MONTERREY, Mexico (By Heather Wells, Arizona Republic)
February 20, 2004 -
When Arizona businesses look south to Mexico, they see Sonora and
Guadalajara and Mexico City.
What they don't see - and what Gov. Janet Napolitano would like them to see - is Monterrey, a behemoth of industry about 150 miles south of El Paso.
Monterrey, in the words of Gail Howard, Napolitano's policy adviser for economic development, is a "sleeping giant," a city of 3.3 million people, a hub of manufacturing with a rising middle class, a better-than-average level of education and a business climate that is unequaled in Mexico.
Yet it has been 15 years since the first Monterrey-based company opened in Arizona, and little has come of sporadic efforts to build trade between the two areas.
Napolitano set out to change that last May, when she visited Monterrey. Her mission was intended to stir up interest in expanding trade and cross-border business between Arizona and Nuevo Leon, the state in which Monterrey is located.
During the trip, Napolitano noted that Monterrey and Phoenix have a lot in common: Both are large border cites with similar economies and a burgeoning interest in "knowledge" industries such as health care and biotechnology.
But nine months later, not much has happened to jump-start the relationship. The only direct flight between the cities has been canceled, and Arizona businesses have not shown much interest in developing the relationship.
Arizona's economic-development efforts have traditionally focused on other parts of Mexico, particularly Sonora, Arizona's neighboring state. The state's only trade offices are in Hermosillo and Guadalajara.
But the strategy has not been working. Since the North American Free Trade Agreement was implemented in 1994, Arizona's trade with Mexico, while rising in dollars, has dropped in terms of market share.
California and Texas accounted for well over half of all exports to Mexico and just under half of all imports from Mexico in 2002, according to a study by Thunderbird, the Garvin School of International Management in Glendale. Arizona claimed only about 4 percent of exports and imports.
Even far-off Michigan does more trade with Mexico than Arizona.
"We woke up and realized what a sleeping giant it was and thought we ought to try to pursue this a little more aggressively," Howard said. "We have a very long relationship with Sonora; we have a trade office in Guadalajara. We have made numerous trips to Mexico City, including trips by other governors as well as Governor Napolitano, but we had really not done much in Monterrey."
Why Monterrey?
Mexico's third-largest city is home to just under 5 percent of Mexico's population, yet it accounts for 9.4 percent of Mexico's manufacturing and about 8 percent of Mexico's gross national product.
Alejandro Gomez, director of foreign investment for the state of Nuevo Leon, said there are 1,700 foreign companies currently operating in the state, most from the United States. Companies come mostly because of the labor force, Gomez said. Wages are low, as in all of Mexico, but workers in Monterrey tend to be better-educated and more skilled than elsewhere. The educational attainment level in Monterrey is three years above the national average.
Howard said Monterrey also has a very Americanized business community.
"If you were a U.S. company thinking about having a relationship with a Mexican company or going into Mexico, I can see how Monterrey would be great launching spot, because English is so widely spoken," she said. "It's a pretty comfortable place for American companies to come in."
The two universities recently launched a dual master of science program designed to develop the next generation of aerospace entrepreneurs and began collaborating on biotechnology research and teaching.
ASU's College of Education partners with Tec's College of Education, and ASU is working to develop a doctorate in education that will be offered to Tec faculty. The universities also are working on developing a joint doctorate in construction management, as well as offering online construction-training courses in Spanish and English for students of both universities.
Claudia Navarro, assistant director of ASU's Office of the President Pan American Initiatives, said that all told, the universities are working on 15 projects in three main areas: education, biotechnology, and technology and new materials.
Navarro said ASU and Tec had been working together for years before Michael Crow was hired as ASU's president more than two years ago, but the ties tended to be professor-to-professor. In fact, Tec's president never had visited the ASU campus until Crow invited him. The first time they met, they hit it off, Navarro said.
"What holds Tec and us together is that both presidents have a very similar focus of education and how you should engage with international partners," she said. "Now we have a structure of relationships between both institutions. We make sure that things are happening."
Tec President Rafael Rangel said he hopes for even more collaboration, including programs addressing the growing Hispanic population in Arizona.
"I am very happy, especially with the new projects for high-tech entrepreneurship, education for low-income students, etc., that I have been discussing with the president of ASU," he said. "I hope that we can have joint degrees, teaching programs and - why not? - facilities."
Phoenix businessman James C. Malee, who has been traveling to Monterrey for more than 20 years for his engineering company, welcomes the educational initiatives.
"There are some energetic, talented people in Mexico that just don't have the opportunities we have in the United States," he said. "If we break down the education barrier, it will increase economic development and further relationships."
The biggest obstacle may be history.
Only 150 miles north of Monterrey, Texas has a long relationship with Nuevo Leon.
