The Mexican city is dangerous and drug-infested, but manufacturers like the wages, freight costs, and location

By Christopher Power

Mexico’s Ciudad Juárez is one of the most violent places on earth. Drug gangs fight endless battles with each other and police in the streets and alleys of Juárez’ poorest neighborhoods. In the past 28 months this city of 1.5 million, across the Rio Grande from El Paso, has recorded 5,200 murders.

Even though Juárez is the center of Mexico’s war on drug dealers, it’s holding its own as the center of maquiladoras, the special zones Mexico developed 30 years ago to attract investment. “It’s a dual reality,” explains Bob Cook, president of the El Paso Regional Economic Development Corp., a group that encourages multinationals to invest on both sides of the border.

In return for building factories in the maquiladoras, multinationals get favorable tax treatment, pay low wages (sometimes as low as $4.21 a day), and take advantage of worker training sponsored by the local government. After mass layoffs during the recession, Juárez factories have added 27,000 workers in the past 10 months. Blue chips like Johnson & Johnson (JNJ), Delphi Automotive, and Scientific Atlanta show no signs of leaving. El Diario, the local daily, is filled with help-wanted ads from Lear (LEA), Delphi, Siemens (SIE), and other companies. Through April, nine companies had obtained permits to operate in Juárez, about the same as last year. K. Alan Russell, who runs industrial parks in Juárez for dozens of corporate clients, mostly American, says he has landed more business in 2010 than all of last year.

Proximity to the U.S. is a big reason for Juárez’ staying power as a place to invest, though drug gangs like their proximity to their American customers, too. Companies have direct access to the U.S. market, and freight trucks can go easily from a Juárez factory to U.S. Interstate 10. “From taking the order to delivery, our Juárez plant can get the job done in three to four weeks,” says Derek Johnson, chief executive of a Denver-based maker of store mannequins. “When you throw in ocean shipping, it sometimes takes our China plant 10 weeks to fulfill an order.” Johnson’s experience reflects recent studies that rank Mexican competitiveness right up with China’s, thanks to cheaper freight costs, a relatively skilled workforce, and those low wages.

The violence never ceases, however. Part of Cook’s PowerPoint pitch for investing in Juárez includes color-coded maps showing which cartels operate where in Mexico. The restaurant industry has been hurt by the violence: Many in Juárez don’t go out at night. “It will take a miracle to solve this,” says Cook.

Yet Francisco Uranga, Foxconn’s chief business operations officer for Latin America, can only recall one murder of a maquila employee that seemed cartel-related. The gangs, it seems, prey mostly on each other. “They don’t bother us. We don’t bother them,” says Uranga. The maquilas operate in closely guarded areas, often on the city’s outskirts and a stone’s throw from the big bridges to the U.S. This year, bridge traffic is up sharply. “We follow the cycle of the U.S. economy,” says Russell, “not the political instability.”

The bottom line: Low wages and freight costs, tax breaks, and location are all persuading companies to stay in Juárez.

Power is an assistant managing editor at BusinessWeek, responsible for international coverage.  

 

 

 

Manufacturers take steps to protect workers and expatriates from potential dangers.

 By:  Jonathan Katz

April 30, 2010 

Drug cartels responsible for as many as 22,000 reported deaths in Mexico over the past three years have put manufacturing plants along the border on notice but have not impeded business activity, say economic-development and plant officials.

The violence has not affected any U.S. citizens visiting the plants, known as maquiladoras, and is primarily targeted at individuals involved in the drug trade, says K. Alan Russell, whose El Paso, Texas, company The Tecma Group operates maquilas throughout Mexico.

“It is certainly a very dangerous environment if you’re in the wrong business, but the data tells us we’re not the ones being targeted,” says Russell, Tecma’s co-founder and president. “There’s certainly the possibility of a random carjacking or getting caught in the crossfire of these violent acts that we hear about; however, I’ve said a number of times it’s probably on the same level as being struck by lightning.” 

Russell says none of his clients have closed plants or left the area because of drug-related violence, though he says it’s difficult to determine whether the company has lost potential business because of the situation. In fact, The El Paso Regional Economic Development Corp., or Redco, has completed 11 deals for new operations in Juarez in the past 11 months, according to Redco President Bob Cook. 

