dr. alejandro diaz-bautista, north american competitiveness conference 2010 university of san diego
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“Mexico-United States Border Efficiency Through Enhanced Infrastructure”. Alejandro Díaz-Bautista, Ph.D. Professor of Economics and Researcher at El Colegio de la Frontera Norte (COLEF) [email protected] Prepared for the The North American Competitive, Innovation & Clean Energy Conference, Wednesday, April 14, 2010 , 8:00 am - 5:30 pm, Main Theater, Joan B. Kroc Institute for Peace & Justice University of San Diego. San Diego, California.TRANSCRIPT
““Mexico-United States Border Efficiency Through Mexico-United States Border Efficiency Through Enhanced Infrastructure”Enhanced Infrastructure”
Alejandro Díaz-Bautista, Alejandro Díaz-Bautista, Ph.D.Ph.D.
Professor of Economics and Researcher at El Colegio de la Frontera Norte (COLEF)
Prepared for the The North American Competitive, Innovation & Clean Energy Conference, Wednesday, April 14, 2010 , 8:00 am - 5:30 pm, Main Theater, Joan B. Kroc Institute for Peace & Justice University of San Diego. San Diego, California.
The integration of the The integration of the economies of North America economies of North America since the signing of the since the signing of the North American Free Trade North American Free Trade Agreement (NAFTA), the Agreement (NAFTA), the internationalization and internationalization and globalization of the globalization of the economy, new infrastructure economy, new infrastructure and investments in the and investments in the border region, remittances, border region, remittances, binational shopping and binational shopping and migration have changed migration have changed how citizens and regions how citizens and regions relate to each other in North relate to each other in North America. America.
United States - Mexico Border Geography
Geography:
• 10 border states.
• 1,952 miles of border.
Economic Integration in Economic Integration in North AmericaNorth America
Mexico and the United States already share the highest Mexico and the United States already share the highest level of economic integration between the most level of economic integration between the most unequal pair of rich and poor neighboring countries unequal pair of rich and poor neighboring countries anywhere in the world. A longstanding economic anywhere in the world. A longstanding economic relationship continues to grow all along the 1,952-mile relationship continues to grow all along the 1,952-mile U.S.-Mexico boundary and its 14 large sister border U.S.-Mexico boundary and its 14 large sister border cities. cities.
At least 10 million people live along the border (92 At least 10 million people live along the border (92 million in the 10 Mexico- United States border states), million in the 10 Mexico- United States border states), and its twin cities share common airsheds and and its twin cities share common airsheds and watersheds. The U.S.-Mexico border is the world's watersheds. The U.S.-Mexico border is the world's busiest, with an estimated 270 million legal crossings busiest, with an estimated 270 million legal crossings from Mexico each year. from Mexico each year.
Border Infrastructure Projects Border Infrastructure Projects
U.S.-Mexico infrastructure projects U.S.-Mexico infrastructure projects are aimed to have a positive are aimed to have a positive economic impact of around 12 economic impact of around 12 million people living along the U.S. million people living along the U.S. Mexico border.Mexico border.
The economic and public policy analysis shows that the western and The economic and public policy analysis shows that the western and eastern regions of the United States-Mexico Border, such as Baja eastern regions of the United States-Mexico Border, such as Baja California and California, Sonora- Arizona and Texas – Nuevo Leon and California and California, Sonora- Arizona and Texas – Nuevo Leon and Tamaulipas must look beyond traditional political and national Tamaulipas must look beyond traditional political and national boundaries and develop new strategies to promote infrastructure boundaries and develop new strategies to promote infrastructure development, competitiveness and economic growth of their development, competitiveness and economic growth of their economies. economies.
There are at least 40 megaregiones around the world and 10 new There are at least 40 megaregiones around the world and 10 new megaregiones within the United States, with 3 important megaregions megaregiones within the United States, with 3 important megaregions on the U.S. Mexico Border. on the U.S. Mexico Border.
As empirical evidence shows, each region like Baja As empirical evidence shows, each region like Baja California-Southern California offers something special California-Southern California offers something special because of its comparative and competitive advantages. because of its comparative and competitive advantages.
For example, San Diego provides the human and For example, San Diego provides the human and intellectual capital in the form of an educated workforce, intellectual capital in the form of an educated workforce, and applied research centers and academics, while Imperial and applied research centers and academics, while Imperial County provides land, water and renewable energy County provides land, water and renewable energy development and generation. While, Baja California offers a development and generation. While, Baja California offers a sophisticated manufacturing sector with low costs, and also sophisticated manufacturing sector with low costs, and also new infrastructure developments in renewable energies like new infrastructure developments in renewable energies like the wind power plant at La Rumorosa, and universities such the wind power plant at La Rumorosa, and universities such as the UABC and research centers such as el Colegio de la as the UABC and research centers such as el Colegio de la Frontera Norte. Frontera Norte.
