Mexico, D.F., November 28, 2011:  The head of Mexico’s Environmental Agency Mr. Juan Rafael Elvira Quezada recognized The Tecma Group, a Juarez / El Paso based company.  Tecma has demonstrated a continuous commitment to the environment and has been awarded for the second year in a row, the highest recognition to environmental excellence.  Tecma is one of only 20 companies recognized that have implemented programs that will allow Mexico to move towards a green economy.  On Monday, November 28  Mr. Toby Spoon, Executive Vice President, accepted the award on behalf of Tecma during the Forum in Mexico City.  Mr. Spoon commented, “This award is a tribute to the efforts of our people and to our overall corporate goals. Mexico has taken a leadership role in Latin America with these type of environmental programs and Tecma is proud to be on the ground floor.” Tecma is a Shelter Manufacturing Company that helps US manufacturers benefit from “near shore” low cost solutions helping North America compete directly with the China alternative.

Mexico City, November 29, 2011 — U.S. Ambassador to Mexico Anthony Wayne met yesterday with Luis Aguirre Lang, president of The National Council of the Maquiladora and Manufacturing Export Industry (CNIMME) and a delegation of maquila association executives. They discussed positive growth in the maquiladora and manufacturing sector and the important role of the sector in promoting Mexico and the United States’s competitiveness.

“Given the importance of Mexico’s exports to the U.S. economy in a number of sectors,” Ambassador Wayne said, “I look forward to working with you and your members to improve our bilateral cross-border trade flows and to find ways to advance our 21st Century Border Initiative.”

Mexico’s maquiladora and manufacturing sector is the second highest revenue generating sector in Mexico after petroleum earnings, and received 28.7% of Foreign Direct Investment in the first three quarters of this year. Nearly 80% of manufacturing exports are sold to the United States. Companies operating under the Maquiladora, Manufacturing, and Export Services Industry (IMMEX) program employ 37 percent of the Mexican workforce, account for 65% of manufactured exports, and generate 41% of Mexico’s GDP.

 

 

 

 

Posted on Tuesday, November 29, 2011
by Shannon K. O’Neil

Over the past two decades China emerged as a manufacturing powerhouse, dominating production in industries ranging from textiles to solar panels, semiconductors to wind turbines. Among the countries hardest hit by China’s rise – and ascension to the WTO in 2001 — was Mexico. In its wake, Mexico’s maquila industry shed thousands of jobs. On factory floors and the halls of government alike everyone talked about the possibility – and in many cases actuality – of plants leaving for the Far East.

But the decade long status quo seems to be shifting again, this time back in Mexico’s favor. More and more plants are opening in Mexico – a mix of new businesses as well as some returnees. One reason is the rising cost of labor in China. Where once China’s wages undercut countries such as Mexico several times over, today the differential is much lower. With China’s strong economic growth and rising per capita incomes, wages too have risen — increasing 22 percent in 2011 alone. When combined with an ever more competitive Mexican peso, many analysts estimate the labor differential between China and Mexico at just 15 percent today.

This much smaller difference no longer offsets Mexico’s geographic advantage. Particularly in a scenario of high oil prices, the long plane or boat ride away from American shores – still the world’s largest economy and consumer — is a drawback. Mexico’s maquila industry too transformed in the last decade, making the most of its strengths. Where once most of the factories lining the border were purely labor arbitrage — sewing blue jeans and crafting Converse sneakers — today an increasing number run highly sophisticated, customized manufacturing operations. Aerospace companies, including Goodrich and Bombardier, have opened operations in Mexico in the last few years, as have many other high tech manufacturers that depend on fast, efficient, technically advanced responses and that create high value added products.

This shift bodes well for Mexican growth, if it continues and expands. To do this, Mexico will need to tackle a few stubborn issues. The most obvious is security. While foreign investment continues, nearly all executives think twice before opening new facilities near the border. One can’t measure the counter-factual, but a safer Mexico undoubtedly would bring more investment, more jobs, and higher economic growth.

A second challenge is the still antiquated and at times overwhelmed border crossings. Many of the current crossings need major renovations or upgrades to help shoulder their part of the now $1 billion dollars of goods and thousands of trucks that cross each day. Waits are not only at times quite long, but also often unpredictable, throwing the delicate just-in-time delivery dance of modern manufacturing into turmoil. The new U.S.-Mexico trucking agreement should alleviate some of these costs, but only if it becomes a full-fledged, permanent – as opposed to pilot – program. With the current mandate still limited, most trucking companies are holding off on the technological investments needed to enter the U.S. market, uncertain about the future payback.

