During its 2013 Spring Meeting in San Diego, several thousand leaders of the Urban Land Institute (ULI) left sunny San Diego saying, “Viva Mexico!”
That’s because, as attendees learned, Mexico’s economy — including its resort development sector — has made an incredible turnaround during the past few years.
John McCarthy of Mexico City–based Leisure Partners, who served as director of Mexico’s National Tourism Promotion Fund (FONATUR) from 2000 to 2006, recalled that Mexico’s tourism business went through a “perfect storm” in 2009: “a bad image, the world economic crisis and even the H1N1 influenza virus; it’s not easy to attract tourists while wearing a mask on your face.”
The storm cleared, however, with two major national policy changes initiated by the Mexican government: first, Mexican pension funds are now allowed to invest in real estate; and second, the Mexican constitution was amended to allow foreigners to own coastal real estate. McCarthy’s company is involved in raising $300 million in equity from Mexican pension funds, to be leveraged with another $300 million in debt, to invest in distressed resort property and new resort development.
ULI and business leaders on both sides of the San Diego–Tijuana border are working to create a “mega-region” called Cali-Baja. This initiative builds on the already significant amount of cross-border economic activity — $28 billion worth of goods move across the border in both directions each year.
A group of ULI Spring Meeting attendees got to see the region’s economic boom firsthand during a full-day tour, highlighted by a visit to the sprawling Samsung factory that employs more than 4,000 workers and manufactures some 65,000 televisions per day for export primarily to the United States and Canada. This factory and others were established under Mexico’s “maquiladora” program, which permits duty-free importation of materials and components used to manufacture goods for export. Manufacturers also benefit from Mexico’s labor costs — well below those of China — and proximity to U.S. markets.
Located just 17 miles south of San Diego, Tijuana is Mexico’s third-largest city with a population exceeding 1.5 million, and one of the country’s most affluent cities. The San Diego–Tijuana border is the world’s busiest, with more than 41 million crossings per year.
No less than the well-known urbanist Richard Florida spoke out in favor of the Cali-Baja mega-region during the ULI conference, saying: “If people could move more quickly across the border in both directions, the national assets, high technology and university expertise on both sides of the border would be unbeatable. This is really part of North America 2.0. If we can have an integrated North American economy, we can have energy independence, food security and uninhibited innovation.”
Development of the Cali-Baja mega-region is being impeded by a number of forces, not the least of which is the difficulty of crossing the border — delays of several hours are common. Congress has halted funding for an expanded San Ysidro border crossing. Even if it were to be completed as planned, however, it would be “a great 20th century border crossing in the 21st century,” according to ULI panelists.
Focusing on air travel rather than land crossing, a private consortium is planning a pedestrian connection between the Tijuana airport and the U.S. side of the border. This bridge would enable U.S. travelers to easily access convenient, low-cost flights to various parts of Mexico and Latin America. Currently, 1 million people cross the border per year just to catch flights from the Tijuana airport; the planned crossing could greatly increase this traffic.
Perhaps the most intransigent factor impeding realization of the Cali-Baja concept is the negative image that most Americans have of Tijuana. Many think of it as unsafe, but its crime rate is actually lower than that of Washington, D.C., and New Orleans. Many Californians still envision the Tijuana of their youthful day-trips: cheap shops and donkey photo ops. A ULI Technical Assistance Panel has issued recommendations for redeveloping a demonstration block in the city’s center that could catalyze a citywide renaissance — one that would match the economic promise of this fascinating city just over the border.
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Leslie Braunstein is with LHB Communications, Inc.
