Even Donald Trump would have been impressed. After all, he is a real estate developer, a businessman.
Last week, I spent several days in San Luis Potosi, Mexico, a place that I will wager that most Americans have never heard of but they should.
This is a city in central Mexico with a metro area population of about 1.5 million people. But more importantly, and the reason why I was there, it is a hotspot for manufacturing.
Indeed, what I saw in the industrial zone south of the city literally took my breath away and left me wondering about previously held beliefs.
I rode past a $550 million Goodyear plant under construction. I walked on a graded site where Ford will build a $1.6 billion assembly plant. Only last month, Ford confirmed that it would build the plant, which Trump has termed “an absolute disgrace.”
On the way to the Ford site, I passed by a 2-million-square-foot General Motors plant completed in 2009. I also saw the construction site for a future $1 billion BMW plant.
Keep in mind, all of these sites are within a few miles of each other.
Holy (insert word here)
I also toured, again in this same very area, one of the finest industrial parks that I have ever seen.
The entire park is a free trade zone, the first in Mexico, and it featured the largest intermodal hub facility in the country, owned and operated by the Kansas City Southern railway. With a customs office in the park, product-laden trains roll north unencumbered, not having to stop at the border and tariff free because of NAFTA.
One final thing, the workers in this ultra-modern industrial park, occupied by blue-chip companies, are being paid $8 to $10 a day. (Minimum wage in San Luis is about $4 a day.)
To which, I thought to myself, “Holy Toledo. (You may insert another word for Toledo.) How in the blue hades can we (the United States) compete with this?”
And all on the doorstep of the U.S.
Our Story Begins
A few weeks back, I got a call from my friend Dave Lewis. Dave is an industrial architect based in Greenville, S.C. He heads a firm called Context Design, and we’ve known each other for many years, principally through automotive projects.
“Hey, Dean, I want you to see something in Mexico. You ever heard of San Luis Potosi.”
“Yeah, believe it or not, about 15 years ago, I actually drove through San Luis. I was headed down to San Miguel de Allende for some R&R.”
“Well, it’s changed a lot since then. I want you to see an industrial park down there where I have done some work. The owners will take care of your travel expenses. Interested?”
“Sure, why not. I could use a little adventure.”
“You won’t be sorry.”
Not a Good Start
My flight from Dallas was like something out a Six Flags, a real roller coaster affair because of turbulence.
I arrived at my hotel about midnight, two hours late because of the weather. To his credit, Dave had sat up and met me at the entrance of the lobby. He could tell I was in a foul mood, and immediately got me a drink from the bar, which was closing.
I grumbled thanks and went to my room, with drink in hand, wondering what I was getting into.
But the next day was a new day, and after breakfast we were soon on the road in a bus marked “WTC Industrial.” I would soon learn in a meeting that WTC is a subsidiary of Grupo Valoran, a privately-owned conglomerate based in San Luis.
You name it, and they probably do it. They do real estate development (commercial, industrial and residential) highway construction, wastewater treatment plants, concrete construction, fast food franchises, gas stations, restaurants, logistics, and funeral homes.
The owner, Vincente Rangel Jr., lives with his family in Houston. I couldn’t find much on him with an internet search, probably by design.
On the WTC bus, I was headed to his WTC Industrial park, referred to as WTC 1, where I would have a series of meetings with my hosts and then tour the park. I would also see WTC 2, but more on that later.
No Rhyme or Reason Until …
I’m convinced that our eyes become accustomed to certain surroundings, and that when we are thrust into new environments, it takes us awhile to get our bearings.
To me, as an outsider, San Luis Potosi seemed a jumbled affair, where nice, modern buildings sat next to other buildings that had a distinct third world look.
A strip joint might set next to an auto repair garage, next to an office building, next to homes, next to whatever the heck that building is. Zoning be damned, which probably works fine for San Luis. For my eyes, a bit confusing.
Even the industrial zone had a jumbled look to it. There was seemingly no rhyme or reason for where certain factories sat, as if some manufacturing god tossed dominoes in the air to see where they would land. That is until we arrived at the park.
