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  March 1st, 2013 | Written by

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Texas Maintains Export Dominance

Ruben J. Diaz Sr. incorporated the El Paso Water Industrial Services in January 2000, starting the new millennium with a new company. The family-owned startup benefited from the founder’s years of experience in the industry, offering water filtration and waste-water treatment products and services for hospitals, restaurants and smaller manufacturers in both the United States and Mexico. Like many ventures in Texas, Diaz’s new business started out export-oriented, making the most of his personal, family and business connections on both sides of the border.

“We saw a tremendous need for industrial consumers in Mexico,” Diaz says. “There are some 400 manufacturing facilities in Chihuahua State alone, for example. But without credit we were limited.”

After a decade of small-but-steady organic growth, Diaz approached the Small Business Development Center of the El Paso Community College, a Small Business Administration resource partner. An advisor helped draw up a financial forecast which Diaz submitted along with his loan request to United Bank of El Paso del Norte.

The Small Business Association (SBA) signed off on a loan guarantee, and with that United Bank did the loan. Diaz’s company also received credit via the North American Development Bank and the Community Adjustment and Investment Program (CAIP). The CAIP loan program was designed to stimulate job creation in areas with high trade-related job losses associated with the passage of the North American Free Trade Agreement (NAFTA).

The new funding has helped the company staff up to 33 people and improve cash flow. “It’s a lot easier for a small business to get financing if it has the backing of the Small Business Administration,” Diaz says. “The banks will respond faster and more positively when you approach them with a guarantee. It’s that simple.”

Coal power plant Petroleum and coal products lead the export parade, totaling nearly $62 billion in 2011.
Coal power plant Petroleum and coal products lead the export parade, totaling nearly $62 billion in 2011.

The Small Business Administration points to the company as a model, and named it Small Business Exporter of the Year for El Paso in 2010. “The company has overcome adversity and has maintained their growth due to their innovativeness and their visionary management, strategic planning and customer services,” the SBA states. “Key attributes include their ability to control costs, quality assurance, and their strategy for recruiting, training and retraining qualified employees and diversification of their product lines, services and markets.”

Thanks to the cross-border instincts of more than 30,000 companies like El Paso Water Industrial Services, including many far larger, Texas is firmly entrenched as America’s leading export state. The Long Star State outpaces both California and New York, grossing more than $265 billion in 2012, according to Census data. Alone at the top for 11 consecutive years, Texas dominates the nation’s export activity. The state’s torrid pace exceeded 21 percent in 2011, before cooling to nearly 6 percent last year.

International business champions attribute the state’s export prominence to a combination of felicitous geography, infrastructure construction and maintenance and desirable demographics. “Texas has the best business environment for growth and expansion,” declares Eleanor Eaton, an independent trade consultant based in the Dallas-Forth Worth area. “There is an excellent infrastructure including two major seaports, Houston and Galveston, as well as the recently activated inland port of Dallas. The region has strong historic ties with Mexico continuously supported by an influx of Mexican-born immigration of high education and upward mobility. Texas is home to more than 35 percent of all middle- and upper-class Latin immigrants. And, the tax structure and a low level of bureaucratic involvement prove conducive to startups.”

“Texas’ central geographic location, well-fortified rail, road, air and sea infrastructure and its nation-leading 28 ports of entry have helped make the state a nexus point for regional and global trade,” says Lucy Nashed, a spokeswoman for the office of Gov. Rick Perry. “Our well-developed coastline and ports, inter-coastal waterway and road and rail connectivity with Mexico also boost our export profile. The Port of Houston is the largest U.S. port in terms of tonnage and the Port of Laredo is the largest U.S. inland port.”

Petroleum and coal products lead the export parade, totaling nearly $52 billion in 2012. Chemicals were second at $47 billion, then computer and electronic products at $42 billion. Other major export categories were machinery ($29 billion) and transportation equipment ($25 billion).

Texas’ largest export markets are NAFTA partners Canada and Mexico. These neighbors represented $122.5 billion, nearly 46 percent of total state exports in 2012. Mexico remains Texas’ top export destination, receiving $95 billion in cross-border exports. Canada spent $23 billion on Lone Star products. China, Brazil and Netherlands follow, at $10 billion, $10 billion and $9 billion, respectively.

