As part of a series of studies on Tecate being prepared by San Diego State University, Universidad Autónoma de Baja California and El Colegio de la Frontera Norte, and sponsored by Fundación La Puerta in Tecate, this Cross-Border Economic Bulletin looks at the economy of the municipality. (Additional research will look at demographic, environmental, social, governmental and related economic issues. The Tecate study is parallel to a forthcoming set of papers on the Mexicali-Imperial Valley region. The latter research is being prepared by the Center for Border and Regional Economic Studies at the Imperial Valley campus of San Diego State University and the Mexicali campus of Universidad Autónoma de Baja California.) The key points of this month's Bulletin are:

• Tecate has 3.1 percent of the state's population (2000), but over the last five years, it has grown faster than the rest of the state.

• The municipality's social characteristics are similar to the rest of the state's, with the exception that a much larger share of the population lives in rural areas.

• Annual employment growth (1993-1998) was more than 3.5 percentage points higher than the national average.

• The share of manufacturing employment in both Baja California and Tecate is much higher than in the nation.

• More than half of Tecate's 1998 employment was in the maquiladora sector.

• Trade flows through the California port of Tecate are not growing as fast as through other California ports, even though they will double approximately every 5.4 years at current rates.

Population and population growth are shown in Table 1. In both periods, 1990-1995 and 1995-2000, the state and the municipality grew faster than the country as a whole. During the second half of the 1990s, Tecate's rate of growth exceeded the state's by a full percentage point and the nation's by three percentage points. Note that in the last five years, the growth of Tecate accelerated.

Table 1: Population, 1990-2000

Table 2 illustrates two characteristics of the population and two characteristics of the housing stock. The first column shows the extent to which education levels are higher in the border region. Illiteracy is more than twice as high in the nation as a whole (10.6 percent) as it is in Baja California (4.2 percent) or Tecate (4.4 percent). Tecate's rate is slightly higher than the state's, even though a much larger percentage of the population lives in rural areas (defined as places with less than 2,500 population).

Tecate is more rural than any of the five municipalities in Baja California. Ensenada is the closest to Tecate in its share of the population living in rural areas (18.4 percent), but the largest municipalities of Tijuana (0.9 percent) and Mexicali (13.4 percent) are much less rural. Services such as education, electricity and running water are more costly to supply to rural areas, where the distances between households are greater. Given Baja California's much lower share of its population in rural areas, it is perhaps not surprising that it ranks significantly better in each of those areas. Tecate's rural/urban division, however, is similar to the nation's, and it is comparable in the share of its households with electricity and piped water. Its literacy rate is considerably better than expected, however, given its ruralness.

There are two features of Tecate's economy that are exceptional. First, it is much more concentrated in manufacturing than either the nation or even the state, which is itself heavily concentrated in manufacturing. Tabulations for the 1999 economic census are still not available at the state and municipal level by sector, so the 1994 census data is used in Table 3. The table shows that Tecate's manufacturing sector accounted for 55 percent of the municipality's employment in 1993, compared with 37 percent in the state and 25 percent in the nation.

Second, the maquiladora sector accounted for 86.2 percent (46.4/55.0) of all manufacturing. Its share in the state was 75.6 percent (28/37) and just 16 percent (4/25) in the nation. Given the increase in maquila activity in Tecate, its share of overall employment increased between 1993 and 1998, and its share of manufacturing is probably even higher than it was in 1993.

Although the city added new establishments at a faster clip than the state or the nation, much of the employment growth stems from the fact that the average number of employees per establishment is much higher in Tecate (9.3 workers per company in 1998) than in the nation (5.3 workers per company). This is another confirmation of the central role of the maquila sector, which tends to have larger companies.

Table 4: Employment and Establishments

Table 5 shows the dollar value of the flow of goods through California ports on the Mexican border. The values include exports and imports as well as transshipments (goods that pass through the border on their way to or from a destination outside the United States or Mexico). Table 5 is not meant to inform about Tecate's exports or imports, but to give a picture of the scale of the goods flow and its growth rate over the last five years. The main point is that the goods flow -- and the truck and rail shipments associated with it -- is growing at a rate that leads to a doubling every 5.4 years. The strain this places on border infrastructure is enormous and, along with the growth of manufacturing and population, constitutes the biggest challenges to the region.

Table 5: Trade flows through Tecate and other California ports

The growth and evolution of the northern Mexican economy is a historical trend that is beyond anything temporary or cyclical, and anyone who travels in the northern states cannot escape noticing the deep changes that are in process. The limits to this growth are anyone's guess, but even though the problems of growth are infinitely preferable to the problems of stagnation, they are very real and pose their own challenges to the environment, to housing, to education and to health care. Tecate is in the middle of this transformation along with the rest of northern Mexico. As a relatively small municipality, it is perhaps more vulnerable to outside forces. On the other hand, its size may confer the advantage of manageability to its future growth. In either case, it is certain that it will look very different 10 years from now.

The Cross-Border Economic Bulletin is prepared monthly by Dr. Jim Gerber, professor of economics at San Diego State University. It is underwritten by Concert, a global venture of AT&T and BT.