San Antonio

The gateway for 60 percent of US exports to Mexico, this cultural and commercial crossroads has the potential to become the `NAFTA capital'

ON his first state visit to the United States in October 1989, Mexican President Carlos Salinas de Gortari confronted Washington with a bold proposal - a trade agreement between his country and the US similar to the one Canada and the US were implementing at the time.

Even though President Bush had promised during his presidential campaign to seek such an agreement, President Salinas's idea was politely dismissed as unlikely given the colossal disparity in the countries' economies. ``Any free-trade agreement between the two countries is a long way off, if ever,'' a Bush administration trade official remarked at the time.

Wrong. Three Octobers later, the presidents and Canadian Prime Minister Brian Mulroney met to watch negotiators initial the North American Free Trade Agreement (NAFTA).

It was no coincidence that the ceremony took place in San Antonio - for five centuries a cultural/commercial crossroads for Anglos, Hispanics, and others. Its string of Spanish missions and shady Paseo del Rio (River Walk) imbue the city with Old World charm. Bilingualism comes naturally to San Antonio, since more than half of its nearly 1 million citizens are of Hispanic heritage.

Until World War II, it was the state's largest city, anchoring one end of a trade corridor with Monterrey, the large industrial city in northern Mexico. ``All roads feed into San Antonio'' from various border cities, says Alfonso Martinez-Fonts, San Antonio branch president of Texas Commerce Bank. San Antonio is a conduit for 60 percent of American exports to Mexico. The city's goal is to add value to the traffic, Mr. Martinez-Fonts says.

One firm doing that is MSAS Cargo. Working for the American Telephone & Telegraph Corporation, it receives from all over the world telephone equipment needing reconditioning. It matches equipment with repair kits from US manufacturers, packages them, and ships them to 11 maquilas (Mexican factories) for reconditioning. Then it takes back the equipment for resale.

Loop Cold Storage Company is another example. It used to store locally grown vegetables for consumption in San Antonio, says company president Jack McGuire. But it added processing and repackaging to its activities and now doesn't compete in the San Antonio market at all.

Instead, it receives frozen vegetables from around the world - peas from Poland, pineapple from Costa Rica - and distributes them to grocery chains in the US. To take advantage of NAFTA, Mr. McGuire has formed a joint venture with a cold-storage firm in Mexico City. It will offer sophisticated logistics for US food companies, eliminating the duplication and hassle of international trade.

San Antonio ``was doing things with Mexico before NAFTA was a gleam in anybody's eye,'' says Southwestern Bell Corporation spokesman Steve Drake. The firm, which has bought a stake in Telephonos Mexicanos, relocated corporate headquarters here from St. Louis last year.

Southwestern Bell was drawn by the city's location on the doorstep of Mexico. Also, Mr. Drake says, firm employees named San Antonio as their most-requested place in which to live.

That relocation, an economic-development coup, confirms the city's potential to become the ``NAFTA capital.'' To that end, the city lobbied hard for NAFTA - first to win fast-track status for the treaty, then to get it passed. ``Anybody in this town that had a travel allowance went to Washington to talk to Congress,'' recalls John McCray, an associate strategic-management professor at the University of Texas at San Antonio.

Meanwhile, San Antonio has become the first major US city to open a trade office in Mexico; by comparison, 10 Mexican trade or government offices and 30 businesses have opened here.

For his part, Martinez-Fonts says his bank is eager to operate in Mexico. And San Antonio Mayor Nelson Wolff has made it a priority to secure the North American Development Bank, which will be associated with the NAFTA Secretariat when it is set up next year to finance infrastructure improvements along the border.

Even so, US businesses lagged behind Mexican ones in recognizing the importance of a 370 million-consumer trading bloc. San Antonio builder Mike Novak visited Mexico's construction-industry association in 1990. Asking the association's position on free trade, he was impressed when presented a bound volume on the topic.

``Where's our book? Where's our position?'' Mr. Novak wondered. ``We're supposed to be the sophisticated ones on the US side, and our industry hasn't done beans.''

Mr. McCray notes that a Mexican businessman has opened a plant in San Antonio that will pack US pork for export to Mexico. But he wonders whether US businessmen have even read the treaty to see what opportunities it creates.

Brian Weiner, president of Periodical Management, admits: ``If there are [new opportunities], I haven't really studied it to see that.'' His firm has distributed books and magazines for decades in Mexico because they never faced a tariff barrier.

But Mr. Weiner is happy about NAFTA because it will help economic growth and indirectly benefit his business. ``If your [gross domestic product] is flat, so are your sales,'' he says.

McCray believes NAFTA should have been called ``the North America Competitive Trade Agreement. There's nothing free about it.'' Now that Mexico's tariff on US cars has fallen from 20 percent to only 8 percent, it should be far cheaper for Mexicans to buy cars in the US. ``Things are expensive in Mexico. Labor is cheap, but nothing else is,'' he says.

So is there an opportunity to sell more cars to Mexicans? ``Somebody's got to work that out,'' McCray says. San Antonians are farther ahead than business people in Dallas or Houston on sifting NAFTA for opportunities, but they still aren't doing enough, he claims.

NAFTA ``is not a bird's nest on the ground. It's a moving, rolling, sharp-pencil deal,'' he adds. ``The work starts now.''