New Mexico’s border industrial zone is booming like never before, as companies scramble to set up shop or expand operations to supply Mexico’s “maquila” assembly industry with raw materials and components, and to provide storage and transportation services to move finished goods from Mexico to markets in the U.S. and Canada.

By Kevin Robinson-Avila / Journal Staff Writer on Mon, May 20, 2013

Editor’s note: Kevin Robinson-Avila and photographer Roberto E. Rosales spent two days touring southern New Mexico, Santa Teresa and Mexico, accompanied by Economic Development Department Secretary Jon Barela for part of the trip, to compile these reports. 

Construction of the $400 million Union Pacific railroad intermodal facility moves ahead at Santa Teresa. (Roberto E. Rosales/Albuquerque Journal)

All the activity is turning the zone’s two industrial parks, located just north of the Santa Teresa Port of Entry, into sprawling construction sites where tractors and bulldozers constantly haul and smooth dirt for roads, and long-necked cranes swing cement blocks and steel into place for new buildings.

On the parks’ northwest edge, construction workers labor alongside automated rail machines to lay down miles of new railroad tracks as they build two locomotive refueling stations and a massive intermodal transshipment terminal for Union Pacific Railroad. Once operational in 2015, the 12-mile-long facility will be Union Pacific’s largest refueling and transshipment center along the U.S.-Mexico border, managing cargo to and from destinations throughout North America.

Filling up fast

Jerry Pacheco, a long-time trade consultant and executive director of the International Business Accelerator at Santa Teresa, said the industrial parks are almost out of spec space for new businesses.

“About three years ago, we had tens of thousands of square feet of vacant space, but today, we only have one space of 16,000 square feet available because of all the new companies and tenant expansions,” Pacheco said.

Since last summer, four new businesses either located in the industrial zone or announced plans to do so, and four existing tenants expanded operations. In the next 60 days, four more companies are expected to announce plans to move in, increasing the number of businesses at Santa Teresa to nearly 50. That’s up from just 40 a year ago and 35 in 2011.

Michael Taylor prepares a shipment of steel to leave the facility at Southwest Steel Coil in Santa Teresa. (Roberto E. Rosales/Albuquerque Journal)

The parks now employ about 2,000 people, plus hundreds of temporary construction workers.

Pacheco, who has worked to promote Santa Teresa almost since the port of entry opened in 1993, said the industrial zone is finally poised to become one of the biggest trade centers along the Southwest border with Mexico.

“It’s been a long time coming,” Pacheco said. “In the 1980s and 1990s, businesses in the U.S. were pulling up stakes and moving into Mexico to supply the maquila industry. In that sense, New Mexico is becoming the new Mexico, with companies now pulling up stakes to move to Santa Teresa.”

All coming together

The industrial zone has had boom-and-bust cycles in the past, such as after 9/11 and following the recession in 2008. But a host of factors are coming together to provide greater, more -sustainable momentum today, Pacheco said.

The two biggest catalysts are the 2009 opening of a massive maquila factory by the Taiwanese giant Foxconn in San Jerónimo, just across the border from Santa Teresa, plus Union Pacific’s decision to locate its new fueling and transshipment center at the industrial zone.

Jon Barela, left, Economic Development secretary for the state of New Mexico, gets details from Danny King, Union Pacific construction projects manager, about the new rail yard. (Roberto E. Rosales/Albuquerque Journal)

Foxconn is now officially pegged as the largest maquila operating in Mexico, producing up to 55,000 Dell computers daily for the U.S. market. And, the company plans to expand its facilities to eight times its current size in the next few years, constituting a mega-magnet for supply, warehousing and transportation companies to provide goods and services from Santa Teresa.

Union Pacific, meanwhile, adds an entirely new advantage to the park that puts it on more equal footing with El Paso, where most regional commercial traffic has traditionally passed en route to and from Mexico and U.S. markets. The intermodal facility allows cargo containers to be seamlessly transferred between rail cars and trucks that leave from, or arrive at, Santa Teresa, easing shipping to and from Mexico, the U.S. and Canada.

