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For many centuries, trade has been one of the main reasons for infrastructure creation. Nowadays, exports require timely investments for the advanced building of facilities, freight corridors, airports, and seaports. Having a border with a world-class infrastructure will allow the maximization of the global rise advantages in the quality of products and services.
According to Boston Consulting Group and its manufacturing cost analysis, Mexico and the U.S. are the two global emerging stars, positioned above other blocs and countries much more celebrated by the media. Both countries have improved their competitiveness due to the moderate increase of its wage costs, productivity growth, steady exchange rate, and capitalization of the energy sector. Thus for the coming years, we can only expect an exponential growth of their bilateral trade.
The best example of this is, perhaps, the automotive industry. According to a study from the Wilson Center, the shared manufacturing model requires that, in order to manufacture one automobile in North America, its parts will have crossed the border an average of eight times.
The Economic World Forum has established that Mexico holds the 65th place in the world in terms of infrastructure while the United States occupies the 12th. Neither country should be proud of these results. In Mexico’s case, there is a notion about the millions of engineer-hours that are required in infrastructure; additionally, its ports and railroads are 40 to 100 years behind. Infrastructure in the United States has been rated on average with 6.8 out of 10, identifying the roads, the transit, and the airports as the areas that require more attention.
In the middle of 2014, with the new century well on its way, infrastructure deficiencies are also found at border crossings. 82% of the trade between the U.S. and Mexico is carried out through ground transportation, and the Department of Commerce has estimated that every minute of delay at the border has a cost of 100 million dollars and up to 500 jobs. These inefficiencies have multiplied due to the growth in demand, the obsolescence of the crossings, and the increased security. On one hand, entry ports are, on average, 40 years and some even 70 years old. On the other, the affiliation to reliable traveler programs advances slowly, especially because of the level of alertness after the 9/11 attacks. As different media outlets have reported, we have 21st century requirements which we are facing with 20th century processes and infrastructure, and with a19th century mentality.
To fix every border infrastructure front we need to undertake three actions: maintain, modernize, and expand. The maintenance and modernization are clear by focusing on keeping what is already there, efficiently updating input and output processes. In addition, there is a need to expand the hours of operation and maximize the traffic volume. However, the private sector’s highest value and interest will be placed on:
- Creating new border crossings.
- Managing border activities.
- Increasing the number of people authorized to use FAST, SENTRI, and Ready Lane programs.
- Consolidating a network of logistics corridors throughout the territories.
- Eliminating barriers that slow down private bilateral investment.
Beyond the necessary political will, the most exciting challenge is how all this infrastructure will be paid for, since its financing will have to be reinvented. In addition to municipal bonds, fees, and taxes, infrastructure private banks, trusts, and revolving funds will be more common. A new fiscal federalism will surround the infrastructure driven by the private sector, and it will be adjusted to the economic development needs from the bottom up. We are close to the peak of public and private projects (PPP) because, in order to continue competing with the different economic blocs, we will need the best of every sector on both sides of the border.
Published on November 21st, 2015 at Empresarios AEM Magazine.