Near-Shoring to Mexico

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2 Globally The United States Least expensive of all developed countries to manufacture (between 10%-30% less expensive when productivity is taken into consideration) The leader in the quality/efficiency of manufacturing machinery Has very inexpensive natural gas a crucial component to manufacturing Asia is becoming a massive consumer market demanding more and more American products/innovation The expansion of the Panama Canal has important direct and indirect implications in the re-organization of the supply chains, port priorities, and West-East land-bridge routes in the US

3 Near-Shoring to Mexico Mexico, already a middle income country, is poised to become Latin America s largest economy over the next 20 years and is planning to develop its own port system, to be integrated into the US intermodal transport network (in competition with the ports of LA/LB) Companies are now interested in Near Shoring (manufacturing close to the consumer market)with Mexico as one of the most favorite destinations for many industrial sectors

4 In New Mexico Extremely favorable 2013 legislative session Reduction of the Corporate Income Tax from 7.6 to 5.9 percent Single Sales Factor for all manufacturers Phased in elimination of GRT for manufacturing equipment The locomotive fuel tax exemption amendment allowing the exemption to be available for any company that invests $50M or more in a facility in New Mexico Union Pacific invested $400M in an intermodal/fueling facility in Southern NM Might BNSF consider an investment in the metro? New Mexico Transload now in operation Los Lunas Industrial Rail Park moving forward

5 In New Mexico The Santa Teresa Port of Entry is growing exponentially and already serves as a better alternative to El Paso for commercial trucks Chihuahua, New Mexico and both federal governments are working towards the relocation of the BNSF/Ferromex railway from El Paso to Santa Teresa New Mexico Ranks #1 in Export Related Job Growth in 2014!

6 2014 New Mexico Exports China 3% Canada 6% Rest of World 22% Italy 7% Mexico 41% Israel 21%

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8 UP s Game Changing Project In May, 2014 Union Pacific completed its Santa Teresa Intermodal Facility $400+ Million Investment, 2,200 acre site Includes a fueling station, crew change buildings, and an intermodal ramp with an annual lift capacity of around 225,000 containers

9 What about Greater ABQ? Greater ABQ as a Logistics/Transportation/Distribution Hub I-40/I-25 Intersection Crossrails between the East-West BNSF rail line from LA to Dallas and Atlanta and the North-South BNSF rail line from El Paso to Chicago Potential for a BNSF Intermodal Facility Within UP s 250 mile service radius of the Santa Teresa Facility Foreign Trade Zone and U.S. Customs ready Proximity to Mexico Transload and future Logistics Park capabilities

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13 What about Greater ABQ? Greater ABQ as a Center for Value Added Manufacturing Goes hand-in-hand with logistics/transportation hubs Existing Foreign Trade Zone and U.S. Customs ready Single Sales Factor Tax Close proximity to Mexico s twin-plant (Maquiladora) industry Automotive, Aerospace, Electronics, Medical Devices, etc. Skilled labor and technical resources As the Santa Teresa port of entry continues to grow, where is the labor going to come from? SET UP 3 HOURS TO THE NORTH Low cost commercial real-estate (and expected to remain low compared to the rest of the region)

14 Juarez Plants Source Colorado Plant Assemble ETHICON ABQ Plant Sterilize Package Dallas Air Distribution to Europe and Asia Memphis Truck Domestic Distribution

15 What about Greater ABQ? Greater ABQ as a preferred location for Regional Headquarters for: Foreign companies shipping product through Long Beach for distribution into the U.S. and Mexico U.S. and Foreign companies who want to take advantage of lower cost manufacturing in Mexico with final distribution into the U.S. and Mexico U.S. and Foreign companies who want to set up American Southwest and/or Mexico regional operations

16 So what s missing? We need data to identify what, if anything, can be done leverage the existing Global, State and Local trends to position Greater Albuquerque as a Transportation and Logistics Hub. The collection and analysis of this data will: Determine the feasibility of growing Greater Albuquerque into a Transportation/Logistics Hub Provide the information needed to assist with strategic planning to accomplish this goal Make a case to be used as promotional material to be shown to BNSF and to help with company recruitment efforts.

17 Study Component 1: Competitiveness and Feasibility Analysis S.W.O.T. including multiple industries and modes Who are our competitors? El Paso? Phoenix? Denver? Tucson?... We need data for each city to evaluate where Albuquerque fits in within multiple industry sectors and transportation modes Detailed analysis of how Greater ABQ might compliment or serve as an additional location for companies looking to take advantage of the Santa Teresa Port of Entry Inventory analysis of existing infrastructure Rail, Truck, Air 3 rd Party (logistics/bonded warehousing/etc) I.T. Infrastructure Existing workforce and potential workforce development needs

18 Study Component 1: Competitiveness and Feasibility Analysis...continued Analysis of transport flows both by modes and for intermodal traffic What is our logistical relationship with Las Cruces, Santa Teresa, Farmington, Gallup, and other NM cities? Identify target industry sectors to invest resources into attracting foreign industry Must be done for Rail, Truck and Air Agricultural packaging like Arizona? Medical Devices? Aerospace products, parts and components? Electronics?... this will depend on the way in which the supply chain of each industry is organized in spatial terms Are there advantages/constraints to locating in Greater ABQ compared to other alternatives? Economic impact model projecting impact of transportation industry growth in the Metro Area Research and Identify key trends shaping the future of transportation/logistics including new models/technologies where Greater Albuquerque may have a competitive advantage for early positioning

19 Component 2: Freight Market Study and Model Development Will assess current freight movement and potential for the region to increase rail shipments Will assist with prospect requests regarding freight costs Will determine what needs to be made up in incentives and other benefits to level the playing field with competition Will provide the information needed to develop effective marketing pieces

20 Component 3: Strategic Plan Identify P3 projects (including sites for development), to further involve and incentivize private investment Legislative changes required for P3 projects? Land Availability? Zoning issues? Opportunity to invest in I.T. infrastructure underneath transportation infrastructure needs? Identify a list of target companies that could consider, given the right competitive conditions, moving their operations to the Greater ABQ area Develop promotional materials utilizing data from the study AED/NM Partnership can then use the materials to target the list Research and Identify innovative incentives related to the development of the transportation industry such at the Locomotive Fuel Tax Exemption Consider purchasing capacity from the rail companies to offer it at subsidized rates to companies interested in operating in the Greater Albuquerque Area? Develop a Certified Sites program to fast track development Develop presentation and make rail investment case to BNSF to pursue in Belen

21 Thank you! Randy Trask