An Economy That Knows No Borders

Tucked into a hot, dry corner of California, Imperial County has long been an economic laggard. It has the state’s highest unemployment rate and lowest median income and a population so thin that it would fold neatly into a few square miles of Los Angeles.

Yet Wal-Mart Stores Inc. is building three Supercenters in the county. A gleaming new regional mall just opened. Home builders are on a tear. What’s more, two Indian tribes want to construct a $175-million casino in Calexico -- a city where nearly 1 in 4 families lives in poverty.

This economic paradox is explained by the license plates on many of the cars: Along with a good chunk of the spending power in the Imperial Valley, they hail from Mexicali, Mexico, the fast-growing industrial hub of nearly 1 million just across the border.

Day trippers such as Maria Fuentes pump nearly $1 billion annually into the local economy buying groceries, clothing, autos, even gasoline, according to local economists who have studied retail and trade figures.

“I come over to this side a lot,” Fuentes said as she filled up her car at a Calexico service station.

Mexicali residents also are snatching up property on the U.S. side, helping drive up values in a real estate market that has seen prices appreciate more than 25% in the last year.

“The more expensive the house, the more likely my buyer is a Mexican national,” said Barry Garman, director of planning with Calexico-based Victoria Homes.

Economic ties between Mexico and Southern California have always been strong, but the integration has speeded up significantly in recent years, as measured by the growth in cross-border sales, trade and investment.

Since the launch of the North American Free Trade Agreement in 1995, two-way trade has boomed. In 2002, California exported $14.9 billion of goods to Mexico, the state’s most important foreign customer. Exports from Mexico to California more than doubled from 1995 to 2002. Mexican-owned companies, which have invested more than $1 billion in California, employ at least 10,000 Californians, according to the Public Policy Institute of California.

Now, after all the recent gains, border communities are growing increasingly worried that the Bush administration’s efforts to prevent terrorists or their weapons from crossing the border could slow the wheels of commerce. At a summit Wednesday in Texas, President Bush and the leaders of Mexico and Canada are expected to discuss ways to increase security without impeding the growth of the cross-border economy.

Although estimated to be at least $5 billion a year, Mexican spending along California’s southern edge is invisible to many in the state. That spending sustains far-flung bergs such as Calexico or melts into the larger economy of San Diego County, where by one calculation 1 of every 12 retail dollars comes from residents of Mexico’s northern state of Baja California.

The heightened scrutiny of people and goods traversing the border after the Sept. 11 attacks was a wake-up call for San Diego. When border crossings were shut down, businesses such as the stately Hotel del Coronado scrambled to keep their restaurants running and rooms cleaned. Sales plummeted at Plaza Las Americas, an outlet mall on the U.S. side.

“You close that border and we are in deep trouble,” said James Clark, director general of the Mexico Business Center of the San Diego regional Chamber of Commerce.

Although they are important to San Diego, Mexican shoppers are nothing short of life support for Calexico, a city of 33,000 where nearly 80% of the school district’s children qualify for subsidized school lunches.

“If not for people coming from Mexicali to shop, I don’t know how we would survive,” said Calexico Mayor David Ouzan, who reckons that Mexicans easily account for 75% of the $4 million in annual city sales tax revenue.

Proximity to buying power is the reason the Manzanita and Viejas bands of the Kumeyaay Nation are looking to build a casino in Calexico. The city will hold a special election in June to gauge support for the project, which could include as many as 2,000 slot machines and 45 gaming tables.

“We are bringing the mountain to Mohammed,” said John P. Kennedy, a consultant to the venture, saying the tribes bet that most of their customers will come from Mexico, where Las Vegas-style gambling is illegal.

And although Imperial County’s unemployment rate averaged 17.4% last year, the casino expects to draw at least 12% of its employees from Mexico, Kennedy said. A reason: Mexicali’s universities are turning out workers with skills that aren’t available among the locals.

Many Californians still wrongly assume that most Mexicans who enter the state are impoverished illegal immigrants. In fact, millions of Mexicans come regularly just to shop, visit relatives and sightsee. Others work legally in California while continuing to reside in Mexico.

Last year, 92 million people -- an average of about 250,000 a day -- traveled from Mexico through California’s five border crossings. More than 7 million Mexicans, 1.2 million of them in Baja California, have crossing cards that allow them to enter the United States for up to 30 days at a stretch as long as they stay within 25 miles of the border.

To qualify, Mexicans must prove that they own a home, have a job or have some other strong ties to Mexico. The laminated cards, about the size of a driver’s license, function as temporary visitor visas and are good for 10 years. They are known as “laser visas” because they contain biometric information such as fingerprints that can be machine-read by U.S. border security personnel.

“If you lose your wallet, you don’t worry about the credit cards. It’s this you’re really concerned about,” said Eduardo Ortiz Hurtado de Mendoza, an industrial development official in Mexicali, pulling his laser visa from his billfold. “This is gold.”

