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Growing Mexican trade helps Arizona exports keep pace with other states

By Joshua Armstrong
Cronkite News Service

WASHINGTON – A strong Mexican economy is helping Arizona keep pace with other states in export sales this year, according to recent data from the International Trade Administration.

Mexico accounted for more than a third of the state’s international trade in the first half of 2011, when Arizona’s total export sales jumped $1.2 billion, to $8.9 billion. It was the highest year-to-date increase in at least five years.

The bump in exports follows 10 years in which Arizona had the fourth-slowest growth rate among states in international trade, according to the administration’s data.

Mexico’s quick recovery from the global recession, a strong peso and rising commodities prices are key factors in its increasing share of Arizona’s exports, said Lora Mwaniki Lyman, a border economy expert with the University of Arizona’s Eller College of Management.

Exports to Mexico rose about a half-billion dollars to $2.9 billion in the first six months of the year. That total, not adjusted for inflation, is higher than the same period in 2008, which is currently Arizona’s best year in international sales. In the first half of that year, Arizona exported $2.8 billion in goods to Mexico and $10.8 billion overall.

“These Mexico numbers are very interesting,” Mwaniki Lyman said.

The Mexican economy rebounded quickly from the global recession, and its gross domestic product grew 5.4 percent in the first half of 2011, more than double the U.S. rate of growth, according to a Federal Reserve report from the Dallas office.

“Damage to the (Mexican) domestic banking industry was limited, and unlike in the U.S., there was no housing crisis or excessive consumer debt,” the report said.

Rising mineral prices, such as copper, were also a major factor, Mwaniki Lyman said.
Arizona is the largest copper exporter in the U.S. Average copper prices in the first half of 2011 averaged $4.24 per pound, up about $1 per pound from the same period a year earlier, Phoenix-based Freeport McMoRan Copper & Gold Inc. said in a financial report.

A strong peso also increased the value of exports headed south of the border, Mwaniki Lyman said. An Arizona company that sold 1 million pesos worth of goods in March 2009 would have received about $68,000 in exchange; the same 1 million peso sale in May 2011 would have returned around $86,000 to the company.

But while the U.S. as a whole saw its export totals bounce back to pre-recession levels in 2010, Arizona was still lagging behind.

From 2000 to 2010, Arizona grew the fourth-slowest of all states in international trade, at a sluggish 9.1 percent clip. Forty states grew by more than 50 percent over the decade, and the national average was 64 percent.

While the increase in exports through June is good news for Arizona, the state still has a long way to go, said Barry Broome, president of the Greater Phoenix Economic Council. He said those looking for Arizona to catch up to the other states will have to wait a few years.

Exports can diversify Arizona’s economy and raise wages, but the most significant changes can only happen if property values recover, Broome said.

Still, exports provide balance. Machinery, electronic, solar and pharmaceutical companies can lead Arizona’s export economy and reduce the state’s reliance on construction, Broome said. But he said a true recovery will require improvements in both exports and the domestic economy.

“We’re not going to see 5 percent unemployment until the housing market gets better,” he said.

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