Anyone who has been paying attention to the details would have a hard time arguing that the Rio Grande Valley is not on the verge of potentially becoming a great American economic story, and that it will complete its transformation from an outdated perception of impoverished backwater to a driver of U.S. recovery and expansion.
And yes I know that sounds like hyperbole.
“There’s a storm across the valley….”
But there are a few items to consider before dismissing the claim. The first is that the valley is situated in the midst of two of the largest oil shale fields in North America, the Eagle Ford of Southwest Texas and the Burgos Basin in Mexico. In one year, 2013, $46bn USD was invested in Eagle Ford. Burgos, however, is reported to be eight times larger, in terms of deposits, and the Mexican government, realizing the limitations of its national oil company Pemex, has decided to open up the shale play to multi-nationals.
Exploration and development companies will likely use the Port of Brownsville for shipping and staging operations on the U.S. side of the border. Economists have said that the Eagle Ford has enabled the current U.S. recovery. It’s reasonable to wonder about the impact of the Burgos Basin on the Texas and American economy, given its great size and proximity to the border.
There is also wind. Close to the coast, wind is consistent. More than a billion dollars in wind farms are being built in the region. Two of them are already in operation, including Los Vientos, by Duke Energy just north of the Harlingen airport. Duke is spending hundreds of millions in Starr County, and just started construction on two new sites that will standup 200 more wind turbines. Austin Energy and CPS of San Antonio are purchasing the electricity. E.ON Energy has a 112 turbine wind project in the same general locale.
In the past year or two, almost a billion dollars have been invested in Starr County, which not too many years ago had an unemployment rate of 40% and the worst poverty of any county in America. A new pipeline is also being built through Starr County to carry gas to Mexico from the Eagle Ford. Hotel and motel tax revenues for that county have gone up 18% annually and sales tax collections jump 7-8 percent monthly.
An endless growing season
As exploration and development mature in the Burgos Basin, Mexico will also send natural gas back north of the border for export out of Brownsville. The port has options from five different companies wanting to build gas liquefaction plants at their location; each one will create about 3000 construction jobs.
Omnitrax of Denver, one of the most successful railroad companies in the U.S., has just signed a 30-year operating agreement with the short line Brownsville and Rio Grande Railroad, which has 50 miles of track delivering steel and other freight from the port to Mexico. Omnitrax has plans to build a huge industrial park and development at the port site in Brownsville.
Ninety percent of the freight coming into the Port of Brownsville goes to Mexico, vast amounts of slab steel from Russia and the United Kingdom. And because most of that comes back as automobiles, appliances, and other big-ticket items, the port was just named the number one Foreign Trade Zone exporter in the U.S. for the second consecutive year. And the first new railroad bridge across the Rio Grande in a century was just completed in an effort to expedite the freight movement.
Of course, most everyone knows about Space X. There will be about 600 permanent jobs but Elon Musk has indicated he wants to locate rocket construction at the site of the launch facility so there will be additional positions based upon need. Suppliers are expected to locate their operations close to Space X. Brownsville estimates there will be 20,000 people in the area for each of the monthly rocket launches.
In terms of overland transportation, the last two incomplete interstate highways in the U.S. are under construction to reach the valley. Even with economic challenges for the National Highway Trust Fund, there are more than $700 million dollars of construction projects underway on I-69 inside Texas. I-69 will run from Port Huron Michigan to three different terminations along the border. The easternmost segment follows current U.S. 77 down through Harlingen to Brownsville while another leg will come down the U.S. 281 corridor to near McAllen. Interstate 2 will run along the river from near Harlingen and will, eventually, connect to the westernmost terminus of I-69 in Laredo, which also will provide a junction to I-35, currently the biggest artery for Mexican produce and goods. There seems little doubt completion of these projects will deliver significant economic opportunities to communities like Harlingen and all of the cities connected to the international bridge systems with Mexico.
