Estimating Economic Impacts of

Border Wait Timesin the

San Diego-Baja California Region

February 24, 2006

2

Study Objectives

Understand the economic significance of border delays

Measure economic impacts of wait times Cross-border personal travel Cross-border freight movements

Develop new model for testing public policy solutions

3

Study Framework

For cross-border personal travel 3,603 surveys at San Ysidro, Otay Mesa,

and Tecate For cross-border freight movements

Interviews of trucking companies, Customs brokers, major cross-border manufacturers and U.S. Customs and Border Protection

Published international trade data Published border crossing traffic data Estimated net economic impacts Risk analysis approach Panel of experts and stakeholders

4

Panel of Experts and Stakeholders

Consulate of Mexico in San Diego U.S. Customs and Border Protection U.S. Federal Highway Administration Otay Mesa and San Diego Regional

Chambers of Commerce, South County Economic Development Council

San Diego State University, University of San Diego Transborder Institute, San Diego Dialogue, Mexico’s College of the Northern Border (COLEF), Autonomous University of Baja California (UABC)

5

Crossborder Travel Characteristics

More than 60 million trips cross northbound at the San Diego - Baja California border annually Over half of those trips are for

shopping or recreation Another 10 million trips are made for

work or business

More than 90% of the crossborder trips are local

6

Binational Trade & Freight Facts

9% of U.S.-Mexico

trade value crosses at Otay Mesa and Tecate.

#1

Mexicois the

United States’ second largest

trading partner.

#2

7

Binational Trade & Freight Facts

Mexicois

California’s number one

export market.

#2

#1

#3 The Otay MesaPort of Entry (POE) is the third ranking

POE in theU.S.-Mexico border.

Otay Mesa POE

8

Binational Trade & Freight Facts

$23.2 Billion in Imports and Exports (2004)

Otay Mesa Tecate

Exports: $9.4 Billion

Imports: $13.8 Billion

99%of trade between California

and Mexico is carried by

trucks.

9

Otay Mesa & Tecate POEs

Northbound Truck Crossings

Num

ber

of

Tru

cks

(thousa

nds)

0

200

400

600

800

1995

2001

2002

2003

2004

1996

1998

1999

2000

1997

Otay Mesa

Tecate

0

$ 5,000

$10,000

$15,000

$20,000

$25,000

Two-Way Trade

Tw

o-W

ay T

rade (in

$m

illions)

10

Key Interview Findings

Trade, truck volumes & congestion have grown significantly over the years

Physical infrastructure constraints at Otay Mesa- Mesa de Otay POE

For some industries, modern rail is key to lower transportation costs

11

Key Interview Findings

Extremely sensitive supply chain No inventories: Just In Time Parts go back and forth across

the border several times Delays at Otay Mesa POE are

as important as delays at Port of LA/Long Beach

Delays mean higher logistics costs and lost economic opportunities

Time is money F.A.S.T./ Empresa Certificada Tijuana-Tecate Toll Road

12

Cross-Border Personal Travel

San Diego County More than 8 million trips

lost 3 million potential

working hours and $42 million in wages lost

Output Loss: Between $2 billion and $2.5 billion (total economic impact)

Job Loss: Between 28,000 and 35,000 jobs

Baja California More than 2 million trips

lost About 500,000 potential

working hours and $10 million in wages lost

Output Loss: Between $100 million and $230 million (total economic impact)

Job Loss: Between 800 and 1,900 jobs

At today’s level of waits (45 minutes average):

13

Cross-Border Personal Travel

Impact Category Total Annual Impact

Output Output (millions of U.S. (millions of U.S. dollars)dollars)

Labor IncomeLabor Income(millions of U.S. (millions of U.S. dollars)dollars)

Employment (FTE Employment (FTE jobs)jobs)

-$2,428-$2,428

-$1,018-$1,018

-32,821-32,821

Combined Regional Economic Impacts

(San Diego County & Baja California)

14

Economic Impacts due to Cross-Border Freight Delay

Impact Category

Total Annual Impact (U.S. $ in millions)

California United States

San Diego County

Output

Labor Income

Employment(FTE jobs)

-$ 455

-$ 131

-2,461

-$ 716

-$ 204

-3,654

-$ 1,256

-$ 351

-7,646

MexicoBaja California

-$ 1,317

-$ 150

-6,929

-$ 2,069

-$ 236

-10,889

15

Total Output Impacts by Sector in the San Diego Region (2005)

$455 Million

Machinery & Equipment43%- TV sets- Circuit boards- Trailers- Motor vehicles

Manufactured Goods11%- Biomedical devices- Furniture- Plastics- Textiles

Agricultural & Food Products18%- Tomatoes- Vegetables- Beer

Mining & Mineral Products28%- LPG- Chemicals for electronics

16

Total Output Impacts by Sectorin Baja California (2005)

$1,317 Million

Machinery & Equipment50%

Manufactured Goods19% Agricultural & Food Products

22%

Mining & Mineral Products9%

17

$1,256

$2,069

Economic Opportunities for Trade Growth

via the Otay Mesa and Tecate POEs

$0

$4,000

$8,000

$12,000

$16,000

Exports to Mexico Imports from Mexico

$9,382

$13,793

Outp

ut

Loss

(in

m

illio

ns) Export

Growth Opportunities

= 13%

Import Growth

Opportunities = 15%

18

Total Output Impact Due to Delays at the BorderPersonal Travel and Freight Movements

California-$3.20

(In Billions of Dollars)

San Diego County-$2.71

Baja California-$1.49

Mexico

-$2.24

United States-$3.74

19

California-35,077 San Diego County

-33,915

Baja California

-8,296

Mexico-12,256

United States-39,069

Total Employment Impact Due to Delays at the Border Personal Travel and Freight Movements

20

Projected Output Impact of Border DelayPersonal Travel and Freight Movements

San Diego County & Baja California

United States & Mexico

2005

2014

$0

-$4,000

-$8,000

-$12,00

0

-$16,00

0

Ou

tput

Loss

(in

mill

ions) -$4,200

-$5,974

-$9,979

-$13,873

21

Projected Employment Impact of Border DelayPersonal Travel and Freight Movements

San Diego County & Baja California

United States & Mexico

2005

2014

0

-40,000

-80,000

-120,000

Em

plo

ym

ent

Loss

-42,211-51,325

-104,146

-123,682

22

Conclusions

Current border delays are responsible for significant economic losses on both sides of the border.

Personal travel: Economic impact of congestion is much stronger in the U.S. than in Mexico. It affects mainly the San Diego-Baja California region.

Freight movements: Economic impact of congestion is greater on the Mexican side. It spreads significantly to the national level.

23

Conclusions (continued)

Trade is a key contributor to local, state, and national economic growth.

Border delays impact the competitiveness of the binational region.

Traffic delays and economic losses are expected to double over the next 10 years.

Delays and losses can be reduced with improved infrastructure and management.

Survey results show cross-border travelers are willing to pay a toll if delays can be reduced.

24

Willingness to Pay $3 at Proposed East Otay Mesa POE

Would NotUse

East Otay Mesa POE26.5%

Would UseEast Otay Mesa POE

59.4%

SometimesUse

East Otay Mesa POE14.2%

Estimating Economic Impacts of

Border Wait Timesin the

San Diego-Baja California Region

February 24, 2006