|McALLEN, October 9 - A new superhighway in Mexico will, by far, be the largest catalyst for trade in the Rio Grande Valley in the coming decade, according to an expert in the produce industry.
In fact, the sheer growth over the next ten years is unfathomable, according to Bret Erickson, president and CEO for Texas International Produce Association (TIPA), who says he is anticipating one of the largest surges in imported fruit and vegetables ever seen by those in the industry here.
A sharp increase in Texas imports, combined with record growth in Mexico, and a boom of manufacturing goods coming from Asia is creating a perfect storm, and eventually a “tsunami” of trade that will benefit the region, Erickson said.
Speaking to attendees at South Texas College’s Bi-National Innovation Conference (INNO’ 2013) recently, Erickson said a surge is definitely taking place.
“There is all this stuff happening, and maybe it’s because I’m living in a produce bubble, but I go to all these meetings and I think to myself ‘I don’t know if anybody yet is starting to realize all the pieces’. Somebody should start putting these pieces together,” Erickson said.
TIPA has seen a 67 percent increase in produce volume over the last five to six years, and double digit growth four of the last five years, he said.
Texas has consistently surpassed Arizona in volume three of the last four years, so as a result, Arizona businesses have been setting up shop in Texas, and that trend is increasing, Erickson said.
Why the increase in Texas imports?
A rapidly growing population is increasing demand. While Mexico has been aggressive in supplying the U.S., decreasing acres of farmland, as well as improvements in Mexican infrastructure, especially with the creation of the country’s interoceanic corridor, the Baluarte Bridge and Mazatlan-Durango Highway, will create significant time and cost savings for delivering product to the Midwest and East Coast markets.
Estimates say shippers can save six to eight hours traveling from Mazatlan to South Texas compared to Arizona. Cost savings can be as much as $500 to $600 in savings per truck on the Mexican side if originating from Sinaloa, and $2,500 or more per truck depending on their final U.S. destination round trip.
“I had one of our largest importers of citrus saying that once this (highway) is in place, they can probably save up to 25 percent on their shipping costs,” Erickson said. “If they are shipping 3,000 or 4,000 loads a year, times $2,000 a load, and they can save 25 percent every load, that goes straight to their bottom line. That’s tremendous savings for them.”
So what does the future hold?
Citing figures from the Texas A&M Center for North American Studies, Erickson says the region can expect a 127 percent increase in produce import volume by 2020.
That is the equivalent of 360,000 additional truckloads, with an estimated total value of $7 billion in imported produce coming in less than a decade. This increase will add to a total state annual economic impact of $651 million, and 6,920 estimated jobs during that time span.
“The new highway in Mexico is by far the largest catalyst that we will see in this industry (along with) the rising tide of produce that we are seeing coming in the next seven years,” Erickson said. “It’s great for our region. It’s very exciting to be a part of it.”
Nearly two-thirds of all fresh fruit and vegetables consumed in, or shipped out of Texas are imported. Nearly 35 percent of all fresh produce in the U.S. is imported, and a vast majority of that is from Mexico.
Between 70 to 80 percent of the vegetables that Mexico produces are grown in Sinaloa. Produce then gets shipped to the east coast and into Europe via corridors, which traditionally have run through Nogales in Arizona, an 18-hour trip. The new Coridor will cross seven states in Mexico, starting in Mazatlan, and will cut the time it takes to get to the U.S. from 18 to 10 hours, ending in Matamoros.
The highway took six years to build at a cost of $3 billion dollars (American), and is the largest public works project ever undertaken in the history of the Republic of Mexico, according to Mexican officials.
The engineering marvel will encompass over 60 tunnels and 60 bridges to connect what is considered the breadbasket of Mexico, the Sinaloa-Durango area, to the Rio Grande Valley. As a result, the highways will become the closest connection ever between the Pacific and the Gulf Coast when it opens later this year.
“My piece of the pie is produce, but sitting in on all these meetings, I’m hearing these other guys and start thinking that we need to talk about this whole big picture,” Erickson said.
“When you look at the increase of all the produce that is going to come across, when you look at the manufacturing goods that are coming across here, I think the next decade is going to be, well I can’t even tell you what the next decade is going to look like here. It’s going to be crazy,” he said.