2013 – Tijuana: Security Successes In North America’s Quicksourcing Capital


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Briefing document developed by Crossborder Group for the Tijuana Economic Development Corporation (DEITAC), combining updated security trends and data for the City of Tijuana, as well as additional background information to inform potential investors about the current risk levels and security issues in that city. Developed by Crossborder Group as one in a series of research-based informational documents for our client.

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2013 – Tijuana: Security Successes In North America’s Quicksourcing Capital

  1. 1. Tijuana: Security Successes In North America’s Quicksourcing Capital June 2013
  2. 2. www.TijuanaEDC.org || contact@TijuanaEDC.org Call toll free from the US: 1-855-558-5332 (1-855-55-TJEDC) || ph (011-52) 664-681-8344 | fx (011-52) 664-681-8788 Higher Competitive Level and Lower Security Risks: A Location in Tijuana Deciding where to establish your company internationally should always include an objective analysis of risks – using current facts, independent assessments, and the real experiences of business visitors, investors, and international analysts actively working in a region – not sensational stories or out-of-date perceptions. Tijuana – only minutes from Downtown San Diego, and the second-largest city on the West Coast of North America (with nearly 1.7 million residents) – is the focus of this briefing. The goal: to provide some fact-based context about this major metropolitan area to help potential investors understand why – in 2013 – Tijuana is still Mexico’s leading city for nearshore operations, and the home to over 540 maquiladora (IMMEX) manufacturing companies1 . Also an important part of this document: to give specific examples of the significant progress that Tijuana and Baja California have made in addressing public security challenges – with success that U.S. business and governmental leaders, research institutions, as well as many in the U.S. media are now acknowledging. Tijuana & Baja California Rebounding Independent data analyzed by the University of San Diego’s Trans-Border Institute (TBI) 2 shows that Tijuana and Baja California achieved major security improvements throughout 2012. As seen in TBI’s map at right, through Q3 of 2012, areas in Mexico with the most significant security concerns are now more than 500 miles from Tijuana. In fact, security officials and business leaders from the U.S. are also noting the positive security situation that now exists in Tijuana, as noted in the quotes below: 3 “Finally, it is important to reiterate that violence has diminished in certain areas in 2011 and 2012, particularly as the number of homicides fell in key states in northern Mexico, including Baja California…” 2 — Source: “Drug Violence in Mexico: Data and Analysis Through 2012” University of San Diego Trans-Border Institute “When prospective customers visit our manufacturing operation, they are surprised at the quality of organization and products that are built. They always say, this isn’t the Tijuana that they heard about or expected to find on their visit”. — Rod Gunther Plant Manager of Suntron de Mexico part of Benchmark Electronics, Inc. June, 2013 “It always takes time for public perception to embrace the current situation on the ground, and it seems to me that the [security] situation here in Tijuana has improved 100 times over what existed in the past...” — Alan Bersin Assistant Secretary of International Affairs U.S. Department of Homeland Security June 5, 2013 (Televisa Interview)3
  3. 3. www.TijuanaEDC.org || contact@TijuanaEDC.org Call toll free from the US: 1-855-558-5332 (1-855-55-TJEDC) || ph (011-52) 664-681-8344 | fx (011-52) 664-681-8788 The Facts: Context & Tijuana’s Recent Security Successes Like all of Mexico, Tijuana has been a common subject of media reports about security (although lately, often positive). Many past media reports gave little context, and often omitted the fact that the vast majority of violence in Mexico has been of criminals fighting amongst themselves (or with law enforcement) – and that business visitors are not targets, something even the U.S. State Department has acknowledged: “Millions of U.S. citizens safely visit Mexico each year for study, tourism, and