On a recent afternoon, a gaggle of Mexican high school students filed through the corridors of a vast maquila, one of hundreds of similar assembly plants rising south of the border and dependent on U.S. contracts. The teens observed workers doing their jobs, then broke into smaller groups to talk casually with some of the younger employees.
Few factories opened their doors to school groups in the past. Today they do. The change is due in part to suggestions made by northern neighbors such as Woody Hunt in El Paso. The quality of Juarez City’s workforce matters to people like Hunt, a real estate and investment tycoon, because he understands that the economy of the U.S. Southwest is increasingly tied to the economy of northern Mexico.
Seeking to establish more cross-border regional rapport, Hunt helped spearhead the Borderplex Bi-National Economic Alliance in 2013. The group brings together business leaders, educational figures and government officials from both the U.S. and Mexico as a kind of border-blind economic-development co-op. “Woody likes to say, ‘A healthy economy on the Mexican side leads to a healthy economy on the U.S. side,’” says the alliance’s CEO, Rolando Pablos.
Texas border-crossing cities like Laredo and McAllen have for generations benefited from their geographic positioning. Increasingly, so are other cities, towns and counties across the Southwest—nowhere more so than this hardscrabble triangle defined by El Paso, Santa Teresa and Juarez City. In the summer of 2013, New Mexico’s Gov. Susana Martinez joined Cesar Duarte, her counterpart in Chihuahua State, Mexico, to announce the formation of a bi-national community encompassing Las Cruces and San Jeronimo. The governors announced a cross-border master plan to create a collaborative, world-class international trading zone.
Equidistant between the seaports of Long Beach and Houston, the new cross-border region sprawls over 70,000 acres zoned for industrial, commercial and residential use. The economy clearly benefits from the presence of the nation’s newest major rail intermodal center, as well as the huge Foxconn plant in Juarez. Trade advocates credit such progressive cooperative efforts with spurring small and midsized businesses to export more aggressively. “New Mexican exports to Mexico grew by 93% last year,” said Jerry Pacheco, president of the Border Industrial Association, representing Santa Teresa and Sunland Park employers. “By focusing on and developing New Mexico’s border region, we can bring increased economic development and prosperity to the entire state.”
Albuquerque, long dependent on federal R&D spending, is an emerging gateway, leveraging its strong infrastructure and fortuitous location at the center of the New Mexico Technology Corridor hugging the Rio Grande. Las Cruces, near Santa Teresa and the state’s largest city after Albuquerque, has also raised its export profile. The recent opening of Union Pacific’s $500 million intermodal facility in its backyard has motivated at least a dozen companies to relocate here.
“Between Albuquerque and Santa Teresa is where the concept of corridor comes into play,” says Randy Trask, manager of greater Albuquerque’s Trade Alliance program. “In a way, we’re seeing the emergence of a contemporary Camino Real trading route.”
Over in Arizona, state exports are up 12.5% the first half of 2015, representing over $1 billion in shipments. Mexico, the state’s leading trade partner, absorbs about 40% of Arizona’s exports; its appetite for U.S. products increased nearly 20% last year. Phoenix, the state’s largest city, hopes such new programs as the Metro Phoenix Export Alliance and the Metro Phoenix Export Plan will spur exports further. When Phoenix Mayor Greg Stanton met in November with Mexico City Mayor Miguel Espinosa, the men launched their own Global Cities Economic Partnership.
As more cities, towns and counties vie for position on this new Camino Real, the interconnectedness of the U.S. Southwest and Mexico’s North becomes common currency. Summarizes Pablos, “The region has three states, two countries—and one economy.”
TEXAS | #1 | AIN’T BRAGGING IF YOU CAN DO IT
Austin, largely unexposed to the energy sector, paced the nation in job growth last year. It may do the same this year too. Austin’s appeal to employers clearly lies with its talented, high-tech workforce. What lures A-list workers to Austin? “It’s the combination of quality of living, the relaxed culture, the outdoors alongside the urban setting, the music and the economic opportunities associated with industries that are growing,” says Mike Rollins, CEO of Austin’s Chamber of Commerce.
Perryman notes the area’s “workforce advantages and presence in key emerging sectors,” particularly IT, manufacturing, finance, insurance and real estate. The area added 32,000 jobs between May 2014 and May 2015, led by hospitality industry gains, for a 7.9% growth rate. Perryman forecasts continued strong performance through 2016 led by growth in services, durable manufacturing, finance, insurance and real estate.
A recent national study by PwC and the Urban Land Institute named Dallas-Fort Worth the top U.S. market for real estate investment, development, and homebuilding. Austin was No. 2. Locals cheer the major expansion of Fort Worth Alliance Airport, expected to enhance logistics considerably. Says Perryman: “We look for growth to continue at a strong pace.”
