U.S-Mexico border: Tale of a Texas city and economic costs

A Journal of People report

U.S.-Mexico border is now-a-days a much discussed area. With this background, report on a Texas city has been highlighted in a media report.

The “Why closing the U.S.-Mexico border would be ‘catastrophic’ for this Texas city” headlined USA Today report said:

“President Donald Trump’s threat to seal the border has sent jolts of alarm across the U.S.-Mexico border, but few places feel it more acutely than this border city. Besides the economic hit, Laredo would feel a cultural and community loss gained from three decades of living in close proximity to its Mexican neighbor.”

This city is Laredo.

The report by Rick Jervis said:

“Students and workers travel daily across the two main bridges connecting Laredo with Nuevo Laredo, Mexico. Families span both side of the border, crossing frequently to attend family dinners or quinceañeras, the traditional celebration of a girl’s 15th birthday. And Laredo businesses depend heavily on well-heeled Mexican tourists who come to shop and dine on the U.S. side.”

The April 4, 2019 datelined report described the following scene:

“The lunchtime crowd at El Meson de San Agustin restaurant is a lively mix of locals, Customs and Border Protection officers and Mexican tourists enjoying specials such as marinated beef tongue or the eatery’s famed homemade salsa.

“Close the U.S.-Mexico border, located just two blocks away, and that scene — and owner Jesus Bernal’s livelihood — will vanish, he said.

“‘It’ll be catastrophic,’ he said. ‘I don’t even want to think about it. We share everything here, on both sides of the border.’”

The report described:

“On Wednesday, under a soft pelting rain, long lines of cars stretched along the Gateway to the Americas International Bridge near downtown Laredo, waiting to cross into the U.S., while a steady stream of people crossed on foot. Roughly 260,000 people call Laredo home, while Nuevo Laredo has about 360,000 residents.

“Juan Angel Rosales, 22, travels from Mexico to the U.S. five days a week. A U.S. citizen, Rosales, lives in Nuevo Laredo with his wife and 7-month-old son but goes to work each day as a forklift operator at a warehouse in Laredo.

“Closing the border would sever their only income source, he said.

“‘I wouldn’t be able to buy diapers for my baby, pay the rent, pay the electricity bill, water bill,’ he said. ‘My family depends on me getting across this bridge each day.’”

The USA Today report mentioned economy as it said:

“Around $234 billion in imports and exports cross through Laredo each year, making it one of the busiest land ports in the U.S. The area is also home to 510 freight forwarders, 400 trucking companies and 105 U.S. Customs brokers.

“If the border were to close, about one-third of the city’s economy will come to an immediate halt and 60% of the local workforce will have nowhere to go, said Olivia Varela, president and chief executive of the Laredo Economic Development Corporation.

“‘It would have an absolutely devastating effect on this community,’ she said.”

The report by Rick Jervis also mentioned other aspects of life:

“More than just economically, Laredo is intertwined with its Mexican neighbor in ways unique even for border cities. The Tecolotes de los Dos Laredos (the Owls of the Two Laredos), a Mexican baseball squad, play home games in stadiums in both Laredo and Nuevo Laredo.

“Each year in February, Laredo and Nuevo Laredo also celebrate the Abrazo Children Ceremony, where four children – two from the U.S., two from Mexico – meet on the international bridge and share a hug. The annual ceremony is cheered by thousands of onlookers crowded onto the bridge.

“This year, House Speaker Nancy Pelosi attended the event along with Laredo Mayor Pete Saenz and U.S. Congressman Henry Cuellar Nuevo.

“‘It’s our roots,’ said Webb County Judge Tano Tijerina, the county’s top executive. ‘We have a very defined culture here. It’s a multicultural environment that exists on both sides of the border.’”

It said:

“Bernal, 66, the restaurant owner, said the connections with Nuevo Laredo run deep. He was born in Nuevo Laredo and has spent 50 years living in the U.S. His restaurant, opened 22 years ago, relies heavily on a lively, open border, he said.

“In Laredo, he said, there’s a saying: If someone sneezes in Nuevo Laredo, someone in Laredo catches a cold.”

