Riding an enormous surge in trade between the United States and Mexico, U.S.?-jdbanking is booming on the border.

Veteran bankers in such towns as El Paso and Laredo, and those slightly further from Mexico in Dallas, decline to disclose specific figures. But they talk of 25%, 35%, and 100% increases in foreign exchange, cash management, corporate lending, and even retail business. And judging by their forecasts, that business is only just getting started. "There has been an explosive growth in trade with Mexico," said Felix S Fernandez, executive vice president and head of corporate international banking at Norwest/Wells Fargo Bank in El Paso. "This is a very, very strong market."

Signs of the boom are everywhere. Lines of trucks backed up for miles, hundreds of thousands of newly built warehousing facilities, and tens of thousands of U.S. and Mexican residents crossing the border every day are only the most visible signs of the massive increase in trade between the two countries.

According to the U.S. Department of Commerce and estimates from banks, two-way trade between the United States and Mexico has shot up from $75 billion in 1992 to between $200 billion and $220 billion last year.

This year, bankers predict, it will probably climb to $250 billion. But if Mexico succeeds in avoiding economic and financial turmoil during the upcoming presidential elections in July and its debt gets investment-grade ratings, all bets are off. Trade, they predict, could skyrocket to $300 billion in 2001.

Behind the massive increase in business with Mexico was a decision by the two countries 35 years ago to allow U.S. corporations to set up low-cost assembly plants known as maquiladoras in northern Mexico to process U.S. goods and then re-export the finished products to the United States.

Even more important was the 1994 North American Free Trade Agreement, or Nafta, which eliminated most customs tariffs on manufactured goods and services flowing between the two countries.

"Nafta is working, Nafta is increasing trade between the two countries on a monthly basis and this is turn is creating more jobs, more commercial activity, more investments and a whole new business dynamic," says James F. McCabe, senior vice president and country manager for Bank of America Corp. in Mexico City.

The success of Nafta has given an enormous boost to smaller local banks such as Laredo, Tex.-based, $5.2 billion asset International Bank of Commerce and Laredo National Bank, its neighbor across the street. It has also prompted big banking companies such as Chase Manhattan Corp., Bank One Corp., Bank of America Corp., and Wells Fargo & Co. to expand their networks and step up Mexico-related business.

Bank of America, for example has opened up a satellite office in Tijuana to handle cross-border business. Wells' Norwest/Wells Fargo unit has set up a separate border banking unit in El Paso to manage Mexico-related business and opened an office in Brownsville in eastern Texas, completing an unbroken string of offices stretching from the Gulf of Mexico to San Diego.

International Bank of Commerce is also handling business further afield in San Antonio and Houston.

Banks in the U.S. Southwest are ideally positioned to reap the benefits of the growth in cross-border trade, because of their prime location, the bi-cultural character of border-region cities in Southern California, Arizona, New Mexico, and Texas, and the ready availability of Spanish-speaking staff.

"We're located smack in middle of a major trade hub and we've got an absolutely natural combination of factors in our favor," said Gerry Schwebel, executive vice president and head of international operations at International Bank of Commerce.

Also working U.S. banks' favor is the weakened condition of Mexican banks after a disastrous financial crisis in 1995 that saddled them with tens of billions of dollars in nonperforming loans and severe capital shortages.

And though nearly all U.S. banks prefer to stay on this side of the border until Mexico clarifies its banking regulations, some, like Norwest/Wells, are already contemplating setting up offices in northern Mexico as their U.S. corporate customers move deeper into Mexico to attract cheap workers. Others, like FleetBoston Corp., have launched ambitious plans to radically expand their operations inside Mexico.

"There's a lot more to Mexico than just low wages," Mr. Fernandez said. "You're dealing with an increasingly well trained and sophisticated work force, and companies looking for low-end wages now have to go pretty far into Mexico."

Last year alone more than $10 billion in direct foreign investment flowed into Mexico. A couple of years ago, that would have largely gone into plants and equipment just south of the Rio Grande. Today an ever-growing amount of investment is flowing to cities such as Mexicali and Piedras de la Negras, hundreds of miles further south. Within a few years, bankers say, even more is going to start getting invested in places well into southern Mexico such as the port city of Veracruz and new industrial development zones in the Yucatan peninsula.

"First you had the General Motors and the Fords and the Phillips of this world moving into Mexico," said Alfonso Martinez-Fonts, chairman of the El Paso banking region at Chase Texas and manager for relationships with the maquiladora, or subcontracting, industry. "Now you've got the guys who make the wire and connectors for them moving in as well. "

Without Mexico, he adds, the "automotive industry in the United States would not be able to operate today."

Most U.S. banks along the border focus on commercial banking.

Chase Texas, for example, has opted to stick to the corporate sector. International Bank of Commerce helps finance trade, shipping, warehousing, and real estate finance, and gets added earnings from foreign exchange and cash management. But the rapid rise in banking-related business with Mexico is hardly limited to the corporate sector.

Wells/Norwest runs a number of business lines related to trade with Mexico, including retail and private banking services to middle-market and large corporate customers, maquiladora-related financing, correspondent banking, and trade finance.

But as a growing number of Mexican companies invest in U.S. distribution, banks are stepping up business with those companies as well.

As millions of Mexicans migrate to the United States to fill rapidly growing labor shortages, and tens of thousands of workers cross the border daily in both directions, banks are stepping in to meet a sharp increase in demand for retail banking accounts, secured credit cards, and cash remittances.

And as the U.S. and Mexican economies become every more closely intertwined, bankers believe trade and investment and banking are going to keep surging.

As Mr. Fernandez puts it, "Mexico's success is based on the fact that the outside world is willing to just keep on investing.

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