Although news headlines may suggest a somber story for Texas for 2016, Texas continues to drive the economy of the United States—and the world. The Texas markets of Dallas-Fort Worth, Austin and San Antonio, the Rio Grande Valley, and the Houston area, form the heart of the Texas economy and account for the vast majority of the state’s population, jobs and income.
Mario E. Garcia, a CPA and tax partner with Houston-based Calvetti Ferguson, shares his experiences as a longtime member of the region. He is a respected leader in the international community as a tax advisor to Houston-based and international middle-market companies. He has been a driving force for cross-border business throughout his career and continues to grow the international clientele of the firm.
Garcia has served as a member of the board of the local chapter of the U.S.-Mexico Chamber of Commerce and has been a longstanding member of the American Institute of Certified Public Accountants (AICPA).
Alliance Magazine: Mr. Garcia, please tell us about your history in the Houston market and what you have seen over the years with respect to cross-border business.
Mr. Garcia: First of all, thank you for the opportunity to talk about my experiences in the area. I was born in México and have been in Texas all of my adult life. I have served as a tax advisor to Houston businesses since 2001 after attaining a Masters in Taxation from the University of Texas at Austin’s McCombs School of Business. I have more than 15 years of experience working with many great middle-market energy, manufacturing, food distribution, healthcare and international companies.
Year after year, Houston becomes more and more of an international center for business in a wide range of industries. The international business is ripe and growing. In particular, Mexican and multinational businesses continue to show more interest in Houston than other areas of the U.S. Many of them have had local subsidiaries operating, importing and exporting products to México and the rest of the world. Local organizations such as the Greater Houston Partnership help us attract a lot of that business.
AM: How’s 2016 looking for the Houston area?
Mr. Garcia: In spite of what you hear, it’s been a two-way street in terms of business and trade. There are companies that have owners from all over México and most other major foreign markets in addition to the local and U.S.-based multinationals.
On almost a daily basis, I talk to someone looking to do business in the Houston area with a particular interest in the energy value chain from upstream to midstream to downstream operations and related services and products. As such, the demand for cross-border business services and products continues to rebound. I am bullish on Texas and expect the Houston area demand to continue to grow even more as the oil markets turn around later this year.
AM: Certainly, Houston is going through tough times right now because of the poor energy prices. What do you think is the impact these tough times may have in the area?
Mr. Garcia: The big picture is that the tough times are not here to stay. This is not Houston’s first rodeo, as they say.
In comparison to the oil downturn in the 1980s, Houston and the surrounding areas are much more diversified in terms of people, culture, and tastes and preferences. There is a lot of opportunity out there, and the challenge is to find the value in the business taking place. For example, in the oil and gas sector, we have seen the jobs and investment move from west Texas to east Texas. Why do I say this? Business is booming in the eastern part of the state with construction and development of chemical industry projects which grow when the oil prices go down.
AM: How are companies from energy to real estate doing given the current climate?
Mr. Garcia: Houston will weather this storm. Overall, I think the U.S. economy needs to do better because we’ve had lower oil prices for the past two years, thus, it seems that there are still lingering effects from the 2008 downturn and attempts to restart it have not been very effective.
By far, energy has been the hardest hit; however, real estate and construction don’t seem to be slowing down. Texas is a business-friendly state that drives the economy in a variety of ways. Nevertheless, a lot of companies are cutting budgets and costs and strengthening their balance sheets either voluntarily or involuntarily. Extra attention is placed on budgeting and planning to minimize surprises and risks.
Furthermore, they are looking for opportunities that will create real value for them. For example, private equity funds are abundant right now—there is a lot of cash sitting on the sidelines waiting to be deployed. As soon as the oil markets stabilize, the focus of more Houston-based businesses will directed toward México’s new energy policies. I foresee stronger demand for oil and gas knowledge and expertise coming out of Houston.
AM: As an advisor, what do you recommend to foreign investors or companies interested in doing business in Texas or the U.S? What planning considerations need to take place before embarking on new horizons?
Mr. Garcia: It’s inevitable that people and companies will take on risk or make investment decisions even when they don’t know the market entirely because too much market analysis can freeze the best of business plans. Nonetheless, I would always recommend that they at least look at the landscape they plan to conquer and, in particular, consider how personal and business and tax regulations work. I also recommend that they obtain and understand the various forms of doing business and the related implications.
Most importantly, I suggest that they invest time in forming alliances with local partners, if possible. In my experience, the firms that build strong relationships are able to reap the biggest profits. They need to consider the available monetary and nonmonetary incentives to strengthen the viability of their investment.
AM: What are some common mistakes businesses make when entering the Houston market?
Mr. Garcia: Because food sales and distribution is a big industry in Houston, please allow me to illustrate the issues I see with an analogy.
Clients will often come to me because they failed to outline well in advance the ingredients needed to go in the soup. They often try to cook and serve the soup without having identified all of the ingredients needed for optimum results. I often help them identify the right mix of ingredients for the best results.
For example, investors and companies will do better when they have a strong balance sheet, when they are able to factor in the best legal entity structure in terms of financial, tax, labor and immigration concerns, etc. I like to work with clients in a holistic manner and often end up working with their internal and external advisors to establish a common platform for discussion and action items.
To help them have a smooth landing, we equip our clients with a list of established contacts, including clients, bankers, attorneys, and relevant relationships that may prove helpful to their success. One of the most important recommendations we make to them is that they get to know the advisors well, and find out what additional benefits their relationships may offer to maximize the chances of success for their businesses. I find that many can do better simply by recognizing there is a difference in business culture.
Mario E. Garcia is a certified public accountant and an international tax partner with Calvetti Ferguson. He can be reached at
mgarcia@calvettiferguson.com
or via phone at (713) 726-5719.
About Calvetti Ferguson
Calvetti Ferguson is a full-service public accounting and consulting firm that provides financial audit, tax, and corporate advisory services to public and private companies. It is ranked among the top 25 CPA firm in Houston, Texas. The firm’s primary focus is corporate clients in the middle-market sector, i.e. companies under $2 billion in annual sales.
With offices in Houston, The Woodlands and San Antonio, the firm services clients in oil and gas, oilfield service, pipelines, engineering and construction, manufacturing, distribution and healthcare companies.