Russell and Cook say most plants in the region that have closed or moved have done so because of economic conditions. 

Maquila Workers Face Dangers

Cook characterizes the rare instances of crime in the manufacturing community as “opportunistic” incidents conducted mainly by small-time criminals who are taking advantage of the Mexican government’s focus on corruption.

 ”What’s happened is with all the focus on these organized-crime elements and the fact that the government at the local level has made an effort to get rid of corruption, it’s created an environment where opportunistic criminals have tried to undertake their criminal activity when law enforcement is elsewhere,” Cook says.

Despite reports that the violence has had little, if any impact, on U.S. business travelers, maquila workers have been directly and indirectly impacted by the increased criminal activity. Gunmen made off with uniforms and at least five trucks on April 11 from an operation owned by oilfield services company Schlumberger Ltd. in Reynosa, Mexico, which borders McAllen, Texas., according to a report in The (McAllen) Monitor. IndustryWeek could not reach a Schlumberger representative for comment. 

An employee at a General Cable Corp. plant in Piedras Negras, Mexico, lost his brother-in-law who was caught in crossfire, says German Zavala, plant manager. The plant hasn’t taken many formal actions to increase security but has advised employees to keep a low profile. 

“We’re basically spreading the word to not stay out too late at night, don’t go around bar hopping — stuff like that,” Zavala says. “We’re not taking out-of-the-way measures to keep everyone safe. If you stay in your own business, you should be safe.”

The plant also has cut back on training seminars and courses in Mexico to protect employees and limited travel from Mexico. “We used to fly out of Laredo, Mexico, or Monterrey, but now most people are driving up to San Antonio, Texas, and flying out of there,” Zavala says. 

Ensuring Worker Safety

The safest plants provide transportation for late-shift workers, says Garrett Brown, network coordinator for the Maquiladora Health & Safety Support Network based in Berkley, Calif. The organization comprises more than 400 volunteer occupational health and safety professionals who work as advocates for maquila worker safety.

“The better employers have had in place for some time a system of buses that are employer funded or subsidized, which take people on routes from the plant to their home,” he says. 

Tecma’s Russell says that’s been the standard at his plants for years and typical for most maquilas. But Brown says female employees could be hesitant to take the buses because some of the suspects associated with a series of rapes and murders between 1993 and 2003 in Juarez were maquila bus drivers. 

“Part of the reason these young women have been victims is that the maquilas often work two or three shifts, so oftentimes women who work the second shift get off at 11 or 12 at night, at which point no public buses are operating,” Brown says. “Since maquila workers are paid so little, it means they can’t afford cars and they’re walking through industrial areas at 11 or 12 at night, which is very unsafe.”

 

As you well know, Juarez is in the national headlines this week due to last weekend’s shooting of two American Consulate employees.  We have always said that should the drug violence ever target or involve U.S. Business persons, that things would go to a whole new level.  With the Consulate employees being killed, the attention has leapfrogged over business matters and has drawn both governments to the table.    There are many rumors and stories as to why, or if these employees were targeted, or if this was a mistake in identity on the part of the shooters.  I do believe that we will find the answers in the coming weeks.  There is a lot of pressure to find the truth.   As horrible as it is for these victims and their families, just maybe this new focused attention will bring the violence issues to a head, and the lives of many others will be saved.  Below is a very good article published by the Associated Press that will give you some perspective.  Please do not hesitate to call me directly should you wish to visit more in depth about how all this is affecting the business community.  K. Alan Russell, President, The Tecma Group, L.P.

 FBI: No evidence Mexico hit men targeted Americans

 By OLIVIA TORRES AND MARTHA MENDOZA, Associated Press Writers Olivia Torres And Martha Mendoza, Associated Press Writers – Tue Mar 16, 7:12 pm ET

CIUDAD JUAREZ, Mexico – Confused hit men may have gone to the wrong party, the FBI said Tuesday as it cast doubt on fears that the slaying of three people with ties to the U.S. consulate shows that Mexican drug cartels have launched an offensive against U.S. government employees.

