'Hemispheric Globalization' Could Boost El Paso Trade

FreightWaves recently chatted with Jon Barela, CEO of the Borderplex Alliance, about the port of El Paso's role in global trade and how the city can continue to capitalize on its location along the United States-Mexico border.

The Borderplex Alliance is an El Paso-based economic development nonprofit. In the past nine months, Amazon Inc. AMZN, T.J. Maxx Inc. TJX and Critical Materials Corp. have announced plans for major distribution centers in the far West Texas city.

El Paso cross-border trade struggled during the pandemic, dropping to $29.2 billion during 2020, compared to $76.6 billion in 2019, according to the U.S. Department of Transportation.

The El Paso port of entry also handled only 286,434 commercial trucks in 2020, compared to 792,441 in 2019.

Barela said in the wake of the pandemic he sees more nearshoring opportunities for the Borderplex, a transborder region that includes the cities of El Paso and Ciudad Juárez, Mexico, as well as Las Cruces and Santa Teresa, New Mexico.

This interview was edited for clarity and length.

FREIGHTWAVES: Do you often hear from foreign companies wanting to relocate to the Borderplex?

BARELA: "We're at a record level of being vetted; people have discovered our region as being a compelling choice for a business expansion and relocation. We are coming off a record year in 2020 in terms of expanding our economic base and job creation [more than 2,000]. We're expecting that trajectory to continue again throughout this year and into the next as we recover from this COVID pandemic."

FREIGHTWAVES: Can you expand on how much nearshoring the region could see in the future?

BARELA: "Our trading relationship between Canada, Mexico and the U.S. remains extremely strong. Those clearly are our primary trading partners in our region. But we are experiencing an increased level of reshoring opportunities in our region from China and other parts of Asia. I think that is going to continue for the next year or two; reshoring momentum that has started will not abate in any way. In the short term, or maybe the medium term due to the heightened tensions we have with China, both militarily and through trade, I don't see the Biden administration changing any major policies right now, in terms of their approach in dealing with China." 

FREIGHTWAVES: You say North America could experience a "hemispheric globalization" in the near future. Can you explain what you mean?

BARELA: "I think we're going to see in the post-COVID-19 world a consolidation of supply chains that emphasize ‘hemispheric globalization' here in North America. Supply chains will become more consolidated, especially in communications and technology, medical devices, medical equipment, and in transportation. 

"I also believe there'll be an advent of rare earth mining in the U.S. and in Mexico, and less of a reliance on China and other parts of the world for these rare earth minerals. Those are the bigger trends that I see. We're certainly seeing those immediately in the number of companies that are looking in our region to expand or relocate from China." 

Outbound tender volumes in El Paso (OTVI.ELP) were about 48% as of May 2, climbing mildly week-over-week and significantly over the past two years. (Chart: FreightWaves SONAR. To learn more about FreightWaves SONAR, click here.)

FREIGHTWAVES: Amazon, T.J. Maxx and Critical Materials Corp. recently announced plans for major distribution centers in El Paso. How did El Paso attract those projects?

BARELA: "Our objective is to come up with a verticality of sectors that would lend itself towards some larger industrial projects. Think of assembly plants, think of even data centers and the like. We're a perfect region for that. We don't have hurricanes, tornadoes, snowstorms, earthquakes like other parts of the country. Companies are looking at risk-averse places, places where there's very low risk of doing business — for redundancy purposes, for just-in-time deliveries, etc.

"The other advantage our region now has: While we do not ever celebrate the big freeze that happened in Texas, we're not part of the ERCOT system [almost 70% of Electric Reliability Council of Texas (ERCOT) customers across the Lone Star State lost power during a record-breaking winter storm Feb. 13-17]. Our electric reliability in our area is superior to other parts of Texas, at least right now, because we're not part of that ERCOT grid. That electric reliability now is becoming a consideration when businesses are looking at Texas, and we're the only ones that can offer that reliability."

FREIGHTWAVES: Do you work closely with officials across the border in Ciudad Juárez, Mexico, or from the Mexican state of Chihuahua, in terms of bringing companies to the region?

BARELA: "We do work very, very closely with them. We're a unique organization in that we are, to my knowledge, the only privately funded group that serves three states and two countries, through economic development initiatives, job creation leads and in policy advocacy. We inherently have to work very closely with government officials in El Paso County, Ciudad Juárez and Dona Ana County in New Mexico.

"We have a region of 2.7 million people, but government officials, we have to work together closely, because in the end, we're the ones who put together the public incentive packages to get these companies here. We have to rely on their support and get those incentive packages approved. They've been very generous in the past putting together competitive bid packages, incentive packages for companies looking to expand or relocate."

FREIGHTWAVES: How important is President Joe Biden's infrastructure plan for U.S.-Mexico trade? Biden unveiled a $2 trillion infrastructure plan in late March, which could include heavy investments for border crossing facilities.

BARELA: "The one thing that is limiting our optimization of job growth, not only here but throughout Texas and throughout really the rest of the country, is these chokepoints that are occurring at our border ports of entry at all of our border cities. For every minute of delay that occurs on the bridges in the Southern border, we lose a million dollars worth of productivity. That affects job growth and optimization. 

"We're hoping that members of Congress will fight for our fair share of the infrastructure money, certainly the congressional delegation from the border areas will band together — $681 billion that is being proposed. We're going to have to invest in three ways for our ports — personnel, technology and infrastructure. If not, we will not optimize job growth. The United States-Mexico-Canada Agreement's promise of high-paying jobs, high-wage jobs, growth in all three countries will be limited, if we don't attack this now."

"We need new bridges; we need to improve the existing bridges. It would be great to have 10 more lanes over here in our El Paso bridges, but if you don't have the personnel to staff it, it's worthless. My mantra has always been, ‘Yes, you can have a secure border and facilitate legitimate commerce and legitimate trade; the two concepts are not mutually compatible.'"

FREIGHTWAVES: Are there any big announcements on the horizon for El Paso?

BARELA: "We expect a few more announcements in the next several months. I never want to spike the football before getting into the end zone. But I expect that we're going to have a few more announcements this year. We are competing for some very large industrial projects. People have discovered El Paso and the Borderplex region, which is a good thing."

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