Wind Power in the Border Wind Power in the Border RegionRegion
In early March 2010, President Felipe Calderon In early March 2010, President Felipe Calderon inaugurated La Rumorosa wind-energy project in Baja inaugurated La Rumorosa wind-energy project in Baja California state, prompting the executive to declare that California state, prompting the executive to declare that Mexico is becoming the most advanced country in Latin Mexico is becoming the most advanced country in Latin America in harnessing this type of energy. America in harnessing this type of energy.
Mexico will become the most advanced nation in Latin Mexico will become the most advanced nation in Latin America in renewable energy and will rank among the America in renewable energy and will rank among the top 15 in the world.top 15 in the world.
Wind energy can be a viable option as long as it is Wind energy can be a viable option as long as it is accompanied by other improvements in infrastructure. accompanied by other improvements in infrastructure. Mexico is economically and environmentally competitive Mexico is economically and environmentally competitive when [wind energy] is accompanied by improvements in when [wind energy] is accompanied by improvements in the electric grid.the electric grid.
U.S. Mexico Border RegionU.S. Mexico Border Region
The U.S.-Mexico The U.S.-Mexico border region have border region have a joint economy a joint economy that ranks third in that ranks third in the world and its the world and its population is population is outpacing averages outpacing averages in other areas.in other areas.
Increasing Economic Ties in the Increasing Economic Ties in the Border Region.Border Region.
Millions of Mexicans and Americans cross Millions of Mexicans and Americans cross the border every workweek, depend on the border every workweek, depend on each other for their livelihoods, and live each other for their livelihoods, and live and work over the same watersheds. and work over the same watersheds. Americans have been crossing into Tijuana Americans have been crossing into Tijuana from San Diego since it was founded more from San Diego since it was founded more than a century ago, sampling food and than a century ago, sampling food and culture. culture.
Economic AnalysisEconomic Analysis
More than $28 billion in goods moves More than $28 billion in goods moves across the San Diego-Tijuana border across the San Diego-Tijuana border annually in both directions. It is estimated annually in both directions. It is estimated that Mexicans spent $6 billion a year in that Mexicans spent $6 billion a year in San Diego County, or more than $1 of San Diego County, or more than $1 of every $8 in retail sales. More than 10% of every $8 in retail sales. More than 10% of all Tijuana residents cross the border five all Tijuana residents cross the border five to seven times a week; during Christmas to seven times a week; during Christmas day they spend approximately 50 to 65 day they spend approximately 50 to 65 million dollars.million dollars.
In the San Diego Tijuana Border, the In the San Diego Tijuana Border, the economic impacts of congestion economic impacts of congestion costs to the regional economy are in costs to the regional economy are in the billions of dollars and forecasts the billions of dollars and forecasts indicate that costs will double in the indicate that costs will double in the next 10 to 15 years if no new next 10 to 15 years if no new infrastructure projects are built.infrastructure projects are built.
El Chaparral ProjectEl Chaparral Project The economic impact of waiting times at the border The economic impact of waiting times at the border
crossing from Tijuana to San Diego, has been estimated at: crossing from Tijuana to San Diego, has been estimated at: losses of over 8 million trips annually, 1.28 billion dollars of losses of over 8 million trips annually, 1.28 billion dollars of potential revenue, 3 million work hours, between 2 and 2.5 potential revenue, 3 million work hours, between 2 and 2.5 trillion dollars and job losses between 28 to 35 thousand trillion dollars and job losses between 28 to 35 thousand people. people.
The Integrated Project at the Tijuana San Diego Border, The Integrated Project at the Tijuana San Diego Border, called Chaparral will have a new port of entry building with called Chaparral will have a new port of entry building with 225 thousand square feet, 29 entry lanes, two for 225 thousand square feet, 29 entry lanes, two for passenger buses and more for six lanes to exit. passenger buses and more for six lanes to exit.
The cost of the project is The cost of the project is estimated at around 577 to estimated at around 577 to 740 million dollars of 740 million dollars of construction, and construction, and construction was planned construction was planned to begin in 2009, and to begin in 2009, and estimated to be completed estimated to be completed in 5 years, around 2014.in 5 years, around 2014.
Otay Mesa II ProjectOtay Mesa II Project
The Otay Mesa crossing has a demand of 12 The Otay Mesa crossing has a demand of 12 million passenger vehicles per year (33,000 a day million passenger vehicles per year (33,000 a day on average) with waiting times that average 2 on average) with waiting times that average 2 hours. hours.
Waiting times the United States-Mexico border Waiting times the United States-Mexico border crossing for trucks is estimated at an average of crossing for trucks is estimated at an average of over 4 hours, adding to the costs of trade over 4 hours, adding to the costs of trade between Mexico and the United States.between Mexico and the United States.