The Lone Star State racked up some major wins last year, including the $1.6 billion Total Petrochemicals facility in Port Arthur, and General Motors’ $1.4 billion expansion in Arlington. In
Austin, major expansions and relocations were announced by Google and Charles Schwab; Apple began moving employees into its brand-new hemispheric headquarters.
Gov. Greg Abbott, stepping into the boots of his famously pro-business predecessor, Gov. Rick Perry, set the tone for his new administration by slashing the state’s franchise tax 25%. The Dallas-Plano-Irving metropolitan division added jobs at a 3.8% rate during the May 2014—May 2015 period; Perryman forecasts more robust growth in 2016. Houston, hammered by the downturn in energy prices, replaced some of its lost jobs with lower-paying positions in education, health care and hospitality. “We all know the price slump is temporary and that Houston is resilient,” says Austin-based economic development consultant Angelos Angelou. San Antonio regained some luster in 2014, as the pace of job growth more than doubled to 4.2%.
ARIZONA | #9 | OVER THE HUMP
2016 should be the year Arizona regains its economic energy, says George Hammond, director of the Economic Business and Research Center at University of Arizona’s Eller College of Management. Dr. Hammond forecasts job creation will inch past the national average this year and continue rising through 2020.
Notorious in past years for aggressive recruitment policies targeting California companies over the state line, the Grand Canyon state seems poised to resume those efforts. “Arizona is the place companies come to scale up,” says Chris Camacho, CEO of Greater Phoenix Economic Council. “A company of 20 people in San Francisco can afford to be a company of 200 people in Phoenix.”
Arizona added jobs faster than the national average in the 12-month period between September 2014 and September 2015: 2.3% compared with 1.9%. Greater Prescott paced state job expansion with a 3.4% rate during that period, followed by Greater Phoenix (2.5%) and metro Tucson (1.4%).
The closely watched construction sector reversed recent contractions, enough to grow slightly last year. Software looks to be the biggest gainer long-term; Camacho projects 40% growth over the next 10 years. Business leaders point to Apple’s $2.2 billion new data center going up in Mesa as another turnaround sign.
OKLAHOMA | #16 | GROWTH SOONER OR LATER
The bright side is diversification. The Sooner State “has achieved real economic diversity” in recent years, says consultant Angelou. “It’s attracting more technology and R&D companies.”
Still, Oklahoma struggles to regain peak employment. After registering a 5.35% employment hike in 2013, that figure dropped to 4.49% in 2014 and could inch up to 4.59% this year, forecasts Oklahoma State University economist Dan Rickman. While acknowledging that oil and gas prices won’t rise anytime soon, Evans nevertheless forecasts that Oklahoma’s real gross state product will grow 3.1% in 2016.
Employers worry that Oklahoma’s aging workforce could thwart expansion. Education’s a concern too. In Tulsa, the regional chamber continues to press the legislature to address the teacher shortage. Manufacturing, once a state strength, continues to decline. Over the last year, Oklahoma’s manufacturing cluster has shrunk by more than 8,000 manufacturing jobs, nearly 6% of its total. According to Ernie Goss, director of Creighton University’s Economic Forecasting Group, the cluster will shrink further in Q1 2016.
Oklahoma City, the state’s major business center, “continues to enjoy the fruits of economic geography as economic activity concentrates along the I-35 corridor megalopolis,” writes Russell Evans, executive director of the Steven C. Agee Economic Research and Policy Institute at Oklahoma City University. Major expansions and relocations include Boeing’s 290,000 square foot plant in Oklahoma City and Petra Industries’ 275,000 square foot facility in Edmund.
Site selector Foote calls the overall Oklahoma business environment “one of the finest business climates in the country.” He also likes its tax credits, certified real estate sites, incentive programs and welcoming attitude. “Oklahoma is saying, ‘We want you to come here,’” he says.
Logistics are advantageous. As Bill Luttrell, senior locations strategist with Werner Global Logistics, puts it: “It doesn’t hurt to have I-35 and I-40 coming through your state.” Economic development policies also please. Luttrell says, “Oklahoma is a state that’s on the forefront of making things happen.”
WHY WE’RE HERE / OKLAHOMA
SITE HISTORY All tribal businesses, with about 1,800 employees, are administered from tribal council headquarters building on Otoe Reservation in Red Rock. Operations include hotel, restaurant, five casinos, fuel delivery and online lending business.
WHY OKLAHOMA “Oklahoma is not merely a place to do business—it is our home and the center of Otoe-Missouria culture. We work hard to provide meaningful careers and job skills to improve the quality of life for families across northern Oklahoma.”
WHY RED ROCK “This is our home.”
