Chapter 8

Enhancing Our Relationship with

Pima County Economic Development Plan UPDATE THROUGH 2018 Chapter 8

Pima County Economic Development Plan UPDATE THROUGH 2018 manufacturers in Nogales are increaslingly high tech and need supply chain, worker training and logistical support that Pima County is uniquely situated to provide.

exico is the third largest trading Mexican side of the border, which appears to be partner for the United States and part of an effort to comply with United States M the first for Arizona. Total trade in anti-money laundering regulations. However, 2015 was $532 billion, and in 2015, Arizona’s this action is having an adverse impact on legit- exports to Mexico were nearly $9.2 billion. imate border businesses and impacts our abil- ity to attract Foreign Direct Investment (FDI) Pima County and Mexico share a longstand- from all countries. The County will continue to ing relationship and deep cultural ties; and the explore avenues to address this issue and con- Mexican state of and Pima County share tinue to encourage cross-border investment. major industries, such as aerospace, manufac- turing, mining and tourism. Pima County is 2. Nearshoring. taking the appropriate steps to collaborate with our neighbors south of the border. In initiating China’s labor and shipping costs continue to these relationships, we have identified a number rise, and quality is declining. Mexico is offering of benefits to expand upon, as well as limitations high-skill, low-cost manufacturing; and many that require cross-border collaboration to im- United States manufacturers are relocating to prove trade and tourism. With increased collab- Mexico from Asia (nearshoring). Foreign auto- oration, we can improve our region’s economic motive manufacturers are also targeting Mexi- growth and resulting employment growth. co for expansion of their operations. Nissan has constructed a $1.4 billion manufacturing facili- A. The Cost of Doing Business for ty, and Volkswagen is implementing a $1 billion Import/Export: Banking, Nearshoring expansion of its existing Mexican facility. Audi and Port of Entry Efficiency also plans a Mexican factory to produce vehi- cles for export to Europe, the United States and 1. Banking. other markets.

Some United States banks are closing accounts The Maquiladora industry in Nogales, Sonora of certain customers with operations on the includes approximately 110 assembly-for-export

UPDATE THROUGH 2018 Pima County Economic Development Plan chapter 8 | 1 to Canada SALT LAKE CITY

LAS VEGAS

HENDERSON California PHOENIX LOS ANGELES Tucson SAN DIEGO Texas NOGALES EL PASO HOUSTON

HERMOSILLO SAN ANTONIO GUAYMAS SONORAN CROSSROADS Mexico Tucson is the crossroads of three LOS MOCHIS of the world’s largest economies; CULIACÁN California to the West, Texas to the East and Mexico to the South.

plants that employ an estimated 40,000 people, the products’ shorter lifespan. In 2015, over many of whom have visas to cross into the Unit- 319,000 trucks crossed the Nogales POE. The ed States for tourism and shopping or actually private sector has suggested it will take more live in southern Arizona. We also have an op- than additional Customs officers at the Port. portunity to identify distribution companies in It will require all key process stakeholders to Pima County to provide locations for engineer- find common ground to improve the systems ing, quality control and distribution support of of transporting goods across the border. Pima companies in the Maquiladora industry. County supports the development of technol- ogy and improved processes on both sides of 3. Port of Entry Efficiency. the border to make us more competitive with Texas and California, both of which have ex- The Mariposa Port of Entry (POE) at Nogales, perimental programs in place. a $250 million expansion and moderniza- tion project, has been completed. It is now a In July 2016, US Customs and Border Pro- state-of-the-art facility that is already creating tection (CBP) Nogales Commercial POE opportunities by increasing capacity of im- (Mariposa) initiated a “proof of concept” for port goods and produce, and it has decreased a unified processing of cargo by CBP and SAT the wait for truckers. However, a significant (Mexican Customs). The primary goal of the adverse impact on cross-border trade still “proof of concept” was to determine whether continues to be border delay. United States the unified processing of FAST lane shipments and Mexican companies face higher transpor- would decrease the transit time of interna- tation costs as a result of lengthy border wait tional cargo, thereby increasing security and times and intrusive (duplicated) inspections. reducing cost of doing business. After a 30-day These costs are passed on to consumers. In review, the results were better than expected: addition, time-sensitive products, such as 22 percent of all laden trucks are being jointly fresh fruits and vegetables and other agricul- processed by CBP and SAT; 20 minutes is the tural commodities, are placed at risk due to average crossing time from Nogales, Sonora to

