McALLEN — The early 1980s are a painful reminder to Alida Hernandez of how fragile businesses and the economy are.

Many downtown businesses laid off employees, she said.

“It was very hard,” said Hernandez, who has run her staffing business downtown for 40 years and now heads the McAllen Heart of the City downtown revitalization project. “But we made it through and we’re still here today.”

As if the national recession of 1980-82 wasn’t enough, the peso devalued in 1984 and Rio Grande Valley retailers were slammed again. Mexican visitors to the area considerably slowed because their money wasn’t as valuable, and many long-time businesses shut down for good at that time.

Nationwide, economists, financial analysts and politicians are speculating that the United States could be headed into a financial slowdown.

On Wednesday morning, federal officials announced the nation’s gross domestic product had dropped to a growth rate of only 0.6 percent in the fourth quarter of 2007, sharply down from the 4.9 percent figure during the previous quarter. Low or negative GDP growth is one of the best indicators of a recession.

Some say the area is sheltered from the regular ebb and flow of the U.S. economy by a large number of wealthy Mexican visitors and a diverse economy that includes manufacturing, services and the medical industry. Diversification and the proximity to Mexico would prevent deep cuts felt elsewhere in the United States.

“What happens with the economy here in the United States and in Mexico has a great impact on us,” Hernandez said. “We have a very unique situation. But if a recession hits, we’ll definitely feel it.”

Not ‘recession proof’

Life and money in the Rio Grande Valley have considerably changed since the 1980s.

At that time, citrus fields, onion farms and sugar stalks formed the bulk of local industry. Retailers in downtown McAllen helped serve northern Mexico’s upper crust on fine goods such as clothing and jewelry.

That changed in 1994, when the NAFTA decree formalized cross-border factories, ushered in a new manufacturing era and created thousands of jobs in the region.

With that, a growing economy in Mexico helped the Valley become a destination for an increasing number of wealthy Mexican shoppers, which are accountable for more than a third of the area’s retail economy, according the McAllen Chamber of Commerce.

Rapid growth helped the region with other economic slowdowns since then, too.

Bank deposits in the Valley are now more than $12 billion a month, according to statistics collected from the Rio Grande Valley Partnership in Weslaco each month.

And unemployment during the last 15 years has dropped from near 30 percent to 6.6 percent in December, according to the Texas Workforce Commission and federal Bureau of Labor Statistics.

Since then, growth in the Valley has created thousands of jobs and sliced unemployment rates.

Agriculture is still a leading employer to thousands of migrant farm workers that come here during the winter months to pick citrus and winter vegetables.

And manufacturing and trade employ more than 50,000 people in Hidalgo County.

Healthcare, education, retail and government are also large industries, though not one dominates the local economy.

“Our economy is much better than it was,” said former McAllen Mayor Othal Brand, who served from 1977-1997. “I’m not concerned about a recession, but we’re not recession proof.”

A symbiotic relationship

Salvador Gonzalez has weathered several economic downturns at his gift shop, LaMac, in downtown McAllen. Most of his customers are Mexican nationals, snatching up perfume and sunglasses to take back to Monterrey.

Border violence in Mexico is more of a concern than a recession, he said.

“We have never felt it because of the Mexican part,” he said. “We always survive it in the Valley. We are in paradise because of Mexico.”

Historically, Mexico’s economy is closely tied to that of the United States. Financial issues here could tighten markets all over the world, which could possibly affect manufacturing across the border.

However, professionals in the maquiladora industry aren’t worried about any cutbacks stemming from recession, even one with worldwide consequences, said Enrique Castro, a spokesman for the Reynosa Maquiladora Association.

Castro said it was far too early to start talking about changes from a recession.

Like the short recession in the United States in 2001 after the 9/11 terrorist attacks, an economic downturn elsewhere could actually help the Valley, said Keith Patridge, president of the McAllen Economic Development Corp.

“When companies need to cut costs up north, they consider moving here (Reynosa),” Patridge said. “And when they want to expand, they think about moving here, too.”

The years around 2001 proved to be the most productive in the history of the Valley despite a recession, Patridge said. The maquiladora industry added dozens of plants and hundreds of workers and the local population on the U.S. side of the border continued to increase.

“We’ll still feel it”

Even with the Valley’s diverse economy, the impact of a recession on the area will depend on the severity of financial problems nationwide. A minor recession may barely be felt here because of fast growth and development. However, a deep recession could bring much of that to a stop if national companies make major cutbacks.

Cynthia Sakulenzki was the head of the Mission Chamber of Commerce during much of the 1980s, when the Valley economy was dealing with hard economic times.

“The recession, we did feel it, also with the peso devaluations as well,” said Sakulenzki, who now heads the McAllen Hispanic Chamber of Commerce. “We felt it a little, not as much as the whole country, but we did.”

One of the biggest changes here was a stop in hiring at companies, which had to tighten belts because of cuts elsewhere in the country, she said.

“Because of the boom that we are in it wouldn’t hurt us much,” she said. “But we’ll still feel it.”

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Kyle Arnold covers business, the economy and general assignments for The Monitor. You can reach him at (956) 683-4410.