Economic Integration between Baja California and Southern California in 2012. Dr. Alejandro Diaz-Bautista Professor of International Economics, Colef. Distinguished Researcher at the National Council of Science and Technology. adiazbau@gmail.com

1. “Economic Integration between Baja California
and Southern California in 2012”
Dr. Alejandro Díaz-Bautista
Professor of International Economics,
Colef
Distinguished Researcher at the
National Council of Science and
Technology
adiazbau@gmail.com
http://www.linkedin.com/pub/alejandro-diaz-bautista/6/6
Presentation at the Mexico Business Center,San Diego Regional Chamber of
Commerce. 402 West Broadway, Suite 1000, San Diego, California. March 16, 2012.

2. Economic Integration in North America
 The U.S. and Mexican economies have integrated
since the passage of the North American Free
Trade Agreement (NAFTA) in 1994.
 In 2009, the U.S. provided up to 80% of all
inputs for Mexico’s maquiladora manufacturing
and assembly firms, and nearly 90% of all
exports from Mexico’s maquiladora industry went
to the U.S., with an estimated $114 billion in
bilateral U.S. and Mexico trade.
 By 2010, the United States was Mexico’s largest
trading partner and largest foreign investor.

3. California and Mexico Economic Integration
 Trade links and economic integration between
Mexico and California are deep in terms of the
total value of traded goods. Mexico continues to
be California's number one export market.
California exports to Mexico were close to $21
billion in 2010.
 More than three-quarters of all California origin
exports are shipped to Mexico’s northern border
states.
 Baja California residents contribute billions of
dollars annually to the California economy.

4. Baja California and California Economic Integration
 Economic Integration can also be seen at the regional level.
 During 2010, the official data shows that the number of
northbound crossers from Baja California to California
reached 61,105,484 people, the majority of whom, crossed
in personal vehicles. Baja California residents constitute an
important component in the economy of communities and
counties on the U.S. side of the border, like San Diego
County.
 These visitors from Baja California enter the U.S. regularly
for shopping, tourism, work, and socialization with family
and friends. It’s a well known fact that cross border visitors
from Mexico have a significant economic impact on U.S.
communities and counties.

5. The Border Economic Zone (BEZ) in Baja California
 A major challenge for the commercial
sector of Baja California is without a
doubt, the increase consumer spending of
Baja California residents into the U.S.
market, which has been estimated at
around 6 billion dollars a year.
 With the implementation of the BEZ in
2012, Baja California wants to recover
part of the consumer spending by Baja
residents in California.
 The BEZ is intended to promote the
consumption of regionally made goods in
the Baja California region. The economic
impact of the implementation of the BEZ
could be as high as an 8% reduction of
spending by Baja California residents in
California.

6. The Border Economic Zone (BEZ)
 A considerable amount of money is spent on
a multitude of retail items including
groceries, clothing, appliances, tourism and
services.
 As a measure to increase consumer spending
in the state of Baja California, the
government and business sectors of Baja
California in conjunction with the State
Government and the Federal Government
proposed the new Border Economic Zone
(BEZ) in 2012.

7. “El Buen Fin” Program in Mexico
 The idea of “El Buen Fin” program in Mexico was
created as a private initiative to enforce the economic
activity in Mexico during November of 2011. The
initiative was presented through a program created by
the federal government and some of the most
important media networks of Mexico.
 The program is similar, in some way, to the famous
“Black Friday” of the United States, while this day
represents the day with highest consumer spending,
and when the commercial sector shows their best
offers and the biggest discounts throughout the year.
 The economic impact of the implementation of the “El
Buen Fin Program” was estimated as high as a 2%
reduction of spending by Baja California residents in
California during 2011.

8. Economic Impacts and Expenditures
 Shopping is the primary reason to cross into the U.S. for
Baja California residents. Depending on the study, 42 to
68% of border crossers identify shopping as the primary
reason for the visit into Southern California. Other reasons
are social in nature, like visiting family and friends, or are
work related.
 During 2010, around 74 percent of crossers entered
California in their private vehicles, since a car allows them
freedom of movement between different shopping locations
in the U.S. as well as enough room to handle the volume of
their purchases.
 The estimated average daily expenditures reported by Baja
California visitors into San Diego County and California in
various studies ranges from US $140 per trip to $300 per
trip. The current estimation uses an average amount of
expenditures per trip of $240 per trip as the base case
scenario.

9. Economic Impacts
 The annual retail sales to Baja California Cross Border
Visitors are estimated considering an annual rate of
economic growth in Baja California of 2.3%, with a base
case spending of $178 per trip, a high case spending of
$300 per trip and a low case spending of $140 per trip.
 The estimation considers that 42% of border crossers
identify shopping as the primary reason for the visit into
Southern California.
 The implementation of el “Buen Fin” program is estimated
to have a reduction of 2% on annual retail sales to Baja
California Cross Border Visitors. While the Border Economic
Zone (BEZ) is expected to reduce annual retail sales by
Baja California CrossBorder visitors by al least 8% during
the first few years of the program.

