SAEDG would like to acknowledge the Cochise College Center for Economic Research for providing permission to publish excerpts from their 2010 Douglas Economic Outlook Publication.
Cochise County’s economy is significantly impacted by that of Mexico. The 82-mile shared border between Cochise County and Sonora, Mexico serves as a crossover point for millions of visitors from Mexico each year, ranging from day shoppers and workers who cross legally through the designated ports of entry at Douglas and Naco, to drug and illegal alien smugglers who cross illegally through the Sonoran desert. The Naco port of entry is located approximately 55 miles, and the Douglas port 75 miles, southeast of Benson.
Cochise College Center for Economic Research (CER) focus group discussions in Benson indicate the city sees relatively little traffic from illegal crossers due to the distance from the border. However, the city does host a considerable number of Mexican shoppers, indicated by the large proportion of vehicles with license plates from Sonora, Mexico parked daily at the city’s retail outlets.
Trends in the numbers of shoppers from Mexico are likely impacted by the exchange rate between the U.S. Dollar and the Mexican Peso. A strong peso makes U.S. goods and services less expensive for Mexican visitors, encouraging shoppers to visit the United States, while a weak peso makes U.S. goods and services more expensive. In the summer of 2008, the exchange rate was just over 10 pesos to the dollar. Since then, the peso has generally weakened, trading at over 12 pesos to the dollar in October and 13 pesos to the dollar in November 2008. The exchange rate hit 14 pesos to the dollar in January 2009 and 15 pesos to the dollar in February 2009. Since February 2009, the peso has strengthened, trading at just over 13 pesos to the dollar for most of the second half of 2009, and from 12.3 to 13.2 pesos to the dollar in 2010. The final 4 months of 2010 saw the peso strengthen to below 12.5 and the opening months of 2011 saw a further strengthening to below 12.2 pesos to the dollar. Although the peso has generally strengthened since early 2009, it remains considerably weaker than in previous years, making U.S. goods and services more expensive to Mexican shoppers. This is likely to continue to discourage Mexican shoppers from visiting the United States.
Another factor influencing Mexican shoppers is the inflation rate in Mexico. As prices rise in Mexico, relative to prices in the United States, this encourages Mexican shopping in the United States. In 2010, consumer prices in Mexico rose 4.2 percent, compared to 1.6 percent in the United States. The inflation rate in the United States has historically been considerably lower than in Mexico.
The City of Douglas, Arizona shares a border with Agua Prieta, Sonora, Mexico, approximately 75 miles southeast of Benson. With thousands of border crossings into the United States each day at the Douglas POE, that city hosts many foreign shoppers, workers, and other visitors. A 2007-2008 study conducted by the University of Arizona indicated 81.6 percent of Mexican residents entering the United States through the Douglas port did so for the purpose of shopping—the highest proportion of all ports of entry in the State of Arizona.
Population estimates for Agua Prieta vary widely, ranging from about 60,000 to 150,000, although some estimates have placed the city’s population close to 200,000. According to figures provided by the Agua Prieta Municipal Government, the city’s population in 2006 was 100,000, of which 35 percent were economically active. The city’s unemployment rate in 2006 was 15 percent, with a total labor force of 35,000, according to municipal government figures.
Agua Prieta was traditionally a ranching and farming community, but since the passage of the North American Free Trade Agreement (NAFTA) in 1993 the town has seen a significant increase in maquiladoras (twin factories), which are foreign-owned factories that manufacture and assemble products for export. Major industrial employers in Agua Prieta as of 2006 were Levolor Kirsh, a blinds manufacturer employing 2,100 workers; Commercial Vehicle Group, an automotive manufacturer employing 2,000 workers; Takata, a seat belt/harness manufacturer employing 1,200 workers; Velcro USA, a textile and Velcro products manufacturer employing 850 workers; and Standex International, an electronics manufacturer employing 965 workers. In 2008, Alstyle Apparel & Activewear announced it would open a new 700,000 square-foot manufacturing facility in Agua Prieta. The facility will include knitting, dying, cutting, sewing, and distribution and will employ approximately 2,500 workers. The facility is expected to be operational by 2011.
Agua Prieta’s general infrastructure, according to the municipal government, includes 50 hotels and motels, 30 restaurants, a museum, two theaters, two bookstores, five private clubs, a bowling club, two gymnasiums, two shopping centers, seven gas stations, six local radio stations (AM/FM), three supermarkets/food stores, three local newspapers, a post office, six main banks, six private hospitals, three public hospitals, and two sports arenas. Transportation infrastructure includes six national, intercity bus companies; a local public transport intra-city bus system with 25 routes; eight local and international trucking companies; a rail line; and an interstate airline.
