Increased Security: A Careful Balancing Act for the U.S.-Mexico Border Region

This material has been reproduced with permission of Standard & Poor's, a division of The McGraw-Hill Companies, Inc. This article, Increased Security: A Careful Balancing Act for U.S.--Mexico Border Region, by Horacio Aldrete-Sanchez, Patricia Calvo, and Frank Benassi, was initially published by Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc., January 12, 2006. [c] 2006. Increasing security along the U.S.-Mexico border is an obvious necessity. However, federal, state and local officials need to craft policies that increase security and minimize the potential negative impact of these policies on trade, investment and regional labor markets. Increasing security, if done in a vacuum, can slow the movement of goods, services and people, thus hindering the characteristic vibrancy and social interaction of the border region and other parts of the United States that are highly dependent on trade with Mexico. In Mexico, the economic growth spurred by the North American Free Trade Agreement (NAFTA) fostered the decentralization of industrial and commercial activity to the country's U.S. border, away from cities like Mexico City, Guadalajara and Monterrey. Today, Tijuana, Juarez, Mexicali, Matamoros, Nuevo Laredo and Reynosa are important alternative industrial and commercial centers. Cities on the U.S. side of the border have fared similarly. Laredo, TX, handles 40 percent of all trade with Mexico, the United States' second-largest trading partner after Canada. The city's population has increased by nearly 28 percent over the past ten years, its property tax base has more than doubled and the unemployment rate, which averaged only 5.9 percent in 2005, is well below the 14.9 percent experienced prior to the implementation of NAFTA (Standard & Poor's 2005). U.S. and Mexican border cities have experienced substantial economic and population growth. The growth is both a blessing and a challenge for city administrators to sustain the infrastructure needed to attract investors and achieve economic growth in a post-September 11th world. With an estimated eleven million people living in the border region, including cities in six states in Mexico and forty-eight counties in the United States, there is intense pressure to tighten security at the border to prevent future terrorist attacks. Furthermore, undocumented immigration has added to the demographic and infrastructure challenges. The flow of investment to the border region, while still steady, is slower now than in the early years of NAFTA. Infrastructure levels lag behind those of other parts of the country. Unemployment remains above the U.S. average. And gang- and drug-related violence, which has risen in several Mexican border cities, threatens to spill to the U.S. side. In order to boost border security, a member of the U.S. House of Representatives recently proposed the construction of a 2,000-mile, steel-and-wire border fence from San Diego, CA, to Brownsville, TX. Furthermore, the recently House-approved Border Protection, Antiterrorism and Illegal Alien Control Act of 2005 (H.R. 4437) mandates that 698 miles of border fencing be erected in five strategic locations along the U.S.-Mexico border. While the bill may experience significant changes as it moves through the legislative process and may never become law, its approval by the House highlights the increased attention that control over the flow of people, goods and services at the border has attracted in the public debate (U.S. Citizenship and Immigration Services). Security, immigration and economic and population growth all present a challenge to city managers to provide solutions that are fiscally sound and do not risk a city's credit quality. The credit quality of Laredo, like that of other U.S. and Mexican border cities, has improved, indicating a healthier financial situation for the city government. Credit quality is assessed by rating agencies, such as that of Standard & Poor's, which evaluate the overall financial management of public entities, such as cities, states and municipal school districts. …

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