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.

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.

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.

Workers at a maquiladora assembly plant in Juarez, across the border from El Paso, Texas, make mannequins. While other parts of Mexico are moving slowly out of the recent recession, the maquiladoras have been rapidly adding jobs and boosting exports to record levels.

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.

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.

This is part of an occasional series looking at U.S.-Mexico trade and the economy along the Texas-Mexico border.

EL PASO ? Freight-laden forklifts zip through the city’s warehouses, some manufacturers run extra shifts to keep up with demand, and trucks idle in queues at the Mexican border waiting to cross international bridges. This border metropolis is back.

After a debilitating recession in 2009 that led to layoffs and business failures on both sides of the border, companies that make parts in the greater El Paso region are working hard to keep up with sales from Juarez, where automobiles, electronics and other goods are assembled.

The irony is that today’s surge is happening amidst bloody battles as drug cartels fight each other and the Mexican government. Juarez, which borders with El Paso, seems like ground zero in this national drug war.

“Our business is absolutely booming right now,” said Amy Noyes, vice president of operations for J.H. Rose Logistics, a transportation company that moves unfinished and assembled goods between the U.S. and Mexico. “We’re going to have a record year.”

Business is going so well that the 64,000-square-foot facility may no longer be big enough.

“I’m quoting a lot of business. If we get it, I’m full, then I’m going to expand,” Noyes said as workers unloaded rolls of blue vinyl from a container at the warehouse in Santa Teresa, N.M., about 14 miles northwest of downtown El Paso. The Chinese vinyl will be used for automobile seats manufactured in Juarez.
Today’s rebound is courtesy of a booming maquiladora business in neighboring Juarez, where workers are churning out parts for everything from automobiles to airplanes as well as assembling laptops and other consumer goods.

“Whatever happens to that industry across the border has significant impacts here,” said Roberto Coronado, economist with the El Paso branch of the Federal Reserve Bank of Dallas. “Both cities complement each other.”

Like many other border communities, El Paso and Juarez are closely intertwined. When manufacturing plummeted in Juarez in 2009, so did plant production in El Paso. Business at El Paso transportation companies also suffered as trucks didn’t need to shuttle merchandise back and forth across the border.

“The maquiladora industry is like a harbinger for the U.S. economy,” said Jerry Pacheco, executive director of the New Mexico Small Business Development Center Network. Factories and warehouses in the desert of southwestern New Mexico, near El Paso, are also benefiting from the growing maquila production.

Leader in growth

U.S. trade with Mexico is booming now. But no other Texas port of entry’s imports and exports grew by a larger percentage than El Paso’s did last year.

El Paso’s trade with Mexico increased last year to $69 billion, compared with $47 billion in 2009, according to Customs and Border Protection data. That’s higher than the $50 billion traded in 2008.

By comparison, Houston’s trade with Mexico increased to $22 billion in 2010, compared with $16 billion in 2009. Despite the headlines about crime in Juarez, that hasn’t driven manufacturing plants out, locals insisted.

“We are not aware of a single company in Juarez that has left because of the violence,” said Bob Cook, president of El Paso Regional Economic Development Corp.

Instead, those that were forced to shutter did so because of the slowdown in the global economy, and more so, the U.S. economy, he said.

Took message to Asia

Cook and other El Paso and Juarez leaders spent several days in March traveling through Asian cities to extol the virtues of the region to companies interested in opening international plants.

Not many manufacturers need much convincing to come to the greater El Paso and Juarez region, some say.

“Companies are coming and knocking on the door more than I’m recruiting,” said K. Alan Russell, president of  Tecma, an El Paso company that helps others run their maquila operations in Mexico, and he’s seeing more companies eager to open plants in Juarez.

But many do believe that had it not been for the shoot outs in Juarez, more businesses would have set up shop in the Mexican border city.

“As brisk and healthy as the economy in El Paso is, it would have been twice or three times as much if not for the violence,” said Jerry Shapiro, plant manager of Eagle Brass’ southwest division in El Paso. “I think there are more companies who would move to Juarez. There are plants that definitely didn’t move here.”

Staying out of Juarez

Until the violence started, Shapiro traveled to Juarez frequently to visit customers interested in buying coils of metal used for automobile, appliance and medical parts, among other things. After Juarez became more dangerous, he and friends would travel together to make sales calls. He stopped even doing that after friends witnessed gunfire.

