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Copyright © 2014 Albuquerque Journal
Editor’s note: For the first time in decades, Mexico’s maquila industry is smashing the competition in China and other Asian nations as investors relocate their overseas factories closer to U.S. markets. And that is creating huge opportunities for business development along the New Mexico-Mexico border. Today, in part two of a four-part series, the Journal looks at the mushrooming development at Santa Teresa. Go to today’s Business Outlook for part three about Mexico’s maquila explosion, which is fueling the growth in New Mexico.
SANTA TERESA – Tractors and bulldozers are busting up shrub and leveling land on two huge desert plots at Santa Teresa’s industrial border zone.
The plots, spanning about 25 acres each, will soon house storage and shipping yards for hundreds of cargo containers streaming in and out of Union Pacific Railroad’s new intermodal terminal at Santa Teresa.
The yards will be run by two companies, Twin Cities Services and Transmaritime Inc., which have operated freight facilities for decades in Texas.
Twin Cities and Transmaritime are now planting roots in Santa Teresa to be next to United Pacific’s facility – a sprawling, 12-mile-long terminal that began operating April 1 as UP’s largest refueling and transshipment center along the U.S.-Mexico border.
Santa Teresa may soon be home to a new foreign-owned metal extrusion company that would serve Mexico’s maquila industry from the border industrial zone. The company, which would invest about $40 million to establish operations, could bring hundreds of jobs paying an average annual salary of $41,000.
New Mexico has been competing with El Paso to recruit the firm. State officials and local economic development specialists are tight-lipped about negotiations, but it appears the company is leaning toward the Land of Enchantment.
“We’ve had deep discussions with them, but it’s not a done deal yet,” said state Economic Development Secretary Jon Barela. “We’re optimistic that the company will soon call New Mexico home.”
They are not alone.
With the opening of the UP center plus the prospect of more maquila plants coming to San Jerónimo, just south of Santa Teresa, a perfect storm is emerging for rapid development in New Mexico’s border industrial zone.
Companies are flocking to set up new facilities there to supply goods and services to the maquila industry.
In fact, Twin Cities shut its freight yards in El Paso to relocate operations here.
“We’re moving lock, stock and barrel,” Twin Cities owner Ed Hazelton told the Journal . “I hope to grow my business by 50 to 60 percent in the next couple of years. I’ve already got new clients lined up for as soon as I get this facility open.”
The unprecedented boom in business activity at Santa Teresa has brought nearly two dozen new companies to the industrial parks in the past two years. Last month alone, six companies announced plans to build here.
Employment is mushrooming.
More than 2,500 people will be working in the Santa Teresa area by midyear, including scores of workers at the UP facility, which plans to hire about 600 permanent employees as it ramps up operations in the next few years. That’s up from about 2,000 people who worked at the industrial parks in early 2013.
The ‘maquila’ boost
Businesses connected to Mexico’s “maquila” assembly industry for years have been setting up operations at Santa Teresa to take advantage of the local border crossing, which offers much faster access to and from Mexico for commercial traffic compared with the congestion now common at international bridges in El Paso and elsewhere.
For example, a massive maquila factory that Taiwanese electronics giant Foxconn opened in 2009 at San Jerónimo, just across the border from Santa Teresa, has lured many more companies to the border industrial parks to supply goods and services to its plant.
Now, UP’s massive intermodal transshipment facility has accelerated those trends, said Jerry Pacheco, a Journal trade columnist and executive director of the International Business Accelerator, which recruits companies to Santa Teresa.
The UP facility has elevated the zone’s reputation nationally and internationally as a prime location for doing business with Mexico.
“It’s taken years to get to the tipping point where everybody knows who we are,” Pacheco said. “Foxconn got the ball rolling, but now we’re well known in places like Boston and New York, and in huge part, that’s because of UP. It’s a very effective marketing tool.”