Gunmen chased two white SUVs from the birthday party of a consulate employee’s child on Saturday and opened fire as horrified relatives screamed. The two near-simultaneous attacks left three adults dead and at least two children wounded.

The working theory, described to the AP by FBI spokeswoman Andrea Simmons, drives home just how dangerous Ciudad Juarez has become — and just how vulnerable those who live and work there can be, despite the Mexican government’s claims that most victims are drug smugglers.

According to the line of investigation, the assailants — believed to be aligned with the Juarez drug cartel — may have been ordered to attack a white SUV leaving a party and mistakenly went to the “Barquito de Papel,” which puts on children’s parties and whose name means “Paper Boat.”

“We don’t have any information that these folks were directly targeted because of their employment by the U.S. government or their U.S. citizenship,” Simmons said by phone from El Paso, just across the Rio Grande from Ciudad Juarez.

Experts as well cast doubt on the idea that drug cartels would be interested in turning their guns on U.S. government employees.

“A systematic, nationwide shift to the use of such tactics would work against drug traffickers’ interests,” said Allyson Benton, an analyst with the Eurasia Group. “It would dramatically raise the level of both Mexican and U.S. governmental involvement in the fight against organized crime.”

The wife of one of the victims, a 13-year employee of the consulate named Hilda, described to a friend how she watched in horror as hit men pumped bullets into her SUV with her husband and children inside. She had been trailing her family in a second car when the attack occurred.

She leapt screaming from her car, begging the men to stop and telling them her children — ages 2, 4 and 7 — were inside, the friend said. But they continued until her husband, Jorge Alberto Salcido, was covered in blood, slumped dead behind the steering wheel.

All three children in the car were treated for injuries and released — the older children grazed by bullets and the youngest hit by shards of glass, the friend said. His account differed from authorities who said two children were in the car.

The friend asked not to be named, for fear of his own safety. Mexican authorities declined to comment on the discrepancy.

The other attack killed Arthur H. Redelfs, 34, and his wife, Lesley A. Enriquez, 35, a consulate employee who was four months pregnant. They too had just left the party at the lemon-yellow business, decorated with drawings of children’s blocks in a neighborhood of two-story homes with manicured lawns.

Their 7-month-old daughter watched the slayings from the back seat, where she was strapped into a car seat. Police found her wailing, her parents dead from gunshots.

President Felipe Calderon, Foreign Relations Secretary Patricia Espinosa and U.S. Ambassador Carlos Pascual flew together to Ciudad Juarez to express their outrage on Tuesday. Calderon, whose trip had been planned prior to the attacks, announced an expansion of the country’s welfare program.

The consulate was closed Tuesday to mourn for the dead, but the officials were expected to meet with employees there.

Amid the tension, a bomb threat forced the evacuation of about 3,000 people at the Autonomous University of Ciudad Juarez. No bomb was found.

Already, the city is one of the world’s deadliest places. More than 2,600 people were killed last year, and another 500 so far this year — all in a city of 1.3 million.

The attacks on Saturday were the second time this year that gunmen shocked Mexico by opening fire on a Ciudad Juarez party. In February, gunmen killed 15 youths in what relatives said was a case of mistaken identity. State officials, who have made several arrests in the attack, maintain someone at the party was targeted but have not said who.

People who knew Saturday’s victims said they had nothing to do with drugs or crime.

Salcido was production manager at a Ciudad Juarez assembly plant of the Dallas-based information technology and outsourcing company, Affiliated Computer Services Inc.

The family friend said he had changed his home, work and mobile phone numbers recently after receiving calls from someone trying to extort money from him. Even so, Salcido, who led a local church choir, brushed off the threats, which are common in the crime-plagued city.

Enriquez was the sole consular employee killed in the attack. No stranger to Mexico’s violence, her work entailed helping U.S. citizens recover the remains of loved ones who had died in Mexico. Her husband worked as a jail guard in El Paso.

Members of both families declined to speak with reporters on Tuesday. Zonia Rivas, a nurse practitioner who lives across the street from Enriquez and Redelfs, said the couple would take walks around the neighborhood with their baby. Redelfs would clean his wife’s car every Saturday afternoon, a detail Rivas admired.

