Transborder Report
Laredo - From Small Town to Major Hub in 10 Years
When looking at growth and changes in the North American transborder business it’s impossible to find a location anywhere that has experienced what Laredo, Texas, has gone through in terms of a transformation. Laredo is a city that has existed under seven flags and seen more growth in the last ten years than ever before in its 250-year history as a town on the banks of the Rio Grande. In fact, Laredo is now the fastest growing city in Texas and rated as the second fastest in the United States, according to The Laredo Development Corporation.
Border towns often represent meeting places or trading posts, the points where history has often determined territories and where cultures will divide. Laredo has built on its position of geographic advantage to become the major trade gateway between Mexico and its northern neighbors. As the United States’ largest inland port, Laredo enjoys close proximity and good access to Monterrey as well as others centres in Mexico through the Pan-American Highway.
I spoke recently with an old friend and former colleague, Jorge Mata, who grew up and makes his home in this rapidly expanding city. Jorge is the president and founder of a NAFTA Logistics company that has positioned itself to take advantage of the burgeoning trade by offering comprehensive solutions to importers and exporters across North America.
The reason for Laredo’s current success in outpacing the growth of other border towns is in part due to its location, and to trade with Mexico being an important part of Laredo’s economic foundation. Even in the days of punitive Mexican tariffs and commercial shipment running at a fraction of today’s volumes, local merchants benefited from the “Chiveras.” Translated this means “laden goat” and it certainly conjures up images of my last trip to the airport.
These “Chiveras” are private citizens and small business operators from Mexico who came across the then only bridge and bought retail goods in great quantities from downtown merchants. Local banking institutions also enjoyed a thriving business in crossborder traffic. Trade, more than manufacturing agriculture or tourism, has allowed the city to prosper in the past and Laredo simply continues to build on this tradition.
The opening of the World Trade bridge in 2000 was the second bridge to be opened in the last decade. The Columbia bridge, an estimated 20 miles from Laredo, was opened in 1993.
Commercial vehicle statistics for January this year reflect this upward trend. More than 125,000 crossings took place in Laredo and Columbia in January. This includes 12,500 rail movements.
Brownsville and Eagle Pass volumes combined represent about 25 percent of the Laredo volume. A new tollway runs directly from the interstate to the Columbia Bridge that handles roughly 30,000 shipments per month. The balance of commercial shipment traffic is now processed at the new bridge and the other bridges known to locals as “bridges one and two” are now used only for non-commercial movements. There is now talk in Laredo of a fifth bridge. This is interesting for me, coming from a small village in England where the “new bridge” was built in 1837.
I first visited Laredo more than ten years, or two bridges, ago. As I often do, I looked in the Yellow Pages to see which of our freight forwarding competitors were there. What l learned then, and what still holds true today, is that the competitive mix is very different in Laredo compared to other centres across North America. What Jorge Mata describes as “a cottage industry that grew” is alive and well in Laredo. While a number of the major international firms are represented, many of the major importers and exporters are handled through privately owned and operated service providers. Many of these companies have made significant investments in their facilities and are offering third party services operating full scale distribution centres. What used to be referred to as the “Monte,” Spanish for “the out back,” is now the location of arterial roads and industrial parks. With strong connections to partners or sister companies in Nuevo, Laredo, offers Mexico‘s single source solutions for the transportation clearance and distribution components.
In terms of changes in the processes or systems involved in getting goods in or out of Mexico there is not much to report. It still differs greatly from the environment we know on the northern border.
United States Customs are now housed in a new facility at the World Trade Bridge. Typically, Shippers Export Declarations (SED’s) in Laredo are still handled in a non-automated fashion. There is light at the end of the tunnel, however, as the Bush administration’s first budget proposal orders the U.S. treasury to ensure that technology modernization efforts are managed effectively and this would include customs automation.
On the Mexican side I was interested to learn that it is still a requirement that the Pedimento be completed and duty and tax paid into the Mexican bank prior to physical arrival of shipped goods. (There is still duty on a large number of commodities until 2004.) The good news is that this advance payment can now be handled by Electronic Funds Transfer (EFT).
The current issue in Laredo and beyond, which will potentially have some impact on the United States’, Canadian and Mexican trade, is the right of access to the USmarket by Mexican carriers, advises Mata.
NAFTA provided for access to the four states adjoining the Mexican border by 1995, and by January 2000 Mexican carriers were to gain access to all U.S. states for movement in and out of Mexico. Reciprocal access to the border zones and the interior of Mexico by U.S. carriers was also part of the NAFTA agreement. The Clinton administration had adopted a closed door policy towards Mexican carriers, due to safety concerns. These sentiments were consistent with those of many others including safety groups, trade unions and U.S. carriers groups. Mexico, however, claims it has sustained several billion dollars in fiscal damages as a result of this non-access policy towards a business that represents 14,000 daily truck movements. The matter has been taken to arbitration.
The issue could effect Canadian carriers. This draft bill, entitled the Foreign Truck Safety Act, calls for mandatory safety inspections at the cost of the carrier, and these separate inspections are not presently a requirement for Canadian trucks.
The NAFTA arbitration panel has, in the meantime, ruled in favor of the Mexican position and President Bush has announced that Mexican trucks meeting the safety standards may now have access to transporting goods in the United States. A Mexican transport ministry official is quoted as saying there are 184 Mexican trucking companies that have applied for approval to transport goods in the United States.
The coming months will determine how and when this legislation will be implemented and, later, to what degree the carriers will want to take advantage of the access opportunities that they have acquired. It is fairly obvious that U.S. carriers can outsource their Mexico interior deliveries and pickups to a Mexican agent at a lower cost than handling these with their own assets. It is possible that asset utilization concerns and partnership agreements may also see some Mexican carriers shy away, at least from the longhaul movements, into the United States.
Signals for the future of the cross-border trade at Laredo remain strong. The first international visit of President George W. Bush was to Mexico and his position is very much one of pro trade with Mexico. The new secretary of State for the State of Texas is from Laredo and an agency promoting Mexico-Texas business has been established at the state level. The policy of Mexican President Fox and his government is also favorable to the growth of trade and a crackdown on the corruption that can impede the movement of goods across the borders. All of this helps assure that Laredo, once a sleepy little border town, will continue to grow and establish its position as a key distribution hub in North America.