‘A fundamental shift’

That provides a huge draw for trade-related companies. In fact, Pacheco said a number of El Paso firms have relocated to Santa Teresa since Union Pacific broke ground in 2011, and more companies are expected to follow suit.

“I believe we’ll soon see a fundamental shift of a portion of El Paso’s manufacturing base to Santa Teresa,” Pacheco said

Among other things, Santa Teresa also offers thousands of acres of land available for development, plus rapid transport through the port of entry. That compares to mounting congestion and declining space for growth in El Paso, plus long waits at that city’s border crossings with Juárez.

In addition, under Gov. Susana Martinez, New Mexico has worked closely with communities on both sides of the border to facilitate trade and promote infrastructure development, said state Economic Development Secretary Jon Barela. That includes monthly meetings between Barela and his Mexican counterpart, and close cooperation with the Border Industrial Association, a trade group that formed in 2008 and now has 70 member companies from Santa Teresa and Sunland Park.

Those efforts led to state approval last year of an “overweight” commercial zone for northbound trucks from Mexico to travel up to six miles into New Mexico with 96,000 pounds of weight, or about 16,000 pounds more than is permitted by federal law on U.S. highways. That was a central factor attracting new companies and tenant expansions since last year, because shippers can now carry their full load into the industrial parks without off-loading cargo at the border.

‘Enormous potential’

The state also appropriated funds for a number of infrastructure projects, such as $6 million this year for new water and wastewater facilities.

“We believe this area holds enormous potential for growth,” Barela said. “Our vision is to see New Mexico and the state of Chihuahua develop a world-class, one-of-its-kind, binational port that eventually will be home to hundreds, if not thousands of businesses.”

More dollars are flowing into the port of entry to accommodate growing commercial and passenger traffic, said New Mexico Border Authority Executive Director William Mattiace. In 2012, northbound commercial crossings reached a record 81,339 trucks, nearly double the number from four years ago.

The port will inaugurate two new commercial and two new passenger crossing lanes on May 24, Mattiace said. And, on May 3, it broke ground on a new, $12 million inspection station for northbound trucks.

Meanwhile, companies at Santa Teresa say they’re bullish about Mexico’s maquila industry, which, in the end, is the underlying factor driving the border boom.

The maquila factor

The maquilas suffered little from the drug-related violence that has rocked Mexico in recent years, but the 2008 recession had a huge impact.

Juárez-based maquilas lost about 85,000 employees during the recession. But most of those jobs have since come back, thanks in good part to “re-shoring” by companies that moved to Asia in years past but are now returning to Mexico to be closer to U.S. markets, said Manual Ochoa, vice president of the El Paso Regional Economic Development Corp., which tracks the industry.

Ed Camden, president of Southwest Steel Coil Inc. in Santa Teresa, said healthy maquila activity encouraged his company to double its factory space since 2011, from 55,000 to 110,000 square feet.

Across the street, Mallory Metal Products is also doubling its facility from 25,000 to 50,000 square feet.

“Our business is doing very well,” said Mallory executive administrator Alonso Maldonado. “It’s exciting to see all the growth in Santa Teresa.”

As Union Pacific and other firms set up shop, Santa Teresa is also gaining some powerful movers and shakers to attract more business to the zone.
“Union Pacific is a catalyst,” said railroad spokeswoman Zoe Richardson. “We’ll work with the state and local economic development organizations to recruit more investors and businesses to the area, because ultimately, our facility is successful only if we have customers using it.”

The 2013 New Mexico Legislative Session adjourned this past Saturday. The session was a very good one for our BIA membership, as we successfully achieved $3.8 million extra funds for improvements to the water/wastewater treatment system in Sunland Park/Santa Teresa.

