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.”

C-TPAT Importers, Mexico/Foreign Manufacturers, Mexican Long Haul Carriers and US/Mexico Highway Carriers should be cognizant that DTOs may target all entities involved in the supply chain regardless of the commodity being transported.

In light of this information, C-TPAT highly recommends members to re-assess the risk of shipments coming from Mexico and especially in the SWB corridors. It is imperative that companies mitigate vulnerabilities through actions such as:

• Conducting Risk Assessment on Business Partners
  • Communicate the importance of security within the supply chain to all business partners; monitor your business partner’s Status Verification Interface (SVI).
  • Have effective business partner screening procedures in place (site visits).
  • Highly scrutinize new business partners.

• Contracting/Sub-Contracting Policies and Procedures
  • Thoroughly screen the contractors and sub-contractors which are providing such services.

• Conveyance/Trailer/Container Security Inspections
  • Management should conduct random and unannounced inspections of container inspections taking place.

• Conveyance Tracking and Monitoring Procedures
  • If GPS is in place, ensure that it is being utilized correctly and efficiently.
  • Maintain constant communication with the driver, tractor and trailer while en route to the border and to US Border Patrol Checkpoints.

• Procedural Security
  • Make sure managers/appropriate personnel understand company procedures on reporting suspicious activities, discrepancies and anomalies to local law enforcement agencies, CBP Port(s) and assigned Supply Chain Security Specialist.

• Personnel Security Hiring Practices
  • Periodically conduct thorough background checks of employees, especially those who come in contact with the cargo.

• Security Threat and Awareness Training
  • Conduct refresher training for employees handling cargo and especially truck drivers and train managers to detect internal conspiracies.

Members have developed several Best Practices (refer to the C-TPAT Best Practice Catalog for additional information) to defeat breaches such as:

• Designated time spots – driver must report time at each specific area along the route.

• Minimize/eliminate un-necessary stops by drivers throughout the transportation route.

• The Highway Carrier has the ability to shut off the engine remotely in the event of route deviations / lost contact with driver.

• Use tamper-indicative security labels bearing an actual photo of the seal and a serial number, attached to the hinges and between the two doors of the vehicle.

• Use multiple ISO/PAS 17712 certified high security seals on all shipments bound to the U.S.

• For company owned trailers – utilize spot welded bolts and other hardware (such as hinge covers) to avoid tampering.

• In addition to using a bolt seal, attach a cast iron J-bar device to the locking bar that requires a specialized tool for removal.

Many CBP Ports have established a local 24/7 contact number and members should familiarize themselves with local port communication protocols or call 1-800-BE ALERT (1-800-232-5378) to report suspicious activity.

To find your local CBP Port telephone number, please click the link below:

http://www.cbp.gov/xp/cgov/toolbox/ports/

Below are the links to the various criteria for your review:

• C-TPAT Security Guidelines/long_haul_carrier_mx
• C-TPAT Security Guidelines/highway_carriers/
• C-TPAT Security Guidelines/foreign_manufacturers/
• C-TPAT Security Guidelines/importers/

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.

Ed Camden, president of Southwest Steel Coil Inc. in Santa Teresa, said company sales to Mexican assembly factories, or “maquilas,” doubled two years in a row in 2011 and 2012. This year, he expects sales to Mexico to grow another 35 percent to 40 percent.

“We expanded our facility in Santa Teresa by 20,000 square feet last year, and we just broke ground today on another 35,000-square-foot expansion that will be finished in October,” Camden told the Journal on Tuesday. “By fall, we’ll have expanded from 55,000 square feet to 110,000, doubling our production capacity.” 

His company’s explosive growth is part of a boom in export activity by businesses in southern New Mexico, and in other parts of the state, that are shipping goods and services to Mexico at unprecedented rates.

The value of New Mexico exports to its southern neighbor grew 33 percent last year, from $464.5 million in 2011 to a record $617.6 million in 2012. And last year’s growth follows robust expansion every year since the recession ended in 2009, driving total export income from sales to Mexico up 61 percent in the past four years.

Mexico alone accounted for about one-fifth of the $2.98 billion in New Mexico exports worldwide last year. Those exports include everything from fabricated metal products to computer chips to agricultural goods.

The southward boom reflects strong activity in Mexico’s maquila industry, and in that country’s economy overall, which is projected to expand by between 4.1 and 4.4 percent in 2013, according to the New Mexico Economic Development Department.

Economic Development Secretary Jon Barela said concerted efforts by Gov. Susana Martinez’s administration to promote trade with Mexico also have been a major factor.

“We’ve pursued a multi-faceted, deliberate approach to increase trade worldwide, but with Mexico in particular,” Barela said. “It’s not just coincidence that we’re seeing strong growth in our export numbers.”

State initiatives include monthly meetings between Barela and his counterpart in the Mexican state of Chihuahua, which borders New Mexico. Chihuahua signed a memorandum of understanding with New Mexico last year to promote trade and commerce.

Barela’s staff also organizes frequent trade missions to Mexico and other countries to help New Mexico business people find foreign buyers for goods and services, and to assist them in navigating trade regulations and issues. A new Gateway to Exporting program, funded by the Small Business Administration, has helped the state offer those services.

Barela said exports increased from businesses across the state. But about 50 percent of products and goods sent to Mexico are shipped from southern New Mexico, particularly from Santa Teresa’s two industrial parks, where a growing number of maquila suppliers and related businesses are locating.

New Mexico has promoted business development at Santa Teresa for about 25 years, but the border industrial zone is bustling with activity like never before, said Jerry Pacheco, a long-time trade consultant and executive director of the International Business Accelerator at Santa Teresa.

