WESLACO, RGV – There was a lot of doom and gloom emanating from a recent “Border Business is America’s Business” forum hosted by Congressmen Filemon Vela and Vicente Gonzalez at the Lower Rio Grande Valley Development Council.
Experts from the fields of manufacturing, banking, real estate, retail, tourism and agriculture spoke in largely negative terms about proposals from the Trump Administration that would directly impact the border economy, such negative comments towards Mexico, renegotiation of NAFTA, imposition of a border adjustment tax, and construction of a border wall.
There was so much doom and gloom that after the event, the Rio Grande Guardian asked one of the speakers, McAllen Chamber of Commerce President Steve Ahlenius, if the Valley was hurtling towards a recession. Ahlenius responded:
“I think we are going to have some tough times in the sense that there is a lot of uncertainty about what is happening, a lot of uncertainty about what comes out of Washington, and what can come out of Mexico City. I think we are going to see an escalation of ‘if Washington does this, then Mexico is going to do this.’ So, I think we are going to see some challenges when it comes to dealing with rhetoric and policies and it could really do some harm to our region.”
Ahlenius pointed out that two weeks ago his chamber hosted an event with chambers of commerce from Tamaulipas, Mexico. “What we really tried to stress at that meeting is the importance of working together as a region and not to be taken apart. We have to recognize that there are ties, there are a lot of seamless ties on the border between Mexico and the Rio Grande Valley and we need to strengthen those ties and recognize that what happens on one side of the border, it impacts the other side.”
In his remarks at the forum, Ahlenius acknowledged that the Trump’s administration’s changes to immigration policy, “could come back to hurt us in lots of different ways.” He was referring to undocumented immigrants not coming out of their homes or undocumented children not going to school, for fear of being apprehended by Immigration and Customs Enforcement.
In his interview with the Rio Grande Guardian, Ahlenius said Mexico should be viewed as an ally of the United States.
“Mexico is an ally and if you look at the success that our economies have had is because we look at each other as friends and allies and not enemies, and building a wall doesn’t work. I think there are other ways to secure the border and that continues to be the issue. But, Mexico is not the issue. We are focusing on Mexico when we really shouldn’t be because that is not where the challenges are or where the issues are.”
Asked what would happen if a 20 percent tariff was placed on Mexican imports, in order to pay for a border wall, Ahlenius said: “You turn around and see Mexico doing something similar and so you start escalating with tariffs or taxes and then it just spirals out of control.”
So, what was said at the Border Business is America’s Business? Here is the commentary of SOME of the experts gathered by Congressmen Vela and Gonzalez:
Joe Quiroga – Texas National Bank President
“There is no question that we are seeing softness already, based on the rhetoric alone and on the retail side we are seeing maybe small decreases but, in some cases, it can be a catastrophic downturn. We are seeing that first hand on the banking side, but, more importantly, in the real estate market. The real estate market thrives on the investment of capital from our Mexican nationals. They enter this market and it continues to be ranked, this region has been ranked with the top five of the nation for the last ten to 15 years and sometimes we don’t associate that with our region, but at the end of the day we benefit from that. We are already seeing softness there.”
Quiroga gave an example to make his point.
“I had a local attorney, a Mexican attorney who is a U.S. resident and has lived here all his life but practices in Mexico. His kids go to school here, his wife lives here, he pays sales and property taxes here and he just decided to practice and Mexico. He came a week ago to the bank and said ‘I cannot do this anymore.’ The same dollar that I used to be able to buy, I almost have to pay as twice as much for. So, I have no choice but to sell my house. ‘I’m going to have to dump it, and I am going to have to go back to Mexico and just figure it out over there,’ he said.”
An example of the “softening” of the local economy can be seen in Sharyland, Quiroga said.
“I can share with you that on the banking side we are seeing some serious softening. For example, in the Sharyland Plantation area, there are many homes for sale. A lot of it is based on the Mexico devaluation. I think the banking industry, whether we like to believe it or not, we are tied to the Mexican economy. We benefit from it greatly. I know there is a lot of rhetoric about Mexico benefiting from the U.S. Here on the border we are benefiting from the Mexican economy. And when I have conversations with people that are in businesses I always tell them, let’s put the Democratic and Republican thing aside. I think we are Valley entrepreneurs, we are Valley residents and so let’s talk about what benefits the Valley before we talk about the political side of this. If we could just put our differences aside and just focus on the things that are positive for us, I think we are going to do well.”
