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Executive roundtable

More business opportunities opening in Tijuana

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As Mexico pushes to transform itself into a “country of engineers” and as some U.S. firms shift their supply lines away from China, there are new opportunities opening up south of the border that could benefit the northern side as well, business executives, academics and civic leaders told The Daily Transcript at a recent roundtable.

The roundtable -- comprised of participants from San Diego and Tijuana -- was sponsored by Integrated Marine Services Inc.

Partly thanks to a six-year push to build more colleges and universities, the latest data show that Mexico is now graduating around 80,000 engineers per year, roughly as many engineers as the United States, as well as 50,000 technicians from special tech-focused high schools.

The combined number of those graduates has outpaced Canada, Germany and Brazil.

“The conversation about Mexico has changed,” said Bob Nelson, vice chairman of the San Diego Port Commission. “People are realizing that there’s an excellent workforce there.”

A greater supply of engineers can translate into more innovative companies in Tijuana, which could mean greater demand for supplies and services from San Diego, Nelson said.

David Mayagoitia, who heads the Tijuana Economic Development Corp., echoed that theme, noting that Tijuana already depends on $11 billion in supplies from the United States, including $6.5 billion in electronics, $1.5 billion in medical devices and $1.2 billion in aerospace parts.

In the meantime, rising labor costs in China are leading some U.S. manufacturers to pick up stakes and shift their supply lines closer to home, including Mexico. “Wage rates along the coast of eastern China are becoming comparable to some areas of Mexico, said Jim MacLellan, director of trade development at the Port of Los Angeles.

Mauricio Monroy, who chairs the Baja California chapter of the U.S.-Mexico Chamber of Commerce, added that South Korea and Japan have also been making more inroads into the border market, expanding on the beachheads they formed in the early 1990s, as the North American Free Trade Deal was being negotiated.

Mayagoitia cited Korea’s Hyundai auto conglomerate as one company that is expanding its operations in Tijuana, with plans to start producing engine blocks.

“Judging from the way companies have done things in the past, if the engine blocks are successful, the next step would be to build transmissions and then engines and then entire autos,” he said. “And that would really make us part of the automotive industry in North America, which San Diego could take part in, too. We have the shortest supply line in the world if we wanted to take advantage of it.”

But the biggest problem in the border zone remains the border itself, which remains dogged by long wait times for truckers and tourists alike, despite such recent innovations as Sentri passes that speed up the entry process.

“The border is a mess,” said Charles Shapiro, president of the Institute of the Americas. “People who want to go to Tijuana, get dinner and see the tourist sites, have to be able to know that they can get back from Mexico without waiting in line for two or three hours.”

Ramon Castillo, president of CMF Global Inc., a San Diego-based distributor of irrigation systems, noted that border crossings are much easier at the only similar border crossing in the world, linking the semi-autonomous economic zone of Hong Kong with the Chinese mainland.

“The first time I saw the border between Hong Kong and Shenzhen, I was prepared to wait for three or four hours, but there really was no wait,” he said. “If they can do it there, why can’t we do it here?

Mayor Bob Filner said that delays at the border cost the regional economy an estimated $6 billion per year. But he added that those wait times would be relatively easy to fix, just by keeping all the border gates open 24 hours a day, while using smart cards and other new technologies to streamline the process.

“Technology and staffing are a trivial issue,” he said. “It’s more about a lack of political will and understanding. The federal governments, both in Washington, D.C., and Mexico City just don’t understand the border. In Washington, they’re convinced that long lines at the border somehow give Americans a sense of security. They’re afraid of having a more efficient border.”

Filner said he’s been trying to press this case with the Obama administration and Congress, but has so far had limited success.

“Thirty-two states in the country – including places like North Carolina, Montana and Idaho – list Mexico as their primary trading partner, yet they don’t want to help improve this situation,” he said. “Right now, the representatives of some of those states are voting against their own constituents by taking demagogic positions on issues affecting the border.”

Filner said he is trying to identify which companies in those states depend on just-in-time deliveries from Mexico, in order to get them to lobby their representatives to improve the border crossings.

But even after cargo-laden trucks cross the border, they face an additional problem: how to get their goods to the broad U.S. market.

San Diego has no direct rail links westward, meaning manufacturers often have to truck their products to Los Angeles, where it is then loaded onto trains.

Castillo complained that partly because of such costs, it is currently cheaper to ship components across the ocean to factories in the Philippines and Vietnam than to transfer them to Indiana and Ohio.

Mayagoitia said the process adds so much time and money to the shipping process that it may stymie Hyundai’s plans for expansion.

But port commissioner Nelson said some of those problems could be addressed through an oft-mentioned plan to link San Diego, Tijuana and the Plaster City railhead in Imperial County, which would provide a direct link to the transcontinental railroad.

Even though that idea has often been unsuccessfully floated before, Nelson said that its chances are looking better because of a recent export initiative from the Obama administration.

“That would create a huge opportunity for San Diego, Imperial County and Baja California,” he said.

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Roundtable Participants

Ramon Castillo, President, CMF Global Inc.

Victor Castillo, Director, San Diego Center for International Trade Development

Bob Filner, Mayor, City of San Diego

Abner Hinojos, Senior VP of Business Development & Business Banking, Citibank

Jim MacLellan, Director of Trade Development, Port of Los Angeles

David Mayagoitia, Chairman, Tijuana Economic Development Corp.

Alejandra Mier y Teran, Executive Director, Otay Mesa Chamber of Commerce

Mauricio Monroy, Chairman, U.S.-Mexico Chamber of Commerce, CA Chapter

Bob Nelson, Vice Chairman, Board of Port Commissioners, Port of San Diego

Charles Shapiro, President, Institute of the Americas

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