Resolving these issues should give Mexico an edge over China. But in addition, it would strengthen North America vis-à-vis its competitors in the global marketplace, benefiting the United States in the process.

 

 

 

 

 

by Diana Washington Valdez \ El Paso Times

Posted: 11/27/2011 12:16:03 PM MST

The El Paso border economy, and not just the Mexican peso, may be in for a bumpy ride if the U.S. recession returns and European markets remain shaky, experts say.

The peso fell by 20 percent during the past four months, and it can be expected to reach 17 pesos to the dollar at retail outlets. Last month, some retail outlets in Northern Mexico were trading the currency at 18 pesos to the dollar.

Grupo Banamex reported the interbank exchange rate at 14.14 pesos to the dollar, and the teller rate at 14.25 pesos to the dollar.

Politics, violence and foreign investment trends south of the border will also affect the local economy as well as the peso’s strength, experts say.

“Given the precarious nature of economic conditions in the United States and Western Europe, there is substantial downside risk facing the borderplex economy,” said Tom Fullerton, J.P. Morgan Chase professor at the University of Texas at El Paso.

“Widespread sovereign debt default risks across Europe and debt rollover debacle in Washington have already contributed to a steep decline in the exchange value of the peso in recent weeks.”

Sergio Kurczyn, an analyst for Grupo Mexico, also said in a recent study “Review of Mexico’s Economic Situation” that instability in European financial markets will continue to put pressure on the peso.

Juárez resident Gina Gutierrez, 58, said devaluations, no matter how small, have an adverse effect on the pocketbooks of low-income people who rely on stable currency-exchange rates for business or shopping.

“One of my neighbors sells decorative hairpins that she makes herself,” Gutierrez said. “She buys her supplies for the pins in El Paso in dollars, but whenever the peso loses value, she complains that she can’t make enough of profit for her business to be worthwhile. Her customers buy her products with pesos, and so she can’t raise her prices too much.

“Devaluations are good for people who deal in dollars, but not for those of us who receive salaries or microbusiness income in pesos.”

What Gutierrez said reiterates the notion that casas de cambio, or foreign currency exchange services, amount to the poor man’s stock market in Mexico.

Carmen Martinez, who sells used clothing in Juárez, said a weaker peso makes her items more expensive for her customers. “They are less likely to buy clothes because the dollar has become more expensive,” she said.

Martinez buys the used clothing with dollars and sells them in pesos.

On the flip side, a cheaper peso has helped U.S. manufacturers who operate in Mexico, including those who have maquiladoras in Juárez, because their costs, including labor, go down.

But Fullerton said that while a cheaper peso “helps export manufacturing prospects in northern Mexico, it also hurts retail performance on the north side of the river as a consequence of reduced purchasing power for prospective customers who reside in Ciudad Juárez and elsewhere in the state of Chihuahua.”

It may become less expensive to make products, but consumers who hold pesos will not be able to afford them if the dollar continues to gain against the peso.

Mike Haskell, vice president of the Valuta currency exchange service, said earlier market reports indicated that the dollar was going to weaken, but that just the opposite happened. “I believe the dollar rather than the peso is the currency to watch,” he said.

Politics and violence will have an impact on the border’s economic trends.

Community leaders have complained that the ongoing violence in Mexico may be scaring investors away from the border. However, the violence and adjacent criminality have mainly affected small businesses and not major industries.

Mexican authorities have attributed the continuing violence to drug cartel wars that have evolved into turf battles between competing organized crime groups.

Nathan Ashby, another economics expert at UTEP, said his research indicates that violence is not keeping other countries from investing in Mexico, although the countries that are most likely to invest are those with a history of organized-crime-related violence, such as Colombia, Brazil and Italy.

Mexico will elect a new president next year, and the possibility of a shift in political party rule is bound to add to uncertainty about the Mexican government’s future role in the crackdown against the cartels.

“Some are finding that the violence across the border has become more predictable, even though homicide rates stay about the same,” Ashby said. “Our sources in Mexico believe that the PRI may be willing to negotiate with organized crime if a PRI president is elected.”

At least one political leader in the Mexican border state of Coahuila is using the Internet to sound an alarm over previous devaluations under presidents of the Institutional Revolutionary Party, or PRI.

Erick Zapata, an official of the state National Action Party, or PAN, in Monclova, Coahuila, warned in an Internet posting about Mexico’s previous currency devaluations under PRI presidents.

