Border Companies Thrive on Mexican-Americans

By James Flanigan

New York Times

June 17, 2009

MEXICO’S economy has suffered a series of blows in recent months — drug violence, swine flu and the worldwide economic downturn. Yet some companies on each side of the border with the United States are prospering because they serve the expanding Mexican-American market in the United States.

A new economy is emerging that builds on the economic relationship between the countries. Exports and imports between Mexico and the United States have grown rapidly in the last decade, to close to $400 billion annually. And now trade is taking on new complexity, with operations in Southern California sometimes serving as Mexico’s link to the global economy.

Viz Cattle Corporation, for example, the American division of Mexico’s SuKarne Global, handles exports of Mexican beef to Japan and South Korea, through contracts made in Compton, Calif. The beef originates in SuKarne’s home base in Culiacán, Sinaloa, in northwest Mexico. “Japanese and Korean executives buy here, and they go to inspect the ranches in Mexico, too,” said Jesus Tarriba, manager of Viz Cattle’s warehouse operation in Compton, in southeast Los Angeles County. “Last year we sold $40 million of beef to Japan and Korea and $80 million here in the U.S.”

Viz Cattle has grown rapidly, from less than $10 million in revenue five years ago to $120 million in 2008. And it is doing well this year despite the downturn, Mr. Tarriba said. Its main business is importing beef from Mexico for American restaurants and retailers. “We specialize in smaller cuts of rib-eye and strip steaks because Mexican ranches slaughter livestock at younger ages than American ranches,” Mr. Tarriba said. “Restaurants like those cuts.”

Viz Cattle and other food companies on the border have also capitalized on the expanding Latino population across the United States and the changing tastes of the public.

“Chipotle was unknown here five years ago,” Marcelo Sada, president of Source Logistics Center Corporation, said of the smoked jalapeño pepper in many Mexican foods and sauces. Mr. Sada’s company, based in Montebello, Calif., imports bakery and soft drink products from Mexico.

Martinez Brands/Tequila Holdings Inc., from Pasadena, Calif., has also been a beneficiary of the growing American taste for Mexican products. “Tequila is the fastest growing liquor variety in the United States for the last seven years,” said Javier Martinez, president of Martinez Brands. “And why? Because young Americans vacation in Mexico and associate tequila with fun, freedom and friendship.”

Business is good as well, for Inter-Con Security Systems, a company also based in Pasadena, that protects State Department installations in the United States and abroad as well as private businesses, hospitals and sports arenas, said Carlo Gobelli, who leads Mexican operations. “Security is in very great demand, to guard executives and company operations and also shipments of goods,” Mr. Gobelli said..

Inter-Con employs 6,500 people in Mexico; the company has 30,000 employees over all. “A new concern here,” Mr. Gobelli said, “is that we are getting demands to protect pharmaceutical laboratories against theft of key ingredients that drug gangs can use.”

Still, some companies are seeing a more mixed picture. ICS Group Inc. of Rolling Hills Estates, in southwest Los Angeles County, represents Carlisle Companies’ roofing and building products in Mexico and Latin America, said, “Right now, American companies are holding back from investing in Mexico and are not sending their personnel because of dangers from the drug wars,” said Mark Aston, the president of ICS.

But he credited business in the Caribbean with helping the company’s annual revenues grow to an estimated $15 million this year from $300,000 in 2004. “Mexican business people and investors are confident that when this recession ends, Mexico will do well again,” he said.

Mr. Gobelli and other Mexican executives generally agreed that the economy’s overall outlook was positive. “The businessmen say, ‘This crisis did not start here in Mexico’ as have so many crises in the past. It started in the U.S. and the world,” Mr. Gobelli said. “Therefore, they say, when the U.S. and the world recover, Mexico will too.”

Meanwhile, the slow American economy and moves to control illegal immigration with increased border patrols and raids on domestic job sites have reduced migration from Mexico. So remittances to families in Mexico from people working in the United States have declined sharply in the last year. But the Latino population in the United States has grown as a result of children born to immigrants in recent decades. That Latino population is 45 million, according to the Pew Hispanic Center.

This has led to more online commerce with Mexico and other shifts in the marketplace, said Hector Orci, co-founder of La Agencia de Orci, an advertising agency in Los Angeles. “For example, Liverpool department stores in Mexico sell online to people here and the goods can be delivered to their mother living in Mexico,” Mr. Orci said.

Spanish-language media is also shifting to more use of English language commercials and programs, he said. So Mr. Orci is building a new division of his agency, called One Plus Two, for the population that speaks English but enjoys Spanish language programming like telenovelas from Mexico.

“Online use is very high among Latinos, maybe 20 million people using broadband Internet,” said Michele Ruiz, a former television anchorwoman who started the Saber Hacer (to know, to do) Web site in 2007. The site offers advice to Latinos on such subjects as parenting, personal finance, health and medicine and college preparation.

Ms. Ruiz said she had raised $700,000 to start the Web site and investors have now put in “several million more.” The site has close to 200,000 visitors, Ms. Ruiz said, and she is looking to private equity funds and other investors to raise an additional $5 million.

She wants to expand the Web site’s reach and content, which includes presentations in English or Spanish on the importance of annual mammograms, on how to write résumés and apply for positions and how to talk to your doctor or your children about sex. “We understand the culture and how people think,” she said.

This column about small-business trends in California and the West appears on the third Thursday of every month. E-mail: jamesflanigan@nytimes.com

New York Times Article at:

http://www.nytimes.com/2009/06/18/business/smallbusiness/18edge.html?_r=1&ref=americas