February 25, 2024

Borderlands: Shifting supply chains boost trade in California-Baja mega-region


Borderlands is a weekly rundown of developments in the world of United States-Mexico cross-border trucking and trade. This week: Shifting supply chains boost trade in California-Baja mega-region; Union Pacific opens expanded Phoenix intermodal terminal; Radiant Logistics expands air cargo operations in Texas; and avocado workers in Mexico file labor complaints.

Foreign companies looking to diversify their supply chains have increasingly been choosing Mexico’s northern and central states in recent years.

One of the biggest beneficiaries of the evolving global trade flows has been the so-called Cali-Baja mega-region, the border area connecting Southern California and the northern portion of the Mexican state of Baja California.

“This kind of movement and trend started after the pandemic, where the companies started decoupling, fragmenting their supply chains, putting their eggs in different baskets for production,” Bertha Martinez-Cisneros, a logistics professional and educator, told FreightWaves. “These companies decided to start looking for places around the world. I think that in the case of Mexico, and especially Baja California, it’s kind of like the stars aligned, because we have a very privileged geography.”

Martinez-Cisneros is the coordinator of the bachelor’s degree program in international logistics at the Center for Technical and Higher Education, a private university in Mexicali, Mexico, in Baja California. In addition to teaching, Martinez-Cisneros has held management positions in international logistics and operations for Acer Inc. and Sony Corp. in Mexico.

“Baja California is on the border with the United States, but we also have the coastline along the Pacific, so we can receive shipments directly from vessels from China,” Martinez-Cisneros said. “We are also very close to Los Angeles and Long Beach, which are the main ports in the U.S., and one of the main ports in the U.S. for receiving raw materials and products from Asia.”

The Cali-Baja mega-region is the most extensive integrated economic region along the U.S.-Mexico border, according to a 2022 study from the University of San Diego. The region comprises the two southernmost counties in California (San Diego and Imperial) and the Mexican cities within Baja California (Ensenada, Mexicali, Rosarito, San Quintin, Tecate and Tijuana).

In 2020, the Cali-Baja region boasted a regional GDP of around $250 billion and an estimated $70 billion in cross-border trade flows, the study said. 

Additionally, the Otay Mesa port of entry connecting Tijuana to San Diego, California, processes nearly 1 million commercial trucks annually. The state of California is currently constructing the Otay Mesa East-Otay II border crossing, which will also be just south of San Diego.

Otay Mesa East-Otay II will develop a new U.S.-Mexico border crossing three miles east of the original Otay Mesa port of entry. It will include 10 lanes, five for passenger vehicles and five for cargo transport. More than $1 billion has already been slated for construction.

Otay Mesa East-Otay II, which began construction in August 2022, is scheduled to be completed in 2026.

Martinez-Cisneros said the trend of companies nearshoring their manufacturing facilities to Mexico has also benefited the region.

“Our geography is something that helps a lot in the case of nearshoring because companies see they can just ship goods from China, Singapore, Taiwan, other countries in Asia using ocean vessels, and we can receive the merchandise here in Mexico in Baja California, at facilities such as the Port of Ensenada,” Martinez-Cisneros said.

The Port of Ensenada is a commercial seaport and cruise terminal about 90 miles south of San Diego. It handled 462,183 twenty-foot equivalent units, a 6% year-over-year increase compared to 2022, according to Mexican authorities.

“In Baja California, we have been receiving companies from the U.S. or from other countries for a long time,” Martinez-Cisneros said. “In Mexico, Baja California is probably in third place for receiving foreign investment right now. 

Martinez-Cisneros said while Mexicali is the capital of Baja California, it’s the border city of Tijuana that has received the largest investments and foreign factories in the state. 

“Tijuana is one of the cities that received the most investments, from manufacturing, from warehousing, for logistics service and everything,” Martinez-Cisneros said.

Reynosa was the Mexican city with the most commercial real estate demand from firms nearshoring operations in the country in 2022, followed by Ciudad Juarez, Tijuana and Monterrey, according to data from Newmark, a New York-based commercial real estate advisory and services firm.

Foreign direct investment (FDI) in Mexico totaled over $36 billion in 2023, 2% more than 2022, according to data from Mexico’s National Institute of Statistics and Geography (INEGI).

From January through September, FDI investment reached $1.1 billion in Baja California, accounting for 3.6% of the national total, which placed the state in 9th place in attracting FDI across the country.