“Bad government and the excesses of PRI governments caused this country to collapse on various occasions,” Zapata said. “We only need to recall the devaluations by PRI members after they said they would defend our economy, and then how we lost control of the peso at the end of their sexenios.” Mexican presidents serve six-year terms or sexenios.

Vicente Fox was the first opposition party candidate (PAN) in Mexico’s modern history to defeat the PRI to become president in 2000. His successor, Felipe Calderon, is a member of the PAN.

“Politics can affect the economy, if it results in uncertainty about what’s going to happen, or it can create more certainty” Ashby said. “We don’t know if presidential politics will affect the peso exchange rate. Usually, when there is uncertainty, there is a flight to the dollar.”

But “Mexico’s fiscal policies have been sound, and the government has allowed the peso exchange rate to float, instead of artificially holding it up,” Ashby said. “Mexico had major peso devaluations after the government spent like crazy and then fixed the exchange rate to the dollar.”

Trade accords such as the North American Free Trade Agreement have integrated the economies of nations, including those with disparate economies like the U.S. and Mexico, to the point that it’s impossible for one country’s economic woes not to affect its trade partners.

Experts say this is why the world is worried about whether or not Greece can recover with a bailout. If it doesn’t, then its problems will spill over in different ways to other parts of Europe and North America.

The U.S. provided Mexico with a $50 billion bailout after the 1994 peso crisis that crippled that country’s economy and set back its middle class for an additional 10 to 15 years. The Mexican government repaid the bailout money.

Back then, a severely weakened peso resulted in fewer customers for retail stores in South El Paso, some of which relied on shoppers from Juárez for up to 70 percent of their business.

Ashby and Fullerton both agree that the border’s fortunes, including a healthy peso-dollar exchange rate, hinge on when and how quickly the U.S. economy rebounds.

“Preliminary simulations with the UTEP Borderplex Econometric Model indicate that local economic growth will be moderate in 2012, but only as long as a national business cycle downturn is avoided,” Fullerton said.

Juárez resident Ruth Navarro, who shops regularly in El Paso, said she knows the dollar has gotten more expensive over the course of the year. But she is not likely to stop crossing the border to hunt for the occasional bargain.

“Some commodities are more expensive in El Paso than in Juárez, and sometimes it takes me a long time to cross the international bridges,” she said, “but it’s still worth it to me to shop in El Paso.”

Diana Washington Valdez may be reached at dvaldez@elpasotimes.com; 915-546-6140.

The Mexican peso
Mexican peso devaluations and their presidents:

1975: -29.4 percent, Luis Echeverria Alvarez.

1982: -56.1 percent, Jose Lopez Portillo.

1986: -38.7 percent, Miguel De La Madrid Hurtado.

1994: -26.9 percent, Carlos Salinas De Gortari.

1995: -24.6 percent, Ernesto Zedillo Ponce de Leon.

2006: +12.1 percent (gain), Vicente Fox Quesada.
Source: Banco de Mexico, INEGE figures.

 

 

 

By TIM JOHNSON

McClatchy Newspapers

November 30, 2011.  GUADALAJARA, Mexico — Mexico’s two most powerful criminal gangs are locked in a titanic battle for control of the country’s heartland in a struggle that’s redrawn Mexico’s map of violence.

Violence has dropped along the U.S. border, with Ciudad Juarez, once considered the most violent city in the world, seeing a 35 percent decline in homicides this year.

That good news is balanced by bad news in Guadalajara, Culiacan and Veracruz, where the Sinaloa cartel, whose bulwark has always been Mexico’s Pacific coast, and the Zetas, a violent gang that originally was created to protect the Gulf cartel along the Gulf of Mexico coast, are locked in a spiraling struggle that’s seen each gang invade the other’s territory.

The conflict has thrust Guadalajara, an important manufacturing center of 4.4 million people, into the battlefield. After overcoming a spate of drug violence in the mid-1980s, Guadalajara quieted down, perhaps because the Sinaloa cartel held a monopoly on operations in the surrounding state of Jalisco.

“Here in Jalisco, we’ve seen this as a distant thing. ‘Oh, this is happening over in Michoacan.’ It felt like it was far away,” said Dante Haro Reyes, a law professor and public security expert at the University of Guadalajara. “Now it feels like it’s around the corner.”