Rivas said she spoke to Enriquez just before she returned to work from maternity leave, and expressed concern that Enriquez was taking a risk by returning to the violent city.

“I just said, ‘Is there any way you can quit?’ and she said no,” Rivas said.

___

Martha Mendoza reported from Mexico City. AP writers Alicia Caldwell in El Paso, Texas, and Matthew Lee in Washington also contributed to this report.

 

Maquilas dodge THE VIOLENCE:

Juárez plants hurt more by recession than drug violence

By Vic Kolenc / El Paso Times

Posted: 03/07/2010 12:00:00 AM MST

EL PASO — The drug war in Juárez has prompted an estimated 10,000 small businesses to close or move across the border to Texas. But it has not slowed Juárez’s biggest economic engine — the maquiladoras, or manufacturing plants, largely operated by international corporations.

TECMA: NAFTA in Motion Since 1986

Interview with K. Alan Russell By Arturo Chretín – Juarez-El Paso Now Magazine.  January 2010

Tecma provides virtually everything a company in Mexico needs when looking to outsource or manufacture off-shore without the inherent hurdles and hassles. This is done at tremendous savings with 100% control in the client’s hands – guaranteed.

K. Alan Russell is Co-Founder and President of The TECMA Group headquartered in El Paso, Tex. The firm has a subsidiary in Mexico with locations in Ciudad Juarez, Camargo, Chihuahua, Torreon, Coahuila and Leon, Guanajuato. He was interviewed by Juarez El Paso NOW.

 “What sets Tecma apart from its competitors” he explained, “…was that it began more than 15 years ago and was the result of the industrial real estate industry. The market for industrial buildings at that time,” he continued, “was for the most part built to suit. In other words there were no spec-buildings being built and very little available vacancy.” 

 During this time, according to Mr. Russell, Tecma did not have the ability to develop industrial sites or construct facilities for their clients.  “In order to compete,” he explained, “our Sheltered Services had to be much better than the advantaged builders and developers that also offered shelter services.” 

 In today’s market with a large amount of real estate to choose from, Tecma has the advantage. 

 The Company has grown since its conception over 20 years ago and so has the Tecma philosophy. As co-founder of the Company, Russell sees it and explains: “Experience is always the best teacher. We have learned that our true competition is not China, it is not another region or another Shelter Provider.” 

“Our real competition” Mr. Russell continues, “is a company coming to Mexico and doing their own Integration into the country and then running Stand-Alone without us.”  

Tecma accepts all operational liability in Mexico for its clients; they can facilitate the lowest employee turnover. The Company can also put 25 years of experience on the table in all disciplines.  This is what is expected of them. “The real test is that we can do this,” said Russell, “at a cost that is competitive to what a client, any client, can do for themselves. And we understand this at Tecma and use our economies of scale to bring this advantage to our clients.”

Tecma is really not diverse at all. They are extremely focused on their core competency. Even though their clients range in industries from textiles, automotive, electronics, plastics, magnetics, fiber optics, pet products and even fire arms, Tecma’s product quality remains the same and Tecma’s clients are able to see the border as an opportunity rather than a barrier.

What does it mean to operate under the Tecma Umbrella? It means that the Company’s professional services facilitate working in Mexico while boosting their clients’ productivity and profitability. K. Alan Russell pointed this out: “First, there are the integration services. This is the step where we help our client pick the correct region, the correct city and then the correct site within the city decided on. We assist with cost analyses, budgeting, construction or lease negotiations and other front-end requirements which all business transfers require.” 

“Once established,” Russell said as he elaborated on the Tecma Umbrella, “then the sheltered services begin. This is where the symbol of the Umbrella becomes significant. The Umbrella represents the shelter which protects our clients from the many complexities and distractions of operating a manufacturing plant in Mexico. Tecma also provides independent cafeteria, payroll and Mexican accounting services for clients in their own stand-alone operations.”