The Douglas POE for vehicle and pedestrian traffic is open 24 hours a day, 7 days a week. Between 2003 and 2007, an average of more than 5.4 million people each year (more than 14,700 per day) passed through the Douglas POE from Agua Prieta into Douglas. About 60 percent of these were non-U.S. citizens, while 40 percent were U.S. citizens returning from Mexico. In 2008, shortly after the implementation of the Western Hemisphere Travel Initiative (WHTI) travel restrictions on U.S. citizens, U.S. Customs and Border Protection discontinued reporting the numbers of U.S. visitors to Mexico crossing back into the United States, thus data on those crossings are no longer available.
In 2010, vehicle crossings through the Douglas POE from Agua Prieta into Douglas were down by 5.5 percent and the number of vehicle passengers was down by 11.7 percent. Pedestrian traffic into Douglas from Agua Prieta was down by 15.3 percent in 2010. Overall, the number of visitors (passengers and pedestrians) crossing into Douglas was down by 12.7 percent in 2010.
DOUGLAS INTERNATIONAL PORT AUTHORITY. In 2008, the Douglas International Port Authority, Inc. (DIPA) was incorporated making it the state’s third port authority (the other two are the Greater Nogales/Santa Cruz County Port Authority and the Greater Yuma Port Authority). DIPA incorporated as a nonprofit, private organization. It comprises and is directed by area executives representative of the trade/logistics business service sector, cross-border manufacturing, and agribusiness industries, as well as community and economic development.
The primary mission of DIPA is to promote trade and commerce. High on its priority list is the expansion and further development of the Douglas POE, which it views as essential to further growth and prosperity of the region on both sides of the border. The Douglas POE is the second largest commercial port in Arizona with more than $1 billion in trade conducted each year. According to DIPA, increased amounts of logistical traffic to the port will expand economic activity for both U.S. and Mexico and increase the potential for more jobs and growth for their respective communities.
A feasibility study by the U.S. General Services Administration (GSA) was recently completed. The current schedule calls for port design in 2012-2013 and construction of $60 million of infrastructure for 2014. Recently, the Arizona Department of Transportation approved $3.5 million to extend Chino Road in Douglas approximately one quarter of a mile to the south to provide connectivity to the commercial port of entry as proposed by GSA, as well as to perform a Design Concept Report (DCR) and an Environmental Assessment (EA) to consider the needs and alternatives to upgrade Chino Road to its ultimate configuration.
The town of Naco, Sonora, Mexico shares a border with Naco, Arizona, an unincorporated area of Cochise County approximately 55 miles southeast of Benson. The population of Naco, Sonora as of 2000 was 5,370, according to Mexico’s Instituto Nacional de Estadística y Geografía (INEGI). The population of the Naco, Arizona Census Designated Place (CDP) as of 2000 was 833, according to the U.S. Census Bureau.
With thousands of border crossings into the United States each day at the Naco Port of Entry (POE), the area serves as a gateway to Cochise County’s retail shopping outlets. A 2007-2008 study conducted by the University of Arizona indicated that 80.1 percent of Mexican residents entering the United States through the Naco port did so for the purpose of shopping—the second highest proportion of all ports of entry in the State of Arizona behind Douglas, also located in Cochise County.
The Naco POE for vehicle and pedestrian traffic is open 24 hours a day, 7 days a week. Between 2003 and 2007, an average of 1.4 million people each year (more than 3,900 per day) passed through the Naco port from Mexico into the United States. About 75 percent of these were non-U.S. citizens, while 25 percent were U.S. citizens returning from Mexico. In 2008, U.S. Customs and Border Protection discontinued reporting the numbers of U.S. visitors to Mexico crossing back into the United States, thus data on those crossings are no longer available.
In 2010, vehicle crossings through the Naco port from Naco, Sonora into Naco, Arizona were down 5.8 percent and the number of vehicle passengers was down by 22.1 percent. Pedestrian traffic into the United States from Naco was down by 3.7 percent in 2010. Overall, the number of visitors (passengers and pedestrians) crossing into Naco was down by 20.1 percent in 2010.
A 2007-2008 study conducted by the University of Arizona measured the economic impact of Mexican visitors to Arizona. The study found that Mexican visitors to Cochise County accounted for 5.3 percent of countywide taxable sales. Mexican visitors spent $186.4 million in Cochise County, up 92.6 percent from 2001. More than two-thirds of spending by Mexican visitors to Cochise County occurred in Douglas, according to the study.
