S e c u r i t y, a n d W h y I t M a t t e r s. San Diego Regional Economic Development Corporation Board Meeting March 13, 2013

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1 B a j a C a l i f o r n i a s E c o n o m y, S e c u r i t y, a n d W h y I t M a t t e r s San Diego Regional Economic Development Corporation Board Meeting March 13, 2013

2 Some (Possibly) Surprising Manufacturing & Trade Numbers

3 NAFTA: INTEGRATION STILL INCREASING Trade in the combined NAFTA marketplace of 454 million consumers is still increasing US$1.2+ trillion in trade between NAFTA partners in 2011 $460 billion in trade between US & Mexico (12.5% of total US)

4 MUCH OF THAT TRADE AT OTAY MESA PORT OF ENTRY Otay Mesa is typically #2 Land Port along US-Mexico border Over 62,000 trucks cross northbound (and south) each month Over US$38.2 billion in imports and exports at Otay Mesa in 2011 Nearly$2.8 billion/month in trade in 1H-2012

5 TIJUANA & BAJA CALIFORNIA ALSO BIG IN MANUFACTURING Mexico s maquiladora/immex industries regaining strength; Baja California still top state but growing more slowly than some regions Mexico: 2.0M (above 2007 peak of 1.9M); Baja: 236K (vs. 260K in 2007) Tijuana: 159K (vs. 170K in 2007); Mexicali: 48K (vs. 57K in 2007) Baja s growth sectors: medical devices, aerospace, automotive, food

6 REGIONAL ECONOMICS: BAJA S ADVANTAGE FOR TECH MFG Tijuana: a national (& North American) leader in some tech sectors #1 location in NorthAm for medical device mfg employment (31K) One of top NorthAm metros for electronics mfg employment (46K) Over 7,300+ employed in aerospace/defense mfg (similar # s in MXL) 2010/2012 Medical Device Mfg Employment in Key Regions* City of Tijuana* Minneapolis-St. Paul New York State Boston Metro Chicago Metro Los Angeles County Michigan State Orange County San Diego County Santa Clara County 31,079 22,099 18,233 15,229 12,789 12,570 11,261 11,528 10,360 9,859 *data for Q *see endnotes for estimation methodology used

7 WHY IS MEXICO S MANUFACTURING GROWING? There has been persistent trend for manufacturing labor cost increases in rest of North America and many other markets Labors costs for Mexico manufacturing have relatively flat (in US$) Costs higher in Brazil and (possibly) soon China

8 BIG PICTURE: MFG COSTS NOW FAVOR MEXICO AND TJ China: times they are changin Boston Consulting Group: by 2015, China mfg costs approx. $4.50/hr Total China costs for mfg & logistics to North American markets increasing KPMG: 2012 Competitive Alternatives study found little difference in Mexico v China costs One of San Diego s unique advantages is nearshore proximity to lower-cost, globally competitive manufacturing in Baja California

9 Tijuana: Size, Security and Borders Waits

10 TIJUANA : BIGGER CITY THAN YOU MIGHT THINK Amongst top Metro regions, Tijuana ranks #6 in population Tijuana: Second-largest city on West Coast of North America Nearby Mexicali is #13 in ranking of Mexico metro regions

11 REGIONAL SECURITY HAS IMPROVED Baja California and Northwest Mexico: on the mend Despite media hysteria: peak of violence in 2008 In fact in 2012: Tijuana s homicide rate significantly lower than many cities in the US

12 REGIONAL BORDER CROSSINGS: HISTORIC LOWS Car crossings at SY continue to decline affected by long border delays: 2.4M POV crossings/month in 2005, down to 1.2M in 2011

13 LITTLE BORDER DELAY DATA SO FAR To-date, very few efforts to accurately measure border wait times at San Ysidro and Otay Mesa SANDAG & Caltrans changing that: border wait time study underway (with a bit of help from Crossborder Group)

14 BORDER CROSSINGS PLANNED BUT NOT ENOUGH $$ Yet: too-little (+ delayed) funds for POEs (SY, Otay & Otay East) Around $2-3 billion needed just for California-Baja CA POEs

15 Why better infrastructure? It s a benefit for the economy on both sides of the border

16 BORDER CROSSERS: SIGNIFICANT SOCAL ECONOMIC IMPACTS Border delays not just about inconvenience At-border surveys by Crossborder Group show typical $ daily average expenditure by Mexico-residing border crossers $10-14 million in crossborder expenditures daily Baja residents spend minimum of $4-5 billion in San Diego retail stores annually + tourism destinations in SoCal

17 PORT OF ENSENADA: CRUISE SHIP PASSENGERS & POTENTIAL 2012: Rebound in cruise ship passengers to Ensenada (above nearly all other MX West Coast cruise destinations) Jan-Dec 2012: over 429K PAX arrived an 9.7% over 2011 MX s #1 West Coast Cruise PAX destination in 2012 (above Cabo & PV); #2 nationally (after Cozumel) Growth of Ensenada s wine region points out opportunities to attract investment & upgrade attractions which can benefit both San Diego & Ensenada s cruise ship traffic plus increase tourism expenditures

18 SOMETHING UNIQUE: THE CALI-BAJA MEGA REGION Tried to give a sense of why it matters San Diego Regional EDC blog, March 4: Let s make sure it s really the year of cross-border progress.

19 Gracias! Preguntas? Kenn Morris, President/CEO of Crossborder Group San Diego: Tijuana: