DED promotes Missouri goods south of the border

by Paul Schreiber

SBJ Reporter

pschreiber@sbj.net

In an effort to boost the $693 million worth of Missouri's goods sold south of the border in 2002, the Missouri Department of Economic Development relies on the services of Monterrey Business Consultants, a firm based in Monterrey, Nuevo Leon, Mexico, with a satellite office in Guadalajara.

"Our central mission is to facilitate the sale of Missouri goods and services in Mexico in order to promote job creation in Missouri," said Todd Nelson, managing partner. The firm provides professional services, such as bilingual lawyers and accountants, as well as marketing and finance specialists to assist companies.

Of the 232 countries purchasing $6.7 billion worth of Missouri's goods and services in 2002, Mexico's almost $693 million take ranked second only to Canada's $3.1 billion haul, according to information provided by the Office of Trade and Economic Analysis, of the U.S. Department of Commerce.

Leading the list of Missouri exports to Mexico were transportation equipment at $252 million, electrical equipment, appliances and parts at $88 million, crop production at $58 million, chemicals at $53 million with all other industries totaling $239 million, according to the Commerce Department.

Particulars on Missouri companies were not available, according to Bronwen Madden, international marketing specialist with the DED.

How MBC works

Monterrey Business Consultants has logged 3 1/2 years on an annually renewable contract with the state, said Nelson, who is also the associate director for the DED's Mexico Trade Office.

"The contract can be renewed up to four times, including the first year," said Angie Kinworthy, senior coordinator for business development and trade for the DED.

MBC represents Missouri and no other states, Nelson said. There is no charge for MBC's services to individual Missouri companies, Nelson said, because the service is provided through Missouri tax dollars.

Missouri companies are first interviewed by the DED staff in Jefferson City, which then sends the company to MBC to carry out the work needed to promote export sales, Nelson said. In addition, "We cultivate contacts with the larger Mexican companies to promote Missouri as a distribution hub," he added.

"We do that primarily by helping Missouri companies establish a distribution network in Mexico. This usually involves finding a distributor or a sales representative in Mexico with the appropriate background and experience needed to promote, sell and deliver those goods or services to Mexican customers. We also promote Missouri as an ideal location for establishing manufacturing and/or distribution facilities."

Nelson said that Missouri's central location made it appealing as a distribution center for Mexican companies considering U.S. markets for its products. A well-trained work force, along with competitive labor rates and cost structure added to the state's appeal for Mexican companies contemplating a manufacturing move to the Midwest.

Nelson is not aware of any Missouri businesses that have headed south recently and said the DED or MBC doesn't work with firms that are considering closing their U.S. operations.

Keeping score

A compliance report is produced annually and successes must be proven, Kinworthy said. Among these evaluative criteria are company export sales, assisting companies in drafting customized mission statements, periodic meetings with key companies, generating agent distributor searches, finding distributors for companies, helping companies with regulations and insuring that appropriate licensing is completed, she added.

State budgets cuts have impacted governmental operations across the board, Kinworthy said. The budget for MBC in its first year was $219,000; last year it was about $170,000, she added.

All expenses MBC incurs for conducting business must come from its budget, Madden said.

Mexico's state of affairs

"Since the enactment of NAFTA, Mexico has started down the very difficult path of transitioning from manufacturing based on low-wage, assembly work to higher wage, higher value-added manufacturing processes," Nelson said.

One negative aspect of NAFTA on the Mexican economy has been its hit on the country's "small, poorly capitalized Mexican grain farmers" who can't compete with richer U.S. and Canadian growers, Nelson said. Missouri crops sold to Mexico ranked third among the state's exported inventory.

Jobs and labor costs

Nelson said the availability of affordable commercial credit is critical to Mexico's economic development. General commercial credit terms are about 15 percent. Obtaining lower rates typically requires backing the loan with real estate and is typically available only to larger entities with hard collateral, he added.

Nelson said the Mexican labor costs have increased recently, making it less attractive to manufacturers.

"Mexico is no longer a relatively attractive country in terms of labor costs, which have risen steadily over the last several years," probably doubling over the last four years in terms of dollars, Nelson said.

Mexico has lost thousands of jobs in the last couple of years to Southeast Asian manufacturers paying lower wages, Nelson said, adding the country is struggling to replace those lost jobs now with higher-paying positions.

Jobs most likely to disappear, however, in either the United States or Mexico, are those of the unskilled worker, who will also find greater difficulty in obtaining new work in that event, Nelson said. As technology advances, he added, it produces more jobs and at better paying wages than it eliminates.