business, including more than 150,000 who cross the border every day…there is no evidence that Transnational Criminal Organizations (TCOs) have targeted U.S. visitors…4 .” That said, U.S. and international media have started to cover the positive turnaround in Tijuana (such as this article from USA Today, this from the BBC, and even this from National Geographic’s Traveler) – a result of the city’s sustained and serious effort to regain security. In fact, Tijuana’s investment in police screening and training, new equipment, and nearly daily coordination with State and Federal law enforcement officials, has resulted in a -34.6% drop in total crimes5 within the City during 2012, compared to well-publicized peaks in 2008 (see graph at right). In the first-half of 2013, these numbers have even gone lower. Another key fact: not only did Tijuana achieve a respectable -23.0% decline in homicides from 2011 versus 2012, but – more impressively – the number of homicides actually dropped -55.7% between 2010 and 2012. In any big city, that’s a major accomplishment6 . The comparison at right will surprise many – but, using data directly from city police departments and media sources in the U.S7 , the facts are clear: despite misperceptions and the occasional sensational media story, Tijuana’s homicide rate during 2012 was significantly below (or very similar to) that of many well-known cities in the United States. Another overlooked value of Tijuana when assessing risk: it’s a quick drive to San Diego and Southern California. This proximity is also a security benefit – as investors and business visitors (not to mention in-transit cargo) are often in Tijuana for a few hours and have only a short drive to cross back into the U.S. to be with their family – something impossible at non-border or offshore locations. 86.7 65.7 58.6 52.3 48.0 37.6 34.9 33.6 32.7 31.4 24.8 24.0 23.8 21.7 21.4 19.6 18.0 13.9 0 25 50 75 100 Camden (NJ) Flint (MI) Detroit (MI) New Orleans (LA) Monterrey (MX) Jackson (MS) Baltimore (MD) Kansas City (MO) St. Louis (MO) Oakland (CA) Cleveland (OH) Memphis (TN) Stockton (CA) Tijuana (MX) Philadelphia (PA) Atlanta (GA) Chicago (IL) Washington D.C. 2012 Homicide Rate Comparison of Selected Cities (Jan-Dec 2012 data; per 100K residents) Analysis by Crossborder Group using 2012 law enforcement data and media reports. For full discussion of methodology, please see end-notes of this briefing. 0 1,500 3,000 4,500 6,000 7,500 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Total Crime Incidents5 Tijuana: Jan. 2006-Dec. 2012 (Secretaría de Seguridad Pública del Estado de Baja California) 2008Peak -34.6% Decline
  4. 4. www.TijuanaEDC.org || contact@TijuanaEDC.org Call toll free from the US: 1-855-558-5332 (1-855-55-TJEDC) || ph (011-52) 664-681-8344 | fx (011-52) 664-681-8788 Investments in Tijuana’s Security While Tijuana’s overall security situation in 2013 is by some measures comparable to other U.S. and international business cities, the City Government, along with State and Federal agencies, continues to invest in technology, personnel and equipment. In addition to a state-of-the-art Command and Control Center (Centro de Control y Mando) with 60 real-time video screens, there are over 400 high-resolution CCTV cameras spread throughout Tijuana’s industrial, commercial, and residential areas; 67 sound detectors; a mobile security Control Center; and 100 new police vehicles to increase patrol coverage and reduce response times. Beyond technology, Tijuana has also made efforts to professionalize its police force, including: toxicology, psychological, and polygraph testing of 1,984 municipal police between 2010-2012; two new virtual shooting ranges for training; the purchase of 600 new bulletproof vests; increased pay and benefit programs (giving Tijuana one of the highest-salaried municipal police force in Mexico); training for over 1,000 police in use of force and human rights; and an ongoing effort to prepare the procedures and internal processes to secure CALEA Accreditation8 . Tijuana: A Low-Risk Competitive Location for Your Business Tijuana’s and Mexico’s economic stability and competitiveness don’t sell newspapers or draw hits on the internet, but they are facts – and part of what investors should consider when comparing other cities’ long-distance supply chains in a turbulent globe. Tijuana’s “next door” location to the U.S. and California, as well as the protective legal frameworks under NAFTA and the Mexico- European Union Free Trade Agreements, are other key elements in any careful risk assessment. How else can Mexico and Tijuana lower your competitive risk?  