BOTTOM LINE “Our enterprises create jobs in high growth sectors including gaming, technology, financial services, green energy and more. Profits from our tribally owned businesses are used to fund critical social programs for our elders, youth and the most vulnerable members of the tribe and surrounding community.”
ARKANSAS | #33 | SLOW AND STEADY
Pakko expects state payroll to grow 1.3% this year, then 1.1% in 2017. About one-third of the job growth will be concentrated in the professional and business sector. Regionally, the Fayetteville-Springdale-Rogers metropolitan statistical area, encompassing Northwest Arkansas and part of southern Missouri, paces the state growth curve, expanding at over 4% for most of the decade.
“Northwest Arkansas is smoking, it’s doing so well,” says Arkansas Chamber CEO Randy Zook. The Little Rock metro area is “doing okay,” he adds. Major announcements last year include Southwest Steel in Newport and Aerojet Rocketdyne in Calhoun County, both expansions valued at $18 million. In 2015, ArcBest announced expansion plans for Fort Smith and Nucor announced a major expansion of its Hickman sheet steel mill. Later this year, Big River Steel will open its massive $1.5 billion plant, a much-anticipated development.
Business leaders would like more from the state in terms of help with workforce development. After that? Says Zook, “Better highways. Then better tax rates.”
NEW MEXICO | #36 | OH SUSANA!
New Mexico’s economy flexed some muscle in 2015. Could the reason be a more business-friendly climate? Under Gov. Susana Martinez, the state has cut taxes 24 times, reduced its business tax rate by 22%, curbed practices derided as “tax pyramiding” and instituted a single-sales factor for manufacturers. These and new, more generous incentive policies, such as expanding discretionary funds to lure migratory executives, have won over business owners, says Minda McGonagle, lobbyist and state director for the National Federation of Independent Businesses. Still, New Mexico—one of the most federally-dependent states in the union—continues to lag its neighbors in productivity and job creation.
The Great Recession hit New Mexico hard; the state won’t return to 2006 peak employment until later this year. The legislature’s last economic forecast in September projects modest revenue growth through 2020. The economy remains rooted in its Big Three: Government, Oil and Gas, and Tourism. Federal spending supports the National Laboratories at Los Alamos and Albuquerque, as well as three Air Force bases. All have outsized footprints in the local economy.
Business leaders have helped launch a series of state and local programs designed to commercialize R&D from the government labs; results remain mixed. Private-sector expansion is paced by the healthcare industry, which accounted for more than half the new jobs created last year. Recent New Mexico job growth is fairly broad-based: eight industries added jobs and five posted losses. Manufacturing growth was flat last year. The mining sector—mainly oil and gas jobs—contracted.
The economy’s bright spot is global trade. In 2014, New Mexico exports rose 39% in value, a pace export advocates expect will continue through 2015. New Mexico’s merchandise exports totaled $3.8 billion in 2014, supported with rising cross-border trade. Union Pacific’s new $500 billion intermodal hub in Santa Teresa has spurred a trade boom, largely involving products originating elsewhere and heading to Mexico. And vice versa.
“New Mexico is a remote, lower-cost state,” observes Werner Global Logistics’ Luttrell. He notes that location in New Mexico brings access to two Tier 1 railroad intermodal sites and a strong interstate highway grid. “Depending on your supplier base, it can be advantageous to invest there.”
Albuquerque continues putting the Great Recession behind it. The city and environs lost about 7% of jobs in 2008, a loss not expected to be recouped until 2019. Construction, though, has improved and once again drives growth. Most new jobs are in healthcare, which accounts for one out of six metro jobs. Major wins across the state include MCS Industries’ $11.1 million investment in Santa Teresa and Convergys’s upgrade in Rio Grande, creating 250 jobs.
New Mexico has always attracted entrepreneurs and visionaries, says Gary Oppedahl, Albuquerque economic development director and former serial entrepreneur. “Here’s where Smokey the Bear, breakfast burritos and the atomic bomb were invented,” he says. “Big skies help people dream big.”
WHY WE’RE HERE / NEW MEXICO
WHERE Albuquerque, NM
SITE HISTORY Leases 14,000 square feet over two floors in downtown office building.
WHY NEW MEXICO “It all comes down to an earthquake and a woman. I was a student in Taiwan during the horrendous earthquake in 1999, where 4,000 people died. I knew I wanted to start a new life elsewhere. I knew a woman in Albuquerque so I came here.”
BOTTOM LINE “I graduated with a MIS degree in 2004 and started Lavu, a smart-phone payment system, on my kitchen table. The region is beautiful, the cost of living is cheap and people want to help new businesses succeed. The environment here is totally pro-business; a startup gets plenty of support.”