MCALLEN, RGV – A recent presentation by an economist with the Federal Reserve Bank of Dallas reaffirmed McAllen Economic Development Corporation’s strategy of focusing on Reynosa and McAllen as a single unit.
That is the view of MEDC President and CEO Keith Patridge. El Paso-based economist Roberto A. Coronado made his presentation at a retreat held by MEDC’s board of directors at the McAllen Convention Center. Three maquiladora plant managers also made presentations at the retreat.
“What came out of the retreat was a reaffirmation what we have done in the past, focusing on Reynosa and McAllen as a unit. My board supported that. They thought that we would probably always be needing to look at tweaking here and there,” Patridge said.
Patridge said he asked Coronado to give a brief overview of the national and state economic outlook but place most focus on McAllen and the impact of one of MEDC’s key strategy these past 28 years – getting national and multinational firms to open maquila operations in Reynosa.
“It was kind of rewarding to hear the presentation. When you look at the numbers that come out of the Fed, it shows that our strategy has been right on. Coronado said, I know you guys feel like, man, everything is slow. But you have got to understand that for the last 15, 20, years, you have been growing at a five or six percent annual rate. He said nobody can keep growing at a five or six percent annual rate. Now, you are growing at a miserly 2.5 or three percent rate. He said you think you are dying but most people would love to have a two and a half or three percent annual growth rate.”
Patridge said Coronado included a chart in his presentation which showed that employment rates in Reynosa and McAllen run almost parallel. “It was important my board saw that. Yes, we have been focusing on Mexico but look what it has done for this region. They all understood that.”
Coronado made a similar presentation at a UT-Rio Grande Valley economic development summit held at the McAllen Country Club the week before. His data showed that for 2015, McAllen’s Business Cycle Index grew four percent, employment rose 2.5 percent and unemployment stood at 7.4 percent. The Business Cycle Index is a composite index that includes employment, unemployment rate, retail sales and wages.
Coronado showed that McAllen is outperforming Texas’ employment growth and that its unemployment rates are trending downwards but are still elevated. The national unemployment rate stands at five percent, he said.
Maquiladoras in Mexico continue to grow, Coronado pointed out, explaining that the McAllen economy and Reynosa maquiladora employment are closely related. “A ten percent increase in maquiladora output leads to a 6.6 percent increase in total employment in McAllen. The bulk of the impact is on the service of the economy,” Coronado said.
The economist said that the border economy generally is in transition, with economic activity migrating from manufacturing to services. In 1990, manufacturing accounted for 14 percent of McAllen’s economic activity. Today it is just three percent. In 1990, services accounted for 74 percent of McAllen’s economic activity. Today it is 89 percent.
In other points made in the presentation, Coronado said retail sales suffer due to peso weakness, machinery and transportation equipment lead trade for McAllen and that only 14 percent of McAllen’s workforce has a Bachelor’s degree or higher.
The bullet points made in Coronado’s concluding remarks were:
• Growth in McAllen has accelerated but is still below historical levels. Manufacturing in northern Mexico is doing well and should be good news for McAllen.
• The strength of the dollar is a mixed blessing for Texas border metros. It means stronger maquiladora activity and weaker retail sales.
• McAllen trade slowed down in recent months but picked up again in September.
• Education remains a challenge for McAllen.
In his interview with the Rio Grande Guardian after the retreat, Patridge also spoke about his recent visit to South Korea. He said he and other MEDC staff visited more than 40 companies. “There was a lot of interest. We put on a seminar in conjunction with the State of Tamaulipas and Pro Mexico. Then we met with individual companies at their place of business. We have a representative in Korea and he set up several meetings with various companies. A number of companies have shown interest in visiting us. If the Korean companies that we visited with look towards investing in Mexico we hope they put a labor component into the mix. They tend to automate everything. They are a very technology-driven country.”
On the trip, the MEDC delegation also visited with directors for the Korea Advanced Institute of Science and Technology, with whom the MEDC has a cooperative commercialization agreement. “There has been some management changes in the university so we think the structure may change a little. But our two main contacts at KAIST are still there,” Patridge said.
Patridge’s interview with the Rio Grande Guardian coincided with the unveiling of a glossy new MEDC brochure titled “McAllen, Texas – Reynosa, Tamaulipas; Two Nations, One City.” It has a lot of data to entice businesses to relocate to McAllen. In the brochure, Patridge writes the following column:
On behalf of the McAllen Economic Development team, I would like to welcome you to the McAllen, Texas/Reynosa, Mexico international metro area.
Representing the economic interests and job creation efforts of over 2.1 million residents on an international border can sometimes be challenging – but in all cases very rewarding.
The location advantages we offer are globally unique. What other location can offer your company the ability to take advantage of the best of two workforces, two legal systems, two sets of trade policies and agreements, two currencies, and the ability to manufacture products made in the United States or Mexico with one management team?
It is not just our location that makes us an attractive option for your next business expansion. When you look at the two most important factors impacting your business success, cost and availability of a skilled and trainable workforce, we really shine.
With a current manufacturing labor force of over 125,000, an average age of 27 years and an annual population growth rate of between 1.5 percent and two percent, labor availability will not be an issue.
As you look for skilled labor and skills training we continuously have over 70,000 students enrolled in university, community college and technical programs in the metro area. Many are certified to meet national or international academic, trade and industrial training standards.
As you look at operating costs, McAllen is consistently ranked as having one of the lowest costs-of-living in the United States, and in the August 2014 Boston Consulting Group Manufacturing Cost-Competitiveness Index, Mexico is estimated to be four percentage points less than China.
Add to the lower cost structure, the benefits of Mexico’s trade agreements with 45 nations, an extremely strong work ethic and our international community can provide your company with an operational flexibility and opportunity for long-term success few other locations can offer.
If the McAllen/Reynosa international metro looks as good to you as it has for the hundreds of international companies that have relocated or expanded here, let us help you take a closer look.
The McAllen Economic Development Corporation has a highly-qualified staff ready to answer your questions. They will be happy to coordinate local meetings with other managers to learn firsthand the unique advantages of doing business on an international border.
We understand your need for candid, accurate information. If you are looking for options or strategic advantage, contact us.
Sincerely,
Keith Patridge
Editor’s Note: In the main image accompanying this story, McAllen EDC President Keith Patridge and McAllen EDC Marketing Director Olivia Tamez are pictured with a copy of MEDC’s new “McAllen, Texas – Reynosa, Tamaulipas; Two Nations, One City” brochure.
