Archive for the ‘General Comments’ Category

 

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.

 

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.

MARKETPLACE – American Public Radio

By Jeff Tyler Marketplace, Wednesday, July 27, 2011

The Mexican city of Juarez has problems with killings and drug wars, but that hasn’t stopped American businesses creating thousands of jobs there.

Kai Ryssdal: Here’s some good labor news for once in a good long while. So far this year American companies have created more than 10,000 jobs in one single city: Juarez, Mexico.

Juarez is — because of drug violence there — widely considered one of the most dangerous places on the planet. But as Marketplace’s Jeff Tyler reports, the body count hasn’t stopped U.S. companies.

Jeff Tyler: Business is down for Mexican retailers in Juarez as criminal gangs extort protection money from shop owners. But other industries have been spared.

Bob Cook: The organized crime element has not directly targeted legitimate manufacturing and distribution industries.

Bob Cook is president of the El Paso Regional Economic Development Corporation, which recruits new businesses to El Paso and Juarez, just across the border.

Cook: We’ve created more than 10,000 new jobs in the city of Juarez since the beginning of this year, and almost 30,000 in the last two years.

Why Juarez? Location, location, location, says Tom Fullerton, an economics professor at the University of Texas at El Paso.

Tom Fullerton: The attractive feature of investing in Mexico is proximity, and the presence of a fairly highly trained, export-oriented manufacturing labor force.

Some companies are spending more on security. But not all.

Alan Russell: We have not increased costs at all.

Alan Russell is president of The Tecma Group, which helps U.S. companies manufacture goods in Mexico.

Russell: We don’t have a single weapon on any Tecma property. So it’s not an environment where we’re having to guard the gates and guard the people inside the building.

Russell says business has never been better.

Russell: We will have a record year in 2011.

Some workers on the U.S. side will benefit as well. Analysts estimate that for every 10 jobs created in Juarez, one new job is created in El Paso.

I’m Jeff Tyler for Marketplace.

 

By RANDAL C. ARCHIBOLD

Published: July 10, 2011

MATAMOROS, Mexico — When the latest bloody headlines from the drug war in Mexico reach headquarters in New York, Ken Chandler, the manager of an American electronics manufacturing plant here, jumps on the phone.

He is not begging to come home. He is begging to stay.

“We try to put them at ease, to say it is not time to pack up,” said Mr. Chandler, who oversees the company’s operations in this border city, where the military arrived last week to help purge drug cartel members from the police department.

Not that his employer, Spellman High Voltage, needs much assurance. Like a crop of other manufacturers at the border, including six companies in this city alone, Spellman is expanding its operations, with a new plant under construction after making a calculation that offers one of the starker paradoxes of these violent days in Mexico.

Despite the bleak outlook the drug war summons, the Mexican economy is humming along, not without warning signs, but growing considerably faster than that of the United States.

Even as drug organizations battle for turf around them, more TV sets are being assembled, car parts boxed up and electronic widgets soldered together in the large manufacturing plants here known as maquiladoras. The result is a boomlet in jobs in some of Mexico’s hardest-hit cities, a bright spot in an otherwise bleak stream of shootouts, departing small businesses and fear of random death.

Over all, jobs in Mexico’s manufacturing sector increased 8.2 percent to 1.8 million as of January, the most recent figures available, driven mostly by what Mexican officials called regaining health in the auto and electronics industries, the engine of the economy along the border. Even Ciudad Juárez, which has both the highest level of violence and the largest number of maquiladoras, added 1.3 percent more jobs, to 176,824.

Mostly American-owned and in border states, the plants import raw materials duty free and export assembled products, lowering the cost of goods in the United States and providing jobs that pay more than the Mexican average (typically $8 to $16 per day on the assembly line) but a lot less than American wages.

Some of the new or expanding plants come at the expense of plant closings in the United States. Electrolux, which makes washers, dryers and other home products, closed a plant in 2009 in Iowa but opened one in Juárez last month that is expected to employ 400 people.

