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Wade Rain: Helping Mexican Farmers Conserve Water; Helping U.S. Manufacturers Sell Irrigation Equipment Abroad |
Country: Mexico
Sector: Sales and distribution
Challenge: A small family-owned business selling irrigation equipment sought to insure against the potential risk of expropriation as it expanded into Mexico.
Solution: OPIC political risk insurance supported the business as it opened a subsidiary in Mexico.
Impact: Twelve years after establishing an office in Mexico, Wade Rain de Mexico is generating close to $25 million in annual revenues, about three-quarters of which is American-made manufacturing equipment.
Water depleted in Mexico’s farming region
Wade Rain Inc. of Tualtin, Oregon, near Portland, is a family-owned business that was founded as a manufacturer of irrigation equipment in 1935. Today, it operates as a distributor of equipment that helps farmers water their crops more efficiently. In 2001, the company identified opportunities to sell its equipment in the farming region of central Mexico and opened a subsidiary there. Shortly after opening Wade Rain de Mexico, it purchased OPIC political risk insurance to protect against the risk of expropriation.
Central Mexico offers extensive opportunities for a business selling irrigation equipment. Heavy farming and light rainfall has depleted the region’s water table. In recent years, the Mexican government has taken steps to reduce groundwater withdrawals, including offering subsidies to farmers for installing more efficient irrigation systems.
Wade Rain de Mexico acts as a wholesaler that sells advanced irrigation equipment to local businesses. These businesses in turn sell to farmers who are able to reduce water consumption by as much as 80% over the traditional form of “gravity irrigation,” where troughs running alongside a crop are essentially flooded. The equipment that Wade Rain distributes includes drip tape, in which long lines of crops are watered by means of a flat hose with multiple holes for drip watering; as well as wheel irrigation and pivot irrigation, in which crops are watered with sprinklers built to cover large areas of land.
Strong demand for U.S. irrigation equipment
John Newbegin, General Manager of Wade Rain de Mexico says that about three-quarters of the equipment that the company sells is manufactured in the U.S. and that, by establishing a Mexican subsidiary, it has helped create a market for several U.S. manufacturers that are competing against other foreign entities.
”I was really excited when I learned about OPIC,” said Newbegin, who said that OPIC’s political risk insurance made him more secure in setting up a business in Mexico. “If we had tried to do this as an export operation, we would not t have had the success that we’ve had being in the country with a Mexican business license, and a Mexican warehouse, right there with our customers, invoicing in pesos. It gives us a whole level of advantage.”
Newbegin, who estimates the business will reach revenues of $25 million in the coming year, says that without a Mexican subsidiary, sales of this equipment to Mexico would be closer to $4 million a year. He says the business is also supporting its parent company, “helping us maintain an office of 20 people in a suburb of Portland, Oregon.”
In addition to helping farmers conserve water, the irrigation equipment that Wade Rain distributes in Mexico also helps farmers save time; enabling them to grow more crops. “Irrigation is a really good business right now,” said Newbegin, who said that the equipment can help farmers preserve their crops particularly during periods of drought. He said the company is now exploring the possibility of expanding into parts of Central and South America.
To date, the Wade Rain de Mexico project has created about 50 permanent jobs in Mexico.
This project was profiled in 2012
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