, is the mathematically proven economic theory of comparative advantage," he said. "When two countries with contrasting national resources - one industrial, one agricultural - trade, their economies grow multiples faster than they otherwise could. Both countries are enriched. Nowhere is there an example that I can think of where you have a more extreme contrast in this comparative advantage situation than you have here. Where 50 feet apart from each other, you have a dollar-a-day labor economy with low consumption next to probably the most advanced high-economy entity in the world."

But New Mexico remains the little brother of its neighbors. El Paso's internal gross product alone equals almost half that of New Mexico - $15 billion vs. $37 billion. In Juarez it's $20 billion.

"Mexico's economic development office in Juarez has a drastically different mission than New Mexico's," Given said. "They don't have to recruit. Every day they get a new business in Juarez. They don't need help in building Juarez' economy. What they are asking for is for Dona Ana County and Las Cruces to take advantage of what they need. The end result is if we will work together the entire region will be better. If Juarez doesn't get help, it will start losing business to China, Hong Kong, and others that have had the foresight to see that if they don't work together, they will be left behind."

In August, Mayor Gustavo Elizondo Aguilar of Juarez addressed the Mesilla Valley Economic Development Alliance Summit in Las Cruces. His visit was designed to encourage the citizens of Las Cruces to support the three mayors of the region - Ruben Smith of Las Cruces, Carlos Ramirez of El Paso, and Mayor Elizondo - in their pledge to cooperatively promote the region economically and resolve shared problems.