MCALLEN, Texas – The re-shoring move by manufacturers from China to North America can benefit the South Texas-Tamaulipas border region, but additional infrastructure investment is going to be needed.
This is the view of Jorge Torres, president and founder of InterLink Trade Services, a full service customs brokerage company. He said investment in additional warehouses was critical.
“With all the issues going on, the supply chain disruptions, the geo-political issues, there is an opportunity for re-shoring, bringing industry to our region,” Torres said.
“With that, however, the other side of the equation is having the proper infrastructure. We are all working, in conjunction with the counties and cities, to ensure we develop the proper infrastructure.”
In an exclusive Zoom conversation with the Rio Grande Guardian International News Service, Torres pointed out that the McAllen area is in need of more warehousing.
He later told the Guardian: “The forecast for the vacancy rate in our region is between 3.8 percent and 4.2 percent.” In other words, area warehouses are between 96 percent to 98 percent full.
“Net absorption is very low because there is no warehouse space to absorb,” Torres added, citing the percentage figures from Commercial Real Estate Services.
In the Zoom conversation, Torres said the problem has been exacerbated by companies changing from a Just-In-Time management inventory model to a Just-In-Case model.
“As you know, there is very limited warehouse space in our region. The absorption rate increased dramatically in the pandemic years, 2020 and 2021, basically because of the supply chain disruption,” Torres said.
Torres contrasted what was happening before the Covid-19 pandemic with what is happening now.
Before, he said, “containers were flowing normally, which allowed companies to have a Just-In-Time time production (model), meaning having just enough material to produce for a few days or so, because the pipeline was moving fast.”
Now, however, with disruptions to the supply chain, “companies are in a Just-In-Case inventory management (mode), which is, buy whatever we can now and ship it.”
Today, Torres said, companies might not need their raw materials immediately but would rather store them in warehouses in case they are harder to source later.
“In most cases they are stored on the U.S. side and that creates major issues because we have warehouses that are being filled with material that will eventually be needed,” Torres said. “So, we need additional warehouse space, obviously, to be built.”
To further complicate matters, disruptions to the supply chain and inflationary pressures make it a tougher proposition to build more warehouses.
“The time frame it takes to build a warehouse is extended, and (with) inflationary issues, we are talking about an increase in construction costs of about 35 percent. So, those two are obstacles to getting warehouses up and going fast enough.”
In addition to more warehousing, additional investment is needed at land ports of entry, airports that carry cargo and the Rio Grande Valley’s seaport, Torres said.
“We do need to work on a rail bridge here and improve our airport infrastructure, and the ocean port as well in Brownsville. That is going to take a while but as a region we have to look at that, to seize the opportunity that we have to ensure that those companies that are moving back or re-shoring or setting up totally new operations here have the proper infrastructure.”
Torres added: “We have to fight for the funds and… convince the state and federal government that this is an area that needs to be invested in. So, hopefully we will get there at some point. Overall, we see a bright future in our area, with the re-shoring and all these new projects moving along. So, hopefully, we will keep growing in that area.”
In the Zoom conversation, Torres also spoke about the impact USMCA is having.
Here is the Zoom conversation:
Editor’s Note: The Rio Grande Guardian’s interview with Jorge Torres was prompted by a recent webinar he hosted in conjunction with the McAllen Economic Development Corporation. It was titled 2022 Cross-Border Trade – What Happens Now. Click here to watch the webinar.
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