PHARR, Texas - The fact that imports from Southeast Asia are increasingly bypassing California’s gridlocked sea ports is great news for Mexico’s West Coast sea ports and South Texas land ports.
So says Eddie Gutierrez, president of Blue Stone Capital Solutions and a consultant to the Pharr Bridge Board.
Gutierrez spoke about the opportunity for South Texas land ports to garner more imports from Southeast Asia at a recent Pharr Bridge Board board meeting. In support of his contention he referenced a recent study by Juan Arias, a strategic consultant with CoStar Advisory Services in Boston. Arias’ study is titled “Latest Supply-Chain Shift Favors Trading Partners Who Are Closer to Home.”
After the board meeting, Gutierrez gave an interview to the Rio Grande Guardian International News Service.
Eddie Gutierrez“The study basically indicates that because of the supply chain fallout, there are going to be some big winners. And the winners are going to be Mexico, Canada and their sea port of entries. Because they have the ability to take on more cargo,” Gutierrez said.
“Texas was highlighted as being one of the big winners, also. Specifically South Texas because much of the infrastructure is already in place and there is more infrastructure coming in. So, we expect South Texas, the Rio Grande Valley to really benefit from the fall out, through the land port of entries.”
Asked if South Texas land ports, such as Pharr, would only benefit in the short term, until such time as California’s sea ports become more efficient, Gutierrez said: “I think the benefits to our region are going be felt in the long term. The infrastructure is already in place and we can pass products through here much faster. The products, coming in through Mexico, can go up to the central United States and the eastern coast of the United States much faster.”
Gutierrez added: “The study indicates they (Mexico’s West Coast ports) are all ready to take on extra cargo and ready to operate. It is already happening as we speak. The numbers are showing it.”
In his study, CoStar Advisory Services’ Arias said U.S. East Coast ports are already seeing more traffic from Southeast Asia.
“From July 2020 to November 2021, monthly imports from Southeast Asia to the East Coast rose by an average of 32 percent above 2019 levels. Trade route traffic has continued to shift as higher shipping costs, tariffs and pandemic disruptions roil overseas supply chains,” Arias wrote.
“Meanwhile, trade clarity provided by the United States-Mexico-Canada Agreement is driving import growth with trade partners closer to home, specifically Mexico.”
Arias said trends for U.S. trade in goods show a strong rise in imports from Mexico and Canada after the USMCA went into effect in July of 2020.
Juan Arias“Monthly import values from July 2020 to November 2021 have come in 14 percent and eight percent above 2019 values, respectively, for Mexico and Canada. Imports to the U.S. have surpassed pre-pandemic levels for both countries, though this has occurred faster for Mexico.”
Arias said the “swift and strong recovery” in U.S.-Mexico trade is most apparent in inbound truck figures.
“The number of inbound trucks from Mexico to the U.S. surpassed pre-pandemic levels, growing around 11 percent in 2021, after contracting only two percent in 2020,” Arias wrote, citing information from U.S. Department of Transportation’s Bureau of Transportation Statistics.
Meanwhile, inbound truck counts from Canada shrank by eight percent in 2020 and failed to recover to pre-pandemic levels, despite seven percent growth in 2021. “Both trade partners have largely benefited from a strong recovery in U.S. consumer demand, although Mexico appears to be faring better,” Arias said.
A key paragraph in Arias’ study: “After the implementation of USMCA, shifts in consumer spending significantly expanded global trade in goods. But the logistical pressure from this surge in demand has upended global supply chains as well, driving shipping costs higher. In this environment, Mexico appears to benefit due to its proximity and competitive import costs compared to China.”
Arias pointed out that since the China-U.S. trade war started, tariffs placed on Chinese imports have remained elevated along with higher shipping costs.
“Costs to import Chinese goods as a share of customs import value grew from around eight percent in 2018 to over 18 percent in 2021, while costs for Mexico have remained at around two percent over the same time period.”
Arias said Mexico “consistently provides both a lower shipment and tariff cost alternative.”
Arias said that as U.S. retailers and manufacturers develop shorter and lower-cost supply chains, Mexican exporters are poised to benefit, specifically maquiladoras.
Arias said Mexico’s National Institute of Statistics and Geography tracks the performance of the country’s maquiladoras. He said export figures since 2015 have shown continued revenue growth.
“Maquiladora revenues for 2021 have surpassed pre-pandemic levels, albeit with diverging performance across the multinational cities on the U.S. Mexico border. These border cities typically grow in tandem, with Tucson, Arizona/Nogales, San Diego/Tijuana, McAllen, Texas/Reynosa, El Paso, Texas/ Juarez and Laredo, Texas/Nuevo Laredo performing relatively better since 2019.”
Arias also pointed to research by the Federal Reserve Bank of Dallas.
“A ten percent increase in maquiladora production on the Mexican side of the border results in a 7.1 percent increase for Nogales, Arizona, employment, along with increases in Texas of 6.6 percent in McAllen, 4.6 percent in Laredo, 2.8 percent in El Paso, and 2.2 percent in Brownsville,” Arias wrote, citing the Dallas Fed report.
“Recent employment trends for El Paso, McAllen, Brownsville and Laredo, which together make up over 60 percent of maquiladora revenue for the cities analyzed, show a strong performance through the pandemic as maquiladora business remained consistent.”
Arias’ study also discusses unemployment levels and consumption in the major cities along the Texas-Mexico border. For more information about the study, telephone CoStar Advisory Services at 800-613-1303 and ask for Juan Arias.
Edito's Note: For more information about the "Latest Supply-Chain Shift Favors Trading Partners Who Are Closer to Home" study, telephone CoStar Advisory Services at 800-613-1303 and ask for Juan Arias.
Editor's Note: The above news story has been updated to include more information from the "Latest Supply-Chain Shift Favors Trading Partners Who Are Closer to Home" study.
Editor's Note: The main image accompanying the above news story shows Eddie Gutierrez, president of Blue Stone Capital Solutions, and Luis Bazan, director of the Pharr International Bridge.
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