Border Businesses Face Different Challenges Depending on Geography

VIDEO: Gregory Kory of Nogales, Ariz. describes the trials of owning a business on the southern U.S. border during a time of heightened security and negative perceptions.

By Katie Mykleseth
Cronkite Borderlands Initiative

NOGALES, Ariz. — Gregory Kory points to an old black-and-white photograph of his beaming father standing inside the family store, La Cinderella, located a few blocks from the U.S.-Mexico border.

His father actually left him two stores — Kory’s and La Cinderella — but Kory fears he won't be able to pass them on to a third generation.

“Recently, things have not been what they normally were but we’re surviving and that is more or less where we’re at right now,” he said.

Approximately 2,300 miles away in Lewiston, N.Y., Sunny Matthews sits in the kitchen of her bed and breakfast, Sunny’s Roost, located less than three miles from the Lewiston-Queenston Bridge that crosses into Canada.

It’s off-season and today only one of the three rooms she rents out is occupied. But Matthews is seeing success in her small-town business, so much so that she’s given up the part-time job she once worked to make ends meet.

“Every year it has grown, every single year. I have not had a year where I backtracked,” Matthews said.

While Matthews’ business is growing, Kory is having to cutback.

“Just about four or five years ago, I had as many as 60 employees. Right now, I have 32,” Kory said. “I’m sorry about it. A lot of my employees have been with me 15 to 20 years.”

These two small business owners living 2,000 miles apart depend on the revenue generated by tourists from their neighbors across the border. Visitors from Mexico spent more than $9 billion in the U.S. in 2011. That same year Canadian tourists brought over more than $16 billion.

Cities and regions closest to the borders are particularly dependent on spending from Canada and Mexico. In 2008, visitors from Mexico spent around $3 billion in Arizona. That same year tourists from Canada who spent at least one night in New York brought in $900 million to the state.

But business owners and economic development officials report that Mexican visitors are not as enthusiastically recruited as Canadians.

“By securing the border, they kind of interpret that as hassle the Mexican crossing into the United States," store owner Gregory Kory said. "If you were a customer and had to wait 45 minutes to come into the United States on a regular basis, would you do it? I don’t think so."

On the northern border, Dottie Gallagher Cohen, former president of Visit Buffalo Niagara and now head of the Buffalo Niagara Partnership, said the office focuses heavily on reaching out to potential tourists from the north.

“For us, it is the most significant, profitable and viable market from a tourism point of view so we are working really, really hard to cater to Canadians,” said Gallagher Cohen.

One of the steps Visit Buffalo Niagara launched in 2012 was the “Buffalo Loves Canada” campaign.  The campaign logo — a buffalo silhouette and a maple leaf with a heart between the two — is meant to show Canadians they are appreciated by Buffalo.

Peter Burakowski, communications manager for Visit Buffalo Niagara, said the campaign is “an effort on our behalf to show Canadians they are welcome here in our community and we value their visit.”

Visit Buffalo Niagara’s southern border counterparts are not focusing as aggressively on attracting tourism from Mexico but are trying to increase tourism in general.

“We’ve always had representation in Mexico. We have public relations and trade contracts in Mexico,” said Sherry Henry, director of the Arizona Office of Tourism. “There is a new entity called Brand USA, and they are only doing international marketing and we are now in a co-op program with them focusing on Canada and Mexico.”

Arizona’s statewide tourism efforts are bolstered by marketing done by local cities.  But even there, Henry noted, the larger focus is not neighboring Mexico and its growing middle class, but tourists from Canada.

“We also have the advantage that our partners, the Scottsdale Convention and Visitors Bureau, Phoenix, Tucson, Flagstaff are also focused on these two markets, in particular the Canadian market,” said Henry.

Gregory Kory shows off an old family photo as he tells the story of how the Kory's became business owners in Nogales, Ariz. Photo by Perla Farias.

According to Arizona Office of Tourism, 703,800 Canadians visited Arizona for an average 17.9 days in 2011. An average visitor from Canada spent $1,125 or about $63 a day.

On the northern border, Canadian shoppers are streaming across the border said Visit Buffalo Niagara’s Burakowski. She said an advantageous currency exchange rate, low taxes, better selection and low prices fuel Canadian desire to shop in the U.S.

Shopping is also the major driver for Mexicans visiting Arizona. A tourism department survey indicated that 57 percent of Mexican visitors listed shopping as their primary goal. Mexican tourists spent an average of $201 per visit to Arizona in 2008, according to the state tourism office, and they accounted for 70 percent of Arizona’s overnight international visitors.

But Arizona’s tourism promotion efforts have been hampered by Mexicans feeling unwelcome after Arizona’s passage in 2010 of the law known as SB 1070, which aimed to crack down on unauthorized immigrants. Meanwhile, Americans worry that the drug wars in Mexico are making the borderlands too dangerous to visit.

“One of our biggest concerns in the past three or four years is SB1070 and all of those other laws they are trying to pass creating obstacles here at the border," said Nogales Mayor Arturo R. Garino. "And I sometimes don’t understand why they do this because trade is not only with Nogales but with the whole state of Arizona.”

Laura Franco French, director of community relations for the Arizona Office of Tourism, said her office was contacted by key business leaders in Nogales for help in reinvigorating cross-border commerce in the city.

