What Business Can Expect In New Mexico

 

What does New Mexico offer smaller companies, particularly when compared to its Sunbelt neighbors? Here are some conclusions, based on data gathered by IND. for its "Special Report on State Business Climates" (October 1981) and from interviews with state officials, economic specialists, and small business leaders.

Labor. This is clearly New Mexico's strong suit. It has the highest unemployment rate (7.4% last year) in the Southwest, and some of the lowest wages and rates of unionization in the country. On the other hand, the rate of immigration to the state is low -- only about 20% of the projected population increase of 200,000 over the next decade will be people moving from other states -- so companies will have to settle for the skills already available.

Albuquerque has over a third of the state's population and offers its most diverse labor pool, but the influx of major electronics firms means stiff competition for employees. The rest of the state has areas that are "real sleepers for smaller firms that don't mind being a bit isolated, can live without super air service, and can utilize local labor and management," says Saul Grohs, vice-president of Fantus Co., New Jersey-based consultants on plant-site location who evaluated the state for several electronics firms.

Capital Resources. New Mexico has historically been capital-poor. The state has only about a half-dozen venture capital firms, all in Albuquerque, and all but one were started within the last seven years. Banks have typically been closely held and have operated quite conservatively. Total assets of all banks and savings and loans in New Mexico were about $8.7 billion last year. (In Arizona, for example, they were $20 billion.) Of the 14,000 commercial banks in the United States, only 89 are in New Mexico.

But the capital environment is improving, largely because of recent interest in the state by outside businesses and investors. Most of the money that flowed into the state in the past was for mining or real estate deals, but now commercial and industrial ventures are attracting attention.

It's undoubtedly more difficult to get venture financing in New Mexico than in more sophisticated financial centers, but it's not as difficult as New Mexicans think it is, says David Livingston, a former New Mexico banker who now heads an investment firm working in New Mexico, Hawaii, and California. And Edmond E. Pace, also a former banker, now with banking consultants Sheshunoff and Co., says, "My guess is that banks in New Mexico go as far as banks anywhere in making small business loans."

Small Business Commitment. New Mexico's political leaders have traditionally takes a hands-off approach ot business. They have made no exceptions for small business, though only about 40 companies in the entire state have more than 500 employees. The state has only one major economic incentive to new or expanding companies, an in-plant training program, and only two major state programs aimed specifically at small firms, the year-old Small Business Development Center and the University of New Mexico's Technological Innovation Center. In INC.'s ranking of the states by small business commitment criteria, New Mexico was 30th -- a mediocre showing.

Taxes. Taxes in New Mexico have been cut every year since 1972, and last year's cuts were largest for smaller companies, which now pay 4% on net annual earnings up to $1 million. But it still doesn't stack up well against its neighbors, Texas, Arizona, and Colorado, which made the top 10 in the INC. rankings for favorable tax climate. New Mexico ranked only 30th.

Energy Costs. Though New Mexico is rich in energy resources, a company buying electricity there pays more than companies do in may other states. The state's largest utility went to coal-fired power much earlier than most states, and these rates are paying off that investment. New Mexico's Four Corners-area power plants -- one of the largest coal-fired, electricity-producing complexes in the United States -- produced enough electricity in 1980 to sell 60% of it to other states. But the high cost of electricity and a climate with a large number of cooling days made New Mexico 42nd on INC.'s ranking of state energy costs.

Quality Of Life. Though this one is difficult to measure, it's clear that New Mexico, or at least Albuquerque, stands out here. Albuquerque's four-season climate is mild, the University of New Mexico is located there, and the city is only an hour away from Santa Fe's cultural center and two hours from Taos's skiing.