2 | chapter 8 Pima County Economic Development Plan UPDATE THROUGH 2018 Nogales, Arizona for unified cargo processing states that tend to have a more coordinated (UCP) shipments; with reductions of up to 85 approach. The County will increase our efforts percent in in-transit transportation costs for to develop relationships on both sides of the the unified proof of concept participants. In border to increase efficient border-crossing September 2016, CBP and SAT met in Mexico awareness and work toward solutions that City to discuss the first 30-day review. As a make Arizona POEs more competitive, easier result, it was agreed that workgroups would to use and quicker to assess. be formed to evaluate whether the expansion of the unified proof of concept would be fea- B. Strengthen Our Relationship with sible for other ports within Arizona (Douglas Guaymas, Port of Guaymas and Port and San Luis). It was also agreed that unified of Tucson inspections would be expanded to include “all” Fast lane users, including produce, effective To thrive in the future economy, we must re- October 3, 2016. alize Pima County is part of the international marketplace and is situated at a crossroads for 4. Over-stop. foreign trade. By focusing on import distribu- tion and export concentration, it is possible Other challenges include varying interpreta- to increase the region’s participation in the tion and execution of border crossing proce- international marketplace. dures by each agency at the POE. This lack of coordination leads to an increase in wait times The Port of Tucson is certified to handle in- and a resulting increase in cost of products ternational containers for import and export coming across the border, which makes Ar- operations. The availability of onsite Customs, izona less competitive with our neighboring intermodal capability, existing infrastructure

Mexico is investing millions of dollars upgrading the Port of Guaymas.

UPDATE THROUGH 2018 Pima County Economic Development Plan chapter 8 | 3 and land at the Port of Tucson to accommo- container ship loading facilities at Empalme by date immediate growth, as well as a “can-do” 2020. The expanded rail yard in Empalme is approach to meeting unique market demands, being designed to maximize the flow of con- provides a cost effective doorway to national tainer rail cars from and to these docks. and international markets for the region. In order to enhance the capability of this regional Due to federal funding cuts, the Port of Guay- asset, Pima County sponsored a successful $5 mas expansion has not been expanded as million TIGER Grant to provide high-speed planned. The Port is still open for business, switching of trains off the main Union Pacific and the Port of Guaymas Authority is seeking Sunset Line, thereby reducing cost and tran- private investors to move forward with the sit time for cargo. This unique capability can expansion project plans, with concessionaire be rapidly expanded to accommodate a broad opportunities for investors. range of bulk and finished products that can be shipped in a container or flatbed rail car. The significant increase in the capacity of the Port of Guaymas provides a critical gateway Pima County will renew our efforts with state for expanding regional imports and exports. and federal highway counterparts to allow We must focus on developing the appropriate transit of heavy loads on southern Arizona infrastructure and marketing programs to

The Port of Guaymas is in the process of a $300 million upgrade that initially will dredge the channels to handle larger ships, followed by development of new facilities on reclaimed land to more than double the bulk cargo capacity highways in order to accommodate interna- position the Arizona/Sonora region as the next tional containers and avoid the costly need to major gateway to the Pacific/Asian markets, as break contents down into smaller loads. Desig- well as the rapidly expanding markets in Cen- nating a heavy haul route from Douglas to Tuc- tral and South America. Our unique geograph- son will result in immediate economic return ic location at the crossroads of the north/south based on the mining industry in Mexico. and east/west trade routes for this region is an asset that must be maximized. Another key regional factor in international trade is the Port of Guaymas. This port is in C. Strengthen Rail Service and the process of a $300 million upgrade that ini- Customs Capacity at the Border tially will dredge the channels to handle larger ships, followed by development of new facili- With the increased traffic projections from ties on reclaimed land to more than double the the Port of Guaymas and minor infrastructure bulk cargo capacity of the current port. This is modifications, Union Pacific/Ferromex indi- critical to the region’s mining industry as more cates the transport capacity of the current infra- minerals, bulk and refined, are exported to off- structure between Tucson and Guaymas could shore markets through the Port of Guaymas. easily double. However, the growth of the Port This phase of the expansion was scheduled to of Guaymas is not the only driver of increased be completed by 2017, but lower oil prices have rail traffic. After extensive testing, it has been impacted the progress, and the completion determined that certain types of produce can may be delayed to 2018 or 2019. Commensu- be successfully and efficiently shipped by rail to rate with this growth in capacity, the rail yard distances as far as the US East Coast. Increased at Empalme is also being expanded to handle industrial activity in Sonora, particularly in the the increased volume of bulk materials being aerospace and maquiladora industries, will also shipped. The second expansion phase of the increase cross-border trade and offer increased Port of Guaymas will create three additional opportunity for Arizona exports.

4 | chapter 8 Pima County Economic Development Plan UPDATE THROUGH 2018 It is vital the federal government add Customs staff and improve infrastructure to speed the flow of goods across the border.

Developing appropriate sidings and other rail truck traffic. This will occur primarily through infrastructure to encourage efficient rail activ- infrastructure improvements and technology, ity must be a priority to remain competitive. as well as staffing. The short-term solution It should be noted the Nogales line of Union is increased staffing at the Land POE. Of the Pacific Railroad is only one of six rail POEs in 2,000 new Customs officers authorized nation- the US and the only one in the State of Arizo- wide in the FY 2013/14 federal budget, Arizona na. This line is currently being upgraded on was allotted 170; 120 in Nogales, 25 in Douglas both sides of the border; the timber bridges are and 25 in San Luis. Training for new officers being replaced with concrete structures that takes about a year. Currently, United States would allow for additional loading. The present Customs has a team of 10 officers (5 per shift) maximum weight limit is 268,000 pounds; the to inspect north- and southbound trains, and weight limit will be increased to 286,000 per inspection is on average one hour per train. car with the upgrades. This upgrade is being completed in Arizona at a cost of more than $8 With the completion of the Mariposa POE, it million. The Mexican railroad Ferromex has is imperative staffing levels for Customs agents already completed its portion of the upgrade. are increased appropriately to minimize car, truck and pedestrian delays, as well as provide Delays at the border are costly. There are seri- sufficient staff to inspect trains in a timely and ous competitive threats to Arizona when goods responsible manner. Recent legislation initiat- can cross the border at Calexico, California; ed by both Arizona Senators to allow transfer Santa Teresa, New Mexico; and Texas to the of separating military personnel to Customs east, often with shorter wait times. For Arizona and Border Protection should reduce the time to compete with these other border crossings, required to get officers in place at the POEs. we must ensure timely movement of rail and Significant progress has been achieved by a

UPDATE THROUGH 2018 Pima County Economic Development Plan chapter 8 | 5 new consolidated truck inspection program from Mexico comes back to the United States; where joint inspections occur at the US facility a quantity 10 times greater than the 4 cents in Nogales. This new program has reduced av- returning for each dollar paid on Chinese im- erage inspection times from 3 to 5 hours to 45 ports. Six million United States jobs depend on minutes and is being replicated at other POEs. trade with Mexico. Pima County also arranged for Consul Pineda to present to the Arizona D. Educate Southern Arizona State Transportation Board, the focus of his Businesses and Citizens About Cross- presentation being on coordinated transpor- border Opportunities and Make It tation infrastructure across the region. The Easier for Mexico-based Businesses to Mexican government has already committed Operate in Pima County to investing $1 billion to improve Highway 15 that connects central Mexico with Nogales, In order to help establish and improve which will provide better flow of commercial cross-border relationships and communication and light vehicle traffic. with private, local, state and federal contacts in Mexico, the County has employed a bilin- Pima County is completing construction of gual/bicultural Coordinator of Economic De- an economic development web page to serve velopment and International Projects to focus as a regional resource guide and tool to pro- primarily on coordination of these efforts with mote business opportunities in the County Sonora. The Coordinator has participated in and attract business and investment from mission trips to cities in Sonora and Sinaloa, Mexico. Valuable resource information from meeting with local and state government the US Census, Eller College at The University officials, as well as economic development and of Arizona, and the Maricopa Association of maquiladora officials, to establish relation- Governments makes the web page valuable to ships and educate about the roles of counties site selectors and business developers looking

