NAFTA a Mixed Blessing for Laredo

By Paul Duggan, Washington Post, Sunday, April 18 1999; Page A17

LAREDO, Tex. Manuel Sanchez has mixed feelings about the North American Free Trade Agreement. In the half-decade since trade barriers were lowered, vastly increasing commercial traffic across the U.S.-Mexico border, the restaurant owner has praised the treaty and cursed it.

As he tallies receipts at his Cotulla Style Pit BBQ in this fast-growing city on the Rio Grande, Sanchez loves NAFTA. With millions of tons of goods moving through Laredo daily in mile-long freight trains, a stream of cargo jets and thousands of 18-wheelers the local economy is humming, and so is the 300-seat restaurant that Sanchez has run since 1979. Before NAFTA he had 23 employees. Now he has 47.

Driving home after work, though, he sees what else NAFTA has done here:

Main roads to the Rio Grande bridges and to Laredo's dozens of huge warehouses and cargo transfer yards often are backed up for miles. Exhaust fumes linger in the balmy air amid the snarl of truck engines, the hiss of brakes. At nearly every turn, it seems, Sanchez is stalled by spillover traffic from the highways, detour signs and sweat-drenched men spreading asphalt on worn thoroughfares.

Arriving on Elm Street, five blocks south of Laredo International Airport, Sanchez, 60, measures NAFTA by the damage to an exterior wall of his red-brick, ranch-style home an eight-foot-long crack that he attributes to vibration from jets roaring low overhead.

"Sometimes I don't know what to think," he said. Like those who live near the city's highways and rail lines, Sanchez and other airport neighbors worry that the trade boom is ruining the quality of life in Laredo, which has a population of about 200,000, up more than 60 percent since 1990. "But if it wasn't for those planes," he added, "I wouldn't have all this business."

Which is the story of Laredo in the NAFTA era. It is a border city reveling in phenomenal, trade-fueled growth, yet also reeling from the strain of it.

For most Americans, the NAFTA issue is history. After the agreement took effect in January 1994, the acronym all but disappeared from the nation's political vocabulary. But on NAFTA's front lines in historically neglected communities along nearly 900 twisting miles of the Rio Grande in Texas the trade pact has been visibly real from the start, causing or hastening economic changes that are stirring optimism in some places, trepidation in others.

The dynamics differ from city to city, and economic outlooks along the border vary like the landscapes from El Paso in the desert to McAllen near the coast. Laredo, 200 miles upriver from the Gulf of Mexico, is just one example. But its NAFTA experience has been profound.

"There was no anticipation it would happen like this," said Mayor Elizabeth G. Flores, chuckling for a moment, then sighing.

Long the busiest trade crossing on the nation's southern border, largely because of its proximity to Mexico's industrial region, Laredo's growth as an inland port began accelerating in 1986, when Mexico joined the General Agreement on Tariffs and Trade (GATT). Then in the early 1990s the city embraced NAFTA, figuring its growth would continue at a reasonable, albeit faster, pace.

Instead it exploded. "And unfortunately for this community and its people," said Flores, "as much as they support NAFTA and international trade, it has become a burden."

Year after year, the numbers by which Laredo measures trade have staggered the mayor and others here. About $80 billion in goods passed through the city en route to Mexico last year, up 92 percent from 1993, while an estimated $95 billion in goods came into the United States by the same route, an increase of 138 percent since NAFTA took effect.

On the two highway bridges across the Rio Grande at Laredo, officials counted 2.5 million commercial trucks driving to and from Mexico last year an average of more than 8,000 per day, Monday through Saturday. About 1.4 million of those trucks were fully loaded. And of those, about 650,000 were bound for the United States, a 158 percent increase from 1993.

On the railroad bridge, with its single track, a quarter-million freight cars crossed the river here in 1998, up 70 percent since the year before NAFTA. And near Sanchez's house, 415 million tons of cargo arrived by plane, a 45 percent increase since trade restrictions were eased.

Those trailers and boxcars cannot pass through the city without stopping. The old bridges and local roads were not built to swiftly handle such heavy traffic. And even with trade barriers lowered, the border is still a border, crowded with government inspectors and layered with red tape for cargo-haulers.

The resulting bottleneck is the reason for the Laredo area's population and economic boom its thousands of new jobs in service industries (motels, restaurants, gas stations), in the public sector (teachers, police officers, highway workers), and in trade-related industries such as warehousing and transportation. More than 400 trucking companies now operate out of Laredo, local officials said, and virtually all of the city's 55 million square feet of warehouse space is occupied.

