N.M. enjoying boom in cross-border trade

Particularly disappointing for this border state, which shares a name with the U.S. neighboring country to the south, have been the state’s exports to Mexico. For years I have tracked the exports to Mexico by the four U.S. border states. Texas ($94.8 billion) and California ($26.3 billion) lead all U.S. states in terms of exports to Mexico. Even Arizona, a relatively small state in terms of population and industry compared to its border counterparts, exported $6.2 billion to Mexico last year.

New Mexico has been a different case altogether. When I started my career more than 20 years ago, New Mexico exported a total of $16 million annually to Mexico — an embarrassing pittance. I remember thinking that a large manufacturing company probably generated more than $16 million in scrap in a month.

During the next 20 years, New Mexico’s trade did increase with Mexico, but not at the rate of its neighbors or even non-border states such as Arkansas, Mississippi and Iowa, which consistently ranked ahead of it in trade with Mexico.

However, 2012 saw a dramatic turnaround, as New Mexico increased its overall exports more than 42 percent over the previous year, making it the top U.S. state in terms of export growth percentage for the year. In these tough economic times, the state was only one of 11 that experienced a double-digit increase in exports.

What has happened to suddenly make New Mexico appear on the radar screen? Analyzing the state’s 2012 trade figures, a very old factor pops up.

The state exported approximately $1.3 billion in goods/services to Israel in 2012, making that small Middle Eastern country the state’s largest export destination. This odd trade relationship will have many people scratching their heads, but it is not hard to understand given what I have referred to over the years as the “Intel factor.”

This silicon-based manufacturer of computer-related components such as silicon wafers, chips and processors, and which has a major operation in Rio Rancho, has at times accounted for more than 50 percent of the state’s exports. Countries in which the company has sister plants, affiliates or major consumer products customers, such as the Philippines, Malaysia, Ireland and Israel, have long dominated the export destinations for New Mexico, because Intel exports its products to those countries.

In 2012, Israel proved the Intel factor once again. Many people would argue that the export numbers need to be taken with a grain of salt, because if Intel is shipping its components to those countries, they are being incorporated into consumer products that eventually are exported back to the U.S. — thus they are often referred to as temporary exports.

Taking the Intel factor out of New Mexico’s export equation leaves Mexico as the state’s number one export partner. New Mexico’s exports to its southern neighbor increased by 33 percent in 2012 over the previous year. Leading the growth are areas that reflect the state’s rapidly increasing trade with Mexico, mainly supplies (metals, plastic parts, assorted components) to the maquiladora industry, and milk-based dairy products, reflecting the state’s strong dairy industry.

Adding to the momentum is Union Pacific’s $418 million Santa Teresa intermodal yard/refueling station project that is attracting interest from all over the world and bringing companies to southern New Mexico that seek to be close to this project.

Directly across the border, the Foxconn plant is making 55,000 computers a day and shipping them north, causing the Port of Santa Teresa’s traffic to grow 11 percent last year. These projects are bringing in millions in investment and cross-border trade.

A couple of years ago, the U.S. Department of Commerce estimated that well over 40 percent of the state’s exports to Mexico originated in southern New Mexico, specifically Doña Ana County. With the growth of the industrial base in this region, this figure is now probably more than 50 percent.

New Mexico Gov. Susana Martinez has emphasized New Mexico’s lead in export growth, and is pointing to the fact that international trade, and particularly trade with Mexico, has been a focus of her administration, and rightfully so. There probably has not been this much focus on New Mexico’s trade with Mexico and the border by a governor since the early 1990s.

To her credit, she and her team have realized that the New Mexico border, the trade portal to Mexico, is one of the few rapidly growing regions in New Mexico, aside from the state’s oil patches. However, credit also must be given to the New Mexico Legislature, which also has seen the potential of New Mexico’s border region and trade with Mexico, and increased its support of the region.

New Mexico’s gross total exports (ranked 47th) and trade with Mexico (ranked 34th) still are in the bottom of the pack compared to the majority of U.S. states. However, the state has moved up in the rankings consistently every year, and that is good news for the state and the border region.

Jerry Pacheco is the executive director of the International Business Accelerator, a nonprofit trade counseling program of the New Mexico Small Business Development Centers Network. He can be reached at 575-589-2200 or at jerry@nmiba.com.<br>