Monterrey: De Facto NAFTA Capital
I recently visited Mexico’s leading industrial city to see the benefits brought by nearly 2 decades of free trade with the U.S.
There may not be a North American metro better associated with one policy than Monterrey is with The North American Free Trade Agreement (NAFTA). It has long been the industrial heart of Mexico and has further strengthened in the last 2 decades due to more open trade with the U.S. and Canada. In January, I visited to see what kind of city all this industry creates.
Monterrey had long been a fascination for me because of its interconnectedness with the U.S.—particularly with the urbanized parts of Texas. This has helped it develop a reputation as the most Americanized Mexican city. But its industrialization began well before Bill Clinton signed that 1993 agreement.
The industrial growth started in the mid-1800s when, during the U.S. Civil War, Monterrey replaced the southern U.S. as a major source of cotton for Europe. It continued through the decades due to its geographical location, which gelled nicely with advances in train- and auto-mobility. Monterrey is 200 miles from the Gulf of Mexico; under 100 miles from the U.S.-Mexico border, and is among the only natural paths between the Sierra Madre Oriental mountains that divide northern and central Mexico. It was through that path that 19th- and 20th-century workers produced and sent iron, brass, steel, woolen textiles, beer, and flour for the world to consume.
Nowadays, companies headquartered in Monterrey include Cemex, the 2nd-largest building materials company worldwide; Arca Continental, a $5.4 billion bottling company that distributes soft drinks across the Western Hemisphere; and ALFA, a $15.8 billion company that is among the world’s leading producers for European and American car parts. These industries impact all of Nuevo León, the Mexican state of which Monterrey is the capital. According to Global Business Magazine, the state has 4% of Mexico’s population but accounts for 8% of its GDP, while attracting more foreign direct investment than any other Mexican state.
This industrial apparatus has gone into overdrive following NAFTA. Since the trade deal, U.S.-Mexico trade volume increased by 255% in real terms, while Canada-Mexico trade volume increased by 433%. The coining of Monterrey specifically as a “NAFTA capital” came from the Wall Street Journal in 2017.
Although many trade routes emerge from Monterrey, a popular one goes from the metro to the highly urbanized Texas Triangle. Goods are freighted from Monterrey’s large factories north along Mexican Federal Highway 85. They cross the U.S. border at Laredo, TX, which is America’s #1 port by trade value for land, sea, or air. From there, goods further move along I-35 into the Triangle metros of San Antonio, Austin, Dallas, and Houston, all of which have robust manufacturing sectors (Texas has the 2nd-largest manufacturing output of the 50 states). Monterrey has a strong cultural connection with these metros, particularly San Antonio, where many wealthy locals buy 2nd homes.
I wanted to see what all that industry looks like at ground level. It became evident during my 15-mile cab ride from the airport to my downtown hotel—large factories and warehouses lined the highway much of the way. When I walked in the following days through neighborhoods, I found small factories popped up at random next to residential areas, with freight tracks often cutting through.
Moreover, as is common in other Mexican cities, small blue-collar enterprises—such as auto repair and tool-making—were sometimes run from homes.
Many of the bigger factories are in neighboring municipalities, says Manuel Garcia Gozon, a real estate consultant at the local firm Fortier.
That is not to say most of Monterrey is some industrial hellscape. The business elites have nice residential municipalities in which to locate, such as San Pedro Garza Garcia (SPGG), a 122,000-person neighboring city that is the wealthiest in Mexico.
During a driving tour of SPGG, Gozon showed me the ins-and-outs: large Spanish-style mansions, cutting-edge skyscrapers, and grand civic works like the Puente de la Unidad bridge. SPGG’s development runs up the mountainside, creating gorgeous views of the city.
Some parts of the city center are nice too, such as the Jardin neighborhood, which contains Torres Obispado, the tallest building in Latin America.
But other parts of the city center, explains Gozon, are generally stigmatized by the local upper class and are suffering from visible decline.
Perhaps the most notable thing about metro Monterrey, though, is how much certain parts feel like America—which cannot be said of other Mexican cities. There are strip malls with big-box retail stores housing U.S. staples like Home Depot, HEB, 7-eleven, and Tim Horton’s.
Seeing these areas fed my intuition that Monterrey is somewhat like a “Mexican Houston.” It is an Americanized, sprawling metro that is growing quickly, experiencing an 18.5% population growth rate since 2010 (faster than 44 of the 50 largest U.S. metros, and far faster than Mexico at large).
Its economy did not grow through government, or even through modern white-collar glamour professions like tech, but on old-school blue-collar sectors: oil, manufacturing, transportation, and logistics. This has produced a wealthy metro—the one with Mexico’s highest per-capita income—and while much of it remains working-class, it has a visible “new rich” who live in satellite cities like SPGG that embody textbook cases of corporate neoliberalism.
Monterrey is thus a testament to the benefits of free trade—particularly trade with two of the world’s leading economies. But just as the world is not zero-sum, there is no apparent loser from Monterrey’s growth. Consumers worldwide get more competitive prices for steel, oil, auto parts, food products, and much more as a result of having this Mexican industrial powerhouse involved.
Scott Beyer is the owner of Market Urbanism Report, a media company that advances free-market urban policy reform. He also writes columns for Catalyst, Governing Magazine, and HousingOnline.com. Follow him on Twitter: @marketurbanist