For the West, a Declaration of Interdependence
Today’s column commences a broader focus on the business and economies of California and the West, with frequent emphasis on Southern California.
All businesses in Southern California--in fact everybody living in the region--must broaden their perspective. Economic links are growing and evolving, connecting this region to the rest of California and all of the Western states.
Regional institutions are beginning to recognize the increasing importance of economic links across a vast area reaching from California to Texas and the Mexican border, to Colorado and Wyoming, and to Washington and western Canada.
The Denver-based Center for the New West has been studying the West as an interdependent region of a dozen or more states since 1989. “The West increasingly defines America’s place in the global economy,” the center declares, citing “technology, entertainment, business services and recreation” as basic industries. Recreation is the big business that brings visitors to the Grand Canyon, Disneyland and Las Vegas, to name only three attractions.
Utah’s Department of Taxation holds an annual conference of economists from 11 Western states--including Alaska--”to get an idea of how California’s economy is affecting us and how we are affecting California, if at all,” says economist Doug Macdonald of the agency.
Why is such knowledge important? Because airport and highway planners need to know what is moving where, because housing markets and schools need to prepare. “Three years ago, 10,000 people a year were coming into Utah from California, and that had a major impact on our housing market,” says Macdonald. “Now the migrations in and out of state are about equal.”
Such knowledge is of critical importance to businesses that need to know where opportunity is knocking anew.
Did you know, for example, that the San Bernardino area has become a major manufacturing center for plastic molding products, ranging from PVC plumbing pipe to intricate computer parts? You would if you knew that the Santa Fe railroad brings in hundreds of grain hopper cars filled with plastic pellets from Gulf Coast petrochemical plants in Texas, says Inland Empire economist John Husing.
But perhaps the best way to get an appreciation for what is happening across the West is to look at a single small business. Mercado Latino, founded 31 years ago and based in the city of Industry, distributes about $120 million worth of grocery products a year aimed at Mexican and Central and South American tastes.
Over the last 15 years, sales in 13 states outside California have grown to about $50 million as the company discovered one Latino community after another waiting to be served with the special rice and particular peppers, cookies and packaged goods their people prefer.
Growth of the interstate business reflects the “spread of Latino people throughout the Western states,” says Jorge Rodriguez, Mercado Latino’s chief financial officer. Rodriguez is one of four children of Gracilianio Rodriguez, now 82, who founded the firm and still works in the warehouse every day.
Mercado’s interstate selling began in El Paso, when Safeway stores there took on a line of the firm’s specialties. “A lot of our products come in from Mexico at Laredo, Texas,” says Vice President and General Manager Al Mena. So supplying El Paso gave the company an opportunity to use its fleet of trucks and drivers efficiently, delivering goods on both the drive out from California and back from eastern Texas.
From El Paso, business spread into New Mexico and Arizona, to Oklahoma and Colorado. It now ranges as far north as Burlington, Wash., a farm community north of Seattle.
But geographic reach demands increasingly complex logistics. A truck going north to Seattle cannot come back to Southern California empty. Costs of $1 a mile for the vehicle, depreciation, maintenance, insurance and drivers would break the company.
So it is fortunate for both the company and its Washington and Oregon customers that eastern Washington and Idaho grow most of Mercado Latino’s beans. “We get our pinto beans, black beans, corn and other grains from there,” Jorge Rodriguez explains. So the company’s trucks--it now has a fleet of 150--travel with full loads in both directions. Grocery customers in Oregon and Washington get Latin foods at reasonable prices because of transportation economies made possible by Idaho farmers whose business prospers because of the spread of Latino communities throughout the Western states.
The connections grow and sophistication increases. Mercado Latino now supplies its groceries, broken down into preferences for each store, to the warehouse of the HEB supermarket chain in San Antonio. HEB, in turn, is opening supermarkets in Monterrey, Mexico.
The details of one small grocery supplier are multiplied and magnified in the West these days. Silicon Valley’s links with Arizona, Colorado, Utah and New Mexico are increasing. Airports have expanded in Denver, Las Vegas, Phoenix, San Jose and Ontario, Calif., to handle growing cargo. Transportation planners in Los Angeles, Irvine and San Diego should take note of these emerging patterns.
The historic model to keep in mind is the expansion of industry and trade between New York and the hinterland that began in the 1820s. Over a century, it forged the nation’s industrial heartland.
Now the nation’s new industrial heartland is emerging in California and its neighboring states. That demands new thinking.
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James Flanigan can be reached by e-mail at jim.flanigan@latimes.com.