The wakeup call came at daybreak Nov. 24, when mobsters abandoned three vehicles filled with 26 dead bodies at the iconic bright-yellow Millennium Arches that straddle a Guadalajara thoroughfare. A message on a poster board was signed “Z,” a signature of Los Zetas.

“Look how we leave you these dead people,” the poster said in part. “We are in your kitchen.”

Boasting of their penetration deep into Sinaloa turf, the Zetas claimed to be “the strongest cartel at the national level, the only cartel that doesn’t pass information to the gringos,” a reference to the son of a Sinaloa boss who claims to have been a Drug Enforcement Administration informant before his 2009 arrest.

Just a day earlier, the Zetas had dealt another blow to Sinaloa, leaving a truck filled with 16 charred bodies in Culiacan, the capital of Sinaloa state, from which the Sinaloa cartel takes its name.

The war between the groups – clearly the alpha dogs of Mexico’s underworld – pits not just weapons but also two very different business models and geographic strongholds.

“This is a kind of death struggle, a definitive struggle between the Zetas, who have no remorse and expand constantly, and Sinaloa, which is trying to consolidate itself,” said Bruce Bagley, an organized crime and narcotics expert at the University of Miami.

Sinaloa operatives appear to have set off the conflict over the summer, forming a group called “Matazetas,” or Zeta Killers, to exterminate Zetas in Veracruz, a Gulf Coast state that’s a bottleneck on a key smuggling route. The group went public in a big way at afternoon rush hour on Sept. 20, parking three vehicles packed with dead bodies near an urban underpass. Security agents found 35 victims at the grisly scene, nearly all asphyxiated and partially naked.

The “Zeta Killers” released videos of masked gunmen promising to hunt down Zetas and end their rampant extortion in Veracruz against common people.

Even as they execute plenty of their own rivals, Sinaloa bosses are thought to detest the brutality of the Zetas, which they think brings increased law enforcement pressure on crime groups.
“The Matazetas quite clearly tried to win a kind of public approval and government tolerance. They said, ‘Get out of our way and we’ll take care of this problem,’” Bagley said.

With the latest Zetas blows against Sinaloa, experts say tit-for-tat violence is taking on its own momentum.

“The theory going around is that this is a battle for total control,” Haro Reyes said, adding that reprisals wouldn’t take long to occur. “When you get attacked on your own territory, you’ve got to attack in your rival’s territory or you look weak.”

Sinaloa and the Zetas have vastly different histories.

Smugglers from Sinaloa began packing marijuana northward half a century ago. Today, the Sinaloa cartel’s tentacles loop as far as Australia and West Africa, making it the most powerful drug syndicate in Mexico, and perhaps the world. The group, which is also known as The Federation, is loosely organized and more inclined to negotiate with rivals and bribe authorities.

In comparison, the Zetas are upstarts. A militia formed by former Mexican special forces commandos recruited to protect the Gulf Cartel, the Zetas broke away early last year. Unlike the Sinaloa crime group, which sticks largely to drug trafficking, the Zetas branched into extortion, kidnapping, human smuggling and the sale of pirated goods. Brutality and beheadings have become their hallmark.

Only a year or two ago, Mexico had half a dozen significant crime groups, including the Tijuana, Juarez, Beltran Leyva and La Familia Michoacana cartels. Security forces have crippled some of those groups through arrests and killings, while others have splintered, leaving remnants to struggle for allies.

One of those fragmentations occurred in Guadalajara after the slaying of Sinaloa boss Ignacio Coronel on July 29, 2010. Some of his enforcers have allied with another group, Milenio, and moved under the umbrella of Los Zetas.

If the Zetas win control of Jalisco state, their territory would bisect Mexico, stretching from Tamaulipas along the Gulf Coast through San Luis Potosi and into Jalisco, giving them access to Manzanillo, the nation’s busiest port.

While body dumps are becoming common in central Mexico, residents of Ciudad Juarez, where homicides have dropped this year, are finding unusual periods of calm. For 65 hours over Nov. 19 to 21, Juarez tallied no homicides at all, the longest such period in three years.

“There are clear signs of Ciudad Juarez’s recovery,” Gov. Cesar Duarte of Chihuahua state said last week. “Instead of streets congested with security forces, we have restaurants congested with clients.”

To be sure, Ciudad Juarez has tallied 1,832 killings so far this year, an unacceptable rate of about 5.5 homicides day. But the trend line heartens residents.

Ciudad Juarez’s police chief, Julian Leyzaola, a former army lieutenant colonel who gained notoriety for tough tactics in quelling crime in Tijuana in an earlier posting there, notes that the drop in murders coincides with his arrival in March.