Others are from investors farther afield. Foxconn, a Taiwanese firm that makes iPhones, Dell computers and other electronics, is one of several Asian companies taking root. It opened a plant in Juárez last summer. Down the coast from here, Posco, a Korean steel manufacturer, has announced plans to expand its operations with a second plant that will employ 300 people by 2013. Several other companies plan to built or expand in other states as well.

The gains have not made up for losses during the global recession; many plants closed or have shed jobs for good, focusing on making their operations more efficient through automation and other measures, analysts said.

Still, border towns are showing some of their biggest signs of economic life in months. Over all, the Mexican economy, the second largest in Latin America after Brazil, grew 5.5 percent last year, its fastest pace in a decade, and is expected to grow 4.5 percent this year, driven largely by manufacturing as well as internal growth from an expanding middle class. The American economy, by contrast, is expected to grow between 2.7 percent and 2.9 percent in 2011, the Federal Reserve projected late last month.

Economists say Mexico’s growth would be even stronger without the cartel violence, which in the last five years has left more than 40,000 people dead, according to the count by national newspapers.

And given how central the American economy is to its welfare, Mexico could suffer if the recovery in the United States does not pick up speed. While trade with the United States hit a record last year of nearly $395 billion, foreign investment has lagged, suggesting that much of the job and economic growth is depending on existing businesses expanding or restarting production lines that had been waylaid by the recession.

The Bank of Mexico reports foreign investment was $17.7 billion last year, far off pre-recession levels of $25 billion and fed in good measure by a single transaction, the purchase of a one of the country’s largest beer companies by Heineken.

Monterrey, the country’s business and industrial hub, has exploded with violence in the past year, though even there, in the suburbs, some plants have expanded or announced plans to open. For better or worse, the plants are at once part of and apart from the communities that surround them, protected by tall fences, armed guards and cameras galore.

The violence has largely spared the plants, though workers have been caught up in it. Last fall, gunmen apparently looking for a rival fired on a bus carrying maquiladora workers near Ciudad Juárez, killing four people. Higher-paid supervisors and managers, American and Mexican, tend to commute from the American side of the border.

Security costs are rising to protect property and shipments, and safety remains the top concern expressed by potential investors, said Bob Cook, the president of the El Paso Regional Economic Development Commission, which helps recruit businesses to Ciudad Juárez, Mexico’s most violent city.

“But we are still working with more companies now than we did three years ago,” he said.

Business is business, and the proximity to the United States is hard to pass up. The rising cost of labor, transportation and the renminbi have made some companies reconsider Mexico instead of China, he contended. Despite several murders a day, trade between Juárez and Texas rose 47 percent last year to $71.1 billion, he said.

“Central location, great infrastructure, suppliers and labor pool,” he said. “Those things haven’t been tampered with by organized crime.”

Industry promoters argue that the additional jobs may help dampen crime, with more people working and able to support their families. But cities that have benefited from manufacturing have often been slow to help workers and their families.

“The maquiladoras may be growing again, but there is still not much of an effort to address the social needs of the workers and their families outside the plants,” said Cirila Quintero, a sociologist at El Colegio de la Frontera Norte, a research group based in Tijuana, Mexico. “What investment has been made in schools and social centers has been minimal. The governments say they don’t have money and the plants say they are there to create jobs and help industry.”

But workers like Rosalia Carrasco, 41, who has worked at Spellman here for two months, said they are relieved to have steady work, with benefits. “I am hoping to improve myself and get ahead, like anybody else,” she said.

Loren Skeist, the president of Spellman, said he frets over security. The plant took additional safety measures after robbers stole an automatic teller machine last year. A few clients have refused to visit the plant, citing the violence. (The Mexican military this month moved in to police the streets.)

But over all he embraces Matamoros as a smart investment.

“Relatively speaking it is reasonably safe,” he said by phone from Hauppauge, N.Y. “There are compelling reasons, if you are willing to do it with reasonable security, to want to be in Mexico.”

