Economic Ties Between Texas and Mexico

Luis Bernardo Torres Ruiz, Ph.D. February 6, 2015 Research Economist International Forum TAR

Contents1. Economic Integration

2. Residential Impact

3. Concluding Remarks

Mexico is the largest export market for TexasTexas Exports by Destination

(Billion $)

Source: Foreign Trade Division, U.S. Census Bureau

(%) of Total Exports Average 2000-2014Q3— Mexico 37.8— Canada 10.1— China 3.7— Netherlands 2.8— Brazil 2.7

Exporting manufactured goods to MexicoTexas Exports to Mexico by Product

(Billion $)

Source: Foreign Trade Division, U.S. Census Bureau

Texas exporting manufactured goods directly and indirectly support jobs in the state

Jobs Supported by Manufactured Exports by State(Thousands)

Source: International Trade Administration, U. Department of Commerce

Product Sharing: U.S. (Texas) and Mexican factories work together to manufacture a good

Value of US Content in Imports from Selected Economies

Country

%

Mexico 40

Canada 25

Malaysia 8

Korea 5

China 4

Brazil 3

European Union 2

Japan 2

India 2

Source: Robert Koopman, William Powers, Zhi Wang and Shang-Jin Wei, “Give Credit Where Credit is Du: Tracking Value Added in Global Production Chains, National Bureau of Economic Research, Working Paper No.16426, March 2011, page 38.

Creating jobs in the Texas border cities when output increases in Mexican maquiladora industry

10% increase in maquiladora output leads to an increase in employment in the adjacent Texas city

City

%

El Paso 3.0

Laredo 3.6

Brownsville 1.9

McAllen 5.9

Source: J. Cañas, R. Coronado, R. Gilmer, E. Saucedo. “The Impact of Maquiladoras on U.S. Border Cities”,Federal Reserve Bank of Dallas, working paper, 2011.

Flow of goods and services create jobs in services, like transportation and warehousing

U.S.-Mexico Trade by Top 10 Land Ports in 2013

City Rank

Total Trade (Billions $)

Share of Total(%)

1. Laredo, TX 168.8 43.1 2. El Paso, TX 66.9 17.1 3. Otay Mesa-San Ysidro, CA 34.8 8.9 4.Hidalgo, TX 26.8 6.9 5.Nogales, AZ 23.5 6.0 6.Eagle Pass, TX 21.7 5.5 7.Santa Teresa, NM 19.9 5.1 8.Bronsville-Cameron, TX 15.4 4.0 9. Calexico, CA 7.3 1.9 10.Del Rio, TX 4.1 1.1 11.Other 2.9 0.7Source: Texas Center for Border Economic and Enterprise Development, Texas A&M International University

Mexican investment supports U.S. (Texas) jobs, with an annual compensation to employees around $65,465*

Mexican Foreign Companies with Operations in Texas

Company

City

Axis Pipe and Tube, Inc. (Prolamsa) Bryan

Bimbo Bakeries USA Inc.(Grupo Bimbo) El Paso, Fort Worth, Rockwall

Bio-PAPPEL International El Paso, Rio Grande City

Borden Milk Products LLC(Grupo Industrial Lala) Austin, Dallas

Cemex Cement(CEMEX) El Paso, Houston, New Braunfels, Odessa

Elamex USA Corp(ACCEL Group) El Paso

Metalsa Light Truck Inc.(Grupo Proeza) San Antonio

Mission Foods Inc.(Gruma) Irving, San Antonio

* Bureau of Economic AnalysisSource: Office of the Governor The State of Texas

Contents1.Economic Integration

2. Residential Impact

3. Concluding Remarks

Approximately 65 percent of buyers from Mexico purchased properties in Texas

Mexican Home Purchases by State(%)

Source: National Association of Realtors. 2014 Profile of International Home Buying Activity

Sales price of Mexican purchases are below all other categories, while the peso/dollar exchange rate had a negative effect in 2014

Median Sales Price($)

Source: National Association of Realtors, 2014 Profile of International Home Buying Activity and Real Estate Center at Texas A&M University

Average Sales Price ($)

Source: National Association of Realtors, 2014 Profile of International Home Buying Activity and Real Estate Center at Texas A&M University

Of the markets of greatest interest for Mexican buyers, four are in Texas: El Paso, Houston, Laredo and San Antonio

Financing by Mexican Purchase(%)

Source: National Association of Realtors. 2014 Profile of International Home Buying Activity

Type of Purchase(%)

s.a./ Seasonally adjusted. Source: Real Estate Center at Texas A&M University.

Contents1.Economic Integration

2. Residential Impact

3. Concluding Remarks

Concluding Remarks The Texas and Mexican economy are highly integrated The state’s relationship with Mexico is of complementary, not

economic rivals Texas and Mexico trade occurs in the context of production

sharing (vertical integration) Texas border is especially integrated with Mexico In addition to trade, Mexicans have significant important foreign

investment in Texas Mexican economic growth has a positive impact for the Texas

economy Possible further long-run integration can be boosted by the

recent energy reform in Mexico and immigration reform (aging labor force in the U.S.)

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