Since UP first broke ground on its $400 million facility in late 2011, the number of companies at Santa Teresa’s three industrial parks has grown by 50 percent, from 40 firms to 60, Pacheco said. That includes businesses that supply things such as steel coil or plastics to the maquila industry, logistics companies that manage warehousing and storage, and shipping firms like Twin Cities and Transmaritime.
Six new companies
In March, six companies announced plans to set up shop at Santa Teresa. That included three freight management and transportation firms, a metal recycling operation and an aviation maintenance and repair company that will operate at the Santa Teresa Airport.
It also included the industrial zone’s first lodging facility and restaurant, now under construction by the national chain Oak Tree Inn and Penny’s Diner. The 56-room hotel, which primarily will serve railroad workers passing through Santa Teresa, marks the first service-oriented business to target the industrial zone’s rapidly growing employee base.
Apart from new companies flocking to the parks, many existing businesses are also expanding operations.
Southwest Steel Coil Inc., for example, has doubled its factory space at Santa Teresa since 2011, from 55,000 to 110,000 square feet. Its latest 35,000-square-foot expansion was finished in the fall, but the company is already nearing capacity again, said President Ed Camden.
“Spacewise, we’re almost full,” he said. “We’ll need to decide this year or next if we want to build more warehousing space, or if we should leverage operations through a third-party logistics company.”
Demand for steel
Robust demand at Mexico’s maquila factories is driving the steel company’s growth. Southwest established operations at Santa Teresa because of proximity to Mexican customers, rapid crossing at the local port of entry, and the ability to bring massive steel coils from U.S. mills by railroad.
“Our location here has allowed us to take market share from competitors,” Camden said. “Being next to UP and having access to a good, efficient border crossing allows for truly ‘just-in-time’ delivery to customers.”
The boom in Santa Teresa could accelerate even more as maquila development intensifies in San Jerónimo.
Foxconn currently operates two factories there that produce up to 55,000 Dell computers daily, but it plans to open a third by year-end to produce other products, said Francisco Uranga, vice president and chief business operations officer for Latin America.
“By Dec. 31, that third facility will be up and running,” he said. “Our workforce will go from 5,700 to 9,700, and the number of trucks crossing the border that serve Foxconn will increase from 200 per day now to 300.”
Faster customs clearance
Moreover, federal authorities from the United States and Mexico are expected to conclude negotiations this year on a first-of-its-kind “pre-clearance” customs-inspection center at San Jerónimo. If that happens, it could generate an explosion of maquila development.
The agreement would allow Foxconn and other businesses to get cargo fully inspected by U.S. customs agents in Mexico before even crossing into the U.S., greatly speeding the shipment of goods.
Anticipating that, Mexican businessman Eloy Vallina’s company Corporación Inmobiliaria, which owns 47,000 acres of land in San Jerónimo, will start building out two new industrial spaces this year, including a 95-acre section for businesses that operate under the pre-clearance customs agreement, said Chief Operating Officer Octavio Lugo.
“That area would first serve Foxconn and then later expand to include other industrial users,” Lugo said.
As maquila operations grow in San Jerónimo, and product and service suppliers expand in Santa Teresa, public and private sector representatives from both sides of the border jointly will coordinate infrastructure development.
Gov. Susana Martinez and Chihuahua state Gov. César Duarte announced last August that their governments will work together on a cross-border master plan to build needed roads and utilities to sustain industrial activity, while encouraging private development of housing and commerce.
Residential plans, too
In fact, Corporación Inmobiliaria will break ground this year on San Jerónimo’s first 3,200-home residential development. And, on the New Mexico side, about 1,000 new homes have either already been built or are now under development.
New Mexico Economic Development Director Jon Barela said the business cycle is approaching critical mass.
“We’re seeing a continuing cycle of economic development appear here, with hundreds of jobs being created, new residential developments being built, and the first commercial operations getting established,” he said. “A center of gravity is emerging for businesses to continue expanding and relocating to the area.”