There may be other reasons, however. The Sinaloa Cartel appears to have reached a settlement with onetime rival cartels in Tijuana and Juarez, negotiating a 60-40 split in drug trafficking profits, “with Sinaloa taking the lion’s share,” Bagley said.

The agreements may explain why Ciudad Juarez and border areas to the west all the way to Tijuana on the Pacific coast have seen violence drop, he said.

EL PASO, Texas — Economic experts fear a 50 percent chance of a new recession, but some parts of the country still have it going on. From business development to sustainability, livability to transportation and infrastructure, Newsweek offers a glimpse not just of how our nation’s 200 largest cities are performing across these categories, but how they’re progressing. And El Paso is No. 1.

America’s 20 Can-Do Capitals

By Clark Merrefield and Lauren Streib

Economic experts fear a 50 percent chance of a new recession, but some parts of the country still have it going on. From business development to sustainability, livability to transportation and infrastructure, Newsweek offers a glimpse not just of how our nation’s 200 largest cities are performing across these categories, but how they’re progressing.

The largest 200 cities in the United States were on the hook for a maximum of 25 points for each category, for a total possible score of 100. Differences in the yearly ranges of data used are due to data availability.

For sustainability we took into account 2008 county emissions data from the U.S. Environmental Protection Agency for 13 major air pollutants, with total emissions divided by population to determine a final carbon footprint; we also took into account the change in total park acreage from 2008 to 2009 with data from the Trust for Public Land, and the percent change in LEED-certified buildings from 2006–08 to 2009–11 with data from the U.S. Green Buildings Council.

For livability we considered the change in the percent of people with health care from 2008 to 2009 and the change in the percentage of people over 25 with at least a bachelor’s degree, both with data from the U.S. Census Bureau. We also considered the change in cost of living from 2005 to 2009, with data from Moody’s.

For transportation and infrastructure we looked at the momentum of new construction via the percent change in new building permits from 2005 to 2010, and we looked at how people travel with the percent change in people who take public transportation or walk to work from 2007 to 2009, both with data from the U.S. Census Bureau.

For business development we considered the change in Moody’s cost-of-doing-business index from 2005 to 2009; the change in unemployment from 2006 to 2011—with data from the U.S. Bureau of Labor Statistics; the percentage change in patents issued from 2005 to 2010 with data from the U.S. Patent and Trademark Office; the small-business growth rate from 2005 to 2009 with data from the U.S. Census Bureau and Payscale; and venture capital growth for new startups (a combination of the percentage change in the number of venture-capital deals and the number of venture-capital companies from 2005 to 2009) with data from the National Venture Capital Association.

 

1. El Paso, Texas

Sustainability: 21.46

Livability: 18.45

Transportation and Infrastructure: 20.37

Business Development: 11.15

Final Score: 71.43

For additional rankings, see:  http://www.thedailybeast.com/newsweek/galleries/2011/09/11/american-can-do-cities-oakland-boston-philadelphia-photos.html

Opinion: In comparison to China, Mexico has emerged as a “best cost country” for products destined for the United States and global markets. The reasons are relatively straight forward.

By Daniel J Hill, Silicon Border — EDN, September 29, 2009

Recent articles in business magazines (Business Week, April 9, and June 15, 2009) and studies done by independent consulting agencies (Alix Partners, Manufacturing Outsourcing Cost Index, May 2009) have begun to cast doubt on the conventional wisdom that goods made in Asia are always lowest cost. In fact, recent calculations have shown definitively that the cost of Asian manufactured products is growing rapidly. Looking at prices overall, Asia is now approximately 15 to 20% more expensive that it was only four years ago. So, if Asia isn’t the lowest cost venue for manufacturing, is there an alternative?

In comparison to China, Mexico has emerged as a “best cost country” for products destined for the United States and global markets. The reasons are relatively straight forward. In addition to being a low labor cost country, six other key elements have emerged to provide Mexico’s advantages:

