U.S. Border Corridors, Site Selection Magazine, July 2003

ndustrial activity south of the Rio Grande and north of the Great Lakes tends to rise and fall with the U.S. economy. In Mexico, border regions are beginning to benefit from optimistic manufacturers hopeful of a break in U.S. economic doldrums. Up north, regional organizations are working to alleviate traffic headaches and improve infrastructure.

Proximity Keeps Mexico On Manufacturers’ Minds

From Matamoros in the east to Tijuana in the west, Mexican cities along the U.S. border continue to attract interest from manufacturers who want low labor costs a stone’s throw from the U.S. market. A still-sluggish U.S. economy notwithstanding, industrial activity along the U.S.-Mexico border appears to be on a gradual incline.

        “We’re seeing a noticeable pick-up in corporate clients looking to open in Mexico,” says Michael White, managing director of CB Richard Ellis’ El Paso/Juarez office. “Areas along the border in Mexico have a high attractiveness to manufacturers because they can manufacture something and the same day re-enter the U.S. with those finished products.”

        For the last couple of years, Mexico has lost some manufacturers to China and other Far East locations. White says severe acute respiratory syndrome (SARS) is at least temporarily slowing this trend. In late May, White says he was working three assignments with companies who had planned to locate production in China prior to the SARS outbreak.

        “Because of the corporate travel ban of these companies, the border with Mexico became their next best option,” White says. “It’s kind of hard to predict how long and how deep it will last, but right now corporate America is very wary.”

        Another factor keeping border regions industrially active is proximity. White says companies making products on a tight logistical time frame continue to explore border possibilities.

        “If they are making automotive products and have to get them right back to an OEM plant in Ohio or Michigan, then Mexico has an advantage,” White says. Another industry in this category is computer manufacturing, he says.

        “Juarez has become a real computer battleground. All of the contractors have to get the PCs right back in the U.S. distribution system.”

        Jim Braby, a consultant with Troy, Ohio-based Solutions for Manufacturing LLC, says Juarez, just across the border from El Paso, is one of several border cities doing particularly well.

        “Reynosa is busy, Matamoros is picking back up,” he says. “It had languished, but now is back in the competitive ballgame. Nogales and Tijuana are holding their own. Many U.S. companies still need a Mexico strategy. Anyone who has a customer in Mexico or the U.S. or Canada needs to have a position in Mexico.”

        Braby says while some manufacturers may have second thoughts for awhile about relocating to the Far East, the region remains a stiff competitor for the Mexican border area.

Matamoros, Reynosa Heat Up With New Projects

Milwaukee Electric Tool, part of Sweden’s Atlas Copco Group chose Matamoros, across the border from Brownsville, Texas, for its new plant. The company expects to begin production in November at a new 60,000-sq.-ft. (5,574-sq.-m.) facility with 75-90 employees. The site search took about eight months and covered several locations in Northeast Mexico.

        “Matamoros offered us the best vantage point to find an available labor force with low turnover and a demonstrated reputation for producing quality products,” says Paul LeMaster, plant manager.

Delphi’s door latch actuator manufacturing business is growing in Matamoros. The company will employ 140 in its new facility.

        Also in Matamoros, Delphi Corp. is expanding its door latch actuator manufacturing operation. The new 70,000-sq.-ft. (6,500-sq.-m.) facility will employ about 140. Actuators manufactured at the facility will be shipped to Delphi’s Columbus, Ohio, plant.

        Reynosa, located in the state of Tamaulipas and across the Rio Grande from McAllen, Texas, is home to a couple electronics manufacturing projects.

        Andrew Corp., an Orland Park, Ill., manufacturer of communications equipment and systems, has opened a 100,000-sq.-ft. (9,290-sq.-m.) plant in Reynosa to make microwave and satellite earth station equipment for North American and other markets. The facility will initially employ about 200.

        Maytag, continuing work on its growing manufacturing campus in Reynosa, recently broke ground on its third factory there. The company will product side-by-side refrigerators at the 150,000-sq.-ft. (13,935-sq.-m.) facility.

