DALLAS – President Trump's broadsides against Mexican immigrants and trade have not triggered rating agency action on border credits, which, in several cases, have seen upgrades.
In a visit to the Department of Homeland Security Wednesday, Trump signed a directive that calls for the construction of "a large physical barrier on the southern border," according to White House press secretary Sean Spicer.
Congress has not approved funding for the project that some experts believe could cost $25 billion or more.
In remarks to the Department of Homeland Security, Trump said his directive calls for the nation to "begin the immediate construction of a border wall – so badly needed." Trump also said he would hire an additional 5,000 border patrol officers and triple the number of Immigration and Customs Enforcement officers.
A second order deals with immigration enforcement and ends the "catch and release" policy that quickly returned border crossers back to Mexico instead of arresting and processing them for deportation.
In Texas, where more than 1,200 miles of border are largely unbarricaded, state officials have made no official comments on the border wall, even though it was Trump's chief campaign promise.
Until this week, ratings analysts had offered no opinion on how the wall might affect border credits. In two new reports, ratings agencies weighed in on the controversial proposals to build the wall and renegotiate the North American Free Trade Agreement.
Trump has complained about jobs and manufacturing moving to Mexico but has not said anything about U.S. manufacturers with plants in Canada.
"President Trump's campaign proposal to renegotiate and potentially withdraw from the North American Free Trade Agreement has created considerable uncertainty for the area's established economic structure," Fitch Ratings analyst Shane Sellstrom noted in a ratings report on the border city of Eagle Pass, Texas.
"The implementation of a more restrictive policy would be a credit negative for the city," Sellstrom added. Despite that cautionary note, Fitch upgraded Eagle Pass' general obligation bond rating to AA from A-plus on Jan. 23.
Three days before the Fitch upgrade, Moody's Investors Service affirmed its Baa1 rating and stable outlook on the Eagle Pass Toll Bridge System's $16.7 million of outstanding debt.
"Changes to major trade agreements with Mexico could pressure revenues down," said Moody's analyst Duston Hodgkins. "However, we do not anticipate significant impact to the system, since commercial transactions account for less than 5% of total transactions."
The toll bridge system faces more risk if immigration trends between the countries are negatively affected by legislation or political opinion, Hodgkins said. "However, despite the recent political environment, traffic has not seen any appreciable impact," he noted. "Overall, we expect there to be minimal short-term impact from the US political climate."
Other border bond issuers that have seen recent upgrades include Cameron County, the southernmost in Texas, which Fitch Ratings raised to AA from AA-minus on Sept. 22.
The Brownsville Navigation District in Cameron County, which serves as a port for both Brownsville and the Mexican sister city of Matamoros, earned an S&P Global Ratings upgrade to AA from A with a stable outlook.
In a report on how well the Texas economy was performing in the oil and gas downturn, S&P praised the role of Brownsville, which analysts said "remains one of the state's most important ports of entry for international trade and commerce. The retail base benefits from the estimated population of more than 500,000 in nearby Matamoros, Mexico."
The Laredo International Toll Bridge System, which manages the largest border point of entry in Texas 124 miles southeast of Eagle Pass, won an S&P upgrade to AA from A-plus in September.
Fitch Ratings upgraded Webb County, whose seat is Laredo, to AA from AA-minus in July with a stable outlook. The rating covers about $30 million of outstanding debt.
"Laredo's international trade activity fuels the local economy, and the area economy revolves around Laredo's role as one of the largest inland border ports of entry in the U.S.," Fitch analyst Leslie Cook wrote. "The population of Laredo's nearby sister-city in Mexico, Nuevo Laredo, is estimated to add 375,000 to the combined metropolitan center totaling roughly three-quarters of a million people."
In December, S&P upgraded Del Rio, Texas, across the river from Mexico's Ciudad Acuna, to AA from A-plus with a stable outlook. In its annual comment on Del Rio on Dec. 23, Moody's made no mention of immigration, trade policy or Trump's plans to build the wall.
The largest city on the Texas-Mexico border, El Paso, retains stable outlooks on its ratings from all three ratings agencies, as does El Paso County.
"El Paso also benefits from cross-border activity, which plays a vital role in the regional economy, given the city's proximity to Juarez (with an estimated population of 1.6 million)," S&P wrote. "El Paso represents the second-busiest U.S.-Mexico port for bilateral trade."
While employment in some parts of Texas was contracting in 2016, hiring in El Paso grew at a 2.7% rate, far ahead of the state rate of 1.7% and the U.S. rate of 1.5%, S&P said.
In a meeting on border business in Washington on Jan. 23, U.S. Rep. Beto O'Rourke, D-El Paso, said he was "very open to improving NAFTA, but we have to be very careful.
"U.S.-Mexico trade supports 6 million jobs in every state in the United States, 500,000 jobs in the state of Texas alone, and one out of every four jobs in the community I have the honor to represent," O'Rourke said.
Santa Cruz County, Arizona, which includes the border town of Nogales, received an S&P upgrade to AA from A-plus in February based on "strong per capita retail sales, reflecting its status as a hub of international trade and commerce. Nogales, rated AA retains a stable outlook from S&P.
"An estimated 80,000 Mexican citizens cross the border daily during the peak season, mostly from Nogales, Sonora, causing the city's daytime population to swell to five times the full-time population," S&P said. "The recently expanded Port of Entry channels more than 4 billion pounds of fresh produce annually, accounting for about a third of the U.S. national winter supply of fruits and vegetables."
The Nogales port's expansion, completed in 2014, increased its inspection capacity to accommodate double the commercial truck volume.
In California, San Diego County, which includes the border crossing point of San Ysidro, retains a AAA rating from S&P. The San Ysidro Port of Entry is the busiest in the U.S., with 14 million vehicles and 33 million people entering the United States in 2015. In August, Moody's upgraded the San Ysidro School District's general obligation rating to A1 from A2.
Mexican Foreign Minister Luis Videgaray and Economy Minister Ildefonso Guajardo will hold talks with top Trump officials in Washington on Wednesday and Thursday, where NAFTA and the wall will be discussed.
Trump said that U.S. taxpayers would pay to get the wall built but would be reimbursed by Mexico.
In another action that could affect the bond market, Trump announced plans to expand detention facilities for undocumented aliens. The detention facilities, largely bond financed by public facilities corporations, faced downgrades when the Obama Administration began looking for ways to end use of the private lockups. Since Trump's election, outlooks on the bonds have returned to stable.
