““Economic Integration between Baja California Economic Integration between Baja California and Southern California in 2012” and Southern California in 2012”

Dr. Alejandro Díaz-BautistaDr. Alejandro Díaz-BautistaProfessor of International Economics, Professor of International Economics, ColefColef

Distinguished Researcher at the Distinguished Researcher at the National Council of Science and National Council of Science and TechnologyTechnology

adiazbau@gmail.com

http://www.linkedin.com/pub/alejandro-diaz-bautista/6/619/691

Presentation at the Mexico Business Center,San Diego Regional Chamber of Commerce. 402 West Broadway, Suite 1000, San Diego, California. March 16, 2012.

Economic Integration in North AmericaEconomic Integration in North America

The U.S. and Mexican economies have integrated The U.S. and Mexican economies have integrated since the passage of the North American Free since the passage of the North American Free Trade Agreement (NAFTA) in 1994. Trade Agreement (NAFTA) in 1994.

In 2009, the U.S. provided up to 80% of all inputs In 2009, the U.S. provided up to 80% of all inputs for Mexico’s maquiladora manufacturing and for Mexico’s maquiladora manufacturing and assembly firms, and nearly 90% of all exports assembly firms, and nearly 90% of all exports from Mexico’s maquiladora industry went to the from Mexico’s maquiladora industry went to the U.S., with an estimated $114 billion in bilateral U.S., with an estimated $114 billion in bilateral U.S. and Mexico trade. U.S. and Mexico trade.

By 2010, the United States was Mexico’s largest By 2010, the United States was Mexico’s largest trading partner and largest foreign investor. trading partner and largest foreign investor.

California and Mexico Economic IntegrationCalifornia and Mexico Economic Integration

Trade links and economic integration between Trade links and economic integration between Mexico and California are deep in terms of the Mexico and California are deep in terms of the total value of traded goods. Mexico continues to total value of traded goods. Mexico continues to be California's number one export market. be California's number one export market. California exports to Mexico were close to $21 California exports to Mexico were close to $21 billion in 2010. billion in 2010.

More than three-quarters of all California origin More than three-quarters of all California origin exports are shipped to Mexico’s northern border exports are shipped to Mexico’s northern border states. states.

Baja California residents contribute billions of Baja California residents contribute billions of dollars annually to the California economy.dollars annually to the California economy.

Baja California and California Economic IntegrationBaja California and California Economic Integration

Economic Integration can also be seen at the regional level. Economic Integration can also be seen at the regional level. During 2010, the official data shows that the number of During 2010, the official data shows that the number of

northbound crossers from Baja California to California northbound crossers from Baja California to California reached 61,105,484 people, the majority of whom, crossed reached 61,105,484 people, the majority of whom, crossed in personal vehicles. Baja California residents constitute an in personal vehicles. Baja California residents constitute an important component in the economy of communities and important component in the economy of communities and counties on the U.S. side of the border, like San Diego counties on the U.S. side of the border, like San Diego County. County.

These visitors from Baja California enter the U.S. regularly These visitors from Baja California enter the U.S. regularly for shopping, tourism, work, and socialization with family for shopping, tourism, work, and socialization with family and friends. It’s a well known fact that cross border visitors and friends. It’s a well known fact that cross border visitors from Mexico have a significant economic impact on U.S. from Mexico have a significant economic impact on U.S. communities and counties. communities and counties.

The Border Economic Zone (BEZ) in Baja California

A major challenge for the commercial sector of Baja California is without a doubt, the increase consumer spending of Baja California residents into the U.S. market, which has been estimated at around 6 billion dollars a year.

With the implementation of the BEZ in 2012, Baja California wants to recover part of the consumer spending by Baja residents in California.

The BEZ is intended to promote the consumption of regionally made goods in the Baja California region. The economic impact of the implementation of the BEZ could be as high as an 8% reduction of spending by Baja California residents in California.

The Border Economic Zone (BEZ)The Border Economic Zone (BEZ)

A considerable amount of money is spent on A considerable amount of money is spent on a multitude of retail items including a multitude of retail items including groceries, clothing, appliances, tourism and groceries, clothing, appliances, tourism and services. services.