A version of this article appeared in print on July 11, 2011, on page A1 of the New York edition with the headline: Despite Violence, Mexico Plants Hum at Border.

By Diana Washington Valdez \ El Paso Times

Posted: 03/03/2011 12:00:00 AM MST

 

The Texas Department of Transportation is nearly finished with a long-awaited study of El Paso’s international bridges.

The “El Paso Regional Ports of Entry Operations Plan” will provide the first comprehensive look at the border crossings in the region.

El Paso Mayor John Cook said the waits at the bridges was one of the main drivers for the study but not the only one.

“We (at the city) thought that while we are waiting for another port of entry, and the fact that it takes a long time to get a presidential permit for one, we could look at how the existing infrastructure could be made more efficient,” Cook said. “I’m supposed to learn about what’s in the study at a meeting March 21.”

TxDOT officials said they expect to discuss the plan with city officials later this month, to conduct a public hearing in April and to finish the entire process by May.

Cook said El Pasoans in the business and maquiladora industry are eager to know how the study might affect them, and whether it recommends new tolls or changes in traffic flows.

El Paso city officials said the study they commissioned is timely and important because border trade is a major economic engine for the region.

Mark Tomlinson, TxDOT director project for the study, said the work did not cost the city anything because state officials had already planned to analyze border traffic. TxDOT worked with consultants at Cambridge Systematics Inc. and the University of Texas at El Paso.

“The purpose of the (study) is to review all existing ports of entry within the El Paso region, analyze how they currently function, and develop recommendations to improve cross-border mobility,” Tomlinson said.

The study covers all existing border crossings — from Santa Teresa, N.M., to Tornillo, Texas.

At a recent meeting of the Central Business Association, the mayor said one of the challenges for the study was how to measure the waits at the international bridges.

Tomlinson said the TxDOT study measured waits according to when commuters first got in line to cross the international bridges.

This is different from how Customs and Border Protection calculates wait times.

“CBP establishes posted wait times by taking a sample from several border-crossers every hour at each location,” said Customs and Border Protection spokes man Roger Maier. “We report what travelers tell us.”

CBP reported the following delays for passenger vehicles at 5 p.m. Wednesday at three international bridges:

Bridge of the Americas: 52-minute delay with 12 of 14 lanes open.

Paso del Norte: 35-minute delay with four of 11 lanes open.

Zaragoza: five-minute delay with six of 12 lanes open.

A survey conducted for the TxDOT study indicated that 51 percent of border-crossers said they typically waited one to two hours, and 13 percent said they waited two hours or more. At least 49 percent of those surveyed said the current wait times were unacceptable.

The survey also found that 88 percent of respondents favored improving current structures before building a new international bridge.

The survey also shows that the Bridge of Americas is the crossing of choice for a majority of border-crossers, and that most people cross over the bridge nearest their starting point or destination, regardless of whether it’s a free or toll bridge.

For the study, TxDOT’s consultant Cambridge Systematics Inc. collected 1,000 telephone and online surveys of people in El Paso, Doña Ana County and Juárez. TxDOT officials also met with members of the public and of local business and international business sectors.

The study included extensive discussions with officials and other stakeholders in Mexico.

K. Alan Russell, president of the Tecma Group, said he and other companies that do business on the border are hoping that TxDOT’s efforts won’t result in just another study that doesn’t lead to action.

“Our (bridges) are not designed for the amount and type of traffic they’re handling, and it’s only going to get worse with time,” Russell said. “On the positive side, our economic rebound is exceeding the national rebound. Our commerce with Mexico has become attractive again, and for some companies it has become a better option than China.”

Russell, who was on the Model Ports Committee, said the short-term solution to traffic congestion at the border is better traffic management.

“We have enough capacity for the short term, but we need to do something about our traffic-management problem,” he said.

TxDOT spokeswoman Blanca Del Valle said the public still has time to submit views on the international bridges to the state.

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