What the Baja Boom Means for Our State

The next great California city has a lot of manufacturing, good port access and a million people who speak Spanish. Eager immigrants and Asian investment are pouring in. The place is so cosmopolitan that it feels like another country.

Of course, it is another country. But Tijuana is a California city nonetheless. It just happens to be in Baja California, a distinction that will matter less and less as the years go by.

"It's not a Mexican city," says Mauricio Monroy, a Deloitte & Touche partner in Tijuana. "It's more a binational city."

With his flawless English, Monroy exemplifies the situation. Because of Mexico's poor postal service, he has a mailing address in San Ysidro, Calif., to which he dispatches a courier daily. He made sure his children were born in Texas and thus have dual citizenship, and like many local business people, he sends them to a bilingual school where they study science and math in English.

Monroy and his city are emblematic of something much larger--the growing economic interdependence of California and Mexico, one that will deepen in the years ahead whether or not the United States approves the proposed new free trade agreement between the two countries.

"We think we will be increasingly integrated," says Ernesto Ruffo Appel, Baja's governor, who was born in San Diego.

Baja is the best place to see this evolution in action. The two Californias are still very different, of course. "Tijuana and San Diego are not in the same historical time zone," wrote American author Richard Rodriguez--but they're looking more alike all the time.

Like California, Baja is dynamic. Its population of 2 million is growing 3.5% a year. It's a magnet for people from all over Mexico--and even for illegal immigrants from El Salvador and elsewhere. And there's a big underground economy, just as there is here.

The two Californias are also looking more alike ethnically. The proportion of U.S. Californians who are Latino has doubled since 1970 to 25% and is expected to reach 34% by 2010. The Los Angeles public schools, like those of Tijuana, are heavily Latino.

Baja, meanwhile, is getting more American. Tijuana gets U.S. television (but Americans get 25% of their new color TVs from Tijuana), and the best way from Tijuana to Mexicali--the state capital--is on Interstate 8 in California. San Diego and Tijuana are considering a joint airport, and there is talk of a pipeline to carry natural gas from California to Baja.

Development will continue the trend. Frisa, for example, the big Mexican real estate developer, is building a 700-acre resort 11 miles south of Tijuana with 4,000 ocean-view homes starting at $100,000. The entire project is aimed at Americans.

Asian investors like both Californias; Baja is attractive because wages are so low. Per capita income in Tijuana is $2,500, well above Mexico's $2,000, says Eduardo Zepeda, economics chairman at El Colegio de la Frontera Norte, a Mexican think tank. But those figures are peanuts compared to Taiwan's $9,000 or so. Specially licensed assembly plants south of the border-- maquiladoras --make it easy to send products north.

Consider Ace Manufacturing Co., a small Chula Vista tool-and-die maker with 40 employees. Owned by Korean entrepreneur Su Yi, Ace does demanding aerospace and defense work, but with peace breaking out everywhere, it wants to diversify. So within the next few months, Ace will open a second facility, in Tijuana, where 300 workers will produce subassemblies for Hyundai, which makes shipping containers in Tijuana.

This movement of jobs and investment offers a good argument for the free trade agreement. Certain kinds of jobs will leave California with or without the pact; with free trade, at least Mexico's markets would be open. Mexicans would gain the purchasing power to buy stuff from us and, with more job opportunities at home, would feel less compelled to come here illegally.

Besides, growth in Mexico should create jobs in Southern California. Manufacturing in Mexico, for example, will require design, financial, legal and other work that often will be performed here.

Such jobs can be far more plentiful than many might believe. Ted Gibson, chief economist at California's Department of Finance, notes that of the 2.1 million people employed in manufacturing in California in 1987, only 59% were actually on the production line. And that's not counting all the services manufacturers bought from outsiders.

Tijuana and the larger state of Baja California have problems, naturally, but even some of these are familiar. Like the rest of Mexico, it will have to invest in education, highways, railroads, sewers and transit. It will have to improve its phone system and postal service.

Fortunately, Mexico's economy has been growing strongly since 1989, thanks mostly to the free-market economic policies of Mexico's government, which has privatized industry and slashed tariffs. Foreign investment has been pouring in too.

Economic growth should also help Mexico keep a lid on its huge foreign debt, continue slowing its population growth and even achieve a fairer distribution of wealth, an area in which Mexico lags behind virtually the entire world.

This is great news for us. When worriers fret that California's economy may be sluggish for years to come, Mexico is the place they forget. And as Mexico gains affluence, its appetite for California imports--movies, music, wine, software, technology, food products--will be vast.

Meanwhile, agreement or no, Baja's boom continues, interrupted a bit only by the nasty recession in California. Ruffo, Baja's forward-looking governor, sees this growth as "inevitable," but says managing it is a huge challenge that will strain local resources.

"Of course," he says with a smile, "it's a nice problem."

Neighboring Economies Figures are in billions of dollars unless otherwise specified.

California Mexico Population (millions) 30 88 Gross product 777 201 Product per capita 26,429 2,365 Exports 63 28 Imports 73 36 Inflation rate 4.6% 17%

Source: Bank of America estimates for 1991

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