Other highlights include:

• $3.3 million for the Local Economic Development Act fund, which is administered by Jon Barela. We will be lobbying Jon for a portion of these monies to supplement the $3.8 million we received during the legislative session.
• $3 million for the Job Training Incentive Program (JTIP). If any BIA member is planning to expand his/her workforce, the JTIP program can help cover training costs.
• $350,000 to build an access road at the Santa Teresa Port of Entry for a Customs clearance pilot program that CBP will be launching with Foxconn. This will be the second such pilot program on the entire U.S.-Mexico border and promises to expedite northbound commercial truck traffic at the port.
• Reduction of the corporate income tax (phased in over five years) from 7.6% to 5.9%.
• The implementation of a Single Sales Factor for all manufacturers that does not include an investment threshold.
• An increase in the budget of the New Mexico Partnership from $630,000 to $930,000. The Partnership is the non-profit entity with which the state contracts to recruit new industry to New Mexico.

Unfortunately, time ran out on HB 235 (the gross receipts tax reduction for trade support companies), which would have removed the sunset on this bill. However, given the scope of the above, we have to consider the session to be a successful one.

Jerry Pacheco can hardly contain his enthusiasm as he provides a “windshield tour” of the Santa Teresa Logistics Park just north of the Santa Teresa Port of Entry.

“Now it’s happening,” he says repeatedly. The enthusiasm may have drawn extra energy from Pacheco’s passenger this columnist being a fellow Santa Teresa true believer.

“It” has been a long time coming.

The happening starts with one huge industrial project complete just across the fence in Mexico and a bigger project under construction a few miles northwest along Union Pacific’s Sunset Route, the roughly 750-mile main line between El Paso and Los Angeles. (More on UP next week.)

Companies large and small; local (from El Paso), national and international; are moving to Santa Teresa or opening new facilities. Pacheco briefly interrupted our tour several times to enter a phone number from a For Sale sign into a pocket size spiral notebook that lives in his truck. Recently a single day saw seven new prospect companies contact Pacheco.

In addition to being possibly the leading cheerleader and advocate for Santa Teresa, Pacheco is executive director of the International Business Accelerator (www.nmiba.com), part of the state’s Small Business Development Centers Network.

My long-ago first trip to the Santa Teresa port area was a tour with business types. At one point, the bus stopped. We got out in the middle of nowhere. Our guide pointed south across the brush and said the port of entry is over there three miles.

Bigger picture events have affected Santa Teresa. There was political incompetence and ignorance in New Mexico; political incompetence in Mexico resulting in devaluations and other distractions; general business cycle fluctuations; major American land owner-developers becoming financially, ummm, stretched; and last, but apparently not significantly disruptive, the Mexican drug wars of the past few years.

An important element today is the Border Industrial Association (nmbia.org), a trade and development organization with more than 50 members, all industrial firms, employing more than 2,000 people, with hundreds of millions of dollars invested in the area and much more to come, not even counting the Union Pacific. The association is qualified to get state money, which, Pacheco said via email, is “allocated towards upgrading the water system and expanding the wastewater system to accommodate the tremendous growth that we are experiencing.”

The completed industrial plant, the 1.6 million square-foot computer assembly facility from Foxconn of Taiwan, is Mexico’s largest. The approximately 7,000 employees, who bus to work from Juarez, make 55,000 Dell computers each day. Construction of a road through the border fence directly to the Foxconn plant is planned. This road will ease congestion at the border crossing for Foxconn and everyone else.

New energy can be expected in Santa Teresa’s commercial real estate arena. Brookfield Asset Management of Toronto, Canada, just spent $866 million for 81 percent of the Verde Group and Verde Realty of Houston, long a major player in Santa Teresa. The deal closed in December, said the January 28 report in the Las Cruces Sun-News.

Commercial port of entry traffic is growing nicely. During 2012 at Santa Teresa, 81,339 commercial trucks crossed the border, up 13 percent from 2011 and more than double traffic in 2007. At Columbus, 65 miles west on N.M. 9, which parallels the border, commercial crossings for 2012 were 10,627, an 18 percent increase from 2011.

Some of the commercial traffic at Santa Teresa consists of trucks lining the port’s southbound lane every morning to export hundreds of used vehicles to Mexico. Some, no doubt, have traveled NM 136, the Domenici Memorial Highway. Formerly a gem in New Mexico’s Santa Teresa presentation, the east/west section is crumbling.

Growth brings challenges.

Harold Morgan has tracked the New Mexico economy for decades. He was editor for 20 years and publisher for four years of Progress, a business newsletter and was the founding editor of the New Mexico Business Journal.

The new Ferromex-Union Pacific rail infrastructure to be established on both sides of the Chihuahua-New Mexico border will become the link for imports from Asia, governors Cesar Duarte and Susana Martinez declared today.

Martinez assured that thanks to the Union Pacific investment, customs brokers, warehousing, and other businesses have set up in the area to take advantage of New Mexico’s infrastructure.

The Governor of Chihuahua, Cesar Duarte, informed that US$400 million are being invested by Union Pacific in New Mexico and that US$125 million by Mexico in the Juarez rail tracks.

Martinez said that, “We have budgeted taxpayer’s public funds aimed at fortifying New Mexico;s infrastructure, US$2 million were spent in water infrastructure to fight fires.”

http://www.omnia.com.mx/noticias/vialidad-ferroviaria-importara-productos-desde-asia-via-nm-chihuahua/

Just after signing an agreement in the Governor’s Room to create a binational industrial park at the New Mexico – Chihuahua border, both Governors came down the stairs at the Chihuahua Government Palace to listen and dance to the song. 

The dance surprised the NM governor who after the invitation to dance, extended her arm and started dancing. The whole song was danced by the governors in front of the cameras and media.  After “A fistful of dirt”, the band played the “Corrido de Chihuahua”.

http://tiempo.com.mx/_notas/1262326

“We have made a serious effort to make New Mexico a better place to do business and we continue to see the results as more companies choose to locate or expand along our southern border,” said Governor Martinez. “Today, I’m extremely proud to welcome three new companies to Santa Teresa as well as expanded operations for a fourth business. The border region will continue to be a major growth area for our state and we will continue to work to bring more businesses and additional jobs to New Mexico.”

Secretary Barela stated that companies moving here are part of the Economic Development Department’s strategy to locate these types of business in the Borderplex. “We are proud of the work that has been done and will continue to build on this success by bringing economic-based jobs for New Mexicans to this area,” he said.

One of the three new companies is Ironhorse, a shortline railroad operator based in O’Fallon, IL, that will be installing approximately 2.5 miles of new track adjacent to the Union Pacific track in Santa Teresa. The company will be loading and offloading containers to and from the rail. In addition to creating 12 new jobs, Ironhorse will provide a much-needed service to attract other companies to the area in the logistics and manufacturing sectors.

Bizlink, a global manufacturer of cable assemblies and wire harnesses for motor vehicles, IT products, industrial equipment and general electronics products, will begin to build an 80,000 sq. ft. production facility in the Santa Teresa Industrial Park that will employ 70 people. The company is headquartered in Taipei, Taiwan.

Ferza is an El Paso-based transloading firm that will be moving fructose, plastics and other materials for clients using the Santa Teresa Intermodal Park. The company expects to create 30 new jobs in Santa Teresa.

JH Rose Logistics, a multi-faceted third-party logistics company providing transportation, warehousing, and distribution services has been in the Santa Teresa for several years and announced it will be expanding its operations by 20 employees. JH Rose is also currently renovating its building in the Santa Teresa Business Park to make it more energy efficient.

Thanks to legislation that Governor Martinez signed into law last year allowing overweight vehicles to operate within a limited radius of the international border crossing, Ironhorse, Ferza, and JH Rose have all been able to create new jobs in Santa Teresa.

In July, Governor Martinez also welcomed Chihuahua-based Interceramic to Santa Teresa. Interceramic, one of the world’s largest tile manufacturers, located a warehousing and distribution facility in Santa Teresa due to the overweight cargo zone bill that was passed as part of the Border Jobs Legislation.

Left to right on stage: Lorenzo Fernandez-Ferza, Daniel Liang-Bizlink, Jeff Baskett-Santa Teresa Southern Railroad, Inc., James Robinson-JH Rose Logistics, Representative Mary Helen Garcia, Senator Mary Kay Papen, Davin Lopez-MVEDA, Governor Susana Martinez, Secretary of Economic Development Jon Barela, Chihuahua Secretary of the Economy Alberto Chretin, Jerry Pacheco (Master of Ceremonies)