AMC Plenary Highlights Investment in Mexican Sea Port Expansion Signaling Opportunity for U.S. Based Sureties

Recently, Patrick F. Welch, an attorney at Jennings Strouss & Salmon, PLC, attended the 2014 Arizona-Mexico Commission (“AMC”) Plenary Session hosted by Arizona Governor Jan Brewer and Sonora Governor Guillermo Padrés in Phoenix, Arizona on June 19-20, 2014. The theme of the Plenary Session was "Arizona & Sonora: Evolution of a Region." The semi-annual event serves as a platform for meaningful international collaboration between the two states, with the ultimate goal of strengthening their bilateral partnership and enhancing the economic growth and quality of life in the Arizona-Sonora region.

The Plenary Session included a number of topics ripe for discussion that demonstrate how the region is evolving and how collaboration between Arizona and Sonora is increasing, including investment in Mexico’s sea ports, reforms to Mexican labor laws, structural reforms to key economic sectors (energy, fiscal, financial, telecom, education, and labor) crucial to driving economic growth in Mexico, and important international finance tools available to U.S. investors through the Ex-Im Bank and the Small Business Administration to promote U.S. exports to Mexico.

One of the highlights of the Plenary Session was the presentation made by the Mexican Office of the Secretaria de Comunicaciones y Transportes (Secretary of Communications and Transport). This presentation focused on the huge amount of public and private investment being made in Mexico’s Pacific and Gulf sea ports, and how such investment will be a catalyst for economic development and expansion not only for the county as a whole, but also for the State of Sonora. Earlier this year, Mexican President Enrique Peña Nieto pledged $58.6 billion pesos (USD $4.55 billion) to expand and modernize Mexico’s ports, and some of those funds will be invested in the Sonoran sea ports located in Guaymas and Puerto Peñasco.

The investment being made in the port of Guaymas – the key industrial port for Sonora, will focus on the construction of a new port to meet demand for mineral exports (copper, gold, silver, and other minerals from Sonora’s vast mining operations). The total investment being made in the port of Guaymas is $8,300 MPD, and will occur in three stages between 2014-2018. The construction of the new port of Guaymas is potentially very attractive to Arizona based businesses. With railway and highway infrastructure connecting Arizona with the port of Guaymas, Arizona based businesses will now have an attractive port alternative to its south that opens up many possibilities for greater collaboration between the public and private sectors in Sonora and Arizona.

The $600 million pesos (USD$45 million) planned investment just to the north of Guaymas in Puerto Peñasco, a key tourist destination for residents of Sonora, Arizona and California because of its beautiful beaches, fishing, and water sports, will be used to construct a new port terminal for cruise ships aimed at increasing tourism to the area. The new port terminal will have capacity for two cruise ships and a state-of-the-art terminal building for passengers to access Puerto Peñasco and surrounding tourist sites. Mr. Welch spoke with a number of AMC members from both Sonora and Arizona who commented that the opening of the Puerto Peñasco port to cruise ship traffic is likely to drive growth in the local real estate market as well – a prime destination for U.S. and Mexican beach goers.

The modernization of these two Mexican ports is likely to drive additional investment in the Arizona-Sonora region, particularly in the areas of construction and tourism. According to Mr. Welch, “For U.S. based sureties issuing surety bonds in Mexico, these major sea port projects and Mexico’s overall commitment to expanding and improving its infrastructure provide a strong indication that Mexico will continue to be a key market for surety companies in the years to come. Moreover, for U.S. based manufacturers looking to expand production operations into Mexico, these new ports will provide closer and more efficient access to global shipping lanes. The bottom line is that the pace and amount of investment being made into Mexican ports is an extremely positive sign for economic development in the State of Sonora, and the Arizona-Sonora region overall.”

Following the Plenary Session, Jennings, Strouss & Salmon hosted a barbeque at Mr. Welch’s home for AMC members and friends. The gathering at Mr. Welch’s home, which featured some Mexican twists on traditional barbeque favorites like: purple and green coleslaw with jalapeño, green onion, and avocado tossed in a lemon cilantro vinaigrette; and mesquite smoked baby-back pork ribs with a ancho chile rub prepared by Mr. Welch and his wife, Maribel, afforded guests an informal opportunity to further discuss opportunities for collaboration between Arizona and Sonora.

Mr. Welch is licensed to practice in the States of Arizona and Nevada, and the Commonwealth of Massachusetts. He focuses his practice in the areas of general and complex commercial litigation, construction litigation, fidelity and surety litigation, and U.S./Mexico cross-border business transactions and litigation, including surety claim investigations. Mr. Welch is fluent in Spanish, and is a member of the Arizona-Mexico Commission.

Governor Padres, Dianira Froeschle, Patrick Welch 

From left to right are: Patrick Welch (standing), Maribel Welch (seated), Rene Moreno (standing), Karli Moreno (standing), Dianira Froeschle (seated), Duane Froeschle (seated).