Tecma is a Company that bases their success on their qualified labor force. In this way, K. Alan Russell, who is the President of the Company commented: “We believe that all companies are valued by the stability, loyalty and quality of their labor force. It just so happens that these core principles are the foundation of Tecma´s services. Training alone will not do it. You must really care a lot and take the culture, emotions and opinions of your workforce into account.” 

The year 2010 is just beginning and the expectations for the industry as well as for Tecma are relying on the improvement over the situation we just lived through in 2009.

Mr. Russell also had this to say: “The unfortunate part of the down-turn was the required lay-offs of some of our loyal and valued family members. However, if the past 60 days is a good indicator of what 2010 will be like, we are going to need these people back.  We believe that with a waiting list of good people ready to return to work, that Tecma has the experienced surge capacity to seize the moment as the economy turns around.  We will emerge stronger at the end of 2010 than ever before.”

“Never in our recent history,” according to Russell, “have all the cards been stacked so much in favor of manufacturing in Mexico.” The Co-Founder and CEO of The TECMA Group concluded: “As the market turns, the Mexico plants will be the first to deliver on that demand. Mexico has the facilities available and an experienced workforce to address this demand. Those individuals and companies with experience in the Maquila Industry will see the greatest opportunities of our carriers unfold over the next five years.”

Drug war: It’s U.S. problem too

Too many guns fuel violence, Juárez mayor José Reyes Ferriz says.

By Stephanie Sanchez / El Paso Times

Posted: 12/26/2009 12:00:00 AM MST

JUAREZ — Most big-city mayors live in a pressure cooker, but none faces the duress of Juárez’s elected leader, José Reyes Ferriz.

Runaway violence has damaged Juárez’s once-thriving economy. Its neighborhoods have turned from vibrant to mournful. And its streets have been stained with the blood of 2,580 people, all of them homicide victims of 2009. In contrast, El Paso, half the size of Juárez, has had 12 homicides this year.

Reyes, 48, a man of medium height with a soft voice, stands at the forefront of the government’s attempt to stop the violence and save the city.

Once a trade attorney, Reyes studied international law at the University of Notre Dame. He had been in office for two months when crime rampages became the norm in his city of 1.5 million.

Killers armed with assault rifles started attacking their victims in daylight. Messages threatening the lives of police officers and public officials were left scattered throughout Juárez.

Chihuahua police Cmdr. Fernando Lozano Sandoval was one of the first high-ranking officers to be wounded in the war between rival gangs — reportedly the Juárez and Sinaloa cartels. Gunmen ambushed him as he drove along a Juárez street in January 2008.

Sandoval survived the attack. Others haven’t been so fortunate.

Police began to log the deaths — sometimes a dozen a day — until the toll reached more than 1,600 people in 2008. In 2009, against the conventional thinking that the worst was over, Juárez became even bloodier.

In an interview this week in his spacious, wood-paneled office at City Hall, Reyes called the gangland violence a problem for both Mexico and the United States.

“The U.S. needs to get involved. But they need to get involved on the U.S. side,” said Reyes, who speaks flawless English.

The American government, he said, should enforce existing gun laws to help Mexico, especially Juárez.

At the start of President Barack Obama’s term, he sent agents of the Bureau of Alcohol, Tobacco, Firearms and Explosives to El Paso to investigate the type of people purchasing weapons, Reyes said. Reyes called the findings a shock and said they should have been a wake-up call.

“They found a woman who was receiving food stamps. She bought 10 AR-15s and AK-47s. What is a woman who gets food stamps doing buying 10 AR-15s and AK-47s, except participating in a conspiracy to send firearms illegally into Mexico,” he said. “The U.S. needs to prosecute those cases. It’s not a matter of going against the Second Amendment. It’s a matter of prosecuting those who are conspiring to send arms into Mexico.”

Reyes, whose office overlooks Downtown El Paso and downtown Juárez, said the United States needs to stop the flow of drug money from crossing into Mexico. And, he said, the annual 100,000 undocumented immigrants — including 7,000 deported felons — should be sent directly to Mexico City instead of being left at border towns.

“That (deportation) policy by the U.S. government is fueling the violence in Juárez,” Reyes said. “They can’t send them to Juárez and not expect us to have a problem.”

