Texas border spat could benefit New Mexico trade

The state of New Mexico could benefit from a political conflict between Texas and Mexico over recent border inspections, as the Mexican government says it may reroute a major new rail line.

Mexico says it is considering modifying a planned $3.3bn rail expansion known as the T-MEC Corridor, which will connect Sinaloa state with Winnipeg, Canada, so that it passes through Santa Teresa, New Mexico, instead of through Texas.

"I would assume it would trigger a development boom, but I am being very tempered," Jerry Pacheco, head of the Santa Teresa, New Mexico-based Border Industrial Association, told Argus.

Mexican economy minister Tatiana Clouthier said her government could no longer rely on the state of Texas after governor Greg Abbott called for increased security of commercial vehicles at the state's southern border last month, causing gridlock because of long wait times for inspections and major economic losses.

"We are not going to use Texas now," Clouthier said. "We cannot leave all our eggs in one basket and become hostages to someone who wants to use trade as a political tool."

Mexican foreign minister Marcelo Ebrard and US Homeland Security secretary Alejandro Mayorkas met on 3 May to discuss "new infrastructure for the border with New Mexico in San Jeronimo-Santa Teresa to facilitate binational transportation," Ebrard said on Twitter.

True interest

Meanwhile, New Mexico has also said it will send a delegation from its economic development department to Mexico City to discuss potentially building out that crossing.

San Jeronimo is a port of entry in the Mexican state of Chihuahua across the border from Santa Teresa, which is 12 miles west of El Paso and 260 miles south of Albuquerque in New Mexico.

Santa Teresa is already filled with industrial companies that import and export goods through Ciudad Juarez.

They include FXI, a Pennsylvania-based company that produces foam and polymer products; CN Wire, an affiliate of Turkish-based wire manufacturer Er-Bakir; Acme Mills, a Michigan-based industrial textile manufacturer, and Washington-based Corrugated Synergies International.

Yet New Mexico has long aimed to further boost Santa Teresa's potential as a trade magnet and development engine for the state. Importantly, the port does not have a rail line, meaning virtually all goods are carried by truck. Union Pacific has an intermodal facility in Santa Teresa.

The state had already been exploring obtaining a US presidential permit for a rail bypass route through Santa Teresa and has discussed moving a rail line from downtown El Paso to Santa Teresa.

Risk of disenchantment

Still, some industries in southern New Mexico are wary that Mexico's recent announcement could be more of a temporary political move without a long-term commitment.

"There are two ways to look at this," Pacheco said. "One is that the Mexican government is real about this, that Abbott caused them all sorts of problems and Texas could do it again, so it makes sense to diversify your port of entry into the US."

"On the other hand," he continued, "you could look at it as Mexico poking them in the eye just to get them worried. And I just do not know."

Pacheco said it may be difficult to shift the T-MEC Corridor's US port of entry given that the project has been in the works for several years, already has planned routes, and Laredo, Texas —the originally planned port of entry — is over 600 miles from Santa Teresa.

The project, which was announced in 2020 and is being developed by Mexico-based company Caxxor Group, is aimed at helping Mexico further integrate with US and Canada rail systems.

It includes a new rail line between Mazatlan, Sinaloa and Durango state, as well as a new port in Mazatlan that would focus on agricultural, auto and oil and gas shipments, Caxxor head Carlos Ortiz said in 2020.

Caxxor has invested Ps150mn ($7.5mn) so far on the project and expected to spend Ps600mn this year on studies and permits.

The border controversy began in April when Texas' Abbott announced increased inspections of commercial vehicles entering his state from Mexico in response to the Biden administration's decision to end a pandemic-related health order that allowed US officials to turn away migrants.

Abbott repealed the measures later that month after reaching deals with the governors of the four northern Mexican states, who promised to bolster inspections on their side of the border.

Yet the measures caused delays that triggered economic losses at some border crossings of $200mn/d.

Mexican president Andres Manuel Lopez Obrador called the restrictions "despicable."

Trade through Santa Teresa grew by 9pc annually in March to $2.6bn. Trade through Laredo, the busiest crossing on the US-Mexico border, was more than nine times as high at $24.9bn.

By Jens Erik Gould