Economic Ties Between Texas and Mexico Luis Bernardo Torres Ruiz, Ph.D. February 6, 2015 Research Economist International Forum TAR

Contents 1.Economic Integration 2. Residential Impact 3. Concluding Remarks

Mexico is the largest export market for Texas Texas Exports by Destination (Billion $) Source: Foreign Trade Division, U.S. Census Bureau (%) of Total Exports Average Q3 — Mexico 37.8 — Canada 10.1 — China 3.7 — Netherlands 2.8 — Brazil 2.7

Exporting manufactured goods to Mexico Texas 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 El Paso, TX Otay Mesa-San Ysidro, CA Hidalgo, TX Nogales, AZ Eagle Pass, TX Santa Teresa, NM Bronsville-Cameron, TX Calexico, CA Del Rio, TX Other Source: 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 Analysis Source: Office of the Governor The State of Texas

Contents 1.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 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 Profile of International Home Buying Activity Type of Purchase (%) s.a./ Seasonally adjusted. Source: Real Estate Center at Texas A&M University.

Contents 1.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.)