Reyes, accompanied by bodyguards when he walked from council chambers to his office, acknowledged that Juárez is one of the cities with the most murders in the world. But, he said, that does not mean it’s a dangerous place for people who steer clear of drug smuggling and other crimes.

The daily news of people being killed execution-style is hard for Reyes to take.

“It’s very difficult. We try to stop it. We try to find a way to solve it,” Reyes said. “Every time I see or get the police report — I get the police report immediately after something happens — it’s extremely difficult. The fact that the numbers are so large doesn’t make it any easier.”

Reyes said one of the steps his administration took to help quell the bloodshed was to clean up a corrupt police force.

In the past two years, Juárez has fired 800 people from its police department. Of those, a little more than 330 were ousted for lack of trust.

Now the city is patrolled by 3,000 municipal police officers, 200 state officers, 1,800 federal officers and 6,200 Mexican soldiers, Reyes said.

The Mexican army, he said, was sent to Juárez to help contain crime while the police force was rebuilt with trustworthy officers. Until recently, the military’s role was never to stop the homicides, he said.

“We knew we needed to do a cleanup. … We needed a force to help us, not as police officers but as a containment for us. … I think they (soldiers) have been successful because we were able to do that.”

Now, four of every five officers on the streets were hired by Reyes’ administration. They were trained at the Mexican Army’s headquarters in Delicias, Chihuahua, which is about six hours from Juárez. They are the only officers in the country authorized to carry automatic weapons.

Because the police force is stronger, Reyes said, the role of the military can now become to help lower crime rates. Once that happens, he plans to start withdrawing soldiers.

Reyes said his administration has also been getting advice from Inter-American Development Bank experts about social programs. The experts, he said, are based in Washington, D.C., and help design programs to enhance opportunities in education and employment.

Overall, Reyes said, he is optimistic about 2010. He said he foresees a decline in murders and other crime.

“We have the help of the federal government, the help of the state government,” he said. “We have gotten past the problems of 2009. I think we’re at a turning point. In 2010, we’ll see much better things.”

Stephanie Sanchez may be reached at ssanchez@elpasotimes.com; 915-546-6137.

EL PASO, TEXAS – Today CQ Press, who is now the publisher of the City Crime Rankings Safest Cities/Most Dangerous Cities has released their latest rankings.

El Paso has been ranked the 2nd Safest City in America of cities with a population of more than 500,000. El Paso was ranked as 3rd Safest in last year’s ranking. This years ranking are based on the 2008 U.C.R. crime statistics as well as other considerations.

For more information on these rankings and the considerations used by CQ Press, please visit their website at: http://os.cqpress.com/citycrime/2009/CityCrime2009.html

CQ Press is now the publisher for Morgan Quitno’s study on city rankings.

During the month of October, 2009, International Manufacturing Solutions, the Mexican subsidiary of the El Paso-based Tecma Group, was awarded by the Secretary of Tourism (SECTUR), the prestigious award “Distintivo H” for the quality of service in the various cafeterias which provide meals to its employees.  This program is a strategic element of the Secretariat of Tourism that has a direct impact on the tourist promotion of Mexico to the world.  This program takes into consideration the quality and the hygiene measures taken in the preparation of the meals.

The purposes of this program are:  To decrease the incidence of diseases transmitted by food and to enhance the international image of Mexico in the prevention and control of diseases transmitted through contaminated food.  Establishments that meet the standards of this hygiene program get the “Distintivo H”, a recognition presented by SECTUR and endorsed by the Mexican Ministry of Public Health.

This program establishes the standards dictated by the Ministry of Public Health as well as recommendations provided by the World Health Organization (WHO).  These norms assist service providers to improve the quality of hygiene of food and beverages as they are stored, transported, prepared and served.  In addition, the program assists establishments in the verification of operations performed by their suppliers and designed for the protection of food during the purchase, receipt, storage, thawing, cooling, cooking and preservation.

“I am very proud that our cafeterias have been honored with this significant award.  This is one more step towards our commitment to provide the highest standards of quality of service to our employees”, K. Alan Russell, Tecma’s President said.

For additional information contact Oscar Parra at Oscar @ Tecma.com