Posted on 05/28/2008 10:54:33 AM PDT by SwinneySwitch
McALLEN - While poor Mexicans cross the border to take advantage of higher wages and a social safety net, their wealthy countrymen are seizing on the slowing U.S. economy to achieve their own American corporate dream.
Anyone unfamiliar with the U.S.-Mexico border region might expect that private investment only flows from north to south. The Mexican side of the border in south Texas is loaded with factories that American companies have opened since NAFTA cleared the way for them to take advantage of inexpensive labor.
But between the two countries, billions of dollars are moving in both directions each year. In South Texas' Rio Grande Valley, Mexicans and their corporations are pouring their money into real estate, businesses and retail shopping on the U.S. side.
Factors at work in the money streaming north include valuable real estate at reasonable prices, a desire to access American consumers, opportunities created by a cooling economy and weaker dollar, as well as amenities such as shopping, South Padre Island and putting distance between their businesses and the kidnappings and drug cartel violence.
"They prefer to purchase land in the U.S. because they consider it good as gold," said Gilberto Salinas, a spokesman for the Brownsville Economic Development Council. "There's money there (in Mexico). We're the ones going to them."
There is no regional data on how much Mexicans are investing in South Texas, but Keith Patridge, president and chief executive of the McAllen Economic Development Corporation, said "the No. 1 misconception is that there's no money in Mexico."
Patridge said he senses "a marked increase in investment moving north from Mexico."
National data reflect that trend.
In 2006, Mexican companies' investment in the U.S. grew by 60 percent to $6.1 billion. U.S. companies' investment in Mexico is far larger, but grew only 13 percent to $84.7 billion during the same year, according to preliminary figures from the U.S. Department of Commerce's Bureau of Economic Analysis. In 1999, Mexican companies' direct investment in the U.S. was $1.7 billion.
In Texas, Mexican companies' affiliates held $1.6 billion in property, plant and equipment in 2005, the most recent year for which state-level data is available from the Commerce Department. That was up from $1.4 billion in 2002, putting Texas second only to California in Mexican direct investment.
Mexican companies operating in the U.S. also account for 4 percent of the jobs attributed to foreign direct investment in Texas, compared to 1 percent for the country overall. An article published by the Federal Reserve Bank of Dallas in November attributed that to "Mexico's proximity to Texas and the market opening under the North American Free Trade Agreement."
Here are just a few recent investments in the Rio Grande Valley:
In January, Monterrey, Mexico-based Grupo Famsa announced the $16 million purchase of century-old Edelstein's Better Furniture chain, which has nine stores in the Rio Grande Valley.
This summer, PIASA, a Monterrey company that sells spices and other seasonings, plans to break ground on a $6 million plant in Brownsville.
This month, Ciudad Victoria developer Grupo Mianca announced an 80-unit luxury condominium project in McAllen.
Economic development officials, real estate consultants and bankers in the Valley say the U.S. is simply a better place to invest.
"The appreciation is three to four times that in Mexico," said David Allex, of Allex International Properties, a commercial and industrial real estate broker on both sides of the border.
Allex, who sees the Texas-Mexico border created by the Rio Grande as "a street with water in it," rather than an obstacle, recently leased a 100,000-square foot warehouse for Famsa in the Valley.
Salinas, of the Brownsville EDC, said his office has been working with a Monterrey, Mexico investor who wants to develop 1,400 acres he owns on the edge of the city that would become the "new front door of Brownsvillle."
Two years ago, Monterrey-based Banorte paid $259 million for a 70 percent stake in Inter National Bank, which has branches all across the 1,200-mile Texas border region, hoping to tap the U.S. Hispanic market and sell cross-border mortgages.
"With the downturn in the U.S. economy, we get calls every day from Mexican nationals wanting to know where the opportunities (for investment) are," said Carlos Garza, Inter National's president and chief executive. With a weaker dollar and the Valley's relatively stable real estate market, "we're seeing tremendous interest from Mexico."
Besides Mexicans buying first and second homes in the area, Garza sees growth in "average-size" investments of $1 million to $5 million.
Familiarity with attractions on the U.S. side of the border is a factor, too, whether it's shopping in McAllen or vacationing on South Padre Island.
"I think there's been a trend over the last several years of Mexican nationals purchasing second homes, vacation homes, in the Valley," said Fred Rusteberg, president and chief executive of International Bank of Commerce-Brownsville. Monterrey residents visit their condos on South Padre Island several times a year and "people from Mexico City are looking for safe environments for their families to relax," he said.
Some say the security situation in Mexico - federal troops coming to the border area to confront drug cartels and the kidnappings in the major cities - has played a role in an investment bump perceived more recently.
An investment of $1 million - or $500,000 in some targeted employment areas - and creating 10 jobs is enough to get visas for an investor's family. In 2007, the U.S. approved 806 investor visas - that included investors from around the world and their family members - according to the Department of Homeland Security's Yearbook of Immigration Statistics. That was a marked increase from the 64 investor visas approved five years earlier, but still a miniscule number. Data on how many were for investments made in Texas were not available.
"Citizens of Mexico who can afford to, are saying, ‘I'm going to move my family out,"' said Patridge of the McAllen EDC.
Pesos ping!
If you want on, or off this S. Texas/Mexico ping list, please FReepMail me.
There is money in Latin America in general. The problem is that it isn’t always secure. So you always take a part of your earnings and invest it in Miami, or Houston, or Los Angeles, so that when the rainy day comes you don’t lose it all.
And if a real storm comes, and you have to pack up your family and leave in a hurry, you always have a place to go.
Investment money always looks for security. It runs from places where your investments can be seized, nationalized, where your kids may be kidnapped and held for ransom, your trucks hijacked, and where the local political machine must be forever placated.
bttt
“There is money in Latin America in general.”
And it’s in the hands of a small group of entrenched oligarchs. Not exactly opportunity for all.
“The Mexican side of the border in south Texas is loaded with factories that American companies have opened since NAFTA cleared the way for them to take advantage of inexpensive labor.”
What do you know, an honest statement about NAFTA. But they weren’t talking about taking advantage of cheap labor when selling that deal in 1993. Nope, it was all the enormous increase in exports US firms would realize selling to Mexico.
Oh man you guys. a lot of that money is narco money. they use it to buy small towns wholesale and then use the banks to launder money back to mexico.
Yeah, I remember that. I was with a group in Macon, GA who were fighting NAFTA. One of the members discovered that the "growing exports to Mexico" figures included the equipment from the factories they were moving down there. One Mexican investment flyer hyped that they would use the money to buy small U.S. companies, then relocate them in Mexico, and "make millions".
Thats part of the problem, there is no such thing as really "entrenched". Someone is always trying to take you down. If the political winds change you could very quickly find yourself on the outs.
So you invest at least a part of what you have in the US. You fly your wife to Dallas when she's due so your kids are born with a blue passport. You never know when that might prove crucial. You get your own visa based on your investments. Again, you never know.
If you are sufficiently well-known, an entertainer for example, you move to LA or Miami so that your personal security becomes much simpler, you're not always worrying about being kidnapped. Or your kids being kidnapped.
In the Latin American system, keeping whats yours very much depends upon having friends in high places in a way that isn't true in the US or Europe. That kind of environment creates an oligarchy. Overthrow that government, put in another, and another oligarchy results, because you still have to have friends in high places. A supposed anti-oligarch like Chavez produces another oligarchy, even more so. Because again, to keep whats yours, you have to be on the ins with the folks who are in.
When rule of law is weak, everything depends upon personal relationships. When private property isn't secure, you always get an oligarchy.
BTT
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