As a measure to increase consumer spending As a measure to increase consumer spending in the state of Baja California, the in the state of Baja California, the government and business sectors of Baja government and business sectors of Baja California in conjunction with the State California in conjunction with the State Government and the Federal Government Government and the Federal Government proposed the new Border Economic Zone proposed the new Border Economic Zone (BEZ) in 2012.(BEZ) in 2012.

“El Buen Fin” Program in Mexico

The idea of “El Buen Fin” program in Mexico was created as a private initiative to enforce the economic activity in Mexico during November of 2011. The initiative was presented through a program created by the federal government and some of the most important media networks of Mexico.

The program is similar, in some way, to the famous “Black Friday” of the United States, while this day represents the day with highest consumer spending, and when the commercial sector shows their best offers and the biggest discounts throughout the year.

The economic impact of the implementation of the “El Buen Fin Program” was estimated as high as a 2% reduction of spending by Baja California residents in California during 2011.

Economic Impacts and Expenditures

Shopping is the primary reason to cross into the U.S. for Baja California residents. Depending on the study, 42 to 68% of border crossers identify shopping as the primary reason for the visit into Southern California. Other reasons are social in nature, like visiting family and friends, or are work related.

During 2010, around 74 percent of crossers entered California in their private vehicles, since a car allows them freedom of movement between different shopping locations in the U.S. as well as enough room to handle the volume of their purchases.

The estimated average daily expenditures reported by Baja California visitors into San Diego County and California in various studies ranges from US $140 per trip to $300 per trip. The current estimation uses an average amount of expenditures per trip of $240 per trip as the base case scenario.

Economic Impacts The annual retail sales to Baja California Cross Border

Visitors are estimated considering an annual rate of economic growth in Baja California of 2.3%, with a base case spending of $178 per trip, a high case spending of $300 per trip and a low case spending of $140 per trip.

The estimation considers that 42% of border crossers identify shopping as the primary reason for the visit into Southern California.

The implementation of el “Buen Fin” program is estimated to have a reduction of 2% on annual retail sales to Baja California Cross Border Visitors. While the Border Economic Zone (BEZ) is expected to reduce annual retail sales by Baja California CrossBorder visitors by al least 8% during the first few years of the program.

Annual Retail Sales in California by Baja California Border Crossers (Economic Growth Scenario)

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California Economic Impacts

The California and Baja California border region remains an example of social and economic integration in North America, where cross-border shopping is only one aspect of that economic reality in the border region.

Mexican citizens cross frequently into the U.S. to shop, work, dine, vacation, and visit friends and family. What they spend on those visits results in a key contribution to local border economies in California.

The results reveal annual retail sales by Baja California Cross Border Visitors in the range of 5.9 to 6.8 billion dollars along the U.S.-Mexico border, depending on the complete implementation of the Border Economic Zone (BEZ) in Baja California and the “El Buen Fin Program”.

The base case scenario shows that Baja California consumer and economic drain into the U.S. market is estimated at around 5.9 billion dollars in 2012 and 6.2 billion dollars in 2014, with the implementation of the Border Economic Zone (BEZ).

San Diego County Economic Impacts

Each day thousands of people travel between the United States and Mexico via the San Ysidro, Otay Mesa, and Tecate border crossings making the San Diego-Baja California points of entry one of the busiest in the Americas. The number of northbound crossers from Baja California to San Diego County during 2010 reached 42,091,703 people, the majority of whom, crossed in personal vehicles.

It is estimated that 92% of Mexico-residing border crossers at the San Diego-Tijuana points of entry come from the Tijuana Metro Region which consists of the cities of Tijuana, Rosarito, and Tecate.

The 2010 census data from Mexico estimates approximately 475,000 households in the Tijuana Metro Region. It is estimated that 30 to 55% of households reported at least one family member with a border crossing card or visa to enter the United States.

San Diego County Cross Border Retail Sales 2010-2014

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2010 2011 2012 2013 2014

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San Diego County Economic Impacts The results reveal a substantial overall San Diego County cross border

retail sales in the order of 4 billion dollars during 2012 along the Baja California – San Diego County border.

Expenditures by cross border residents of Baja California are estimated at 4.2 billion dollars in San Diego County during 2014 using the base case spending scenario and with the implementation of the BEZ.

