December 5, 2008

Commentary:

A New Border Crossing for a New Mexico

By Vince Vasquez

Last month, a vital border roadway project received regulatory approval from the White House, opening the prospects for billions of dollars worth of new economic opportunity for San Diego’s business community. Whether Mexican entrepreneurs can capitalize from their strengthened market position is a critical question with bi-national consequences.

The receipt of the presidential permit for the proposed Otay Mesa East (OME) Port of Entry is a victory for the San Diego Chamber of Commerce and key elected officials in the region, who have worked tirelessly to advance the development of a third gateway at the world’s busiest border crossing. Connecting State Route 905 and the Tijuana-Tecate Toll Road, OME and an accompanying two-mile U.S. toll road will bring relief from commercial traffic and passenger waiting times where it’s needed most; over sixty million people cross the existing San Ysidro and Otay Mesa Ports of Entry each year. Reducing truck congestion with new public infrastructure will lower the shipping costs and improve the efficiencies in the product supply chain, moving goods in a faster and timelier fashion for consumers. Without new solutions, both sides of the border will continue to miss out from reaping greater economic benefits.

According to regional government officials, Baja California loses nearly 2 million trips a year due to border delays, and Mexican laborers spend over half a million hours each year in queues. On the American side, San Diego County loses more than 31,400 jobs each year due to border delays, mostly in the retail sector, where Latino workers are heavily concentrated. This figure is projected to more than double in size by 2014 if the status quo remains, underscoring the importance of moving the border initiative forward, especially given its own project timeline. An estimated four more years of preliminary work lies ahead before OME contractors can begin laying concrete and asphalt – needed now is an environmental review, design finalization, and the securing of hundreds of millions of dollars for construction before the new border crossing becomes a reality.

The San Diego Chamber of Commerce anticipates that once completed, OME will have an economic impact in S.D. County that exceeds $14 billion over the first ten years. Mexican imports of electronic equipment, machinery, as well as furniture and textiles will gain significantly from OME, but most of the manufacturers are foreign, and profits will be exported to the U.S. and Europe. This touches upon broader aspects of the U.S.-Mexico trade relationship that must be addressed in our regional dialogue.

Though NAFTA has created hundreds of billions of dollars worth of increased trade between the two nations, and maquiladoras have created one million jobs south of the border, they have not fostered the development of large-scale Mexican enterprises in the international marketplace. Mexico is the largest recipient of foreign direct investment in Latin America, but the nation is still heavily reliant on migrant remittances, industry monopolies and government-run enterprises for its economic backbone. Hamstrung by a relatively low-skilled, poorly educated workforce, and weaknesses in law enforcement and regulatory practices, Mexico has only just begun to cultivate entrepreneurship with global potential.

Take for instance the Mastretta MXT, a stunning mid-size sports car that is set to launch in 2009. Though Mexico has been producing cars for more than 80 years, the MXT is the first commercial Mexican automobile to be designed and produced entirely in Mexico. More than national pride will be riding on the success or failure of the MXT. As company founder Daniel Mastretta acknowledged, “(we) want to make our country proud of the MXT and to show the world what we can do.” Only about 100 units are expected to reach the U.S. and other foreign markets in annual sales, but the perceptions of Mexican workmanship and ingenuity can be transformed with positive reviews, opening the doors to greater profits kept south of the border and the possibility for new business ventures in the United States.

This has already been seen with the recent success of D’Volada, a popular Mexican café franchise founded in Tijuana that branched out with new locations in Chula Vista last year, and has also opened shop in Los Angeles, serving Latino and non-Latino customers alike. Over time, the emergence of high quality Mexican goods and services with international and intergenerational appeal can increase tax revenues and create jobs for San Diego County. Change begins in small ways – but conditions have to improve to allow it to flourish.

National lawmakers must focus on reforming key regulatory hurdles, including strengthening the provisions and enforcement of intellectual property rights as well as the overall judicial system, which is notoriously unreliable. Extending the required years of mandatory public education to the level of other modernized nations will make a large improvement towards greater workforce development, and reducing the tax burden on businesses and individuals can boost private spending and investment. President Felipe Calderon must be aggressive in pursuing the steps necessary to foster mature, competitive Mexican businesses that can hold their own in the global marketplace.

The Otay Mesa East Port of Entry may be years away from starting construction, but the time to begin breaking ground on Mexican entrepreneurship is now.

Vince Vasquez is the senior policy analyst at the San Diego Institute for Policy Research.

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