David Deanda, Jr. – Lone Star National Bank President
“The regulatory environment has required the validation and verification of BSA Bank Secrecy and it has been a detrimental effect in all banks along the border, so much so that if we have to validate and verify the source of the customers and the source of cash, it is very complex and it is very difficult to do.
“I am going to tell you that I have always seen our economies between Mexico and the US as being interdependent. We depend on them more so than they depend on us because they come spend their dollars here and that affects retail, wholesale, housing, and hotels. We collect those taxes and we become very used to their source of revenue to help our cities and economies improve. One of my biggest concerns is that as we continue to focus more on that side, we are making the business relationship an immigration issue, one common theme, and it’s not. It’s two different things.
“My biggest concern and fear is that we are letting our political stance affect how we continue to focus and move forward as a value economy. I’m concerned about banks having to verify and validate every source of wealth of every customer. In my business, we know our customers. It is a family. I think we are all family in the Valley. One of my biggest fears is that we start to lose trust in each other and faith in each other as an economy of trust. It’s not like people from Mexico are not family, they are family as well.”
Eva-Jean Dalton – Re/Max Real Estate Agent
“The Texas international home buyers report, dated Sept. 2016, showed that Texas homes purchased by international buyers added more than ten billion dollars to the Texas economy. What if they get nervous and want to start selling properties and they start dumping properties? Who is going to buy these properties? What is going to happen to sales prices? What is going to happen to the market?
“In Texas, 36 percent of international buyers are from Mexico. If you drive west (in the Sharyland and Mission area) and you see what is going on with all the development, much of what you see is Mexico-invested money. And I have heard that close to 50 percent of the homes in the Sharyland Plantation are owned by Mexican nationals. So, if they start dumping properties, we are going to have a problem. So, we need to continue our home sales in the state of Texas.
Sue Ann Taubert – Re/Max Real Estate Agent
“An example of the residential development growth is the Sharyland Plantation area in Mission, where Mexican nationals build large expensive homes. But now we are seeing many ‘For Sale’ signs in those homes in that area. Real estate sales have increased since the implementation of NAFTA, and we want to see this continue.”
Barry Patel – South Padre Island Mayor
“We have a tremendous amount of people that come from Mexico to stay at South Padre Island and shop in the Rio Grande Valley. Mexicans spend about 4.5 billion dollars annually in the border region. Forty percent of all business on South Padre Island comes from Mexico. Fifty percent of the condominiums that are on South Padre Island are owned by Mexican nationals. We know that because we send the tax bills to Mexico and we get a check from them to pay the property taxes. This is a vital part of our industry.
“We understand that Mexico has some issues in regards to the Peso devaluation, but I feel like we can solve this problem by creating more commerce and what is talked about in DC is that we need less commerce. That falls against everything we believe in. A border tax that is being talked about, I think ‘Who is going to pay for it?’ It’s the American consumer who is going to pay for that, the American farmer that produces and exports to Mexico. These are some of the issues and these are also our customers from South Padre Island. So, I think it is a broader damage that this will create.
“When candidate Trump traveled to Mexico last year he talked about a regional enterprise zone that can compete with countries like China. I think we ought to take him up on that challenge. We made note of that, and perhaps that needs to be looked into more. He said it and that is one way to compete, by having a regional commercial zone that gives us great economic power.
“From South Padre Island, I would like to say that we have noticed a significant downturn in Mexican visitors. We have also seen a significant downturn in Mexican visitors that own real estate in South Padre Island that can easily afford to come here, but they feel insulted by what has been said. These are proud people and the rhetoric has to stop in Washington. It’s not just all about border issues, there are many border issues that affect all the economy down here. South Padre Island depends on Mexico and business with Mexico so I hope this gets put in the front in D.C.”
Jason Wolfe – NovaLink, Inc. President and CEO
“We need to look at Mexico as our beautiful, talented resource that we have that does the jobs that we do not necessarily want to do in the U.S. I have toured many factories in the United States and no one in our population is necessarily wanting to sit by a sewing machine.
“Mexico is a resource. There are other places in the world where countries have come together to develop the supply chain that can compete and often times beat other areas. In my opinion, what we should do, we should focus on building that supply chain together. What can we do as the United States, which arguably is one of the most advanced developing technologically driven countries in the world, is to develop things. We develop many fabrics and we have for years. We don’t make them anymore, but we can do that here and bring that back here if we do it correctly and smartly.”