The San Diego-Carlsbad-San Marcos metropolitan area’s GDP in 2009 was estimated at around $171.4 billion, ranking 16th in the United States, according to the federal bureau of Economic Analysis.

In San Diego County, the Hispanic population increased from 27% in 2000 to 32% in 2010, with the resulting significant contribution to the regional economy.

Conclusions From 1995 to 2010, the official estimates indicate more

than 450 million personal vehicle crossings with 966 million passengers, and more than 260 million pedestrian crossings, from Baja California to California.

The Border Economic Zone (BEZ) is expected to reduce annual retail sales in California by Baja California Cross Border visitors by at least 8%, or around 480 million dollars during the first few years of the program.

Expenditures by cross border residents of Baja California in San Diego County represents around 2.4% of the annual gross domestic product in San Diego County.

A new economic and competitive binational Mega-region is evolving. The Baja California – Southern California Mega Region includes Los Angeles County, Orange County, Riverside, Imperial and San Diego Counties on the California side, and Tijuana, Rosarito, Tecate and the port of Ensenada on the Baja California side.

““Economic Integration between Baja California Economic Integration between Baja California and Southern California in 2012” and Southern California in 2012”

Dr. Alejandro Díaz-BautistaDr. Alejandro Díaz-BautistaProfessor of International Economics, Professor of International Economics, ColefColef

Distinguished Researcher at the Distinguished Researcher at the National Council of Science and National Council of Science and TechnologyTechnology

adiazbau@gmail.com

http://www.linkedin.com/pub/alejandro-diaz-bautista/6/619/691

Presentation at the Mexico Business Center,San Diego Regional Chamber of Commerce. 402 West Broadway, Suite 1000, San Diego, California. March 16, 2012.

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Implementation Era.” Growth and Change, 35: 77-89.Implementation Era.” Growth and Change, 35: 77-89.

Bureau of Transportation Statistics (2011). Border Crossing/Entry Data: Various years. Bureau of Transportation Statistics (2011). Border Crossing/Entry Data: Various years. http://www.bts.gov/http://www.bts.gov/

Diaz-Bautista, Alejandro (2012). “Regional Economic Growth and North American Economic Diaz-Bautista, Alejandro (2012). “Regional Economic Growth and North American Economic Integration”, Economic and Financial Series Publishing, ISBN 9780615600437.Integration”, Economic and Financial Series Publishing, ISBN 9780615600437.

El Colegio de la Frontera Norte. (2011). “Estudio de la Implementación de la Zona Económica El Colegio de la Frontera Norte. (2011). “Estudio de la Implementación de la Zona Económica Estratégica en Baja California”.Estratégica en Baja California”.

Gerber, J. (1999). “The effects of the depreciation of the peso on cross-border retail sales in San Gerber, J. (1999). “The effects of the depreciation of the peso on cross-border retail sales in San Diego and Imperial counties”. San Diego, CA. San Diego Dialogue. Diego and Imperial counties”. San Diego, CA. San Diego Dialogue.

INEGI (2010). Censo de Población y Vivienda 2010. México. www.inegi.gob.mx/INEGI (2010). Censo de Población y Vivienda 2010. México. www.inegi.gob.mx/

San Diego Dialogue (1994). “Who Crosses the Border: A View of the San Diego/Tijuana San Diego Dialogue (1994). “Who Crosses the Border: A View of the San Diego/Tijuana Metropolitan Region”. San Diego, CA: University of California, San Diego.Metropolitan Region”. San Diego, CA: University of California, San Diego.

San Diego Association of Governments (2005). “Estimating Economic Impacts of Border Wait San Diego Association of Governments (2005). “Estimating Economic Impacts of Border Wait Times at the San Diego-Baja California Border Region”.Times at the San Diego-Baja California Border Region”.

The contribution of Mexico to the Economy of San Diego

Contribution of the People of Mexican Origin in San Diego:

a) Population. b) The Economy and Employment. c) Consumer Spending. d) Services. e) Contributions and taxes. f) Trade. g) Investments. h) Remittances. i) Tourism. j) Retail Sales and integration with Baja California. k) Human Capital. L) Energy