The University of Arizona has had ties with its educational counterparts in Mexico for decades; but activity in this area is increasing at an impressive rate

(Mexico does not have counties) and how for demographic and sector information. In Pima County is leading efforts to help facil- addition, Pima County has fully supported itate the process of business expansion and the promotion of BIEN (Building an Inter- establishment for Mexican businesses in our national Economic Network, http://www. region. Pima County has partnered in these connectbien.com), which was developed by efforts with the Arizona-Mexico Commission, the Maricopa Associations of Governments as Tucson-Mexico Trade Coalition, the Greater a business-to-business e-platform to connect Nogales Santa Cruz County Port Authority, individual businesses across international Tucson Hispanic Chamber of Commerce, PAG, boundaries in Mexico and Canada. BIEN is a Maquiladora Association of Nogales, Maricopa valuable tool for our entire region to encourage Association of Governments and the Consulate local businesses to become more involved in of Mexico, among others. international trade. The BIEN website is avail- able in Spanish, French and English. In April 2014, Consul Ricardo Pineda from the Consulate of Mexico in Tucson presented to Educational institutions also can play a role the Board of Supervisors and the public about here. The University of Arizona has had ties Mexico’s growing economy and the importance with its educational counterparts in Mexico for of the United States-Mexico relationship. Con- decades; but activity in this area is increasing sul Pineda shared important data, including at an impressive rate, exposing students from that 40 cents of every dollar spent on imports Mexico to the values and opportunities in

6 | chapter 8 Pima County Economic Development Plan UPDATE THROUGH 2018 Supervisor Ray Carroll at the opening of the Vamos a Tucson office in , Sonora. The office is a joint tourism and economic development initiative of Visit Tucson, Pima County and the City of Tucson.

Arizona and Pima County. With a large enroll- is one of only a few community colleges in the ment from Mexico, the University participates United States that is working with Televisa in many cooperative programs with their Foundation (a foundation of the largest Span- counterparts in Mexico. During a recent trade ish-speaking media conglomerate in the world), mission to Mexico led by Governor Ducey, Uni- the Mexican Ministries of Education and versity of Arizona President Ann Weaver Hart Foreign Relations, and Santander Bank. Since signed an agreement with Universidad Nacio- 2014, PCC has hosted a group of 175 students nal Autónoma de México for the establishment from Mexico funded by these organizations. of the Center for Mexican Studies, making the Since 2015, PCC has hosted a group of 53 stu- University a Center of Excellence and focal dents and will be one of only two colleges sup- point for foreign students from Mexico study- ported by the US State Department to facilitate ing in Arizona. the granting of J-1 visas to these students.

In addition, Pima Community College (PCC) In February 2016, Supervisor Ray Carroll and has signed a Memorandum of Understanding the Mayor of Rocky Point participated in a two- with the Technological Institute of Sonora day exchange. The purpose of the exchange and will work together to develop dual degree was to develop economic and cultural ties and programs (like the International Management increase awareness of the role of Pima Coun- Binational Program), student and faculty ty in Mexico, as well as to promote improved exchanges, and other projects. Since 2015, 26 communication and cooperation in the region. ITSON professors have visited PCC for summer ESL and pedagogical training. These bination- On June 8, 2016, Supervisor Ramón Valadez al connections and projects will help people met with Sonora Maquiladora Association on both sides of the border become aware of members in Nogales, Sonora to discuss eco- cross-border opportunities. Furthermore, PCC nomic partnerships between Pima County

