L.A. trails San Antonio in race for Mexico market.

Competition between two cities is likely to get hotter

Merchants in Texas and California have traded with their Mexican counterparts for centuries. But in the six years since Mexico began easing its trade restrictions, San Antonio has far outdistanced Los Angeles as the top U.S. city conducting trade with Mexico.

Making the situation even more humbling for Angelenos is the fact that the San Antonio World Trade Association works on a $75,000 annual budget, while the World Trade Center Association of Los Angeles has an annual budget of about $1 million, more than 10 times that of San Antonio.

To be fair, San Antonio does concentrate 90 percent of its foreign trade efforts on Mexico. Los Angeles, meanwhile, splits its budget between programs aimed at Europe, Latin America and the Orient, confirmed leaders of both cities' trade associations.

On the surface, San Antonio may appear to have a permanent lock on the Mexico market, which has developed an absolutely ravenous appetite for U.S. products since the mid-1980s, particularly for electrical equipment and computer products. But Los Angeles trade experts said the stage is being set for Asian investors to enter Mexico through Los Angeles. As a result, Texas and California will compete with increasing fervor in the coming years to satiate that south-of-the-border appetite.

Los Angeles has become the center for California trade with Mexico, and San Antonio has become the Texas hub, mainly because of their respective transportation and cultural links. But San Antonio, and the rest of Texas, play a larger role in U.S. trade with Mexico than do Los Angeles and California.

According to the Massachusetts Institute for Social and Economic Research, California businesses sold $5.53 billion worth of goods to Mexican buyers last year. But Texas exported $15.49 billion, nearly three times as much. And the majority of those Texas exports passed through San Antonio, reported MISER, which is part of the University of Massachusetts at Amherst.

Despite that disparity, the Los Angeles World Trade Center Association is larger and growing faster than its San Antonio counterpart. Mary Tutton, chief executive officer and president of the Los Angeles WTCA, said 50 to 60 businesses join L.A.'s 1,200-member World Trade Association each month. That compares to San Antonio's core membership of 400, of which 85 to 90 percent export products to Mexico. The San Antonio group has added 100 members in the past seven months, reported Diane Bolles, executive director of the San Antonio World Trade Association. Bolles predicted her group's current growth rate will continue.

World trade associations are private-sector organizations devoted to helping businesses find ways to export and, in some cases, import goods from foreign countries. The Los Angeles and San Antonio world trade associations are supported by membership dues and proceeds from trade-oriented workshops.

San Antonio's strength in trade with Mexico is anchored by long-time relationships between business and government leaders in Mexico and Texas, explained Bolles.

"There are a lot more people in San Antonio that can dial Mexico City and speak one on one with President Carlos Salinas de Gortari than there are people in San Antonio who can dial Washington, D.C. and speak with George Bush," Bolles said.

"San Antonio city leaders are tuned into Mexican leaders at all levels. A strong spirit of cooperation exists between San Antonio and Mexican officials, and we can act quickly," she added. "We have hundreds of people who belong to the association and hundreds of volunteers that actively participate."

Rod Sands, chief executive officer of San Antonio-based Pace Foods, makers of Pace Picante Sauce, is a member of the board of directors for the San Antonio World Trade Association.

"In San Antonio, the mayor is active in boostering foreign trade with Mexico. But San Antonio is also 55 to 60 percent Hispanic," Sands pointed out. "Los Angeles has a lot of Hispanics, but it is much more strategically placed to trade with Japan. At the same time, San Antonio does very little business with Japan."

Tutton of the L.A. trade group said similar involvement with city officials in Los Angeles County is virtually impossible because more than 80 cities exist here.

Even though San Antonio is located much closer to Mexico's major population centers than Los Angeles is, Tutton said she believes small businesses in Los Angeles County will keep expanding their Mexican market shares.

Tutton conceded L.A.'s continued expansion in Mexico will come even though L.A. exporters don't get as much support from their local trade group as San Antonio exporters get from their's.

"San Antonio's efforts are concentrated in a much smaller area than ours," she said. "We conduct workshops on exporting to all countries, maybe four last year were on trading with Mexico (compared to 12 such workshops in San Antonio). But our members live in 80 different cities throughout L.A. County."

But in the next breath, Tutton mentioned an L.A. strength that could offset some of its weaknesses.

"Los Angeles companies are good at learning how to adapt their products to the Mexican market," she said. "There is such a large population of Hispanics here that a company can test market any product (in Los Angeles) and get a good idea how it will sell in Mexico."

It is that adaptability that helped California exports to Mexico grow faster than Texas exports to Mexico in 1991.

Specifically, California exports to Mexico in 1991 totaled $5.53 billion, an 18.3 percent boost from 1990. During that same year, Texas exports to Mexico rose 16 percent, to $15.49 billion, according to MISER.

California's higher growth rate for exports to Mexico, compared with Texas, was especially heartening for Californian exporters because it reversed an earlier trend.

In 1990, Texas exports to Mexico grew a robust 21 percent, compared with the prior year, while California's growth rate for such exports was less than 12 percent, according to MISER.

However, Los Angeles must overcome logistical problems if it hopes to keep growing its Mexico exports faster than San Antonio.

San Antonio's more-centralized trade community allows that city to make more efficient use of its resources. Since only one city is involved, instead of more than 80 in the L.A. area, San Antonio's city government can play a much more active role.

Jack Kyser, an economist for the Los Angeles County Economic Development Corp., admitted Texas has better ties with Mexico, but pointed out the "Lone Star" state is a much shorter drive from major Mexican population centers, such as Durango and Mexico City, than California is. Kyser also claimed much of the export volume counted as originating in Texas actually originates elsewhere and is merely warehoused in Texas before being shipped. But the same is true of Los Angeles.

In the long run, Los Angeles' ties with Asian trading companies will help California export more goods and services to Mexico, said Tutton of the L.A. World Trade Center Association.

"Companies in Asia want to take advantage of the North American Free Trade Agreement," she said. "We think, in many cases, they will provide the financing California companies need to export products to Mexico."

Deep-pocketed Asian financiers will be especially receptive to bankrolling California companies that demonstrate a long-term commitment to trading with Mexico, Tutton added. On the other hand, companies and investors looking for a quick buck "have their head in the sand," she contended.