10. Annual Retail Sales in California by Baja California Border Crossers
(Economic Growth Scenario)
9000000000
8000000000
7000000000
Low Spend. Case
6000000000
High Spend. Case
5000000000
Dollars
Base Spend. Case
4000000000
El Buen Fin Program
3000000000
BEZ
2000000000
1000000000
0
2010 2011 2012 2013 2014
year

11. California Economic Impacts
 The California and Baja California border region remains an
example of social and economic integration in North
America, where cross-border shopping is only one aspect of
that economic reality in the border region.
 Mexican citizens cross frequently into the U.S. to shop,
work, dine, vacation, and visit friends and family. What
they spend on those visits results in a key contribution to
local border economies in California.
 The results reveal annual retail sales by Baja California
Cross Border Visitors in the range of 5.9 to 6.8 billion
dollars along the U.S.-Mexico border, depending on the
complete implementation of the Border Economic Zone
(BEZ) in Baja California and the “El Buen Fin Program”.
 The base case scenario shows that Baja California
consumer and economic drain into the U.S. market is
estimated at around 5.9 billion dollars in 2012 and 6.2
billion dollars in 2014, with the implementation of the
Border Economic Zone (BEZ).

12. San Diego County Economic Impacts
 Each day thousands of people travel between the United
States and Mexico via the San Ysidro, Otay Mesa, and
Tecate border crossings making the San Diego-Baja
California points of entry one of the busiest in the
Americas. The number of northbound crossers from Baja
California to San Diego County during 2010 reached
42,091,703 people, the majority of whom, crossed in
personal vehicles.
 It is estimated that 92% of Mexico-residing border crossers
at the San Diego-Tijuana points of entry come from the
Tijuana Metro Region which consists of the cities of Tijuana,
Rosarito, and Tecate.
 The 2010 census data from Mexico estimates
approximately 475,000 households in the Tijuana Metro
Region. It is estimated that 30 to 55% of households
reported at least one family member with a border crossing
card or visa to enter the United States.

13. San Diego County Cross Border Retail Sales 2010-2014
7000000000
6000000000
Low Spend. Case
5000000000
High Spend. Case
4000000000
Dollars
Base Spend. Case
3000000000
El Buen Fin Program
2000000000
BEZ
1000000000
0
2010 2011 2012 2013 2014
Year

14. San Diego County Economic Impacts
 The results reveal a substantial overall San Diego
County cross border retail sales in the order of 4
billion dollars during 2012 along the Baja California
– San Diego County border.
 Expenditures by cross border residents of Baja
California are estimated at 4.2 billion dollars in San
Diego County during 2014 using the base case
spending scenario and with the implementation of
the BEZ.
 The San Diego-Carlsbad-San Marcos metropolitan
area’s GDP in 2009 was estimated at around
$171.4 billion, ranking 16th in the United States,
according to the federal bureau of Economic
Analysis.
 In San Diego County, the Hispanic population
increased from 27% in 2000 to 32% in 2010, with
the resulting significant contribution to the regional
economy.

16. Conclusions
 From 1995 to 2010, the official estimates indicate
more than 450 million personal vehicle crossings
with 966 million passengers, and more than 260
million pedestrian crossings, from Baja California to
California.
 The Border Economic Zone (BEZ) is expected to
reduce annual retail sales in California by Baja
California Cross Border visitors by at least 8%, or
around 480 million dollars during the first few
years of the program.
 Expenditures by cross border residents of Baja
California in San Diego County represents around
2.4% of the annual gross domestic product in San
Diego County.
 A new economic and competitive binational Mega-
region is evolving. The Baja California – Southern
California Mega Region includes Los Angeles
County, Orange County, Riverside, Imperial and
San Diego Counties on the California side, and
Tijuana, Rosarito, Tecate and the port of Ensenada
on the Baja California side.

17. “Economic Integration between Baja California
and Southern California in 2012”
Dr. Alejandro Díaz-Bautista
Professor of International Economics,
Colef
Distinguished Researcher at the
National Council of Science and
Technology
adiazbau@gmail.com
http://www.linkedin.com/pub/alejandro-diaz-bautista/6/6
Presentation at the Mexico Business Center,San Diego Regional Chamber of
Commerce. 402 West Broadway, Suite 1000, San Diego, California. March 16, 2012.

18. REFERENCES
 Adkisson, R. and L. Zimmerman (2004). “Retail Trade on the U.S.-Mexico Border
during the NAFTA Implementation Era.” Growth and Change, 35: 77-89.
 Bureau of Transportation Statistics (2011). Border Crossing/Entry Data: Various
years. http://www.bts.gov/
 Diaz-Bautista, Alejandro (2012). “Regional Economic Growth and North American
Economic Integration”, Economic and Financial Series Publishing, ISBN
9780615600437.
 El Colegio de la Frontera Norte. (2011). “Estudio de la Implementación de la Zona
Económica Estratégica en Baja California”.
 Gerber, J. (1999). “The effects of the depreciation of the peso on cross-border retail
sales in San Diego and Imperial counties”. San Diego, CA. San Diego Dialogue.
 INEGI (2010). Censo de Población y Vivienda 2010. México. www.inegi.gob.mx/
 San Diego Dialogue (1994). “Who Crosses the Border: A View of the San
Diego/Tijuana Metropolitan Region”. San Diego, CA: University of California, San
Diego.
 San Diego Association of Governments (2005). “Estimating Economic Impacts of
Border Wait Times at the San Diego-Baja California Border Region”.

19. The contribution of Mexico to the
Economy of San Diego
Contribution of the People of Mexican Origin in San
Diego:
 a) Population.
 b) The Economy and Employment.
 c) Consumer Spending.
 d) Services.
 e) Contributions and taxes.
 f) Trade.
 g) Investments.
 h) Remittances.
 i) Tourism.
 j) Retail Sales and integration with Baja
California.
 k) Human Capital.