"It's been a struggle convincing (Mexican businesses) that (Arizona) is a good place to do business when it's not very convenient and when they have a lot of other good options that are more convenient," Howard said. "I think ASU is a good argument, but are they a better argument than the University of Texas? I'm not so sure."
Although there is a lot of wealth in the northern Mexican state and a lot of people who like the things Arizona is known for - golfing and shopping - they tend to turn to Texas first, she said. Texas commands 22 percent of all imports into the United States from Mexico and 43 percent of all exports.
"We're in diapers, basically," said Fernando Jimenez, Mexico liaison with the Arizona Department of Commerce. Arizona businesses are "just not that interested. They think (Mexico) only buys from Texas."
Arizona also lacks direct airline flights to Nuevo Leon, while Houston and Dallas both offer daily non-stop flights. America West Airlines ended its direct flight between Phoenix and Monterrey in October after about a year-long experiment. Airline officials said there wasn't enough business.
The Arizona Department of Commerce tried to persuade America West to keep the flights, arguing that with more time and better marketing, they could become profitable, Jimenez said.
"Now it's going to be even harder" to promote trade between the two places, he said.
The cancellation of the flights and the lack of any real success story since Napolitano's trip already are having an effect, Howard said.
Nuevo Leon officials have "cooled down," she said. "They were really hot on us. They were very anxious, partly because they really like the governor, they really like Crow, they really like the team that we have in place, but I can see that they've cooled off already. I think right now we are probably not much better off than we were a year ago."
Howard said the state has two possible strategies. One is to get as many things as possible going with Monterrey at once, and the other is to find one really tight, strong connection and develop that. To accomplish either, Howard said, Arizona needs to get more sophisticated about its approach to international trade.
"Phoenix, in general, is just not a household name around the world," Howard said. The state needs to "get better known," then it needs to poll businesses and figure out the best trading partners to go after, she said.
Arizona might be better off developing a solid relationship with Guadalajara, she said. "Get ourselves well-known in Guadalajara, build a lot of business connections, get our business community very accustomed to doing business in Mexico, and then maybe in a couple of years that could become the basis for a relationship in Monterrey, instead of trying to work them both simultaneously and not doing either one very well."
"You'll never stop having an interest in a market that is that dynamic," Howard added.
What they don't see - and what Gov. Janet Napolitano would like them to see - is Monterrey, a behemoth of industry about 150 miles south of El Paso.
Monterrey, in the words of Gail Howard, Napolitano's policy adviser for economic development, is a "sleeping giant," a city of 3.3 million people, a hub of manufacturing with a rising middle class, a better-than-average level of education and a business climate that is unequaled in Mexico.
Yet it has been 15 years since the first Monterrey-based company opened in Arizona, and little has come of sporadic efforts to build trade between the two areas.
Napolitano set out to change that last May, when she visited Monterrey. Her mission was intended to stir up interest in expanding trade and cross-border business between Arizona and Nuevo Leon, the state in which Monterrey is located.
During the trip, Napolitano noted that Monterrey and Phoenix have a lot in common: Both are large border cites with similar economies and a burgeoning interest in "knowledge" industries such as health care and biotechnology.
But nine months later, not much has happened to jump-start the relationship. The only direct flight between the cities has been canceled, and Arizona businesses have not shown much interest in developing the relationship.
Arizona's economic-development efforts have traditionally focused on other parts of Mexico, particularly Sonora, Arizona's neighboring state. The state's only trade offices are in Hermosillo and Guadalajara.
But the strategy has not been working. Since the North American Free Trade Agreement was implemented in 1994, Arizona's trade with Mexico, while rising in dollars, has dropped in terms of market share.
California and Texas accounted for well over half of all exports to Mexico and just under half of all imports from Mexico in 2002, according to a study by Thunderbird, the Garvin School of International Management in Glendale. Arizona claimed only about 4 percent of exports and imports.
Even far-off Michigan does more trade with Mexico than Arizona.
Beyond Sonora
While Napolitano said that she wants Arizona to continue its relationship with Sonora, she said it's time to look beyond, to powerhouse states like Nuevo Leon. Officials began seriously looking at Nuevo Leon about 18 months ago."We woke up and realized what a sleeping giant it was and thought we ought to try to pursue this a little more aggressively," Howard said. "We have a very long relationship with Sonora; we have a trade office in Guadalajara. We have made numerous trips to Mexico City, including trips by other governors as well as Governor Napolitano, but we had really not done much in Monterrey."
Why Monterrey?
Mexico's third-largest city is home to just under 5 percent of Mexico's population, yet it accounts for 9.4 percent of Mexico's manufacturing and about 8 percent of Mexico's gross national product.
Alejandro Gomez, director of foreign investment for the state of Nuevo Leon, said there are 1,700 foreign companies currently operating in the state, most from the United States. Companies come mostly because of the labor force, Gomez said. Wages are low, as in all of Mexico, but workers in Monterrey tend to be better-educated and more skilled than elsewhere. The educational attainment level in Monterrey is three years above the national average.
