BROWNSVILLE, RGV – A new study analyzed for the first time the Brownsville-Matamoros manufacturing sector to determine what the region needed to create a competitive advanced manufacturing hub in the Lower Rio Grande Valley.
At an RGG LIVE event with the Rio Grande Guardian, Carlos Marin, principal-in-charge of Ambiotec Group, Inc., along with dean of the UT-Rio Grande Valley Robert C. Vackar College of Business and Entrepreneurship, Mark Kroll, discussed the new study they authored and their recommendation to pursue a Bi-National Economic Development Zone (BiNED) in the border region.
The study was funded through the U.S. Economic Development Agency and United Brownsville, and in partnership between Ambiotec Group Inc., the University of Texas Rio Grande Valley, and the deputy director of the Mexico Institute at the Wilson Center, Chris Wilson. Other authors included UTRGV professors Miguel Gonzalez and Pablo Rhi-Perez.
The study, “Backward Integration of Manufacturing Supply Chains in the Brownsville-Matamoros Region: An Approach for Creating a Competitive Binational Advanced Manufacturing Cluster,” dissected the border economy and found that Matamoros occupied most of the manufacturing jobs while Brownsville remained a “pass-through” economy.
RGG LIVE: Businessman Carlos Marin and academic Mark Kroll discuss the creation of a bi-national economic development zone for the border region.
Posted by Rio Grande Guardian on Friday, August 18, 2017
The Valley isn’t an exporter, the study found, instead products come in and out of the region or “pass-through,” missing a major opportunity to capture those advanced manufacturing jobs and increase the low per capita income in the region.
The study found another challenge: 80 percent of Matamoros manufactures annual output of $8 billion came from resources outside of those maquiladoras. That’s approximately $6.4 billion of resources that are produced somewhere else then shipped to Matamoros to assemble.
Marin said there’s an opportunity to fill in that $6.4 billion dollar gap by producing the products that are imported into the Rio Grande Valley or what he called the ‘backward substitution of supply chains.’
“It was based on the impetus of a number of folks in Matamoros who were in the maquila industries who pointed out the issues of the potential for backwards substitutions of supply chains,” Marin said. “Eighty percent of the gross domestic product or the product being produced in Matamoros was really coming from products being imported from somewhere else.”
Marin said the first element of the study was finding accurate data on what is being produced in Matamoros and where products are coming from to determine what the Valley can produce and export for the future.
“We looked at what we could actually produce and what are the ones that we could potentially extend the current capacity to identify,” Marin said. “I’ll let Mark talk about that, but the last part was, hey backward substitution is just one piece of it, what are we talking about in terms of the future, how can we move up the value chain instead of just substituting what’s here and what does that future look like.”
Kroll said one of the major elements of the study was the type of advanced manufacturing jobs the region needs and could take advantage of, like metal stamping and plastic injection molding.
“Some of the basic findings, first of all, we have apparently a tremendous opportunity to expand a number of subsequent products and components through both metal stamping and plastic injection molding,” Kroll said. “And we already do quite a bit of that in this region.”
Matamoros has a large automotive industry that primarily relies on stamped metal parts and injection molding, but those products are imported from somewhere else.
Kroll said an estimated 40 to 50 percent of what is manufactured in Matamoros is automotive, and this report was the first to study the border economy and how to move forward by providing job training for those skills, and most importantly, can move the region from being assemblers into major manufacturers.
“Just breaking into these companies supply chains requires some real effort, some real tenacity, etc. and then finding the information,” Kroll said. “What we have done, is probably the first effort I suppose in the history of the border economies to really understand who is buying what. We now have, I believe for the first time, a really comprehensive understanding of what is being bought, in what quantities, and by what industries.”
Kroll emphasized that those advanced manufacturing jobs will not come to the region because there aren’t trained workers that can fill in that gap, but the Valley has a major opportunity to seize those jobs.
“The other I think key finding is and we’ve almost talked this to death, but we don’t have the folks here who can make the tools and the dyes that are necessary to exploit those opportunities.”
The dean described these capital-intensive jobs by giving an example of a product like cell phone cases that go through the plastic injection process. The cell phone case has to be designed, molded, machined; a process that takes high skill, but those products are only imported into Matamoros rather than created there.
“These are all high skill set type activities and we don’t have a great deal of that skill here yet,” Kroll said. “And as a result often times local manufactures have to send off to China or a country in the United States or somewhere else abroad to secure that. Its expensive and it lengthens a products life cycle or I should say time to market.”
Marin said recent global trends of nationalistic and anti-globalization rhetoric should strengthen the vision of a single strong regional border economy, but there needs to be federal, state, and regional support for BiNED to succeed.
“Looking towards the future, if you look at the post-Brexit environment, we talked about that anti-globalization, moving away from global economies and globally linked economies to regional economies, and we believe that Texas, the United States, and NAFTA, particularly are going to be the most successful regional economy in the world,” Marin said.
“For one because we don’t have these historical differences, deeply embedded differences, that exist in Europe. There is this recent Trump rhetoric on Mexico, but I think we can overcome him as opposed to China, when you bring product from China, it only has four percent U.S. content. NAFTA has a product brought in from Mexico-United States, has probably 40 percent of U.S. content that means it creates jobs. We have a very integrated manufacturing platform between Mexico and the United States and we think Texas in particular has the opportunity to become the leading manufacturing economy in the United States, in North America and in the world by default.”
Marin added this could not be done if the region doesn’t have a consensus to act together and provide those missing skills to advance the workforce and the manufacturing sector as a whole.
“We are in many ways at a crossroads, what’s gonna happen in the border and what’s gonna happen in Texas and unless we focus on the border and economic growth along the border and making the border more competitive with greater education, we’re looking at either a very prosperous region or a very declining region and that’s gonna happen now and the opportunities now and we need to act and we need to act as a region,” Marin said.
Marin, who envisions a booming manufacturing hub constructed across the Rio Grande River and becoming major leaders in NAFTA, best describes the BiNED vision:
“I think the BiNED region would be a success. We’d have these international free trade zones. For example, let’s say in the Los Indios Bridge or in the McAllen area or in the Pharr area, where you have manufacturing facilities don’t exist on just one side of the river but rather they’re constructed across that river. And you have a port of entry and you have a traffic lane going between the Mexican side and U.S. sides where workers and products can move freely between those two zones. And its not until they leave that zone they would pay or duties would apply, depending on where they’re going. And so the border becomes not the back door to NAFTA, but the front door to NAFTA and a dominant component of trade between the U.S. and Mexico. Wages, per capita income is no longer the lowest in the United States, but among the average at least of the state of Texas, and Texas is a major manufacturing world. That’s what I see. We have had that opportunity before if we worked together.”