The new Otay Mesa II project will have a capacity The new Otay Mesa II project will have a capacity of 1.6 million trucks a year (4,400 per day on of 1.6 million trucks a year (4,400 per day on average) and is expected to increase its capacity average) and is expected to increase its capacity by 2025. by 2025.
The General Administration of Customs in Mexico The General Administration of Customs in Mexico mentioned that this system will allow approximately mentioned that this system will allow approximately 90 million vehicle crossings at the border entry, which 90 million vehicle crossings at the border entry, which undergo a process of risk measurement by checking undergo a process of risk measurement by checking every vehicle that crosses into Mexico. every vehicle that crosses into Mexico.
The system weighs the vehicle, takes a picture, and The system weighs the vehicle, takes a picture, and the data are taken from the plates. The system will be the data are taken from the plates. The system will be crossing information to know if the vehicle has any crossing information to know if the vehicle has any reports of theft or has been used in a wrongful act. reports of theft or has been used in a wrongful act.
SIAVE ProgramSIAVE Program On October 29, 2009 there was a lot of irritation and On October 29, 2009 there was a lot of irritation and
discomfort by thousands of border residents, at the long discomfort by thousands of border residents, at the long rows waiting to enter Tijuana Mexico from San Ysidro, rows waiting to enter Tijuana Mexico from San Ysidro, California, as the new SIAVE program started. California, as the new SIAVE program started.
It is estimated that rows of up to 500 cars were formed It is estimated that rows of up to 500 cars were formed during peak hours at Puerta Mexico, affecting the daily during peak hours at Puerta Mexico, affecting the daily activities for border residents. activities for border residents.
SIAVE ProgramSIAVE Program The private sector in the Mexican Side of the Border The private sector in the Mexican Side of the Border
mentioned that the Vehicle Valuation System (SIAVE) at mentioned that the Vehicle Valuation System (SIAVE) at Mexico’s ports of entry are considered slow and have Mexico’s ports of entry are considered slow and have indicated their dissatisfaction with the bottlenecks that indicated their dissatisfaction with the bottlenecks that occur at the border.occur at the border.
Many people who live in Tijuana and work in the United Many people who live in Tijuana and work in the United States are forced to wait long hours to cross the border, States are forced to wait long hours to cross the border, wasting productive time. wasting productive time.
The private sector have asked the federal authorities to The private sector have asked the federal authorities to expedite the SIAVE system. Comercial, medical cluster, real expedite the SIAVE system. Comercial, medical cluster, real estate, carriers and the tourism sectors have been estate, carriers and the tourism sectors have been economically affected.economically affected.
SIAVE ProgramSIAVE Program
In order to facilitate efficiency and increase trade, In order to facilitate efficiency and increase trade, it is necessary to evaluate the operation of the it is necessary to evaluate the operation of the SIAVE on the border and also analyze the SIAVE on the border and also analyze the conditions for the implementation of new a conditions for the implementation of new a Strategic Economic Zone in the border, which has Strategic Economic Zone in the border, which has been proposed by leaders of business been proposed by leaders of business organizations, as well as academics and the state organizations, as well as academics and the state governments in the border.governments in the border.
NAFTA AgreementNAFTA Agreement
The North American Free Trade Agreement The North American Free Trade Agreement (NAFTA) was signed and effective in 1994. (NAFTA) was signed and effective in 1994. It's known as TLCAN in Mexico and ALENA It's known as TLCAN in Mexico and ALENA in the French-speaking parts of Canada. in the French-speaking parts of Canada. NAFTA eliminated most tariffs or import NAFTA eliminated most tariffs or import taxes on goods moving from one of the taxes on goods moving from one of the three countries to another. three countries to another.
After 16 years, most economists believe After 16 years, most economists believe this has been good, overall, for the this has been good, overall, for the economies of all 3 countries. economies of all 3 countries.
NAFTA’s Trade Impact at 16NAFTA’s Trade Impact at 16
In terms of trade, Canada, Mexico, and the In terms of trade, Canada, Mexico, and the United States have broadened United States have broadened substantially since NAFTA’s substantially since NAFTA’s implementation, though researcher and implementation, though researcher and trade experts disagree over the extent to trade experts disagree over the extent to which this expansion is a direct result of which this expansion is a direct result of the deal. the deal.
Trade with NAFTA partners now accounts Trade with NAFTA partners now accounts for more than 80 % of Canadian and for more than 80 % of Canadian and Mexican trade, and more than a third of Mexican trade, and more than a third of U.S. trade.U.S. trade.
Since the implementation of the North American Free Trade Agreement (NAFTA) in 1994 to the year 2009, 24 percent of total cumulative FDI in Mexico has been concentrated in the six states bordering the U.S.
