ATLANTA -- Bond ratings in the Southeast could get a boost from increased trade with Mexico, according to Standard & Poor's Corp.
Although trade volume attributable to the North American Free Trade Agreement is still small, the region "stands to benefit from Nafta, with possible credit implications in the medium to long term," the rating agency said in a report issued last week.
Standard & Poor's said it "does not foresee any downward credit movement in the region as a result of Nafta."
The region's diverse industrial base, competitive advantages, and favorable tax environment will prevent it from losing manufacturers to low-wage Mexican labor, the report said.
"Aggressive investment in infrastructure, primarily improved airports, roadways, and ports, became a priority, much to the region's credit," said Bernhard Fischer, a Standard & Pools associate director, and one of the three authors of the report.
"Large moves to Mexico or the Texas border area didn't materialize as expected," Fischer said. "Strong local ties kept many industries in the region."
Standard & Poor's noted that Nafta's rules-of-origin provisions -- which require that goods imported from Mexico contain more than 50% of U.S. manufactured materials -- were of special benefit to the Southeast, particularly its textile industry.
The report reviewed four Southeastern states -- North and South Carolina, Georgia, and Florida -- that it said especially stand to gain from Nafta.
Infrastructure development, in conjunction with continued economic growth, will allow Florida to handle increased Mexican trade, according to the rating agency.
The report said that transportation facilities in the state have kept pace with a 30% increase in the state's population over the last decade.
Standard & Poor's noted that recent Florida legislation directs $2.1 billion to expanding and repairing state highways. It also cited the Port Authority of Tampa's new container complex and the expanded Orlando International Airport, which are expected to create 300 jobs.
In North Carolina, job losses in the apparel and textile industries were offset by high-technology manufacturers, particularly in the so-called Research Triangle of Wake, Orange, and Durham counties, according to Standard & Poor's. Despite unfavorable forecasts, the apparel industry registered the largest increase in state exports to Mexico between 1991 and 1993, rising from $19.6 million to $121 million.
Rules-of-origin provisions have been particularly beneficial to the state's textile manufacturers, which have increased shipments of fabric to apparel producers in Mexico by 500% between 1991 to 1993, according to the report.
However, Standard & Pools said the growth could lessen if companies fail to increase productivity as provisions and tariffs are lifted over a six-year period. In addition, the apparel industry, one of the region's largest employers, will remain vulnerable to Mexican competition.
Transportation improvements will give Georgia better access to Mexican markets, the report said.
Georgia's transportation network, including Interstate 85, Port of Savannah, and the Hartsfield International Airport, helped facilitate a 17% increase in exports from 1991 levels, to $410.9 million in 1993. In Clayton County, the airport plans to open a new international concourse in September as part of an estimated $537.3 million capital improvement plan.
In South Carolina, exports to Mexico have accounted for 2,500 new jobs, according to Standard & Poor's.
The report also cited the presence of foreign companies, primarily BMW's large automotive assembly plant in Spartansburg, as a possible "spring board" for exports to Mexico.
"In the short run, Nafta has seen some low-wage jobs lost, but according to unemployment claims, many of these people were reabsorbed," said Robert Martin, economist for the South Carolina Board of Economic Advisors. "We're seeing a change in the composition of our labor force more than outright losses."