• Low transportation cost: Being immediately adjacent to one of the world’s largest markets — especially when oil prices and ultimately transportation costs are so volatile — is a significant long-term advantage. For any product that has any significant cost of transportation, being closer to the end-user market is always less costly than being farther away, no matter what the price of oil may be. Additionally, proximity to market generally means a shorter supply chain, minimizing time in transit. Less time in transit allows companies all along the supply chain to reduce inventory and the capital invested in that inventory required to maintain acceptable service levels.
• Favorable (and relatively stable) exchange rate: As Mexico’s leading trading partner, its economy is inextricably bound to that of the US. As a result, the Peso trades in a relatively narrow range relative to the US dollar. Recent devaluation (about 15%) of the Peso, relative to the dollar, makes manufacturing in Mexico even more appealing. Contrast that to some Asian currencies that have appreciated 10 to11% since 2005.
• Low, stable labor costs: Labor costs in many parts of Asia are appreciating at 7 to 8% per year. This has been driven by both government policy and the labor market. With the explicit approval of government, labor unions have become much more militant regarding work rules and wage scales in foreign-owned enterprises. Asian governments have mandated annual wage increases that equal or exceed the basic rate of inflation. Coupled with a huge influx of manufacturing facilities along Asia’s eastern seaboard, wages have begun to climb dramatically. Foreign companies looking for less expensive labor are now searching for sites in more inland areas. This may solve the labor problem, but lengthens the supply chain even more.
• Contrast the situation in Asia to that in Mexico: Labor rates in Mexico have actually declined when denominated in US dollars over the past five years. This is due primarily to a 15% devaluation of the Peso during this period. But wage rates alone aren’t the only advantage for Mexico. Labor unions in Mexico are relatively benign. Employer-worker relationships are often excellent where management communicates openly and utilizes experienced Mexican Human Resources professionals. It is common to find multiple members of the same extended family working for the same employer. A strong family-oriented social fabric also tends to promote workforce stability.
• Free trade status: As a consequence of NAFTA, Mexican products are exported, duty free into the US market. Mexico also has Free Trade Agreements with 43 other nations, the most of any single country. In addition to the US and Canada, its products can be exported, duty free, to the European Union, most of Latin and Central America, and Japan.
• Low tax profile: Many US companies seeking to locate in Asia request tax holidays from the host government ranging from five to as long as 10 years. That isn’t necessary in Mexico. Tax rates for foreign-owned companies are based on a very small percentage of total value-added in Mexico. Effective tax rates are extremely low and allow repatriation of profits without barriers.
• Protection of IP (intellectual property): Over the past decade Mexico has sought not only to harmonize its IP laws with those of the US and Canada, but has actively sought to enforce IP rights. The rampant piracy that plagues much of Asia simply doesn’t happen in Mexico.

For high technology companies that wish to prosper in the highly price-competitive US market, a low-cost manufacturing strategy is not only desired, it is essential. Mexico provides significant advantages for manufacturing companies such as low labor rates, pro-business environment, and low tax profile.

About the author
Daniel J Hill is the co-founder of Silicon Border and serves as the company’s CEO and chairman of the board. His past industry experience includes serving as a division vice president and general manager for National Semiconductor, and as a C-level executive with Cerprobe, InterConnect, and MCT. He spent 12 years transferring semiconductor technology to Asia, and eight of those years living in Asia. Hill has served internationally on several industry boards, is a public speaker, and is a published author on semiconductor industry issues. Hill earned his bachelor’s of science degree in industrial engineering from New Mexico State University.

 

By Stephen Downer | PLASTICS NEWS CORRESPONDENT

Posted August 22, 2011

CIUDAD JUAREZ, MEXICO (Aug. 22, 2:50 p.m. ET) — Crime has threatened to ruin this border city’s popularity as a hub for international export manufacturing plants for a decade.

But Juárez has survived and is preparing for a new influx of investors.

With El Paso, its business partner across the Río Grande in neighboring Texas, the city of 1.3 million forms one of the most successful cross-border industrial corridors in the world.

The statistics on villainy, however, are grim: hundreds of murders of women, several thousand men and women executed in drug-related gang warfare, numerous cases of kidnapping and extortion.

Like feral rats, the criminals by and large operate with impunity. Whether because of police incompetence, corruption or fear, most crimes are unsolved.

In early August the federal government, having already sent in the army, threatened to withdraw all law enforcement funding for Juárez unless the municipality adequately trained its police force. It subsequently relented.

In the 46 years since the Antonio J Bermudez Industrial Park in Juárez housed the country’s first maquiladora, the number of such plants in the city has grown to about 300. Plastics processors number about 30.

The value of products made from rubber and plastics in Juárez and adjacent towns in the state of Chihuahua in 2010 was $106.6 million, up from $104.1 million the year before, according to the office of economic development (Desarrollo Económico de Ciudad Juárez AC),

In the first five months of this year, rubber and plastics processors’ sales reached $45.3 million, only slightly down ($500,000) from the same period in 2010.