Retailers, home builders and civic leaders on the U.S. side don’t want that to change. In January, the federal government expanded its enhanced border security program, known as U.S.-VISIT, to the 50 major land crossings linking the United States to Mexico and Canada. Under that program, most foreigners are fingerprinted and photographed upon entry. An outcry from southern border communities persuaded the U.S. government to exempt Mexican laser visa holders -- for now.

Tougher border security also could put a damper on home sales to Mexicans, some of whom may be living in the United States illegally. Mexicans holding laser visas can buy a home but aren’t supposed to stay in the U.S. for longer than six months unless they acquire some type of permanent residency status. U.S. officials say they cancel the laser visa if someone is caught overstaying.

Thanks in large part to the laser visa program, nearly 40% of Mexicali families head to Imperial County to shop at least once a week, according to a study by Mexican economic think tank CEESEM. The average family income in Mexicali is slightly less than $8,000 a year, and the typical family spends more than one-fifth of it north of the border, the study found.

Although chains such as Wal-Mart and Costco Wholesale Corp. have moved aggressively into Mexico and are rapidly changing that nation’s retail landscape, many Mexicans are convinced that quality, prices and selection are still better in the United States.

It’s one of the main reasons that Wal-Mart is replacing a 120,000-square-foot store in Calexico with a Supercenter nearly twice that size and planning additional Supercenters in El Centro and Brawley, spokesman Pete Kanelos said.

“A great number of Mexicali people are coming to shop there,” Kanelos said. “The customer reception ... has been phenomenal -- better than we ever anticipated.”

Among the regulars are Mexicali accountant Martin Valdez, who said he bought canned goods, clothing and gasoline from Imperial Valley merchants.

“The only things I buy in Mexicali are staples like milk, vegetables and meat,” he said.

On a recent weekend, Valdez and his family were checking out the new Imperial Valley Mall, which opened in El Centro this month. The 750,000-square-foot mall, a joint venture of Chattanooga, Tenn.-based CBL & Associates Properties Inc. and MGHerring Group of Dallas, has a 14-screen movie theater and about 70 retailers, including anchors Robinsons-May, Dillards, J.C. Penney and Sears. Mall employees, along with the signs, are bilingual.

“There are a variety of things we’ve done to make it not only family friendly but Mexican friendly,” said Michael Lebovitz, CBL’s senior vice president.

Home builders are doing the same. Latinos are the fastest-growing customer segment for San Diego-based Corky McMillin Cos., and a growing percentage of clients are from Mexico, the company said. The firm has two new developments in Chula Vista -- about seven miles north of Tijuana -- where 5% to 10% of the homes are being bought by Mexican nationals, said Sandra Perlatti, senior vice president of marketing.

To appeal to them, McMillin is constructing houses with maid’s quarters and as many as six bedrooms to accommodate extended families, which are more common in Mexico than in the United States. Then there are the decorative wrought-iron gates, a standard security feature of upscale Mexican homes.

Indeed, warring drug gangs, kidnappings and other violence in Mexico’s border cities have some professionals seeking a quiet place to raise their families north of the border while remaining close to their roots.

Alejandra Mier y Teran, 33, and her 35-year-old husband, Simon Somohano, both grew up in Mexico and lived in Tijuana after their marriage. But their lives now straddle the border. Mier y Teran, a U.S. citizen, works in the San Diego area as executive director of the Otay Mesa Chamber of Commerce. Somohano, who is in the process of getting his citizenship, works in Tijuana as a tax partner for consulting and accounting firm Deloitte. And the couple visit Tijuana frequently for family gatherings and nights out with friends.

But they wouldn’t trade their $800,000 five-bedroom stucco house in Chula Vista, even though they could find a place of similar size in Tijuana for half the price. Their quiet community has a guardhouse and secure fences. As their family grows, their children will be able to spend time outdoors in their yard or at nearby playgrounds.

“Safety is one of the main concerns,” said Somohano, glancing at the couple’s 2-year-old son, Simon, as he watched “Shrek” on their big-screen television.

Other Mexicans are preoccupied with financial security. Eager to stake a claim in California’s real estate gold rush, longtime Mexicali residents Javier and Magda Ayuso bought a four-bedroom house in Calexico three years ago.

The 5.5% interest rate on their mortgage would be impossible to obtain in Mexico, where 15% is considered competitive and some lenders require down payments of 50%. And the Ayusos figure that the house they bought for $164,000 has appreciated 40%.

“We couldn’t have done that in Mexicali,” said Javier, 33, an executive at a flooring company, who adds that the nest egg they are building is worth the daily commute to his job.

The Ayusos also wanted their sons, Paul and Alexander, to learn English in U.S. schools. It’s a path familiar to 29-year-old Magda. Born in the United States to an American father and Mexican mother, she split her youth between Long Beach and Tijuana. A product of the border, she wants her sons to feel equally at home on either side, reaping the bilingual, binational and bicultural benefits.

Living in Calexico and visiting Mexicali frequently, she said, “is the best of both worlds.”