Title
Update on Hermosillo, Mexico Trade Development Services Contract
Description
This report provides a status update to the Economic Development and Housing Subcommittee on the progress made with the Hermosillo, Mexico Trade Development Services contract (City Contract 157487). Discover Phoenix and Arizona, LLC will complete the first year of the contract in November 2023, with four one-year renewal options remaining on the contract.
THIS ITEM IS FOR INFORMATION AND DISCUSSION.
Report
Summary
Mexico is Arizona's largest trade partner with over $19 billion in 2022, representing 32.5 percent market share of all international trade activity. Over the past decade, trade activity with Mexico has increased by 50 percent. Phoenix export activity is made up of 14 percent aerospace and defense, 10 percent electronics, six percent mining and three percent medical devices. There has recently been an increase in activity of electronics and growth in the semiconductor ecosystem, electric automotive, rare minerals and chemicals.
In October 2022, City Council authorized a contract with Discover Phoenix and Arizona, LLC to facilitate trade development services between Hermosillo and Phoenix. The contract also includes the following activities:
- Assist Phoenix companies with supply chain sourcing opportunities in Mexico.
- Develop and enhance business to business connections between Mexico-based companies and Phoenix-based companies.
- Foster Phoenix business expansion connections for Mexico-based companies seeking growth opportunities in the U.S.
- Identify prospective Phoenix investments for Mexico-based investors seeking both development investment opportunities and business ventures in the U.S.
Fiscal year 2022-23 saw two outbound delegations to Hermosillo and Monterrey and the City received one inbound delegation from Hermosillo. Highlights of the delegations include the City entering into three Economic Development Collaboration agreements. These delegations do not reflect the number of informal business visits and volume of traffic generated between Mexico and Phoenix, which has happened nearly every week since the contract began. This surge in activity is highlighted by 166 businesses assisted, 10 businesses being incorporated in Arizona as a first step to enter the market and two new companies physically locating in Phoenix.
The relationship between Phoenix and Mexico is very strong and continues to grow with the trend of on-shoring and the U.S. Mexico Canada Free Trade Agreement (USMCA). Growth is anticipated in trade and supply chain activity as the Phoenix mega region becomes a global destination for advanced manufacturing. As the largest city in Arizona, Phoenix is taking the leadership role in growing this international relationship. This is also represented at Phoenix Sky Harbor International Airport by a new direct flight to Monterrey that started in early 2023, with additional flights to Mexico being considered. The City's consultant is providing benefits to existing Phoenix companies by helping them locate alternative sources of supplies during delays and shortages of various materials.
Contract Term
The contract is nearly the end of its first year this coming November and has four one-year renewal options.
Financial Impact
City Council authorized the use of General Funds for the first two years of the contract not to exceed $280,000. Staff will return to City Council for additional funding authorization before exercising any additional option years on the contract.
Concurrence/Previous Council Action
On Oct. 26, 2022, City Council authorized staff to contract with Discover Phoenix and Arizona, LLC.
Department
Responsible Department
This item is submitted by Deputy City Manager John Chan and the Community and Economic Development Department.