This connection, this relation, this interaction, this mutual bond, this mutual reliance are deep and strong. These are related to human life and economic activities. A cut in this relationship will impact a lot. The cut will hurt many. For many, hardship will increase. Many will face uncertainty. The report concludes:

“‘Sealing the border — for whatever reasons — would grind Laredo to a virtual halt,’ Bernal said. ‘It’ll be a tragedy,’ he said.”

Avocados and auto factories

Another USA Today report said: A shutdown of the U.S.-Mexico border would increase produce prices, disrupt auto production and have other widespread economic impacts.

The “Trump closes Mexican border, avocados could cost more and auto factories could shut” headlined report said:

A “shutdown of the U.S.-Mexico border would quickly spread across the economy, spiking fruit and vegetable prices, spawning food shortages, shutting production lines and throwing Americans out of work, at least temporarily.

“‘With thousands of trucks and trains and cars crossing the border each day, you’d have huge backlogs, rotting produce and ripple effects across the supply chain,’ says Dan Griswold, senior research fellow and trade expert at George Mason University. ‘The effect would be immediate and devastating for industry.’”

The report by Paul Davidson and Zlati Meyer said:

“The impact would be widespread because the supply chains of U.S. and Mexico are so tightly integrated and ‘just in time inventory’ has manufacturers and retailers carrying limited stocks to reduce costs, Griswold says.

“With about $1.7 billion in goods crossing the border every day, the effects would dwarf the fallout from the 10% tariff Trump has slapped on more than $200 billion in imports from China, says Gary Hufbauer, senior fellow at the Peterson Institute for International Economics.

“‘This will be a real shock,’ Hufbauer says.”

The April 2, 2019 (updated April 3, 2019) datelined report said:

“Here’s the big picture: The U.S. imported $346 billion in goods from Mexico last year and exported $265 billion in products to the country. Of the $611 billion in trade between the two countries, $502 billion crossed the border in trucks and trains last year, according to the Commerce Department.

“More than 13% of all U.S. imports come from Mexico, with some products making up an outsized share. Shipments from Mexico comprise more than a third of all auto and auto-part imports, nearly half of imported vegetables and 40% of imported fruits, according to the Peterson Institute and the U.S. Department of Agriculture.

“Economywide, the effects would be far more punishing for Mexico, which could slip into recession, Hufbauer says. Border trade represents 37% of Mexico’s gross domestic product compared with about 2% of U.S. GDP, according to Moody’s Analytics.”

The report said:

“Economist Hoyt Bleakley of the University of Michigan likened a brief shutdown of a few days or a week to a blizzard that does little damage to the economy as shippers rapidly catch up.

“Even a prolonged shutdown that lasts a few months would likely shave quarterly U.S. economic growth by just two-tenths of a percentage point, still fairly modest, Hufbauer says. A shutdown, he says, could have broader effects by hurting business confidence.”

Citing the U.S. Chamber of Commerce the report said: “About 5 million American jobs depend on border trade.”

Consumers and business

The USA Today report mentioned potential effects on consumers and businesses:

“A border shutdown would be ‘devastating’ to American auto companies, their workers, auto parts suppliers and regional economies throughout the Midwest, Texas and California, industry experts said Tuesday.

“Not only do parts come into the U.S. from Mexico, but 37% of U.S. parts are exported to Mexico, said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research in Ann Arbor, Michigan. A disruption in the supply chain risks shutting down factories and bigger production operations that can’t easily restart. It affects hundreds of thousands of people immediately, she said.

“‘We have seen Mexico earthquakes, coastal labor disputes at ports of entries and tsunamis. All pale in comparison to the impact a prolonged border shutdown would have on suppliers, dealers and industry employees,’ said Jeoff Burris, founder of Plymouth, Michigan-based Advanced Purchasing Dynamics, a supply chain consultant to auto suppliers primarily in North America.

“What is imported from Mexico has grown over the years from labor-intensive items like wire harnesses and cut-and-sown seat covers to almost every type of automotive component, including engines, axles and transmissions.

“‘A shutdown would be disastrous for hundreds if not thousands of suppliers on both sides of the border,’ Burris said.

“Moreover, the impact of shutting down the border would be almost immediate, and would be of a magnitude that would make it difficult and expensive to develop alternatives for moving product, he said.

“Very simply, Dziczek said, a border shutdown would shut down all U.S. auto manufacturing within a week and ‘crash the economy.’