UPDATE THROUGH 2018 Pima County Economic Development Plan chapter 8 | 7 and the Association begun in 2015 to discuss in this plan. We are currently in the early stag- supply chain and logistics synergies between es of developing the appropriate partnerships southern Arizona and Northern Sonora. After between the health and wellness community, a tour of MTD Products, a Maquiladora that Pima County, Visit Tucson and identifying oth- produces nearly all of the major brands of ers to participate in developing a plan to reach handheld landscaping equipment and ma- out to Mexico for medical tourism. chinery, Pima County Economic Development Director Dr. John Moffatt and Supervisor One of the largest opportunities for growing Valadez made a presentation to the Associa- existing businesses or recruiting new compa- tion regarding the County’s Sonoran Corridor nies is next door in Sonora and in other Mexi- planning and capitalizing on local and interna- can states. Mexico is the third fastest growing tional supply chain opportunities and a surge economy in the world and is at our doorstep. in economic development in Northern and Over $22 billion per year in goods crosses into Western Mexico, including Nogales, Hermosil- Arizona from Sonora alone. Roughly 40 percent lo and the port of Guaymas. ($8.8 billion) is from products that originated in the US and were sold to the Maquiladora indus- E. Increasing Mexican Tourism and try in Sonora, only to return to the US as a part Commerce of another product. The Maquiladora industry in Sonora has asked Pima County, Sun Corridor On January 1, 2014, Mexico’s federal sales Inc., and the Pima Association of Governments tax in border cities and towns increased to 16 (PAG) for assistance in developing local, more percent from 11 percent. Historically, Mexican reliable supply chains for not only materials,

On average, Mexican consumers spend an estimated $8 million per day in Arizona. Mexico is the third fastest growing economy in the world. Over $22 billion per year in goods crosses into Arizona from Sonora alone. consumers have traveled to the United States to but services such as metal finishing, machin- purchase products ranging from food and gro- ing, injection molding and logistics support for ceries to electronics and clothing. Local busi- products crossing the border. Pima County’s ness leaders in Nogales predicted Mexico’s sales Economic Development team and International tax hike would spur Sonoran border residents Projects Coordinator will work closely with Sun to do more shopping in Arizona, which has been Corridor Inc. and PAG to ensure we take advan- the case. On average, Mexican consumers spend tage of this opportunity. an estimated $8 million per day in Arizona. In November 2014, Pima County, in a joint The economic benefit of Mexican shoppers was venture with Visit Tucson and the City of negatively impacted by unfortunate State legis- Tucson, held a ribbon-cutting ceremony for lation and anti-immigration rhetoric. However, a Hermosillo, Sonora business office located in 2014, the Pima County Board of Supervi- in the Vamos-A-Tucson (Visit Tucson) offices. sors unanimously approved a measure that Pima County Supervisor Ray Carroll attended declares the region an “immigrant welcoming this ribbon cutting, which was part of a larger county.” We continue our financial support for three-day trade mission to Sonora and Sinaloa. Visit Tucson and coordination efforts to wel- Supervisor Carroll met with the Mayor of come Mexican tourists and have them enjoy Hermosillo and with several members of the our hospitality and lower sales tax rates. We Sonora State Congress to establish a stronger are also fully engaged with Visit Tucson and relationship and discuss partnership opportu- the medical community to enhance medical nities. This space will serve as an information tourism from Mexico as discussed previously source and coordination point for Mexican