Fifty-five percent of expenditures by Mexican visitors to Cochise County occurred in retail stores, 24.1 percent occurred in grocery stores, and 7.3 percent occurred in restaurants. According to the study, the direct spending by Mexican visitors to Cochise County resulted in 1,498 jobs and $28.8 million in local income. Accounting for indirect and induced impacts, Mexican visitors were responsible for $211.8 million in sales, 1,763 jobs, and $36.5 million in income countywide.
Direct expenditures in Arizona by Mexican visitors crossing through the Douglas POE totaled $466.4 million in the 2007-08 study. This was up 372.1 percent from a similar study conducted in 2001. The increase was the largest of all of Arizona’s POEs. Each party entering the United States through the Douglas port spent an average of $253 while in Arizona, according to the study.
Direct expenditures in Arizona by Mexican visitors crossing through the Naco Port of Entry totaled $98.4 million in the 2007-08 study. This was up 219.6 percent from the study conducted in 2001. Each party entering the United States through the Naco port spent an average of $277 in Arizona, according to the study.
Direct expenditures reflect the amount reported to be spent by visitors while in Arizona, not necessarily in the Douglas or Bisbee/Naco areas since some visitors who pass through the POEs may have other destinations beyond the immediate areas. Although direct expenditures reported by Mexican visitors at the Douglas and Naco ports totaled $564.8 million, the survey indicated only $186.4 million was actually spent within Cochise County. This indicates that Cochise County captures only one-third of the spending of Mexican visitors entering through its borders. Of the $186.4 million spent in Cochise County, $123.3 million was spent in Douglas.
In addition to visitors from Mexico, the Douglas and Naco ports also serve as crossover points for more than 2 million U.S. visitors traveling to Mexico each year. As noted by the Arizona Department of Commerce, the Janos Highway (which begins in Douglas) is the shortest paved route from the western United States to Mexico City and Guadalajara.
In early 2008, a provision of the WHTI took effect, which required U.S. citizens returning from Mexico to show a government-issued identification card (e.g., a driver’s license) and proof of citizenship (e.g., a birth certificate). This likely has contributed to a decline in the numbers of U.S. citizens crossing the border. In Naco, U.S. citizen crossings were down 3.1 percent in the first 3 months of 2008; in Douglas, the decline was much steeper at 25.2 percent. In 2008, shortly after the provisions of the WHTI took effect, U.S. Customs and Border Protection discontinued reporting the numbers of U.S. visitors to Mexico crossing back into the United States, thus data on those crossings are no longer available.
Beginning June 1, 2009, most U.S. citizens entering the United States from Mexico must now have a passport, passport card, or other travel document approved by the U.S. Department of Homeland Security. U.S. citizen children under the age of 16 may present the original or a copy of their birth certificate, or other proof of U.S. citizenship such as a naturalization certificate or citizenship card. Groups of U.S. citizen children ages 16 through 18, when traveling with a school or religious group, social organization, or sports team, may enter under adult supervision with originals or copies of their birth certificates or other proof of citizenship. Visit www.GetYouHome.gov for more information on the new travel requirements.
Another factor potentially contributing to a decline in border crossings of U.S. residents into Mexico is concern over violence resulting from clashes between drug cartels and Mexican government officials in some Mexican border towns. U.S. media outlets have reported various statistics on the numbers of drug and gang-related killings throughout Mexico, and most note that such killings more than doubled from 2007 to 2008 and reached all-time highs in 2009 and 2010.
The violence has been much more prevalent in Mexican cities sharing borders with Texas and California (particularly Ciudad Juarez and Tijuana, respectively) than in those areas sharing a border with Arizona. However, as of early 2011, Nogales, Sonora, which shares a border with neighboring Santa Cruz County, Arizona, is specifically mentioned in the U.S. State Department’s travel warning for Mexico, which notes that “large firefights have taken place in towns and cities in many parts of Mexico, often in broad daylight on streets and other public venues. Such firefights have occurred mostly in northern Mexico, including… Nogales….During some of these incidents, U.S. citizens have been trapped and temporarily prevented from leaving the area.” The State Department issues travel warnings when they decide, based on all relevant information, to recommend that Americans avoid travel to a certain country. Neither Agua Prieta nor Naco, which share a border with Cochise County, was referenced in the State Department’s travel warning for Mexico as of early 2011.