In 2013, Deloitte and the U.S. Council on Competitiveness ranked Mexico #12 of 38 countries in their assessment of 10 factors for global manufacturing competitiveness, noting, “Through a regional lens, five years from now the Americas continues to show significant manufacturing strength with the U.S., Brazil, Canada and Mexico all in the top 15 most competitive nations.”9  Mexico also moved up to #32 in IMD’s 2013 World Competitiveness Yearbook10 , above Poland (#33), Indonesia (#39), India (#40), and even Brazil (#51). Low Risk Investment: Mexico & Tijuana’s Rankings  Mexico #12 of 38 on the Deloitte/USCoC 2013 Global Manufacturing Competitiveness Index  Mexico #32 of 60 on IMD’s 2013 World Competitiveness Yearbook  Tijuana rated AA- for Municipal Public Finances by FitchRatings (only 1 Mexico city is higher)
  5. 5. www.TijuanaEDC.org || contact@TijuanaEDC.org Call toll free from the US: 1-855-558-5332 (1-855-55-TJEDC) || ph (011-52) 664-681-8344 | fx (011-52) 664-681-8788  The City of Tijuana is also considered one of the best fiscally managed and highest-rated municipalities in Mexico: in April 2013, Fitch Ratings continued giving Tijuana an AA- rating (only one city in Mexico was rated higher)11 ; and Mexico’s National Federation of Municipalities (Federación Nacional de Municipios de México) presented Tijuana the 2013 Good Government award for management of local government finances12 . Regional Synergy, Regional Collaboration, Regional Vision While law enforcement collaboration between Tijuana and San Diego has long been part of ongoing security activities, so too has been a broader effort to leverage economic synergies between the two cities – with the goal of growing stronger and more globally competitive binational businesses. This is reflected not only in the nearly $3 billion worth of international goods trucked between Tijuana and San Diego each month, but also in innovative Cali Baja Bi-National Mega-Region Initiative – a long-term economic development collaboration between the Tijuana-EDC (DEITAC), the San Diego Regional Economic Development Corporation (SDREDC), the Imperial Valley Economic Development Corporation, the Industrial Development Commission of Mexicali, the Tecate Economic Promotion Commission, and the Ensenada Economic Development Commission. Regional collaboration and promoting a binational vision is not only part of daily life for many in the San Diego-Tijuana region today, but extends into the future – with a $731 million upgrade currently underway at the San Ysidro Port of Entry border crossing; planning underway for a new passenger and cargo border crossing in East Otay Mesa (to supplement the existing Otay Mesa Port of Entry passenger and cargo facilities); and even preliminary exploration by San Diego and Tijuana of what could be the world’s first Binational Olympics13 games in 2024. “Somos dos ciudades pero una regiόn. We are two cities, but one region… We need to make the border the center, not the end — but the biggest problem we have is not security, it is openness and communication.” — San Diego Mayor Bob Filner Interview in the New York Times13 Published May 12, 2013 “Cubic considers Tijuana as not only a strategic place to manufacture from, but also a safe and innovative environment for our executives and our operations. In fact, Cubic is moving its New Zealand and Orlando manufacturing to Cubic de Mexico in Tijuana and expanding our present location by 50,000 square feet.” — Reiny Giesecke Director of Business Development Cubic Defense Applications June, 2013