Economic Integration in North Economic Integration in North AmericaAmerica
The economic relationship between Mexico The economic relationship between Mexico and the U.S. is evident in the evolution of and the U.S. is evident in the evolution of some of their economic indicators since some of their economic indicators since 1993. For example, it is apparent that, 1993. For example, it is apparent that, since 1993, Mexico's GDP shares its trend since 1993, Mexico's GDP shares its trend behavior with the U.S. GDP. behavior with the U.S. GDP.
Nevertheless, during the 1980s and the Nevertheless, during the 1980s and the beginning of the 1990s the beginning of the 1990s the synchronization of the real sectors of both synchronization of the real sectors of both economies was unclear. economies was unclear.
Economic Synchronization Economic Synchronization Between Mexico and the U.S.Between Mexico and the U.S.
Castillo, Fragoso Pastrana and Diaz-Bautista (2004) Castillo, Fragoso Pastrana and Diaz-Bautista (2004) studied the synchronization between the studied the synchronization between the economies of Mexico and the United States with economies of Mexico and the United States with special reference to the manufacturing sector. special reference to the manufacturing sector. The authors examined the dependency between The authors examined the dependency between the assembly plant industry for export in Mexico the assembly plant industry for export in Mexico and the performance of the economy of the and the performance of the economy of the United States. United States.
Herrera (2004) found also synchronization of GDPs Herrera (2004) found also synchronization of GDPs in Mexico and the U.S. became evident with the in Mexico and the U.S. became evident with the implementation of the NAFTA.implementation of the NAFTA.
The North American ModelThe North American Model
The North American model is increasingly economic The North American model is increasingly economic integrated as seen by the current economic crisis. integrated as seen by the current economic crisis.
An economic downfall in the U.S. has a contemporary An economic downfall in the U.S. has a contemporary economic impact in Mexico.economic impact in Mexico.
Withdrawing from NAFTA would affect the economies in Withdrawing from NAFTA would affect the economies in the U.S. border communities, and rip apart North the U.S. border communities, and rip apart North American supply chains and information systems, and American supply chains and information systems, and devastate North American exporters. In short, it would devastate North American exporters. In short, it would cause incredible damage to the economies of North cause incredible damage to the economies of North America in the long run.America in the long run.
( % annual variation)
Sources: INEGI and US Federal Reserve.
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2004
/01
2004
/03
2004
/05
2004
/07
2004
/09
2004
/11
2005
/01
2005
/03
2005
/05
2005
/07
2005
/09
2005
/11
2006
/01
2006
/03
2006
/05
2006
/07
2006
/09
2006
/11
2007
/01
2007
/03
2007
/05
2007
/07
2007
/09
2007
/11
2008
/01
2008
/03
2008
/05
2008
/07
2008
/09
2008
/11
2009
/01
MEXICO USA
FoxCalderón
Industrial Production in Mexico and the United States Industrial Production in Mexico and the United States during the Fox and Calderon Administrationsduring the Fox and Calderon Administrations
ConclusionsConclusions
We need to continue to emphasize the We need to continue to emphasize the need to expedite the process of crossing need to expedite the process of crossing the border between Mexico and the United the border between Mexico and the United States. On the Mexican side, it is essential States. On the Mexican side, it is essential to improve the operation and to improve the operation and implementation of the Vehicle Valuation implementation of the Vehicle Valuation System (SIAVE).System (SIAVE).
ConclusionsConclusions
The analysis shows that in order to solve bilateral The analysis shows that in order to solve bilateral problems between Mexico and the United States, problems between Mexico and the United States, you have to take the same actions, in a you have to take the same actions, in a coordinated manner, on both sides of the border. coordinated manner, on both sides of the border.
Although the border line and fence exists Although the border line and fence exists between both countries, new infrastructure between both countries, new infrastructure projects have been implemented to increase projects have been implemented to increase trade, transport and economic efficiency.trade, transport and economic efficiency.
The analysis shows the large economic, security The analysis shows the large economic, security and social links between the two countries and and social links between the two countries and the high level of economic integration for both the high level of economic integration for both economies, especially in the border.economies, especially in the border.
““Mexico-United States Border Efficiency Through Mexico-United States Border Efficiency Through Enhanced Infrastructure”Enhanced Infrastructure”
Alejandro Díaz-Bautista, Alejandro Díaz-Bautista, Ph.D.Ph.D.
Professor of Economics and Researcher at El Colegio de la Frontera Norte (COLEF)
Prepared for the The North American Competitive, Innovation & Clean Energy Conference, Wednesday, April 14, 2010 , 8:00 am - 5:30 pm, Main Theater, Joan B. Kroc Institute for Peace & Justice University of San Diego. San Diego, California.