“‘This will impact anyone who buys anything at a supermarket, has a job in manufacturing or distribution, has a family member or loved one who works in those areas or is worried about the U.S. economy not being tipped into a recession,’ said economic analyst Jon Gabrielsen, who advises the auto industry and suppliers.”

There is the issue of fruits and vegetables. According to the report, Mexico is the top supplier of fruits and vegetables to the U.S., with $13 billion imported from the country last year.

The report said:

“A border shutdown would be felt at American dinner tables almost immediately because fresh produce can’t be warehoused for more than a few days, says Scott Vandervoet, whose family owns Vandervoet and Associates, a Nogales, Arizona, business that sells and markets produce imported from Mexico.

“‘There is no standing inventory of fresh produce because it’s perishable,’ Vandervoet said, ‘You aren’t dealing with flat screens or sneakers. So I think the effects for the consumer would be felt immediately.’”


It added:

“Most affected would be avocados. The shortage would be acute because of a recent multi-state avocado recall, a planting season that hasn’t even begun in California and forecasts predicting a weak growing season.

“‘If the border is shut, we have about three weeks’ worth of avocados in the U.S.,’ Lempert says. ‘Forget about avocado toast and guacamole.’ Avocados and tomatoes would begin to disappear from store shelves within days.

“Blueberries, raspberries and strawberries also could be scarce, though Lempert said a berry shortage could be mitigated with imports from Chile and domestic production.

“Ground beef might also be in short supply. He anticipated a price hike of at least 10%.”

Further costs

The report by Paul Davidson and Zlati Meyer gave further facts:

# “If the U.S. closes the border, there are other ways to transport foods from Mexico, but they’re slower and not as efficient. That means companies will charge consumers more.”

# “Prices for tomatoes, berries and tequila could jump 50% or more in some cases, and the cost of Mexican booze could rise as much as 20%, says Phil Flynn, senior analyst with the Chicago-based Price Futures Group. Grapes and mangoes may also cost more. It may take at least a couple of months for some prices to reach those levels.”

# “A border shutdown also would cripple the produce industry in border cities such as Nogales, Arizona, where 60% of winter vegetables imported from Mexico pass through the port daily headed for U.S. grocery stores and restaurants.”

# “To ensure produce is delivered fresh to grocery stores, distribution companies only warehouse about two or three days worth of inventory. The companies would be forced to lay off workers ‘because there is simply no work for them to do,’ which would, in turn, hurt the local economy, Jungmeyer said. ‘As those employees are laid off, they would not be able to go to the stores, and those companies would also suffer.’

# “On a daily basis, 1,200 trucks carrying on average 40,000 pounds of produce imported from Mexico pass through Nogales, Jungmeyer said. That’s about 50 million pounds a day, he said.”

# “In San Diego – home of the busiest land border crossing in the Western Hemisphere – just the threat of an extended border shutdown causes negative impacts, local economic experts told USA Today.

“When the San Ysidro port of entry was closed for about six hours in November of last year, retailers at the border lost more than $5 million in sales, Jason Wells – the Executive Director of the San Ysidro Chamber of Commerce – said.”

# “Mexicans regularly cross the border to go shopping, especially in the southern part of Arizona, before returning home.

“Border communities such as Nogales depend on sales taxes paid by Mexican shoppers as a key source of revenue. They often are the first to feel the impact of a decline in retail trade, and also feel it more heavily than other areas of the state.

“‘Retailers in the U.S. border cities know how critical Mexican residents who cross the border and shop for food, clothing, auto parts, and other retail items on the American side are for their business revenues,’ wrote Vera Pavlakovich-Kochi, an associate professor of geography at the University of Arizona, in a February update.”

# “A true shutdown would imply nobody could traverse the border by car, bus, or on foot, heading either north or south. Arizona businesses such as hotels, restaurants and various stores could feel the pinch from a drop-off of foreign tourists. Americans seeking to hit the beach in Rocky Point or other Mexican vacation destinations also might need to adjust their itineraries.”

The impact on economy will make chain reaction in other areas. This will ultimately affect the common people.

The reports show that (1) the biggest economy is not all-powerful; (2) it is not self-reliant; (3) it is dependent on other economies; (4) it is vulnerable.

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