Leila Aridi Afas – Toyota International Policy Director
“We at Toyota believe that free trade has been beneficial to the U.S. and it has created partners. That’s why we have invested 11 million dollars in our facilities including our San Antonio plant. It’s also why we are able to export from Mississippi to Central America based on the free trade agreements that Mexico has with these economies. It is this belief in free and fair trade that has us so concerned – about the proposal to impose a 20 percent border adjustment tax on all imports coming to the U.S. That is one of our primary concerns. If this distorts global supply chains, it raises consumer prices and ultimately it harms the workers.
“Firstly, I just have to emphasize that businesses need to trust that the laws that are in place when they make investment decisions remain in place so they continue to provide their customers with the best quality products and best prices and also maintain jobs for their workers. It’s really hard to change things after they have made these long-term investments on a 20-, 30-, 50-year time frame.
“Secondly, our concern is that the border adjustment tax will act as a consumer tax. A border adjustment tax will impact everything from diapers to digital devices. The prices that you put in your shopping baskets, the amount of fuel you put in your tank will really hit low-income families the hardest.
“Lastly, the border adjustment tax will really disrupt our industry, our company, but most importantly it will have negative impacts on our consumers and our employees. The rise in prices would put down more pressure on our jobs. It would greatly impact our ability to maintain the tens of thousands of jobs that we have created in American over the past 60 years. I hope that we can shed some light on why we are so concerned on border adjustment tax and the negative consequences that it could have, unintended as it may be.”
Dr. Mark Kroll – dean of the Robert C. Vackar College of Business and Entrepreneurship at UTRGV
“I think there is two important points that we need to remember. One, Mexico is not an inexhaustible supply of skilled low cost labor, and two, we have seen a net migration from the U.S. back to Mexico. Labor costs are 10 to 15 percent of the total production costs for most manufacturers. In my opinion the conversation we need to have with Mexico, and with Canada for that matter, is what we need to do collectively to become a world leading manufacturing center.
“I would be remiss if I did not observe that there would more likely never be a better time for us to embrace the creation of an integrated, innovative and competitive binational U.S.-Mexico border economic mega region whose economic focus is in advanced manufacturing. The keyword is “integrated.” The U.S.-Mexico border economy needs to work together as a single mega region in order to realize our border region’s full potential.”
Bret Erickson – Texas International Produce Association
“For the fresh produce industry, trade is very important. You can’t grow everything here all the time. It requires you to go through different geographies.
“Ever since NAFTA was created a lot of our major growing shippers in our industry have invested significantly in the infrastructure and supply chain to deliver products from Mexico to the U.S. It plays a critical part to our industry and we would be opposed to any types of tariffs that would be implemented. Those tariffs would ultimately be passed on to the consumer and there is no other way to spin it.
“The border adjustability tax is something that needs to be carefully considered. It is concerning because it basically means that you are going to have higher costs on imported goods, which hurts businesses and it is going to hurt the U.S. consumer.
Crossing the U.S., almost half of the fruits and vegetables consumed here are imported from somewhere so the economic impact to the U.S. consumer, it is the consumer who is going to suffer the most.”
Gary Palmer – J. F. Palmer & Sons Produce, Inc.
“The challenge we are experiencing is a positive one. It is called growth, but with growth comes challenges and some of the challenges that we have been experiencing more recently includes what’s happening at the bridge, in the sense of getting our trucks across in a timely basis. We are needing some effort in changing the ways our trucks come into this country. One of our proposals is that we develop a 24-hour concept on the bridge, the bridge would allow trucks to go into Mexico and trucks to come across, 24 hours a day.
My father build the business model more simply. He said a little time times a lot always equals to a lot of time. In other words, don’t try to kill the elephant with one bite. If we can approach this in a minimalistic approach and grow it as it needs to grow, that would be good. Things are too complicated now and we need to start simplifying things.”
U.S. Rep. Filemon Vela
Rep. Vela closed the forum with these remarks:
“One of the reasons for bringing people down here is that we want them to understand that the Rio Grande valley is not all about border security. When you take away the cross section of the businesses that are represented at this table, we can show that we have a vibrant social, economic, and cultural life.
“We need our colleagues from everywhere else to realize that when we are talking about Border Business, we are really talking about America’s business.”
Editor’s Note: The Rio Grande Guardian will be utilizing more information from the Border Business is America’s Business in future stories and videos. Slideshow photos by Stephanie Jara and Apolonio Sandoval, Jr.