Tugboat in Galveston A tugboat in Galveston honors its first voyage out of the harbor.
Tugboat in Galveston A tugboat in Galveston honors its first voyage out of the harbor.

Texas exporters look to a broad range of government programs and services for advice, training and connections to potential overseas partners. The state works with the United States Commercial Services, the United States Export-Import Bank and the SBA’s local development centers to help local businesses penetrate global markets, according to Nashed. Access to federal export services is enhanced by space-sharing arrangements; Commercial Services representatives operate from within state offices, promoting such programs as Gold Key, the Export Express loan program and various Ex-Im Bank services.

Gold Key has been the main export path for Polyguard Products, an architectural waterproofing supplier based in Dallas-Forth Worth. “Our exports are niche and specialized,” says Nathan Muncaster, global business development director. “Except for Canada, we were doing near-zero in global markets. We began building overseas sales in earnest in 2005. Gold Key finds out what’s worked for you in the past, learns what your objectives are, and they go to work for you” finding local partners.

Seeking sales in Turkey, Latin America and India, Muncaster met with Gold Key representatives in April 2006. “Over two days they set me up with six or seven Turkish companies and we clicked very well,” he recalls. “Then they did Singapore and produced 26 meetings in three days.” Relationships built from those meetings continue to produce sales.

Today, Muncaster operates out of Turkey, handling inquiries from places such as Brazil, India, Algeria and Estonia. “Maybe 90 percent of our overseas sales are done through Gold Key [connections],” he adds appreciatively. “They really have got it together.”

Texas is a major agricultural producer as well. The Texas Department of Agriculture has also received federal State Trade and Export Promotion (STEP) grants, funding trade missions to targeted overseas markets for agricultural products and companies, according to Nashed of the governor’s office.

Economic development in Texas occurs on the local level first and foremost, she continues. “The state encourages firms to engage local small- and medium-sized businesses into their larger expansion and community goals, particularly in supply-chain activities. Oftentimes, the local chamber, city or Economic Development Council serve as lead sourcing agent for foreign firms looking for suppliers, materials or personnel,”
 notes Nashed, adding Texas consistently ranks as a top choice for multinational companies seeking U.S. footholds.

According to a database developed by The New York Times, Texas awards more economic incentives at various levels to employers and potential employers—over $19 billion a year—than any other state in efforts to attain and maintain their presence. State programs that benefit exporters and non exporters alike include Skills for Small Business, which helps finance tuition and fees for community and technical college courses for small-business employees; the Skills Development Fund, which funds customized job-training programs; and Skills for Veterans, providing training for post-9/11 veterans returning to Texas.

Key programs involving research, training and general export support come from educational resources such as the state university network. At the University of Texas at San Antonio, the nonprofit Institute for Economic Development focuses largely on export-oriented entrepreneurs and business owners along the Mexican border. Companies like GreenStar, a San Antonio-based high-tech startup, approached the institute’s International Trade Center for help selling their LED commercial lighting products into Latin America.

Alberto Rodriguez-Baez Sr., a consultant at the center, provided GreenStar with a list of potential distributors in the company’s target markets, while making suggestions for product promotion and strategic planning. As a result, the company expanded its footprint in Mexico and Brazil, while entering new countries like Columbia, Peru, Chile and Argentina. A second consulting and research project was undertaken, resulting in relationships with new distributors in Panama, Costa Rica, Venezuela and Uruguay.
 “We are looking forward to continue growing our international distributor network and we are excited to have a strategic ally in the International Trade Center, whose services are invaluable for our global expansion plans,” says Gabriel Senior, the company’s chief financial officer.

Last year, the center’s clients reported $210 million in sales in 140 foreign markets which they attributed to consulting, market research and training they received.

“The culture of international business is ingrained in the state’s business ethos,” says Rodriguez-Baez. “Factors like our closeness to some of the busiest international trade ports in the world, easy access to organizations that help companies [export]” and the impact of free trade agreements like those with South Korea and Columbia “will immediately impact the exports landscape for companies in Texas.”