In 2008 the Juárez maquiladoras employed 250,000 workers. The global downturn led to 80,000 being laid off in 2009. Hiring began again in 2010.

Up to 30,000 have been re-employed, said Alan Russell, president and CEO of the Tecma Group of Companies, of El Paso, TX, which lies across the Río Grande from Juárez.

Tecma helps foreign companies establish themselves in Mexico. It finds factory space, gets permits, imports and installs equipment, hires workers, and so on. It lists 40-plus client companies on its website and is currently making proposals to three potential clients a week, Russell said.

The U.S. Department of Commerce’s Commercial Service (CS) has also been busy. Its El Paso U.S. Export Assistance Center opened in February 2009, after which it launched the Border Trade Initiative (BTI), a series of promotions to encourage trade with Mexico and its maquiladoras.”

According to Robert Queen, the CS director in El Paso, the initiative has been effective.

At one event, sponsored by the state of New Mexico and the CS, in June representatives from 40 maquiladoras and 600 US business people showed up, he reported.

The United States provides 47 percent, or $41 billion worth, of all inputs to Mexico’s 2,800 maquiladoras, 60 percent of which are on the border with the United States, Queen said. Asian companies are the second largest providers.

Russell believes that “for the first time in modern history Mexico can be a head-to-head competitor with China.”

“When the recession occurred, the banks pulled lines of credit from manufacturers. So, as the recession is ending, and slowly, I might say… companies are seeing where they can increase their manufacturing low cost initiatives.

“The minimum wage, and the overall cost of operating, in China have continued to increase this year by as much as 30 percent,” he pointed out to Plastics News.

“Many manufacturers that moved to Asia in the past 10 years now realize the total cost of manufacturing and transportation back to the US consumer is higher than manufacturing on the U.S./Mexican border and are increasingly looking at production plants here in El Paso/Juarez,” Queen said in a separate interview.

He declined comment when asked about the security problem in Juárez. But Russell, while lamenting the violence across the river, said: “Fortunately, the criminal element has allowed our industry to continue.

“We’ve not had any type of assault on plants or personnel. Our shipments have not been obstructed or blocked. We have not had our vehicles hijacked.”

He said crime is declining in Juárez, a claim also made by Chihuahua state governor César Horacio Duarte Jáquez in a speech in August.

“Our biggest obstacles to growth are not the corporate board of directors but news reports” about violence in Juárez, Russell said. “We do take precautions. We have training seminars for our clients… They have not kidnapped expats for the most part.”

Mexico is the United States’ third largest trading partner and US merchandise exports to its neighbor south of the border reached $163 billion in 2010, an increase of 27 percent over the previous year, said Queen.

El Paso is the fourth largest exporting city in the US, he said, behind Detroit in first place, Los Angeles in second and Houston. “Over 75% of El Paso’s exports go to Mexico.”

Plastic Molding Technology Inc, formerly of Bridgeport, CT, moved to El Paso 10 years ago in search of business opportunities presented by the North American Free Trade Agreement (Nafta).

CEO Charles A. Sholtis said the move has paid off handsomely. With just under 100 employees and 58 presses, their clamping forces ranging from 20 to 500 tons, PMT doubled its sales to about $14 million two years ago,

Founded by Sholtis’s father, Charles E. Sholtis with one Arburg press in the mid 1970s, PMT specializes in manufacturing injection molded plastic components with extremely high tolerance. The company serves the automotive and household electronics sectors, which account for 75 percent of the business, principally.

He sees a bright future for his company. “With Nafta established, a number of things have been put into place to promote trade between the two countries,” he said.

“From a freight standpoint, steps have been taken to streamline points of entry”, with multiple crossing points and a beltway around Juárez.

Stuart Roberts, owner of Sun Cross Marketing Inc, of El Paso, which represents companies making plastic molding and extrusion equipment and supplies, said 95 percent of his business is across the border in Mexico.

Business in the area is “on the up and up,” he said.

Alan Russell agreed: “It’s not a boom. We’re growing at a nice pace. We’re back to where we were in 2008” – criminal activity in the city notwithstanding.

 

 

Click to listen to audio interview

by Jason Beaubien

August 4, 2011

Over the last four years of the Mexican drug war, the country’s northern border has become one of the most violent parts of the country. Yet recently that same part of Mexico has been booming economically.

The duty-free maquiladora assembly plants along the border are rapidly adding jobs, and exports to the United States are reaching record levels.