  6. 6. www.TijuanaEDC.org || contact@TijuanaEDC.org Call toll free from the US: 1-855-558-5332 (1-855-55-TJEDC) || ph (011-52) 664-681-8344 | fx (011-52) 664-681-8788 Tijuana: A Template for Growth14 Tijuana’s security successes mean a better place to do business from. Or, as former Wired magazine editor Chris Anderson called it, the “TJ template” for growth – when he wrote about his new UAV/droid manufacturing venture in Tijuana14 , its “quicksourcing” and competitive benefits, as well as his observation that being in Tijuana gives them “less risk” in their production processes, in protecting their intellectual property, in their supply chains, and against international political turmoil. Nearly five years after the 2008 peak of security challenges, Tijuana is once-again gaining recognition as a major, low-risk and high-return investment destination in North America – as seen by the growth of new companies like 3DRobotics (UAVs), Visual Communications Company (LED lighting), and expansions at companies like Bench, Cubic, Integra Biotechnical, OnCore, SMK Electronica, TPV and others. Data from agencies and institutions on both sides of the border demonstrate that the combination of Tijuana’s professionalization in its law enforcement personnel, investments in better security technologies and equipment, and increased coordination with authorities in Mexico and the U.S. has resulted in significant security improvements in the city to levels similar to (or better than) some locations in the U.S.. Truly, a city that deserves a new reputation as a low risk for investors, and as a place for continued growth and innovation. For more information about this briefing, or about investing in the City of Tijuana, please call the Tijuana Economic Development Corporation at 1-855-55-TJEDC. 1 Website of Mexico’s statistical agency, Instituto Nacional de Estadística y Geografía, accessed June 2013 (http://www.inegi.org.mx/sistemas/bie/) 2 “Drug Violence in Mexico: Data and Analysis Through 2012”, University of San Diego, Trans-Border Institute (February 2013, Page 22, http://justiceinmexico.org/publications/reports/) 3 Interview of Alan Bersin by Televisa on June 5, 2013, accessed June 2013 (http://youtu.be/XeDTBb8aek0) 4 U.S. State Department website, accessed June 2013 (http://travel.state.gov/travel/cis_pa_tw/tw/tw_5815.html) 5 Website of Baja California’s State Security Secretariat, Tijuana security statistics (Secretaría de Seguridad Pública de Baja California, http://www.seguridadbc.gob.mx/contenidos/estadisticas2.php, accessed June 2013) 6 Analysis of Tijuana homicide data by Crossborder Group, using data provided by the Secretaría de Seguridad Pública Municipal de Tijuana, and the Baja California Procuraduria General de Justicia del Estado (PGJE). 7 Calculations made by Crossborder Group, using city-level homicide data from January-December 2012 obtained directly from websites of police departments (when available), media quotes from police officials of those cities (when available), or (as homicide data is often not available or delayed from some cities) from multiple regional media sources and/or crime tracking websites. Homicide rates were calculated for 2012 using July 2012 Census data for population in the U.S., and using 2012 population estimates from CONAPO in Mexico. 8 Crossborder Group analysis based on data provided by the Tijuana Secretaría de Seguridad Pública, June 2013. 9 U.S. Council on Competitiveness and Deloitte 2013 Global Manufacturing Competitiveness Index (http://ow.ly/m2hbP), p. 2-3 10 IMD World Competitiveness Center, 2013 World Competitiveness Yearbook (http://ow.ly/m2fJP, accessed June 2013) 11 Fitch México, Finanzas Públicas – Municipios, Listado de Calificaciones (http://ow.ly/m2n6W, April 30, 2013, accessed June 2013) 12 Federación Nacional de Municipios de México website, award for Saneamiento de las Finanzas Locales (http://ow.ly/m2pgs, accessed June 2013) 13 Jennifer Medina, New York Times, “San Diego Mayor Building Economic Bridges to Tijuana” (http://ow.ly/mpSsL, May 12, 2013, accessed June 2013) 14 Opinion piece by Chris Anderson, CEO of 3DRobotics, former editor-in-chief of Wired Magazine, printed in the New York Times (January 26, 2013; http://ow.ly/m3bWK) “Today, what Shenzhen is to Hong Kong, Tijuana is becoming to San Diego. [It] has become North America’s electronics assembly hot spot… What all these pieces add up to is a model — one that might hold the long-sought answer for how American manufacturers can compete with those in China, India and the next generation of economic powerhouses. That’s because the TJ template isn’t so much about outsourcing as it is quicksourcing…” “The sense of possibility I felt when I first crossed from Hong Kong to Shenzhen in 1997 is what I now feel when I cross from San Diego to Tijuana...”14 — Chris Anderson CEO of 3D Robotics January 26, 2013 Briefing researched & developed by Crossborder Group (Version 130626-2pm)