Mexico’s valuable impact on the U.S. economy

By Ben Gonzalez
Managing Director, Borderplex Region

For the casual observer of world news, coverage of recaptured Mexican drug kingpin “El Chapo” and political rhetoric about illegal immigration and border security have dominated the airwaves when it comes to U.S.-Mexico relations.

But there’s a bigger story about the U.S. and Mexico that is getting lost in election season speech-making.

Legitimate U.S.-Mexico cross-border trade is a massive business; one that brings billions in wealth daily to both countries and one that should do well in 2016. It’s a positive story that unfortunately has gotten buried by fears about cartel violence, corruption and border security.

Mexico is the United State’s third largest trading partner, after China and Canada, with 2015 total bilateral trade of $489.4 billion — $217.8 billion in exports and $271.6 billion in imports. It is the United States’ second largest export market.

Texas’ 1,254-mile long border with Mexico and its multiple border crossings make Texas the largest port-of-entry for goods traveling from Mexico into the United States and goods heading from the U.S. into Mexico, according to the Texas Comptroller of Public Accounts. In El Paso, approximately $55.0 billion in goods cross from Mexico via freight every year.

The “Paso del Norte” bridge in El Paso is one of the busiest U.S. border crossings, with about 20 million people crossing the border at that location every year.

As an investment bank focused on middle-market mergers and acquisitions, Capital Alliance Corp. (CAC) last year opened an office in El Paso in response to the growing demand of family-owned businesses along the border who want to invest in Mexico, grow their businesses on either side of the border, or carefully plan and maximize their exit strategies through a sale of their companies to carefully selected financial or strategic buyers.

We are the first M&A-focused private investment bank to set up shop in El Paso and offer investment banking services throughout the Borderplex region, which includes not only El Paso, but also Ciudad Juarez and southern New Mexico. We believe the region’s concentration of family-owned businesses and the powerful maquiladora industry bode well for expanding economic prospects here and throughout Mexico, and we see tremendous long-term potential in various asset classes and investment opportunities. In addition to sale transactions, the area should be able to attract businesses to grow the supply chain to the maquiladora industry, which has been hampered by availability of financing/growth capital in the local economy.

This is an exciting time to be situated on the border. Mexico’s energy reforms coupled with investments in its transportation infrastructure indicate a strong commitment toward a growing international economy. Huge opportunities exist along the border in energy, water, health, manufacturing, and infrastructure.

In 2011 the World Bank ranked Mexico as the easiest place in Latin America to do business, and Goldman Sachs’ research on emerging markets estimated the Mexican economy will become the world’s fifth largest economy by 2050, according to a report by Arizona State University and the New Policy Institute.

The Americas Society/Council of the Americas, two entities that promote economic development in the Western Hemisphere, produced a fact sheet in 2013 with five reasons why the U.S.-Mexico border is critical for the U.S. economy:

  1. U.S.-Mexico trade surpasses $1 billion every day, with the vast majority of bilateral commerce crossing our land border.
  2. Millions of U.S. jobs depend on U.S. trade with Mexico—and facilitate efficient cross-border commerce.
  3. Key U.S. industries vital to our national economy depend on Mexico.
  4. Mexico is on the rise, with a growing middle class looking to legally cross our border to spend significant tourism dollars in the United States and invest their money in personal and commercial real estate, venture capital and other strategic investments
  5. Border communities throughout the U.S. depend on Mexico to keep their economies growing.

There’s a positive story to be told about U.S.-Mexico economic opportunities. With our new office situated in El Paso, CAC hopes to play a major part in helping companies and individuals who wish to explore economic opportunities in the Borderplex region and further south of the border.