Stakeholders Find UTEP Regional Economic Forecast Valuable
Last Updated on February 04, 2017 at 12:00 AM
Originally published February 04, 2017
By Daniel Perez
The political upheaval in Washington, D.C., has added layers of interest to the latest economic forecast prepared by The University of Texas at El Paso’s Border Region Modeling Project (BRMP).
The Borderplex Economic Outlook to 2018 showed that the immediate economic prospects remained favorable for El Paso, Texas; Las Cruces, New Mexico; Juárez, Mexico; and Chihuahua City, Mexico. However, Tom Fullerton, Ph.D., professor of economics and the report’s lead author, said this forecast could change depending on the actions of Donald Trump, who was inaugurated as the nation’s 45th president on Jan. 20.
Fullerton spoke about the report and the X-factors that could affect its accuracy during the 12th Border Economic Forum on Jan. 10 in UTEP’s Blumberg Auditorium. The event typically attracts area leaders in the fields of finance, construction, real estate, retail property management, hospitality and manufacturing, along with representatives from public utilities and government.
The UTEP professor said that stakeholders often accuse his forecast, which he has prepared for nearly 20 years, of being overly pessimistic. One stakeholder called the latest report, released in December 2016, overly optimistic.
“We don’t try to be optimistic or pessimistic,” Fullerton said with a touch of humor. “We try to be accurate. We’ll have to see if we’re accurate or not.”
One thing stakeholders agree on, according to Fullerton, is concern about the future of the North American Free Trade Agreement, which was approved in 1992 and implemented two years later. The goal was to reduce trade barriers and stimulate commercial and industrial ties between the United States, Mexico and Canada.
He said revoking NAFTA could lead to slower U.S. job growth, higher unemployment, depressed wage scales, and higher inflation. In Mexico, he predicted a recession. Among the hardest hit fields would be international banking, customs brokerage, transportation, warehousing and international commercial services.
“Hopefully cooler heads will prevail,” Fullerton said. “I’m crossing my fingers because (revoking NAFTA) would have a chilling effect on the regional economy.”
The report goes on to predict that the El Paso and Las Cruces economies will be supported by slightly stronger private sector numbers in the fields of health care, finance, real estate, and business and technology services, which will help offset the impacts of public sector budget cuts currently being debated at the state level.
“Both cities should experience improving economic conditions as long as a national recession is avoided in the United States,” said Fullerton, who predicted expansion of personal income in El Paso to greater than $30 billion with retail sales of about $12.5 billion. In Las Cruces, total personal income is projected to exceed $7.5 billion.
Although direct foreign investment flows into Juárez and Chihuahua City have slowed due the anti-NAFTA political rhetoric of recent months, BRMP economist Adam Walke noted that growth in the United States, plus a weaker peso, should translate into at least some economic growth south of the border. Members of the audience agreed.
Among the Jan. 10 forum attendees were UTEP graduates Aimee Olivas and Juan Cardenas, both of whom utilize the UTEP report to do their jobs.
Olivas is a business retention and expansion specialist for the City of El Paso’s Economic Development Department. She helps small businesses and large companies that may want to address workforce and training issues. Her focus at the forum was employment, personal income, and retail sales forecasts.
The city employee, who earned her bachelor’s degree in political science in 2014 and her MBA two years later, said she became familiar with the BRMP reports while an intern with The Borderplex Alliance, a nonprofit that helps businesses interested in relocating or expanding their operation in the El Paso region.
“It’s very helpful,” Olivas said. “I appreciate the regional overview because it is important for us to know about the changes to our economy.”
Cardenas, a financial analyst at United Bank of El Paso del Norte, earned a bachelor’s degree in economics and finance in 2010, and his master’s degree in economics in 2015. He recalled assisting with several BRMP reports as a graduate student.
“They require a lot of work,” he said. “As a student, the (BRMP) experience was valuable. I learned how to gather data, build econometric models, and how to prepare forecasts. Now I do that on a day-to-day basis.”
He recently used the report to prepare a market analysis the bank uses to assist its clients in such fields as health care and construction. The analysis highlights areas with the highest growth potential in two-year increments and is updated twice annually.
This BRMP report was prepared by Fullerton, Walke and research assistants/economics graduate students Omar Solis and Ernesto Duarte.
Fullerton called the report a unique service the University offers the region’s stakeholders that allows them to plan ahead.
“This is the only fully documented, large-scale, cross-border econometric model in the world,” Fullerton said. “That sets UTEP apart.”