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Minnesota-Mexico trade still short of potential
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The Red Wing Shoe Company says Mexican sales have tripled in the past five years. The company's international director says the Minnesota-made workboots have become standard equipment for workers in Mexico's booming oil and gas sectors. (Boot photo: Courtesy of Red Wing Shoes-Background: MPR Photo/Jeff Horwich)
When Mexican President Vicente Fox arrives in the Twin Cities, Minnesota-Mexico trade is just one topic on a full agenda. But four years ago when Gov. Jesse Ventura led a trade mission to Mexico, the two sides voiced lofty goals. Among them, Mexico would become our second-largest trading partner, and Mexico would set up a trade office here. Neither has happened, and our economic relationship is still not as strong as it might be.

St. Paul, Minn. — If you're looking for a classic piece of Minnesota in Mexico, head 250 miles down the east coast, to the port city of Tampico. Then hop a helicopter straight out over the Gulf of Mexico. After 60 miles of ocean, set down on an oil rig -- and walk up to the first worker you see.

Then, look down.

"Red Wing is the industrial work boot for the oil industry in Mexico," says Tito Warren, international director for the Red Wing Shoe Company in Red Wing. "Mexico is our largest market in the world, and it represents 10 percent of what we do. It's a great opportunity for us, and there's only growth for us in Mexico. I look at it strategically as: We're just getting started there."

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Image Fox is in town

Red Wing has been selling in Mexico for two decades. But lately the surging oil and gas sector has increased demand for the sturdy -- and pricey -- made-in-America boots. Warren says Red Wing has tripled its Mexican business in the past five years.

Over the same period, Minnesota's overall exports to Mexico rose more modestly -- 56 percent. That's the right direction, but it's also not great -- and Minnesota officials know that.

"Generally, we under-export to Mexico," says Bob Isaacson, director of the Office of Analysis and Evaluation at the Minnesota Department of Employment and Economic Development.

Last year Mexico was our 8th largest trading partner -- outranked by smaller, more distant countries like Ireland and the Netherlands. Mexico is the number two market for the U.S., and Isaacson says it should also rank high for us. "You form solid relationships with your neighbors, and those are the types of export relationships that are going to be solid for the long term," he says.

There are many export success stories, of course. Those Red Wing boots are one; popcorn is another. Act II brand popcorn -- grown and processed in Minnesota by ConAgra -- sells twice as much in Mexico as all its competitors combined. Overall, our processed food exports to Mexico have doubled since 2000. On the agricultural front, Mexico now imports more soybeans than any other crop -- good news for a soybean state.

Isaacson also says many Minnesota exports aren't reflected in the numbers. For example, high-tech components like computer chips get produced in Minnesota and sent elsewhere in the U.S., where they go into products that then go to Mexico. We're benefiting from the Mexican market, but we don't get the credit.

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Image DEED's Bob Isaacson

"It would be wonderful to be able to tag each component coming from Minnesota and follow that journey to where it finally winds up with the consumer or the final business," Isaacson says. "But that isn't always possible."

Even if it were possible to count those indirect exports, the verdict on Minnesota-Mexico trade might still be, "needs improvement."

For one perspective on how to do this, we might pay a visit to a state trade office in Mexico City. There, the office director and four Mexican staff are at work every day to promote exports -- making introductions, doing market studies, learning the ins-and-outs of Mexican regulations.

The state they're working for, though, is Wisconsin.

"We have a very good office, and it works with many, many hundreds of Wisconsin companies to help them sell into Mexico," says Mary Regel, international director at the Wisconsin Department of Commerce.

Wisconsin's Mexico office opened just as NAFTA went into effect, in 1994. They have similar offices in four other countries. Minnesota's only trade office, in Japan, will close this year because of state budget cuts.

"Minnesota and Wisconsin are very comparable in the types of products that we manufacture and that we export," Regal says. "Maybe just the possibility of having a trade office has raised the visibility, and the fact that we've done so many trade missions there."

Business is not necessarily up-and-up in Mexico. Mexico continues to be one of the most corrupt countries in the world.
- Peter Gross, President of Aeromix Systems

Wisconsin also has a Latin America specialist in Madison. The difference in results is stark. In absolute dollar terms, Wisconsin exports twice as much to Mexico as Minnesota does, making it their number three trading partner. In the 10 years since NAFTA, Minnesota exports to Mexico are up 48 percent; Wisconsin's are up 150 percent. And Wisconsin exports kept growing even through the recent downturn in the Mexican economy.

"There are some areas where we might have specialization, where they might not have it in Minnesota," Regel says. "We have Kohler, with all of their plumbing and generators, and they're a huge supplier to Mexico."

Wisconsin also sends lots of auto parts, air conditioning units, and industrial machinery.

Minnesota can't copy that same model, but Regel says a trade office would help the state discover its own strengths. Another alternative: Mexican officials have talked for years about setting up a trade office of their own in Minnesota. Such an office could also help Minnesota companies understand the Mexican market. At the moment the focus has shifted to building a consulate here -- not quite the same thing, though it could provide some trade-related functions.

A trade office in either place could address some of the worries that still linger around doing business in Mexico. Many companies with Mexican experience say the country has emerged under NAFTA and President Fox as a modern, capitalist economy. But there are horror stories as well.

Take the experience of Golden Valley-based Aeromix Systems.

"Business is not necessarily up-and-up in Mexico," says Aeromix founder and President Peter Gross. "Mexico continues to be one of the most corrupt countries in the world."

Aeromix sells and maintains water aeration equipment in more than 70 countries. Gross says almost all of them, including Iraq, are less prone to what he calls "monkey business." His view of Mexico soured last year, when Aeromix got involved with a project to overhaul Tijuana's wastewater treatment system. Gross believes other contractors were making payoffs to sway the deal in their direction.

"The shenanigans didn't start until we were heavily involved in this project," Gross says. "Not until about the 11th hour of this thing, when everybody knew money was going to start flowing, all of a sudden things were going on under the table, arrangements were being made that were just clearly threw the whole thing in a different direction."

After a half-dozen trips to Tijuana and to the North American Development Bank in San Antonio to sort things out, Gross says Aeromix leaders decided it wasn't worth playing the game. Gross is especially disappointed with the bank, which was set up under NAFTA to facilitate cross-border investment. He says the bank was "naive" about the dealings going on under its nose.

Boosting Minnesota exports to Mexico will mean casting a very different image, where the Aeromix experience is the rare exception to the rule. State economic analyst Bob Isaacson says trading with Mexico today is almost as easy as trading with South Dakota.

"I think what's exciting about Mexico is the tremendous change they've seen in their political and economic systems over the last few years," he says. "So any kind of apprehension that may have existed prior to President Fox really has been negated and offset by the tremendous transparency he's brought to the economic process and business transaction process."

It's one of many messages Fox will try to squeeze into his afternoon in the Twin Cities. His visit is largely focused on the Mexicans in Minnesota, whose numbers have grown to some 95,000. But the economic numbers show a strong need as well to focus on what Minnesota sends to Mexico.

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