Juarez, just across from El Paso, Texas, is the murder capital of Mexico and one of the world’s most violent cities. Drug-related violence in Juarez killed more than 3,000 people last year. Extortion, carjacking and kidnapping are rampant.

That might not seem like an ideal business environment, but foreign companies are investing heavily in Juarez and other violence-plagued cities along the border. Cheap labor and proximity to the huge U.S. market are outweighing concerns about security.

Juarez Bouncing Back

El Paso-based TECMA is one such company. It runs a huge, 180,000-square-foot factory near the Juarez airport.

Some of the maquiladoras — plants that can import raw materials and ship out finished products across the border duty-free — produce a specific product for a specific company. But in this plant, TECMA runs seven different operations for seven different U.S. companies. One area manufactures customized dashboard covers. Another produces electronic components for modems. Yet another makes plastic mannequins.

The company’s business also includes “reverse logistics” — refurbishing used products. For instance, the factory will take an old or inoperative credit card reader from Wal-Mart, clean it, replace any worn-out parts, update its software and then send it back to the retailer.

TECMA runs a total of 17 plants across Juarez.

The border city, with a population of just over 1 million people, was hard hit by the recent recession. Between 2008 and 2009, Juarez lost nearly 85,000 jobs out of 250,000, or 33 percent.

But the city is rapidly bouncing back, and local officials expect that by the end of this year employment levels will have returned to their 2007 peak. Even with a smaller workforce, exports in 2010 reached an all-time high. The value of trade between Juarez and El Paso jumped a stunning 47 percent from 2009 to 2010. And similar gains are being reported in other border cities, such as Matamoros, Reynosa and Nuevo Laredo.

Alan Russell, TECMA’s president, says the Mexican border has a huge logistical advantage over China or other industrial hubs in Asia.

“We have another operation that ships the same day that the orders are received,” he says. The specialized medical products are made that day, sent to the border, go through customs and are shipped via FedEx or UPS for next-day delivery anywhere in the U.S.

Foreign Factories Unscathed By Violence

But one issue about Juarez that Russell always has to address with potential clients is security — what he calls “the elephant in the room.”

Convoys of thousands of Mexican soldiers and federal police racing back and forth across Juarez are an everyday reality. The nervous troops wear full battle gear and clutch assault rifles.

Yet Russell and other business leaders say that for the most part, violence from the drug war hasn’t affected the maquiladoras.

“To date, we have not had those kinds of problems, as you would think that could happen in an environment like this — but just hasn’t happened,” he says.

The factories don’t have much cash in them or products that could be easily resold on the black market — for example, air filters for the latest model GM car. The gangs also may be leaving them alone because the maquiladoras are an established and important source of income for much of the population.

But if the foreign companies working in Juarez have been immune to the recent crime wave, local businesses have not.

The local newspaper El Norte estimates that 90 percent of small businesses in Juarez are forced to pay local gangs for “protection.” The head of the local restaurant association pegs the extortion rate at 60 percent to 70 percent.

Those who don’t pay risk being killed or having their businesses torched. The gangs have even been trying to extort teachers and parking lot attendants. “Everyone pays,” says one restaurant owner, who closed temporarily late last year because of criminal demands for “rent.”

‘Two Different Realities’

Maria Soledad Maynez, the head of economic development and promotion for Juarez, says extortion is dampening the city’s economic recovery.

“There [are] a lot of small businesses that … right now, if they want to work, they have to pay. Yes, it’s a big issue for the small businesses, more than the big ones,” she says.

However, Maynez says she’s confident that Juarez will overcome its current crime problem soon. There seems to be a feeling from her and others that at some point the violence simply has to pass. And she says foreign businesses continue to be interested in moving into the area.

For instance, a new slaughterhouse is being built in a free-trade zone on the western edge of Juarez. Maynez says the plant will be able to slaughter and process animals at a significantly lower cost than in the United States.

She says many companies currently operating in the U.S. could operate far cheaper in Juarez. Wages in the maquiladoras start at about $10 a day. Once products are moved back into El Paso, they can be moved quickly by truck, rail or plane throughout the U.S. and Canada.

Manuel Ochoa with the El Paso Regional Economic Development Corporation says the violence doesn’t appear to be significantly affecting the rebound of the Juarez economy.

He says it’s as if there are “two separate realities” unfolding in Juarez: The city’s murder rate rivals that of a war zone, yet its factories are exporting products at a record level.