RELATED ARTICLES "Border Region Makes Progress in the 1990s," Vista, Dec. 1999 (Text or PDF) "The Binational Importance of the Maquiladora Industry," Southwest Economy, Nov./Dec. 1999 (Text or PDF)

Regional Economy
Better on the Border?

San Antonio Branch Senior Economist Keith Phillips reviews the recent economic performance of the Texas border region.

The 1990s have been eventful for the Border Region (Chart 1). The North American Free Trade Agreement (NAFTA) became effective in January 1994. A significant peso devaluation in December 1994 was followed by a sharp recession in Mexico in 1995. After increasing strongly in 1994, employment growth slowed significantly in 1995. Job growth rebounded in 1996 and continued to pick up strength until the second half of 1998, when a steep decline in oil prices hit the oil-dependent areas of the border and caused some slowing in the Mexican economy.

SOURCE: Texas State Comptroller

Overall, however, the 1990s marked a period of progress for the border economy. Gains in state funding for public education and increased funding for Border Patrol and Customs created many new high-paying jobs. The maquiladora industry (mostly foreign-owned industrial plants on the Mexican side of the border) boomed, increasing demand for retail and banking services on the Texas side of the border. And while NAFTA may have played a role in the decline of apparel manufacturing and other low-skilled industries, transportation and warehousing got a boost from strong gains in trade.

The most recent income data show that border earnings per job rose at an average annual rate of 3.9 percent from 1990 through 1997, versus 3.5 percent in the nation. During the 1980s, border growth was slower than the nation's. Average earnings growth varied from a low of 3.5 percent for Brownsville to 5 percent for Laredo. No border metro area grew more slowly than the national average (Chart 2).

Chart 2

Job growth also has been strong in the 1990s. From 1990 through 1997 annual job growth averaged 2.8 percent for the entire border region, versus 1.6 percent in the nation. Job Growth in the metropolitan areas ranged from 1.9 percent in El Paso to 5 percent in Laredo (Chart 2). In 1990 El Paso had a larger share of employment in manufacturing than any other border metropolitan area; hence, it has been hit hard by losses in apparel manufacturing. Laredo, on the other hand, has the largest share of employment in transportation services and has benefited from being the biggest land port for trade between Texas and Mexico. Total shipments through the Port of Laredo increased 89.5 percent from 1994 to 1997 and, in 1997, were valued at about $50 billion—twice the amount of goods traveling through El Paso, the next largest land port.

NAFTA's implementation, a mid-decade peso devaluation and Mexican recession, and strength in the Mexican maquiladora industry have left their mark on the border region during the 1990s. Earnings per job and the number of jobs have increased at a faster pace than the national average, allowing this low-wage region to make small relative gains.

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