Thread: Mexican investors' money is crossing border into U.S.

Mexican investors' money is crossing border into U.S.
Associated Press

June 8, 2008

McALLEN, Texas

While poor Mexicans cross the border to take advantage of higher wages and a social safety net, their wealthy countrymen are seizing on the slowing U.S. economy to achieve their own American corporate dream.

Anyone unfamiliar with the U.S.-Mexico border region might expect that private investment only flows from north to south.

The Mexican side of the border in south Texas is loaded with factories that American companies have opened since NAFTA cleared the way for them to take advantage of inexpensive labor.

But between the two countries, billions of dollars are moving in both directions each year. In South Texas' Rio Grande Valley, Mexicans and their corporations are pouring their money into real estate, businesses and retail shopping on the U.S. side.

Factors at work in the money streaming north include valuable real estate at reasonable prices, a desire to gain access to American consumers, opportunities created by a cooling economy and weaker dollar, as well as amenities such as shopping, South Padre Island and putting distance between their businesses and the kidnappings and drug cartel violence.

"They prefer to purchase land in the U.S. because they consider it good as gold," said Gilberto Salinas, a spokesman for the Brownsville Economic Development Council. "There's money there [in Mexico]. We're the ones going to them."

There are no regional data on how much Mexicans are investing in South Texas, but Keith Patridge, president and chief executive of the McAllen Economic Development Corporation, said that "the No. 1 misconception is that there's no money in Mexico."

Patridge said he senses "a marked increase in investment moving north from Mexico."

National data reflect that trend.

In 2006, Mexican companies' investment in the U.S. grew by 60 percent to $6.1 billion. U.S. companies' investment in Mexico is far larger but grew only 13 percent to $84.7 billion during the same year, according to preliminary figures from the U.S. Department of Commerce's Bureau of Economic Analysis.

In 1999, Mexican companies' direct investment in the U.S. was $1.7 billion.

In Texas, Mexican companies' affiliates held $1.6 billion in property, plants and equipment in 2005, the most recent year for which state-level data is available from the Commerce Department.

That was up from $1.4 billion in 2002, putting Texas second only to California in Mexican direct investment.

Mexican companies operating in the U.S. also account for 4 percent of the jobs attributed to foreign direct investment in Texas, compared to 1 percent for the country overall.

An article published by the Federal Reserve Bank of Dallas in November attributed that to "Mexico's proximity to Texas and the market opening under the North American Free Trade Agreement."

Here are just a few recent investments in the Rio Grande Valley:

In January, Monterrey, Mexico-based Grupo Famsa announced the $16 million purchase of century-old Edelstein's Better Furniture chain, which has nine stores in the Rio Grande Valley.

This summer, PIASA, a Monterrey company that sells spices and other seasonings, plans to break ground on a $6 million plant in Brownsville.

Last month, Ciudad Victoria developer Grupo Mianca announced an 80-unit luxury condominium project in McAllen.

Economic development officials, real estate consultants and bankers in the Valley say the United States is simply a better place to invest.

"The appreciation is three to four times that in Mexico," said David Allex, of Allex International Properties, a commercial and industrial real estate broker on both sides of the border.

Allex, who sees the Texas-Mexico border created by the Rio Grande as "a street with water in it," rather than an obstacle, recently leased a 100,000-square foot warehouse for Famsa in the Valley.

Salinas, of the Brownsville EDC, said his office has been working with a Monterrey, Mexico investor who wants to develop 1,400 acres he owns on the edge of the city that would become the "new front door of Brownsvillle."

Two years ago, Monterrey-based Banorte paid $259 million for a 70 percent stake in Inter National Bank, which has branches all across the 1,200-mile Texas border region, hoping to tap the U.S. Hispanic market and sell cross-border mortgages.

"With the downturn in the U.S. economy, we get calls every day from Mexican nationals wanting to know where the opportunities [for investment] are," said Carlos Garza, Inter National's president and chief executive. With a weaker dollar and the Valley's relatively stable real estate market, "we're seeing tremendous interest from Mexico."

Besides Mexicans buying first and second homes in the area, Garza sees growth in "average-size" investments of $1 million to $5 million.

Familiarity with attractions on the U.S. side of the border is a factor, too, whether it's shopping in McAllen or vacationing on South Padre Island.

"I think there's been a trend over the last several years of Mexican nationals purchasing second homes, vacation homes, in the Valley," said Fred Rusteberg, president and chief executive of International Bank of Commerce-Brownsville.

Monterrey residents visit their condos on South Padre Island several times a year, and "people from Mexico City are looking for safe environments for their families to relax," he said.

Some say the security situation in Mexico - federal troops coming to the border area to confront drug cartels and the kidnappings in the major cities - has played a role in an investment bump perceived more recently.

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