EDINBURG, Texas - The Texas Tribune launched the first of a two-part series focused on the Rio Grande Valley, titled “Preserving the RGV’s Economic Miracle.” Hosted by DHR Heath and held at the Edinburg Conference Center at Renaissance, the program featured panel discussions with local leaders across various industries who provided insight into the Valley’s current economic climate.
Texas Tribune Regional Reporter Berenice Garcia moderated the first panel. It included Bob Anderson, vice president for supply chain and operations of Alps Alpine North America, a Japanese electronic components manufacturer operating in Reynosa with a logistics hub in McAllen. The other featured guest was Nick Rhodes, president and CEO of land development conglomerate Rhodes Enterprises.
To kick off the conversation, Garcia tried to get a pulse from the panelists about their respective industries. Before providing the current snapshot, both first provided context.
For the housing market, Rhodes explained that the Valley has still not bounced back from its height before the 2008 recession. Comparatively, metropolitan areas like Austin, Dallas and Houston have experienced and are still experiencing a housing boom. The Valley, on the other hand, has been steadily keeping pace with the population growth for the last 10 years and continues to slowly grow. But, even here, housing prices have skyrocketed beyond residents’ ability to afford them.
To illustrate, Rhodes says that in 2019, a 1,500-square-foot, entry-level house with three bedrooms, two baths and a garage sold for around $175,000 in the Valley. With a mortgage rate averaging 4.5% at that time, a buyer needed to earn about $45,000 annually to buy the home, matching the region’s median income. So, statistically, the average person could buy the average home. Today, that same home is priced at $240,000, mortgage rates are close to 7%, and the buyer needs to make $80,000 – 33% more the current median income of $60,000. Further complicating things, Rhodes says that Valley home buyers put down significantly less towards their mortgage than the rest of the nation, so they are more affected by the increasing rates.
Garcia asked if anything could be done to fix this.
“Hopefully, people can make more money,” Rhodes joked. “… I think it’s just a catch-up period … The house prices went up too fast, and wages didn’t catch up … So, we need the price to stay flat, we need people to continue to accelerate their income, and it would be very helpful if the rates to borrow go down.”
For Alps Alpine, operations that used to be run in California in the ’90s are now being run in Mexico – to the benefit of the region. But adapting to the ever-changing directives of the Trump administration has affected the company’s bottom line. Though they manufacture out of Reynosa, approximately 20% of Alps Alpine components do not qualify for a USMCA exemption from tariffs. Anderson says that had they not planned tariff mitigation, the company would have lost $70 million this year alone. For now, they are weathering a storm as permanent solutions – some that will take up to two years to implement – are being worked out.
“We moved some product that was being produced overseas into Mexico and qualified it for USMCA,” said Anderson. “Others, we’ve had to approach our customers and say ‘look, we cannot absorb this tariff by ourself (sic). The tariff is almost the profit of what we are selling this for.’ And the OEM [original equipment manufacturer] manufacturers have stepped up to offset some of the tariff impact. Their only requirement is ‘I’m not paying this tariff forever. Make plans to make it go away.’ So, we now have ongoing efforts over the next year to move as much of that into North America as possible and qualify it for USMCA. So, tariffs has (sic) been huge in our company.”
Segueing to the current political climate and its impact on their industries, Garcia asked Rhodes about the effect of immigration enforcement on his business. According to the Center for American Progress, one in five of all undocumented workers in the country are in the construction sector. For residential construction, the National Association of Home Builders says that, depending on the specific job (e.g. painting, carpentry, etc.), between 30% to 61% are filled by undocumented workers.
Rhodes estimates that out of their 3,000 to 4,000 subcontract workers, about 30 to 40 have been deported since the start of the year. He says that his company has done training with subcontractors to respond to ICE officers and put up signs warning that they will not be let onto the private construction sites without a warrant. So far, the company has not seen any project delays related to immigration, but Rhodes says fear has spread amongst the workers.
“It’s sad that people are living in fear to come to work is the way I feel about it,” said Rhodes. “But we haven’t seen the direct economic effect of it yet in our business. I can tell you if they continue to up the presence, it will come. It just has not happened yet.”
For Alps Alpine, immigration enforcement has made crossing the border much more difficult. Anderson says employees that shuttle everyday to Reynosa for technical support are met with inspections that vary in duration, leaving them with lots of unproductive downtime. The uncertainty – not the inspections themselves – is what is most affecting their operations. As negotiations continue, he stressed the importance of respecting Mexico as a business partner, especially for the region.
“From a manufacturing standpoint, we’ve looked at trying to manufacture in Texas, and we haven’t been able to build a better model than manufacturing in Mexico,” said Anderson. “That relationship is definitely needed, and we see the benefits of it daily.”
Looking to the future, Rhodes and Anderson both highlighted the importance of education and workforce training in preserving the Valley’s “economic miracle.” For Anderson that means having well-rounded employees that can manage tasks and perform different roles as needed within a company.
“If you think about a chess board, the most amount of pieces on the board are pawns, and these pawns can only move limited spaces and in one direction,” said Anderson. “We need knights, rooks, bishops – multidirectional workforces that can go in any direction, multiple spaces, forwards and backwards. How do we get our labor force to that? … It’s having these people that can think outside that task and what’s going to come next. How to do the best job for the next person, not simply following an order of procedures in process … If we can do this, I think we have an advantage in this region. We got the numbers. We go the affordability.”
Rhodes added that as the workforce becomes more educated, businesses that once overlooked the area would now have a reason to establish themselves here and provide more opportunities for local employees.
“The Valley really wants business and is pro-business and has a lot of young people that want to stay here that are actually having to leave. I don’t think they’re choosing to leave. I think they’re leaving for opportunities, and I think that if these other companies in the state knew that, you know, a lot of these people are hiring from McAllen, that they would look at the Valley. It would be easier to recruit than they think.”