Howard said Monterrey also has a very Americanized business community.
"If you were a U.S. company thinking about having a relationship with a Mexican company or going into Mexico, I can see how Monterrey would be great launching spot, because English is so widely spoken," she said. "It's a pretty comfortable place for American companies to come in."
ASU ties
Monterrey has one other big thing going for it: Instituto Tecnológico y de Estudios Superiores de Monterrey, known as Monterrey Tec, a private university generally regarded as the best in Mexico. Tec and Arizona State University have already found each other, teaming up on a variety of projects that could lead to stronger trade relationships between their home states.The two universities recently launched a dual master of science program designed to develop the next generation of aerospace entrepreneurs and began collaborating on biotechnology research and teaching.
ASU's College of Education partners with Tec's College of Education, and ASU is working to develop a doctorate in education that will be offered to Tec faculty. The universities also are working on developing a joint doctorate in construction management, as well as offering online construction-training courses in Spanish and English for students of both universities.
Claudia Navarro, assistant director of ASU's Office of the President Pan American Initiatives, said that all told, the universities are working on 15 projects in three main areas: education, biotechnology, and technology and new materials.
Navarro said ASU and Tec had been working together for years before Michael Crow was hired as ASU's president more than two years ago, but the ties tended to be professor-to-professor. In fact, Tec's president never had visited the ASU campus until Crow invited him. The first time they met, they hit it off, Navarro said.
"What holds Tec and us together is that both presidents have a very similar focus of education and how you should engage with international partners," she said. "Now we have a structure of relationships between both institutions. We make sure that things are happening."
Tec President Rafael Rangel said he hopes for even more collaboration, including programs addressing the growing Hispanic population in Arizona.
"I am very happy, especially with the new projects for high-tech entrepreneurship, education for low-income students, etc., that I have been discussing with the president of ASU," he said. "I hope that we can have joint degrees, teaching programs and - why not? - facilities."
Phoenix businessman James C. Malee, who has been traveling to Monterrey for more than 20 years for his engineering company, welcomes the educational initiatives.
"There are some energetic, talented people in Mexico that just don't have the opportunities we have in the United States," he said. "If we break down the education barrier, it will increase economic development and further relationships."
Overcoming distance
While the relationship between ASU and Tec is promising, there are still major hurdles to overcome before Nuevo Leon and Arizona become substantial trading partners.The biggest obstacle may be history.
Only 150 miles north of Monterrey, Texas has a long relationship with Nuevo Leon.
"It's been a struggle convincing (Mexican businesses) that (Arizona) is a good place to do business when it's not very convenient and when they have a lot of other good options that are more convenient," Howard said. "I think ASU is a good argument, but are they a better argument than the University of Texas? I'm not so sure."
Although there is a lot of wealth in the northern Mexican state and a lot of people who like the things Arizona is known for - golfing and shopping - they tend to turn to Texas first, she said. Texas commands 22 percent of all imports into the United States from Mexico and 43 percent of all exports.
"We're in diapers, basically," said Fernando Jimenez, Mexico liaison with the Arizona Department of Commerce. Arizona businesses are "just not that interested. They think (Mexico) only buys from Texas."
Arizona also lacks direct airline flights to Nuevo Leon, while Houston and Dallas both offer daily non-stop flights. America West Airlines ended its direct flight between Phoenix and Monterrey in October after about a year-long experiment. Airline officials said there wasn't enough business.
The Arizona Department of Commerce tried to persuade America West to keep the flights, arguing that with more time and better marketing, they could become profitable, Jimenez said.
"Now it's going to be even harder" to promote trade between the two places, he said.
The cancellation of the flights and the lack of any real success story since Napolitano's trip already are having an effect, Howard said.
Nuevo Leon officials have "cooled down," she said. "They were really hot on us. They were very anxious, partly because they really like the governor, they really like Crow, they really like the team that we have in place, but I can see that they've cooled off already. I think right now we are probably not much better off than we were a year ago."
Catching up
Despite the setbacks, Arizona isn't giving up.Howard said the state has two possible strategies. One is to get as many things as possible going with Monterrey at once, and the other is to find one really tight, strong connection and develop that. To accomplish either, Howard said, Arizona needs to get more sophisticated about its approach to international trade.
"Phoenix, in general, is just not a household name around the world," Howard said. The state needs to "get better known," then it needs to poll businesses and figure out the best trading partners to go after, she said.
Arizona might be better off developing a solid relationship with Guadalajara, she said. "Get ourselves well-known in Guadalajara, build a lot of business connections, get our business community very accustomed to doing business in Mexico, and then maybe in a couple of years that could become the basis for a relationship in Monterrey, instead of trying to work them both simultaneously and not doing either one very well."
"You'll never stop having an interest in a market that is that dynamic," Howard added.