Here the world suddenly became very orderly. Here we entered an ultra-modern master-planned realm. And it was here in WTC 1 where I saw top-ranked companies from the U.S., Europe and Asia. Such names as MetoKote, Faurecia, Valeo, Dräxlmaier, TI Automotive, ABB and Nippon Express, to name a few.
Two Premiere Parks
The $550 million Goodyear plant that I mentioned is being built in WTC 1, which is now almost built out. WTC 1 is 1,610 acres or 700 hectares, as commonly measured in Mexico.
The new Ford facility will go up in WTC 2, a park twice the size of WTC 1, meaning 1,400 hectares or 3,220 acres. And I wouldn’t be surprised if a future WTC 3 might be in the works.
I’ve been in many, many industrial parks over all the U.S., and very few, if any, would compare to WTC 1. The truth is that most of our parks pale in comparison.
Here in the U.S., we have a penchant for big box, metal buildings, devoid of any architecture. Such parks don’t particularly age well. They get ugly fast.
Ostensibly, I was to offer my WTC hosts learned counsel, being that I am a learned site selection consultant. In reality, about all I could say was, “keep up the good work because it’s obvious that you are doing something right.” Two other site selection consultants present really couldn’t offer much more either.
The truth is that WTC Industrial brought us there so that we might spread the word to any corporate clients about these premiere parks. And I must admit that San Luis is now an intriguing option.
I Have to Wonder
That is not to say that I don’t questions. The parks, which sit in an arid region, are dependent on drilled wells for water. I was assured that sufficient capacity is there, but I would want to learn more. I wonder about the current state of the aquifer below.
Also, with all these mega projects in the works, on top of the existing companies, most of which are automotive suppliers, I wonder about the availability of labor.
Will all these big projects suck the oxygen out of the room? Will there be the quality and quantity of labor to meet the needs of these companies? So I have to wonder.
No local economic developers were present in our meetings to give me assurance about existing worker training programs. So I have to wonder.
After all, site selection is about risk assessment and you can never get too much information.
More Plants on the Way
If you were to do an internet search for automotive news in Mexico, you would see a story about Milwaukee-based Strattec Security Corp., the world’s largest producer of automotive locks and keys, having just broken ground on a $22 million factory in Leon, Mexico. It’s also in that central valley area, just south of San Luis Potosi.
In 2015, the Mexican auto industry set numerous records. Production rose 5.6 percent from a year earlier to 3.4 million vehicles. Exports grew 4.4 percent to 2.76 million, and local sales jumped 19 percent to 1.35 million cars and light trucks, according to the Mexican Automotive Industry Association.
And while auto exports have dropped 7.4 percent in the first four months of this year to 854,118 vehicles, compared with 922,029 last year, capacity will be growing. Kia will open a new car assembly plant in coming weeks and Audi plans to open a light-truck factory in the second half of the year.
The new factories could add about 100,000 units to Mexico’s light-vehicle production tally for the year, putting it back into record territory by the end of 2016.
My Kind Hosts
On a personal note, I must say that I really liked my hosts at WTC Industrial. Michele Porrino, Esteban Puente Bustindui, and Fermin Rodriguez Sosa, were great guys, very professional and yet fun to be around.
I’ve always liked Mexico, with its rich cultural history and friendly people, and this trip only reinforced that. The people smile even with my horrible attempts at speaking Spanish.
Still, I recognize that there are problems. Most Mexicans would agree that corruption remains a huge problem, and drug gang violence, while waning and limited to certain areas, do give companies pause. But the WTC parks in the central region are removed from that, and I consider them safe and secure.
San Luis Potosi sits in the center of Mexico’s golden triangle — Monterrey to the north, Guadalajara to the southwest, and Mexico City to the southeast. It is here where 76 percent of the country’s gross national product is derived.
The big question is whether I would take a corporate client, so inclined, to look here. The answer is yes, and the WTC parks might very well be the answer.
But I must confess that I am now questioning my previously held beliefs on free trade. Both parties comprising the political establishment in the U.S. have favored free trade, but $8 to $10 a day? And with millions of U.S. manufacturing jobs lost?
Well, I have to wonder. You have probably noticed that I wonder a lot.
I’ll see you down the road.
Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at email@example.com or at 972-890-3733. Mr. Barber is available as a keynote speaker.