Doing Business In Mexico: How Has COVID-19 Affected the Texas-Mexico Border?

Since the COVID-19 pandemic broke out in 2020, the communities along with the Texas-Mexico border suffered a great deal economically. Elevated mortality rates and infection amongst the population were two main challenges. This resulted in the shutdown of entry ports and the collapse of local trade.

In some border communities, a lack of investment and resources increases the risk of the virus spreading. For instance, the southern Texas area has been one of the high infection areas with the highest cases per capita in the United States.

Another report states that people living in the rural Rio Grande Valley in the state of Texas were at higher risk. This was due to little to no access to adequate healthcare service and lack of infrastructure.

Why does the Texas-Mexico Border Suffer?

This limited access to healthcare facilities and hospitals, in combination with Border Patrol checkpoints, has forced people to choose whether they would want to get healthcare or risk deportation. Therefore, the situation has led to an increase in the risk of infection spreading amongst the border residents.

For instance, McMullen County in the state of Texas had one of the highest per-capita fatality rates at 673. This was higher than any other counties in the southern border region. The second state in the lead was Maverick Country, with 620 deaths per capita. In fact, the top 10 counties with the highest per-capita deaths in the nation were all communities in southern Texas.

According to the New York Times report, last summer, southern Texas housed one of the top five communicates with the highest infection rate in the United States. These were the areas all linked to the Texas-Mexico border with the highest rates of unemployment, poverty, and an increasing population without access to health insurance.

That said, the subsequent federal aid is helping these communities keep pace. The federal pandemic relief policies have helped boost the Texas-Mexico border economy to enable economic growth. On top of that, a recent restoration of US trade with Mexico has also resulted in a migration surge supporting recent border economic activity.

Why Texas-Mexico Border Plays a Significant Role

The Texas-Mexico border plays a vital role in the economy of the state. The international trade at this border amounts to around $350 billion annually. Plus, the economy also relies on Mexican citizens to cross over to the US to work and shop. According to statistics, around 30% of border retail sales come from Mexican shoppers.

However, as the COVID-19 pandemic started spreading, the government closed the US border. This resulted in a decline in cross-border traffic, trade, and tourism. As the situation got worse over time, the border economy at the Texas-Mexico border came to a grinding halt.

Tom Fullerton, who teaches economics at the University of Texas in El Paso, said that the retail sales sports of the areas should have been $1 billion by the end of 2020. However, due to the restrictions on cross-border travel by the US government, El Paso missed the billion mark by $200 million.

While some businesses may recover, others did not last long enough to find consolation in reopening the borders. According to the Hispanic Chamber of Commerce, El Paso, at least 30% of small veteran and women-owned businesses had to close their doors for good due to the travel restrictions in March 2020.

Apart from the border-crossing and trade challenges, the Texas-Mexico border also suffered the negative impact of having a large service sector. The sector could not shift to work-from-home like other industries. Thanks to the federal aid that has helped the border economy emerge from this crisis, things are now picking up pace.

How Is Federal Aid Helping the Texas-Mexico Border Economy?

The aid by the US government is providing a cushion to the Texas border area to reduce the inverse effects on the economy. One of the main reasons behind the improvement in the Texas-Mexico border economy is the wide range of relief programs offered by the federal government. These include:

• Consolidated Appropriations Act 2021
• Coronavirus Aid, Relief and Economic Security aka CARES Act
• American Rescue plan Act, 20201

Texas is the state that has received the second-highest amount of federal aid to boost the economy. Peter G. Peterson Foundation Reported that till January 2022, the total amount of federal aid injected into Texas had been approximately $322 billion.

The best part is that there was no discrimination when it came to the distribution of aid money to the recipients. Whether big or small, all areas received equal amounts of supplemental unemployment benefits and stimulus payments. Therefore, the low-income communities, including the Texas-Mexico border, received a comparatively higher sum of money than their actual income.

Did you know that along the Texas border, the$600 per week supplemental unemployment benefit by the federal government had a much wider impact than anywhere else in the state? Not to forget that the unemployment benefits in each state are different, with an average amount of $385 per week across the United States.

Now adding the $600 of Supplemental unemployment benefits to the $385 per week brings the total benefit amount to $985.

The Texas-Mexico borders’ workers received a weekly wage of $609 per week before the rise of a pandemic. Therefore, federal aid actually raised the workers’ border wage by 62 percent. The rest of the state was not that lucky and only received an unemployment benefit with a  17 percent raise.

So, you can see how a fiscal stimulus aided the communities on the Texas-Mexico border in fighting the initial pandemic-associated decline in trade and economic activities. The stimulus offered by the federal government gave rise to local demand.

On the other hand, as the cross-border shoppers could not get into the country, the extra money encouraged the local shoppers to provide business to local retail sales.

How US-Mexico Trade is Paving the Way

As the trade between the United States and Mexico is getting better, it is further helping the Texas-Mexico border community to recover from the adverse effects of the coronavirus pandemic. According to the stats, the trade percentage between the US and Mexico fell by 53 percent by May 2020. However, it spiked up again in June 2020 and reached 78 percent by July 2020.

The North American Free Trade Agreement 1994 between both countries resulted in highly integrated cross-border production relations. As the US manufacturers heavily rely on inventory supply chains from Mexico, the Texas-Mexico border communities benefit from being the channel that enables trade between the two countries.

The Federal Reserve Bank of Dallas, Texas, published a study in 2013. This study suggested that if manufacturing increases by 10% on the Mexican border, this triggers an employment boost on the Texan side of the border. For example, employment in the local communities increase by 6.6% in McAllen, 4.6% in Laredo, 2.8% in El Paso, and 2.2% in Brownsville.

Overall Economic Boost in Texas-Mexico Communities

There is no denying that the job losses across Texas and the entire county have been more or less the same since the COVID-19 pandemic. However, you may be surprised to know the unemployment in the Texas border area is 0.4% lower compared to what it used to be in a pre-pandemic era.

The Texas-Mexico border has outperformed the rest of the state in education services, health services, mining, construction, information services, manufacturing, leisure, and hospitality.

That is the reason why employment in the border areas will grow almost by 4.6% by the end of December 2021. This is actually not bad when you compare it to the state’s overall increase in employment rate at 5.1% during the same time period.

Therefore, it is safe to say that despite all the setbacks to the Texan economy due to the pandemic outbreak, the economy on the Texas-Mexico border has done really well. Although the federal government will slowly discontinue the stimulus payments, it may create supply-chain bottlenecks for the time being.

However, the increased investment interest by the investors and companies in this region helped boost the economy in the post-pandemic world. Thanks to the reopening of the border crossing between the US and Mexico in November 2021, the influx of workers and shoppers is further supporting the economy and boosting commercial activity in the local communities.

Want to Trade on the Texas-Mexico Border? No Problem!

When establishing a business in the Texas-Mexico border region, hiring legal assistance should be your top priority. So, if you are a business owner, investor, or a company, thinking about investing in the growing economy of the Texas-Mexico border, it is important to consult a high-quality corporate lawyer.

Contact us at (210) 817-4388 to schedule a FREE initial consultation.