South Texas Dials Up Call Centers

With a good supply of bilingual labor, U.S. border states have long been magnets for call center development. That trend continues with the announcement of two major projects this spring in south Texas.

        Bellevue, Wash.-based T-Mobile USA will gradually ramp up a 600-seat call center in Mission, Texas. The company will move into a 75,000-sq.-ft. (6,967-sq.-m.) building developed by CentraTek, a subsidiary of Hunt Power.

        In nearby Edinburg, Merkafon Teleperformance, a leading provider of Spanish and bilingual teleservices in Latin America, will open a call center, creating more than 500 jobs over the next three years.

        The project comes at an opportune time for Edinburg, a city with a 12-percent unemployment rate.

        “Edinburg was chosen as the site for Merkafon’s expansion based on the availability of quality personnel, an exceptional facility, community support and cooperation and for its quality of life,” says Jesus Rodriquez, Merkafon CEO.

Canada-U.S. Efforts Target Traffic Congestion

Congested Canada-U.S. border-corridor traffic is a problem, one marked by long lineups and exacerbated by trade growth. Recently, a variety of efforts have been kick-started from coast to coast to ease those pains.

        Key among these efforts: a $438-million Border Infrastructure Fund (BIF) established in late 2002 to support initiatives aimed at reducing congestion, and expanding infrastructure capacity.

        Most of the BIF funding will focus on creating solutions at crossing points in Windsor, Sarnia, Niagara Falls and Fort Erie, all in Ontario, and at Douglas, B.C., and Lacolle, Quebec. The lion’s share is earmarked for Canada’s busiest and most vital border connector, the Detroit-Windsor gateway.

        “If trade is the lifeblood of the Canadian economy, then the Windsor gateway is the heart that keeps it pumping,” said Prime Minister Jean Chretien when the fund was announced in late 2002, referring to a corridor connector that accounts for 25-percent of total truck volume between Canada and the U.S.

        Ontario Trucking Association President David Bradley puts it another way. “You can take a truck from Toronto to Miami and you’ll go through 15 stop lights,” he told reporters recently. “Fourteen of them are in Windsor.”

        Improvement plans pitched for the gateway include a proposal to convert the existing 100-year-old cargo train tunnel connecting Detroit and Windsor into a two-way truck tunnel. In May, Canadian and Ontario governments announced a nine-point “plan of action” for the gateway, which clearly defines areas of responsibility, promotes redevelopment of a tunnel plaza and development of commercial vehicle ‘pre-processing and staging areas’ to improve the flow of trucks.

        Similar efforts are being pursued in the Niagara corridor, encompassing the Hamilton, Halton and Niagara Regions in South Ontario, and Erie, Monroe and Niagara counties in Western New York.

        At the January 2003 meeting of the Niagara BiNational Region Economic Roundtable, participants recommended establishment of a regional agency with the power to deal with related capacity issues, infrastructure linkages and overlapping transportation issues; and implementation of technologies in the planning and development of highways.

Exports Power Technology Triangle

Strategically situated within three hours of three U.S. borders, Waterloo Region and the cities of Cambridge, Kitchener and Waterloo, known as ‘Canada’s Technology Triangle,’ are a powerhouse for exports. Extensive R&D tax incentives, coupled with investment in infrastructure and a strong innovation climate, enhance the industrial vitality of the area, which boasts one of Canada’s highest concentrations of employment by foreign-owned corporations.

        Triangle CEO John Tennant has unveiled plans for a new research and technology park at the University of Waterloo which will provide 1.2 million sq. ft. (111,480 sq. m.) of Class A office space across 120 acres (49 hectares) of land, an “accelerator center” to help incubate great ideas and a 270-acre (109-hectare) environmental reserve.

        California-based Bertelsmann subsidiary Arvato Services is opening a new customer support services center in Kitchener that will employ 150.

        “Kitchener exceeded all key location criteria,” says Arvato President Peter Schmitz, “the most important of which is an excellent supply of qualified Customer Support Specialists for Arvato’s demanding Fortune 500 clients.”

        The new center is part of Arvato Services’ strategy to add near-shore capabilities to its existing on-shore and off-shore centers.