Mexico’s manufacturing sector attracted the most FDI last year at over $18 billion. In Baja California, the manufacturing industry absorbed almost 70% of the FDI in 2023. Additionally, approximately $7 out of every $10 invested in Baja California came from the United States (70.8%), followed by Japan with 15.7%.

The INEGI report said that 956 maquiladora factories currently operate in Baja California, of which 621 are located in Tijuana, followed by Mexicali with 151 maquiladoras and 184 in the city of Tecate. Maquiladoras are mainly located along the border and are defined as a factory in Mexico run by a foreign company and exporting its products to the country of that company.

“The commercial occupancy rate in Tijuana is somewhere around 98%. Last year, we received a lot of companies coming from different places around the world, especially Asia, for manufacturing, also looking for places for storage like warehouses, because they are sending assembly of parts or the finished products across the border.”

Martinez-Cisneros said there are some obstacles and hurdles that are hampering the region’s continued growth, including a shortage of truck drivers and the need for more transportation infrastructure.

“What we need as a country is to find a solution for truck drivers; we don’t have the operators here in Mexicali, here in Baja California. That is something that is the headache of all of the companies and not only from the transportation companies, but also for the manufacturing companies,” Martinez-Cisneros said. “Because we have the trucks, we have the containers, we have the boxes, but we don’t have the drivers.”

Union Pacific opens expanded Phoenix intermodal terminal

Union Pacific (NYSE: UNP) recently expanded its intermodal terminal in Phoenix, providing customers a rail option between West Coast ports and the Southwest. The terminal opened on Feb. 1.

“Union Pacific’s new Phoenix Intermodal Terminal is an expansion of our Phoenix yard near downtown to support working and staging intermodal trains,” Union Pacific spokesman Mike Jaxien told FreightWaves. “It was built to service round-trip international containers moving between Southern California ports and Phoenix, and we have the ability to expand.”

Jaxien said the facility sources international shipping containers from the ports of Los Angeles and Long Beach, as well as Union Pacific’s intermodal container transfer facility in Long Beach.

Duncan & Son Lines, a logistics firm in Buckeye, Arizona, will provide drayage support at the facility. The company focuses on international container drayage from the ports of Long Beach and Los Angeles.

“Our collaboration with Duncan & Son Lines reemphasizes the value of a truck-rail transportation solution, reducing greenhouse gas emissions by up to 75%,” Jaxien said. “Union Pacific estimates this new service product could help shippers avoid more than 25,000 metric tons of greenhouse gas emissions annually, through the movement of tens of thousands of import and export containers each year.”

Radiant Logistics expands air cargo operations in Texas

Radiant Logistics recently opened a location in San Antonio that offers U.S.-Mexico freight forwarding services through the company’s service-by-air (SBA) network.

The San Antonio operation will use Radiant’s technology platform, purchasing power and global network to provide domestic, international and U.S.-Mexico cross-border freight forwarding and logistics services, according to a news release.

Mark and Rebecca Sweat will lead Radiant’s SBA-San Antonio location.

“We are very excited to be joining Radiant and the SBA network,” Mark Sweat said. “With Radiant, we believe we have found a unique opportunity to leverage our own strengths along with the capabilities of the Radiant network to bring additional value to our customers here in South Texas.”

Radiant Logistics is a third-party logistics company, providing global transportation and logistics services primarily to customers in the U.S. and Canada. 

Avocado workers in Mexico file labor complaints

Workers from the RV Fresh guacamole manufacturing facility in Michoacan, Mexico, filed a labor complaint under the United States-Mexico-Canada Agreement (USMCA) on Wednesday. 

The Office of the U.S. Trade Representative (USTR) said the complaint was filed under the USMCA’s rapid response labor mechanism. 

The petition alleges violations of workers’ rights to freely associate and collectively bargain, following a collective bargaining agreement legitimation vote on June 23, which confirmed the MP Union as the representative union at RV Fresh. 

According to the petition, officials at RV Fresh have since refused the MP Union and its leadership access to the RV Fresh facility. 

RV Fresh officials have also interfered with the selection of union delegates and used intimidation tactics to undermine the union’s organizing activities, the petition said.

“Any action that undermines workers’ rights to organize and negotiate collectively is contrary to the core objectives embedded in the USMCA and Mexico’s labor laws,” Thea Lee, deputy undersecretary of labor for International affairs, said in a news release

USTR has 30 days to review the claim and determine whether to bring the case to the Mexican government for further review.

More articles by Noi Mahoney

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329 layoffs hit freight-related firms in Texas


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