“They invited us to come and do a brainstorming session and hear all of their concerns about border wait times and about the perception that was being perpetuated in the media that it was a dangerous place," Franco French said. "We decided we really wanted to do a focused program with them and that is what we’re in the middle of right now.”

Nogales is particularly dependent on shoppers from Mexico. In 2007-2008, Mexican visitors spent $491 million dollars in Nogales, according to a University of Arizona study. The same study found that spending by Mexican visitors represented almost 50 percent of the total taxable sales in Santa Cruz County, where Nogales, Ariz., is a twin city to Nogales, Sonora in Mexico.

“Our city lives by city sales tax, not property tax. So we depend highly on the tourism from Mexico,” said Mayor Garino.

Nogales, which has a population of about 21,000, is the largest city and the Santa Cruz County seat, but is only about one-twelfth the size of its cross-border twin in Mexico.

Garino notes that many of the Mexican tourists who cross into the U.S. at Nogales travel further north to Tucson or Phoenix to shop as well. In addition, Nogales is a key point for Mexico-U.S. trade; nearly half of the fresh vegetables and fruit consumed in the U.S. during winter months is imported through Nogales.

Nogales merchants like Kory, whose stores are just a stone’s throw from the Morley Avenue port of entry, say they are seeing diminished business because of long border-crossing wait times and lingering impacts from the series of immigration laws passed in Arizona.

“Traditionally 80 percent of our customers came from Mexico. I think that percentage has changed considerably in the last three years,” Kory said. “I would say that 60 percent or maybe even a little less come from Mexico now. My gross sales also diminished because if the 80 percent were still coming my gross sales would be what they were before and they’re not.”

While northern states like New York have been more welcoming to border crossers, wait times rankle merchants in the north too.

Increased security measures since 9/11 has prompted Canadian visitors to plan their stays around the time it takes to cross the border.

“Wait times are terrible now,” Sunny Matthews said. “I have had guests who have deliberately not bothered to have breakfast until 10 or 11 in the morning because the border waits in the morning are so terrible.”

Mayor Paul A. Dyster of Niagara Falls, N.Y., agreed that border wait times are a constant issue for Canadian shoppers.

“We have a large number of cross border shoppers coming from Canada, but they often times have to wait in long lines for border inspections, especially going back into Canada after they’ve been shopping and they have items to declare," Dyster said. "Even the Canadian government has recognized this as an issue and has raised the amount of goods that can be brought into the country duty free, presumably, to speed up the process at the border.”

Shops in Lewiston recognize the lure the lower fees have on Canadian tourists. Matthews said many of her neighbors run sales directed toward the Canadian consumer, “On Canadian holidays they all come over here … and our stores will run sales for Canadian holidays.”

Still, Gallagher Cohen said that Visit Buffalo Niagara must remind New Yorkers of the value of Canadian shoppers.

“One of the things we’ve been really working on is sort of softening up the Buffalo market to be as friendly as they can be to Canadians because for some people ‘they’re in our way,’ right?" Gallagher Cohen said. "And we’re saying ‘no, no, no,’ they’re not in our way. They’re really contributing to our economy and here is what giving up that parking spot means for you.”

The Canadian influx can be seen at the Fashion Outlets complex in Niagara Falls, N.Y. Underneath the American and Canadian flags, Canadian license plates fill the parking lots.

“The one thing I will say, is sort of a blessing and a curse here is that we do benefit from a lot of Canadian visitation," Gallager Cohen said. "Our malls for example are extremely crowded on the weekends, and you will drive around our parking lots and it’s like Christmas every weekend of the year here."

Mayor Garino said the shoppers from Mexico fill Arizona malls, but that positive economic benefit is often overshadowed by media reports focused on immigration and drug smuggling.

“You go to any mall in Tucson, you go to the main malls in Phoenix, look at the plates of the vehicles," Garino said. "They’re from Sinaloa and they’re from Sonora. That should tell you right away who is buying and who is really generating a lot of the funding in the retail business,”

Garino said he is frustrated with the lack of understanding Arizona politicians have of the business opportunities Mexican visitors present to the southern border region

“C’mon, it doesn’t take a rocket scientist to figure out the trade and the amount of business we can do with Mexico,” Garino said.

Erik Lee, associate director of the North American Center for Transborder Studies at Arizona State University, argues the debate over illegal immigration clouds the potential for trade and commerce with Mexico.

“What has happened is that illegal immigration from Mexico has really taken over the discussion in this country with respect to our relationship with Mexico," Lee said. "What we see is a very different picture in Mexico. What we see is a country slowly becoming wealthier over time."

Lee said the American perception of Mexico as a very poor country is wrong. According to Lee, Mexico is actually a "middle income" country that is on track to become the seventh largest economy in the world by 2020.

According to the Arizona Office of Tourism, Mexico’s economy grew 3.9 percent in 2011 and 4 percent in 2012. Mexico ranked 12th in the world for all goods and services produced in the country just behind Italy and two spots ahead of Canada, according to the CIA's World Factbook.

It’s that growing wealth that Kory and other merchants along Nogales’ Morley Avenue are hoping will soon translate to increased sales.

“Mexico is not down. They are building themselves up, they are creating a middle class. Their infrastructures are being improved all of the time,” Kory said.

But for now, despite the growing economy in Mexico, Morley Avenue USA is struggling.

“There never used to be property available for purchase on Morley Avenue, it was a thing unheard of," Kory said. "In the last year there are three or four properties for sale on Morley Avenue and they’re not being sold."

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