“The activity we’re experiencing is unparalleled,” said Pacheco, also a Journal columnist who writes on trade. “I can’t remember any other time we’ve seen such interest in southern New Mexico and Santa Teresa.”

Union Pacific Railroad’s $400 million investment in a massive intermodal refueling facility has drawn many more businesses to the industrial parks, Pacheco said. Three new companies announced plans to set up operations last September, and an El Paso-based freight-container firm just bought land to relocate its operations at Santa Teresa.

“A lot of deals are in the hopper,” Pacheco said. “Things are just going gangbusters.”

An altercation among used vehicle exporters at the Santa Teresa Port of Entry Feb. 8 has led to new procedures on the U.S. side that will expedite the port’s booming export trade.

The fracas that prompted the changes involved drivers hired to export vehicles into Mexico who were waiting in line and frustrated by a new 240-vehicle limit imposed by the Santa Teresa port on the number of vehicles that the port would handle each day.

“What happened unfortunately involves a threat of officer safety because people were not complying with what we were telling them,” said Customs and Border Protection’s port director Joanne Thale-Lembo. “They would not step back.

“So, we had to stop the insanity at that point.”

All that required was a halt to the processing of vehicle export paperwork for the day.

After that, Thale-Lembo said, she decided it was time to re-examine and streamline the export process on the U.S. side.

She said the new procedures were hammered out at a meeting she called Wednesday with U.S. and Mexican customs officials, export-import brokers and others at the offices of the New Mexico Border Authority.

“Everybody walked away happy, understanding what needs to be done and why,” Thale-Lembo said. “All of this came about in the midst of us trying to streamline this and make it better for everybody.

“Now, we’ve come up with a better plan.”

That plan went into effect the next day, Valentine’s Day, allowing exporters to file the required documents for each vehicle electronically and eliminating a manual document inspection and stamp by U.S. Customs.

Thale-Lembo also lifted the 240-vehicle daily limit she recently imposed. Now, she said, the port will handle as many vehicles as Mexico can take each day.

Princess Trillo, whose mother is in the business of exporting used cars bought at auctions and junkyards in the U.S. to Mexico, said the effect of the changes implemented Thursday was immediate.

“My mom is very pleased and everyone is very much pleased with the new process,” Trillo said. “It will significantly improve the situation and make it easier for them to do their jobs.”

Before, she said, people would line up at the Santa Teresa port to submit the vehicle documents that had to be filed 72 hours before the vehicles could be driven or hauled into Mexico for sale. Those documents can now be filed electronically.

After the 72-hour waiting period, the drivers paid to cross hundreds of vehicles would park along the road to the port and wait to be cleared to cross. Sometimes the lines stretch a mile.

“Now, cars can cross directly to Mexico without further examination from an officer,” Trillo said in an email. “In my mother’s own words, ‘We could not have asked for more.’ ”

On Friday, she said, the line heading south to the border was gone.

Referring to Thale-Lembo, Trillo said, “She did a great job. Before, they would have to wait on both sides of the border, and it could take all day.

“Now, she’s cut that in half for them.”

Senator Mary Kay Papen

Senator Mary Kay Papen of Las Cruces was elected Senate Pro Tem of the NM Legislature by unanimous vote on Tuesday.  The Pro Tem is one of the top two positions in the Senate and selects committee chairs.  This is great news for the BIA, as Senator Papen has been a strong supporter of the border.

By Kevin Robinson-Avila / Journal Staff Writer

on Tue, Jan 8, 2013

Ben Hall, NMPRC Chairman

SANTA FE – Republican Ben Hall and Democrat Valerie Espinoza were elected as 2013 chair and vice chair, respectively, for the Public Regulation Commission in a 3-2 vote on Tuesday.

The vote ended a potentially rough start to the new year, following disagreements about the chair and vice chair election last week at the PRC, which faces some major changes in 2013.

Voters in November approved constitutional amendments to increase qualifications for PRC candidates to become commissioners, and to move responsibility for insurance regulation and for chartering and regulating corporations elsewhere.

Both Hall and Espinoza said they want to assist legislators to carry out the reforms. But Hall, who opposed the amendments, said he would fight any new efforts to take more PRC responsibilities away.

“If there are more bills to tear more things away from the PRC, I will oppose it,” Hall said.

As chair, Hall said he will work to tighten up internal management of departments to eradicate lingering fraud and abuse.

“There are still people coming and going as they please in too many (state) cars, and there are still people who misuse or abuse the rules,” he said.

Espinoza said the newly constituted commission marks a fresh start at the PRC, which has been battered by scandal. Two former commissioners were either convicted or pleaded guilty to felony charges in recent years.

“We have competent staff here,” Espinoza said. “I think we all got on the same page today, and that’s where revitalization begins.”

Earlier in the day, Commissioner Pat Lyons, a Republican who chaired the PRC the past two years, nominated Hall and Espinoza for the positions.

Separately, Democrat Karen Montoya nominated fellow Democrat Theresa Becenti-Aguilar as chair, with Espinoza to serve as vice chair. But Espinoza said she preferred to support Hall to rotate leadership at the PRC, since Becenti-Aguilar has already served as vice chair for two years.

“I believe each of us should have the opportunity to serve as chair, and we will, because 12 months is really just a short period,” Espinoza told the Journal. “This is Commissioner Hall’s opportunity to take the lead.”

Both Espinoza and Montoya are newcomers to the commission. They replaced Democrats Doug Howe and Jason Marks, respectively, on Jan. 1.