The Tucson Hispanic Chamber expanded its presence in the region last year through its affiliate chambers in Sierra Vista, Douglas and Ambos Nogales. As we hosted events and held meeting with business leaders in Southern Arizona,, we heard a recurring theme. Access to capital was the leading challenges for small business but even more so in the border communities of Nogales and Douglas.
This past week, we participated in a second visit to Nogales by the FDIC (federal deposit insurance corporation). The first visit stemmed from a letter we sent requesting that the Chairman of the FDIC visit the border and hear directly from the business community about banking challenges they were facing. The Chairman responded quickly and sent Regional Director Stan Ivey and his team to Nogales in March to speak to the Ambos Nogales Hispanic Chamber and other business leaders. The first meeting was helpful in providing real examples to the FDIC which regulates Banks across the nation.
This recent meeting, however was a first of its kind. Director Ivey in partnership with the Arizona Bankers Association invited twelve financial institutions as well as our Ambos Nogales Hispanic Chamber, businesses and elected officials. The group that gathered had a strong interest in border banking issues.
The meeting focused on educating the business community on the Bank Secrecy Act and the pressures that Banks are under to mitigate risk. In a January letter to bank CEO’s, the Chairman of the FDIC suggested a case-by-case risk based approach. He had received letters and communications from businesses along the border about deposit accounts being closed and the challenge in getting commercial loans due to the perceived risk of money laundering.
The FDIC discussed a number of top concerns related to cross border transactions. They were 1) ACH transactions, 2) Foreign Bank Account reporting, 3) Declaring cross border cash transactions and 4) wire transactions and beneficiaries. There concerns stemmed from the challenge that information was not as readily available on foreign businesses, owners, customers, signers on account and it was difficult to follow the trail of money through the system. Traditional internet and Lexus searches were not sufficient for cross border transactions and did not provide the level of details required by the banks.
Both President Obama and Governor Ducey have spoken about the importance of doubling trade with Mexico in the short term. The outcry from our chamber and other business groups has centered on the challenge to grow and expand our businesses without adequate capital. Both Senators McCain and Flake as well as many of our congressional delegation have been advocates for our federal legislators to tackle this issue.
The conversation with the FDIC is promising, but ultimately we are looking for solutions. There is a void in banking along Arizona’s border. The federal regulatory environment has caused some banks to react by eliminating their retail presence or entire industry groups as clients. We were encouraged to have so many financial institutions in attendance. There is a business opportunity for a financial institution with good financial controls in place to work with legitimate, long standing businesses.
To find a solution to this challenge facing businesses along the border, banks must have risk mitigation policies in place to reduce concerns and work with businesses on a case by case basis. The FDIC also encouraged businesses to build meaningful relationships with their bankers to ensure that they understand business operations. Ultimately, the business of lending is based on trust. Arizona has been slowly recovering from the economic recession. Trade with Mexico is a key driver for our economic recovery and acquiring capital to grow is vital. Thank you to the FDIC for highlighting this issue at Arizona’s border. It’s time for a solution to our Border banking challenges.
Governor Ducey launched our recent trade mission trip to Mexico City at a reception where he acknowledged Mexico as our friend and neighbor. I was honored to participate in the Delegation representing our Tucson Hispanic Chamber and affiliated chambers in SierraVista, Douglas and Nogales. Repeatedly during the trip, he spoke to the 45 business leaders and cabinet members and our Mexican guests about a “new day and a fresh start” for Arizona in Mexico.
Arizona currently trades over $15.9 billion dollars a year with Mexico. Last year, trade grew by $1.8 billion without much attention by Arizona leadership. Governor Ducey’s economic vision for the State includes a renewed focus on Arizona’s largest trading partner and an intention to repair damage and rebuild relationships since the passing of SB1070 five years ago.
Arizona business leaders on the trip were very engaged. Many of the businesses had deep ties to Mexico while others were exploring opportunities about potential industry partners and steps to doing business in Mexico. Delegation businesses included companies in such industries as transportation, legal, metal fabrication, real estate development and mining products.
Several important memorandums were signed during the trip. Most notably, the launch of a Mexico Desk by the Tech de Monterrey at the Phoenix-NPR affiliate, KJZZ; the University of Arizona’s signed memorandum with UNAM (the oldest and largest University in Mexico) and the opening of the UNAM office in Tucson; and a collaborative agreement to benefit Mexican children with custody challenges in the State of Arizona.
David Farca, the Governor’s newly appointed President of the Arizona Mexico Commission spoke passionately about Arizona’s opportunity to stop talking about Mexico and to start talking to Mexico. He said it’s a time of action and of “doing” within Mexico.
During an economic development panel discussion, the delegation learned more about the Industrial Park structure in Mexico, which represents over 2300 tenants and 1.7 million jobs. Speakers also addressed President Pena Nieto’s federal reforms and the much awaited energy reform. We learned that the recent Mexican gasoline shortage and lack of pipeline infrastructure led to Mexico’s interest in reform, and discussed among us about opportunities in Arizona.
In addition, Arizona’s interest in the aerospace industry was reinforced by the discussion on the benefits of manufacturing aerospace components in Mexico. At their advantage is 1) lower manufacturing costs driven by labor, 2) proximity to OEM in the U.S, and 3) duty free access to important aerospace market. Mexico’s aerospace industry has expanded dramatically from 109 to 280 over the last 8 years, though this still equates to less than 5% of the market. With the concentration of aerospace in Sonora, this is a key opportunity for Arizona.