8 | chapter 8 Pima County Economic Development Plan UPDATE THROUGH 2018 M1 Baseball, a Mexican professional baseball league, brought four teams to Kino Sports Complex for spring train- ing in 2015. corporations and entrepreneurs seeking infor- strategic decisions that leverage our strengths mation about doing business in Pima County. and facilitate cross-border trade and tourism The County will have a regular presence and in both directions is important to the econom- will continue its efforts in promoting these ic growth of our region. Active recruitment of relationships with Mexico. We want to ensure FDI and engagement with our local, state and our neighbors feel welcome and that we are federal partners to address the current con- available to facilitate the process. We already straints are critical elements to realizing these have one company seriously considering Pima opportunities. As discussed in several chapters County for consideration. of this plan, Pima County is dedicated to max- imizing opportunities for our local businesses The largest population of international students and encouraging more FDI in our region. at PCC comes from Mexico. With geographic proximity, most of these students and their F. Mexican Baseball families are able to travel extensively to and from Mexico; creating a network of actual and The largest single attendance at a Major potential consumers in Pima County. Further, League Baseball spring training game was many of these young students will become the between the Arizona Diamondbacks and the future business and industry leaders who will Mexican National Team. Mexican baseball engage in bi-national commerce and tourism. continues to be extraordinarily popular in Mexico, and ongoing discussions have been Mexico offers many opportunities for southern held with the owners of a Mexican Minor Arizona and Pima County, but we have seri- League baseball team. Negotiations have ous competition to the east and west. Making recently been completed with M1 Baseball,

UPDATE THROUGH 2018 Pima County Economic Development Plan chapter 8 | 9 LLC of Woodlands, Texas to secure long-term Mexican Minor League baseball teams’ use of ACTION ITEMS Kino Sports Complex. 8.1 Identify distribution companies in Pima County to provide locations for engineering, quality control and An eight-month lease for one Minor League distribution support for companies in the maquiladora industry. team, Rojos del Águila de , comprised of 40 players and 10 coaches, is for the oper- 8.2 Complete the County economic development web page to serve as a regional resource and tool to attract ation of a baseball academy at Kino Sports business and investment from Mexico. Complex to develop Minor League players for 8.3 Continue to foster relationships on both sides of the Major League Baseball. They also hosted three border to increase border-crossing efficiency and to make Mexican baseball league teams for spring Arizona POEs more competitive with quicker access and training in March 2015 and played 12 exhibi- easier use. tion games in Kino Stadium over the last three 8.4 Continue to promote development of infrastructure weekends in March. The Mexican baseball that maximizes our unique geographic location at the league (officially known as Liga Mexicana de crossroads of the north/south and east/west trade routes. Beisbol–LMB) teams includes Rojos del Águi- 8.5 Continue advocating at the federal level to increase Customs staffing to expedite border crossing for trucks la de Veracruz (located in Veracruz), Diablos and trains. Rojos del México (located in Mexico City), 8.6 Continue our efforts with Sun Corridor Inc. and PAG Tigres de Quintana Roo (located in the Yucat- to assist the Maquiladora industry in Sonora, Mexico in an Peninsula), and Toros de Tijuana (located developing local, more reliable supply chains for materials in Tijuana). All training and games will be and manufacturing-related services. televised across Mexico and in the southern 8.7 Continue to foster the County’s positive relationship United States through a baseball television with the Consulate of Mexico in Tucson to help facilitate program owned and produced by the Rojos del the establishment and expansion of Mexican businesses in our region. Águila de Veracruz team that is available on Latino sports programming. This agreement 8.8 Continue financial support of Visit Tucson and its efforts to encourage Mexican tourism in Pima signals the return of professional baseball to County, including enhancing medical tourism through Kino Sports Complex. partnerships with our region’s wellness community. 8.9 Maintain a regular County presence at the Visit In addition, the sixth annual Vamos a Tuc- Tucson (Vamos-A-Tucson) office in Hermosillo, Mexico son Mexican Baseball Fiesta was held at the to encourage and facilitate Foreign Direct Investment and Mexican companies doing business in Pima County. County-owned Kino Stadium in fall 2016. The tournament included some of the most popular 8.10 Continue efforts to increase Mexican Major League Baseball, including Spring Training and Spring Training teams in Mexico; and over the four-day event, games, at Kino Sports Complex. attendance was nearly 12,500, despite inclem- ent weather.

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