Equally significant, Mexico has recently completed construction of its first coast-to-coast superhighway, HD40 from the deep-water port near Mazatlan to Monterrey and up to the U.S. border in the Rio Grande Valley. This has already begun to change the dynamics of transportation in South Texas. Freight offloaded on Mexico’s west coast can get to the U.S. Northeast and Midwest much faster by going up to Rio Grande Valley border cities instead of Nogales, Arizona, El Paso, and Laredo. There are 12 bridges along that stretch of river to expedite transit, and produce houses from Nogales, Arizona, are already relocating to the valley. Texas A&M has assigned a senior economist to the valley just to study the impact of this one transportation development with HD40.
The context for all of this, of course, is critical. The valley, as recently as a few months ago, was called a “third world” by Texas politicians running for statewide office, and even a “war zone” because of its proximity to Mexico. But national crime statistics have shown McAllen, Harlingen, and Brownsville to be among the safest communities in the U.S. McAllen was named the fastest growing city in the country, best place to be a solo entrepreneur, and Harlingen recently was shown to be the most affordable and best place to raise a family. (Independent analyses provided by third parties, easily sourced.) Brownsville was selected an All-America City a few months previously in a national competition in Denver by the Urban League.
Historically, politicians in Austin and Washington, because of a lack of demographic clout, have ignored the region. The third world slur was close to reality in the 70s with the highest rates of unemployment, poverty, infant mortality, lowest per capita income, and lowest levels of literacy for the entire nation recorded in the valley.
But those days are long gone. The University of Texas has committed $700 million over ten years to the valley. The two historic campuses, UT Pan American and UT Brownsville are being merged to create what will become one of the largest universities in the country when the first class enrolls next August. The commitment also includes a new $54 million dollar medical school that is presently under construction in Edinburg, which will add to the medical education already taking place in hospital residences and an academic clinic. Medical training has already been underway for more than a decade at Harlingen’s Regional Academic Health Center (RAHC.) Third and fourth year medical students from the University of Texas at San Antonio gain valuable experience at the facility, and an estimated 90 percent of them end up practicing medicine in Texas. There are also already more than 50,000 students being served by a community and technical college system encompassed by South Texas College (STC), Texas State Technical College, and Texas Southmost College.
STC, which houses the North American Advanced Research and Education Initiative, has led manufacturing innovation being used by global corporations. Their leading concept, called Rapid Response Manufacturing, can be seen at Alps, Inc, in McAllen and Reynosa, a global parts company for automobile manufacturers that will employ 4500 people and will be generating a billion dollars in revenue next year. Rapid Response shortens the timeline from concept to market and, in some cases, makes it possible for companies to not produce a product until it has been purchased. One manufacturer in the valley begins production by 10 a.m. on day of purchase and promises delivery by the same time the next morning.
The economy in the valley has also begun to take advantage of a concept promoted as “Third Coast Manufacturing.” The idea, which appears to be taking hold, is that natural resources and partially developed products are shipped from Europe and Africa to Mexico’s east coast while Asian products are delivered to the west coast. Refinement and assembly occur in Mexico, which has very few trade barriers remaining, and then they are delivered to the U.S. at the Rio Grande Valley ports of entry for shipment to American markets.
Being in a central location and time zone also gives the RGV an ideal situation to continue to take advantage of as the region grows and prospers. The appeal of all that can be measured in the fact that a few weeks ago the McAllen Economic Development Corporation had 200 Japanese and South Korean companies visiting the valley at the same time. (Unfortunately, the governor was on network TV that night riding a swift boat on the Rio Grande with 50 caliber machine guns.) Most of the global car companies also now have large manufacturing facilities in Mexico.
There are 40 communities in the 120-mile stretch of the Rio Grande Valley and they have begun an unprecedented level of cooperation to take advantage of their geography and other circumstances. And when the governor ordered the National Guard to the valley, there was close to universal disagreement with his decision because of the harm that might cause to the emerging image of the area. Everyone viewed the increase of river crossers as a humanitarian crisis, and not one of criminals and terrorists.
The valley is more than 90 percent Hispanic and is leading the demographic shift underway in Texas. In fact, it might just be the laboratory where we can get a first look at the future of America. And early indications are that the future might be a bit brighter than everyone thinks.