The Arizona delegation had the opportunity to meet with the Secretary of Economy and the Minister of Foreign Affairs. During the meetings, our chamber distributed the Arizona Sonora Business Resource Guide which has been created in partnership with the Arizona Daily Star, and is a strong example of bi-national cooperation. Top of mind for the delegation during the meetings with federal leaders was transportation infrastructure in Northern Mexico and the Arizona ports of entry, namely Nogales. One challenge identified was the imbalance of the market in Nogales. Eighty percent of the products at Nogales are imports from Mexico with 20% exports to Mexico. The cost of having empty commercial trucks returning to Mexico impacts profitability. Secondly, delays caused by the many transportation inspections also create a disadvantage to Arizona in comparison to travel routes to other U.S States. The Querobabi Military checkpoint, located 45 miles south of Nogales causes delays for hours for commercial trucks heading north. Though additional investment by the Mexican government will assist with efficiency, there was conversation on the reality of eliminating the checkpoint in the future.
The trade mission trip was a success for all involved. Our Governor and the delegation met with executives from major Mexican companies and political leaders including Mexican billionaire Carlos Slim. Over 250 business and political leaders attended a reception for the Arizona delegation hosted by the U.S Ambassador to Mexico Anthony Ryan. The trip to Mexico City was a great step in working to repair the perception of the State of Arizona. Our Tucson Hispanic Chamber and affiliated chambers in Douglas, Sierra Vista and Nogales are prepared to continue our work in Sonora to build relationships to benefit our economy and assist the Governor in his vision of doubling trade with Mexico. To join our conversation, members may attend our International Trade committee meetings held monthly. On July 28th, we are hosting an “Economic Impact of Arizona-Sonora Trade” luncheon in Tucson featuring Dr Erik Lee, author of “U.S Mexico Border In Transition”. The event will be followed by a similar luncheon in Phoenix on July 29th and on July 31st, a workshop on “Doing business in Arizona” and a similar Luncheon in Hermosillo. Learn more at www.TucsonHispanicChamber.org.
Hispanic students today represent nearly 42 percent of total enrollment in our K-12 system. By 2035, the U.S Census estimates that a majority of Arizona will be Hispanic.
Yet Hispanic students are less likely than the general population to enroll in either college or graduate school. While 50 percent of Arizona's high-school students pursue post-secondary education, only 44 percent of Hispanic students pursue a college education. Even more startling, only 10 percent of Hispanic students who enroll in our public universities will earn a degree. This is alarming, given that two-thirds of all jobs by 2018 will require a post-secondary education.
With this realization, we are making strides, yet still have a long way to go. For example, in the Arizona high school graduating class of 2005-06, only 5.3 percent of Hispanic students went on to graduate from two-year institutions after six years and 8.3 percent of Hispanic students graduated from four-year institutions. Two years later, the comparable figures are 6.7 percent and 10 percent. This is growth, but it is not enough.
Where do we start? It starts by facing the facts: Arizona ranks 40th in the nation for our college-going rate. Of the roughly 59,000 high school graduates, 24,000 are Hispanic. Unfortunately, fifty three percent of our Hispanic students do not qualify for admission into Arizona’s public universities often because they have not satisfactorily completed core courses for admission or may have grade point averages that do not qualify them for admission. Until Hispanic students have the same rate of educational success as the general population, we face a real threat to Arizona's overall economic health.
We need not search far for the answer as to why these students are struggling. Sadly, poverty is a reality for many Hispanic families. We know that the single biggest predictor of their educational success is family income. Among Hispanics in Arizona, 29 percent live in families below the poverty level, while that number is about 18 percent for Arizonans as a whole.
And for those Hispanics who do live in poverty, about 46 percent are under the age of 18. Think about that for a moment: Children represent almost half of Arizona's Hispanic population affected by poverty.
These children are the future of our workforce. They are bicultural and bilingual, both of which are tremendous assets for businesses looking for a diverse and talented pipeline.
How do we foster greater success?
Increasing college affordability is a must. Creation of a more robust, needs-based financial aid system in the state is a priority. A great example is the Arizona Earn to Learn program supported by the Board of Regents and in partnership with the Tucson Hispanic Chamber. (www.AZEarntoLearn.org)
We must build a stronger college-going culture in Arizona. It begins with parents talking to their children, with teachers building the message in the classroom, and it requires the help of business, philanthropic and community leaders as role models making their collective voices heard to enforce a message of the importance of a college-going culture.
Student retention is imperative. Students who set foot on our campuses encounter all kinds of challenges, from financial to personal, that impact their success as students. Our universities have developed strategic retention tools to predict and foster student success, and a vast array of outreach programs are in place to also assist students.
The Arizona Board of Regents and community partners like the Tucson Hispanic Chamber are committed to driving solutions for these challenges. It also requires collective commitment – from parents, educators, business leaders and our policy makers – to ensure every student – regardless of socio economic status - can access higher education and realize their personal and professional potential. The economic future of our state is dependent on the academic success of our Hispanic students.
Welcome to the Tucson Hispanic Chamber Blog Page.
Our goal is to help member companies grow and prosper. We work to achieve this goal by advocating a pro-business agenda in Tucson and connecting members with business leaders and policy makers. How? With Networking & educational events, and online initiatives — like this blog.