Into the Valley: N. Mexico businesses pulled by growth, pushed by drug war

McALLEN — The latest economic boon in the McAllen area — a place that fared well during the global recession — may be partly attributed to a drug war that is luring investment from northern Mexico.

Drawn by McAllen’s large Hispanic population and discouraged by violent cartel attacks in northern Mexico, entrepreneurs south of the Rio Grande are pouring into South Texas.

An average of three new businesses owned by Mexican investors enters the McAllen area market each month, said Javier Martinez, assistant director of the Small Business Development Center at the University of Texas-Pan American.

Each month, Martinez helps about a dozen potential investors from Mexico. Most — about 10 out of the 12 — say they just want to move north to expand their business.

“But some will tell me: ‘This happened, or that happened,’” he said, lowering his voice. Cartel violence south of the border is not the driving force behind the business exodus to McAllen, he said. “It’s just the final thing that pushes them to move here.”

Demand from investors interested in McAllen prompted the business community in McAllen to host a two-day conference this week for members of Reynosa’s Camara Nacional de la Industria de Transformacion, or National Transformation Industry Chamber.

“Everyone wants to live (in the Valley),” Adriana Garza said in Spanish as she took a break during the conference. “Times are hard.”

Garza, a Reynosa native who opened a cabinet shop in Weslaco in April, said she started the business in the Valley to avoid escalating violence in Mexico. Her father, Victor Rodriguez, who lives in Rio Bravo, said many are afraid to talk about the insecurity that plagues northern Tamaulipas.

“I will not even touch that topic,” one small business owner from Mexico said in Spanish as she hurried out of the chamber’s lobby during the CANACINTRA event.

Rodriguez, a furniture distributor, said Hurricane Alex — which devastated parts of Tamaulipas and Nuevo Leon — also pushed some business owners north.

“A big problem for us (moving into the United States) is the migratory situation,” Rodriguez said in Spanish as he waited for an information session on immigration law during the event. “I want to come, but it is hard.”

The tariff-ending North American Free Trade Agreement brought an economic explosion to McAllen, creating a hub for international business that has experienced continued growth since the 1990s. Since NAFTA went into effect in 1994, the city’s population has nearly doubled, and about 80 Fortune 500 companies have moved in.

Parts of Tamaulipas and Nuevo Leon have emptied into the Rio Grande Valley as northern Mexicans flee narco violence in that state. Victor Castillo, director of sales with the McAllen Chamber of Commerce, said at least 400 Mexican families have moved to McAllen and other nearby towns within the last six months.

Newspapers in Monterrey on Wednesday displayed full-page ads paid by business leaders asking President Felipe Calderón to send more soldiers to the city. Once considered a haven from violence more commonly seen in border towns, Monterrey is Mexico’s richest city and McAllen’s sister city.

Also that day, authorities found the body of Santiago Mayor Edelmiro Cavazos near a waterfall outside his town, Edinburg’s sister city. Cavazos had been abducted Sunday night.

More than 28,000 people have been killed in the country’s drug war. The government says most are victims of cartel infighting, but assassinations of police, government officials and politicians have been prevalent recently.

Federico Alanis Peña, CANACINTRA’s representative in Reynosa, said most affluent Mexicans cross the Rio Grande in hopes of capitalizing on the area’s burgeoning growth — not to flee from violence. The slowing U.S. economy, an influenza epidemic in Mexico and a reeling auto industry hurt business in northern Tamaulipas, and entrepreneurs who once invested in the maquiladora industry are now flocking north to open businesses in the United States, he said.

“The problem isn’t violence in Mexico,” Peña said in Spanish, adding that the country is still largely safe. “The problem is worldwide.”

Jesus Carlos Lopez Flores, a franchise owner from Reynosa who owns shares in the Burritos el Estudiante chain, said he decided to open a business in McAllen because of the Valley’s large Hispanic market.

“(American) clients are already seeking us in Mexico,” Lopez said in Spanish. “We have wanted to do this for a long time.”

Mexico was the United States’ third-largest supplier of goods imports in 2009, according to the Office of the United States Trade Representative in Washington. Mexican foreign direct investment was about $8 billion in 2008, up about 26 percent from the year before, according to the latest data available.

Guillermo Nuñez, a fruit distributor who has been in the Valley for the past 15 years, was among a small group of successful business developers from Mexico who addressed about 100 CANACINTRA members during a panel discussion at Tuesday’s event. Nuñez described the process by which he expanded operations to the United States, and encouraged entrepreneurs to follow his footsteps.

“There is a lot in McAllen,” he said in Spanish. “This is an emporium.”

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Ana Ley covers business and general assignments for The Monitor. She can be reached at (956) 683-4428.