"You have a major, national distribution center that's growing up," said John Adams, a bank executive and president of a Laredo business association. "The folks who did the modeling on NAFTA thought that was going to happen in Dallas or Kansas City. But it's not. It's happening in Laredo."

Although the Laredo area's 9 percent unemployment rate is nearly twice the statewide average, it is down from about 14 percent at the start the decade. And while per capita income, at roughly $12,000, is only about half the Texas average, it is almost double what it was in the early 1990s.

Critics describe the city as little more than a sprawling truck stop and argue that its economic prospects are dim. They envision a time when the border will be completely open, when future phases of NAFTA will greatly reduce delays, and freight-haulers will push through Laredo with barely a pause. When congestion at the Rio Grande eventually breaks, they warn, so will Laredo's bubble.

"Because we're a chokepoint, we benefit," said James R. Giermanski, a trade specialist at Texas A&M International University here. "It's all low-level business activity just blue smoke and mirrors, to be pleasant about it. . . . It's a lot of phoo-phoo dust."

Unless Laredo finds a way to broaden its economy to spur job growth beyond the service and transportation industries and the public payroll it is headed for disaster, Giermanski said. "We don't have manufacturing. We don't have tourism. We don't have agriculture. What we have are a lot of trucks."

But most people here scoff at the warning. "He's talking about some perfect world where there is no river, there is no border, where everything is seamless," Adams said. "That's never going to be the case."

Whatever the future holds, Laredo's growing pains are obvious.

Next door to Sanchez on Elm Street, Margarita Lozano, 78, stood on her front lawn one afternoon and jokingly shook a fist at the sky as another jet roared above her roof, bound for Laredo International and its 150,000 square feet of cargo storage space. Before NAFTA, it had 30,000 square feet. If construction goes as planned, by the end of next year it will have 210,000 square feet.

"More and more," Lozano said, meaning air traffic. "And so low! Everything is shaking." In their kitchen, Lozano and her 80-year-old sister, with whom she lives, sometimes cannot hear the television or the phone.

Laredo, with help from the federal government, recently began a $6 million noise-abatement program near the airport. Eligible residents can sell their homes to the city, or let the city install "acoustical treatments" or accept a fee for the "air rights" over their houses. So far 20 home owners have told the city they want to sell, said Cynthia Collazo, who manages the program. She said the $6 million is not nearly sufficient to satisfy everyone bothered by the jets. Although Sanchez and Lozano live five blocks from the airport, they are not close enough to qualify for noise abatement.

Nor are residents near the train tracks eligible for such assistance.

Outside her home on Laredo's west side, close to the rail line, Juanita Garza, 24, sat cradling Tomas, her infant son. "No sleep. . . . His crib shakes like this," she said. The Union Pacific and Texas Mexican railroads haul so many boxcars into the bottleneck that rail delays have resulted as far north as Oklahoma. Garza said she has been kept awake throughout the night by idling train engines.

"I got a call at 4 o'clock in the morning from one lady," said Flores, 53, a native Laredoan who remembers a poorer but quieter city. "She called me at home and held the phone up and said, 'Mayor, I want you to hear this!' . . . They leave the trains on and the whole neighborhood vibrates."

But like others here, Flores predicts Laredo will survive its growth and flourish.

Highways are being widened and construction has begun on a third road bridge across the Rio Grande, to reduce the near-constant traffic jams. Major renovations are underway in Laredo's aged school buildings. And in surrounding Webb County, which had 26 schools before absorbing much of the area's recent population growth, 10 new schools are slated to open in the next few years.

Just as important, officials said, the border region, led by Laredo, has developed a political cohesion in the years since NAFTA. It used to be that communities on the Rio Grande poor, isolated and largely forgotten battled in the legislature for slices of the state budget, and often had to be satisfied with table scraps. But not anymore.

As the Texas Border Infrastructure Coalition, more than a dozen border cities are lobbying as one in Austin this spring, seeking $900 million for roads, bridges and job training. The biggest share would go to Laredo, the fastest growing city in the state. Gov. George W. Bush (R) and Lt. Gov. Rick Perry (R) have pledged to make funding for the area a priority.

"They can't ignore us," said Flores, a former bank executive. As she said in a recent report about Laredo in the NAFTA era, it is a place "where government [trade] policy is turned into stark reality."