It’s a sentiment many in El Paso echo. “I used to take customers to entertain them. I still do it, but now in El Paso, not on the Juarez side,” said Guillermo Lopez, plant manager for Monarch Litho, a printing company in Santa Teresa, a short drive from El Paso.

Russell said criminals have not targeted the maquilas. “Our factories have nothing of value for a criminal influence to want to infiltrate,” said Russell, whose clients manufacture everything from dog toys to store mannequins. “In 2008, we had a few robberies where armed men came into several factories. There wasn’t anything of value in there,” Russell said. “Since then, we haven’t had any robberies.”

However, plenty of maquilas are investing in armored cars to protect their executives and foreign visitors.

Only with armor

Adolfo Bernal, who runs the El Paso offices of Tijuana-based Car Armoring, said many people won’t go into Juarez unless they travel in an armored car.

“They’re expecting to drive into a war zone,” said Bernal, whose company sold 14 armored vehicles in the first three months of the year. His expectation was to sell 18 vehicles in the entire year.

Many of the Juarez businesses hurt by the violence are those that depend on tourism, such as restaurants and dentists, said Robert Queen, director of the U.S. Department of Commerce’s Export Assistance Center in El Paso.

Working to stop violence

Juarez government officials vow they are working to control the violence so it’s no longer an issue. In the meantime, they try to carry on business as usual.

Next year, Juarez will open a maquila-style slaughterhouse, for example, said Soledad Maynez, director of the Juarez Economic Development Department, who is upbeat about the city’s economic future.

You can tell that Alan Russell, president and CEO of outsourcing manufacturing firm TECMA Group, was a commercial airline pilot once upon a time.

His demeanor is cool and undisturbed, his words are clear and measured. Most importantly, he knows what to do when there’s turbulence.

TECMA provides facilities, workforce, cross-border transportation and logistics support for companies that operate in Mexico. The company operates 15 plants in Mexico with more than 30 clients, ranging from Helen of Troy and Fisher Price to Christmas ornament manufacturers.

In the last three years, TECMA’s business took a dip because of the global economic crisis and the violence in Juárez. But since the middle of 2009, the company has been recovering lost altitude.

And while the flight is still bumpy, making some nervous about the future of manufacturing, Russell is riding the thunderstorm with a steady grip and not a small dose of optimism.

Despite the bloody war for drug profits in Juárez, Russell is confident that the maquiladora sector is not a target of organized crime, and the city can still provide a safe environment for business.

The region still attracts and retains investment, he says, and the pros – like Juárez’s proximity to the United States, plenty of industrial space and a trained and readily available workforce – still outweigh the cons.

What’s more, Russell is confident that the worst part is over and that the industry in the region is ready to take off. As Mexico continues to gain ground on China as a source of low-cost labor, Russell predicts favorable winds for the country’s manufacturing sector.

Russell sat down with El Paso Inc. to talk about Mexico versus China, vintage biplanes, weathering the recession and why business opportunities in Juárez still trump security concerns.

Q: Did all your plants remain open during 2008 and 2009, the toughest years of the recession?
We did not close any plants, but production was reduced considerably in some of them. We did close one in ‘09, but we reopened that same plant in ‘10.

The automotive sector took a heavier hit than most categories of the economy, and since Juárez is a heavy automotive area, we had a number of clients get in trouble. From ‘08 through ‘09, we had seven out of 32 clients file bankruptcy or sell or consolidate in some form.

But some of that resulted in us getting even larger, stronger and better clients, because when the economy falls, it creates consolidation. And we’re starting to see the automotive sector coming back on.

Q: What did that mean for your company?
2009 was pretty static. It was kind of the heart of the recession, and clients weren’t making a move. A lot of them were visiting, exploring and talking, but nobody was making decisions.

2010 was very active and we started seeing decisions being made. Out of the 50 weeks of active business, we probably exchanged conferences with 60 viable clients, so about an average of better than one a week. Out of those we started five new operations in 2010, probably the most we’ve ever done in one year.

Q: In the last few months of 2010, 14 plants closed in Juárez.
Certainly 14 plants closing is not good news, but it’s part of the great recession. This is the worst one that we have seen in modern history, so some of those plants probably closed as a result of worldwide restructuring. And some of that was that they just didn’t have enough projection to justify keeping the plant open. But I would also anticipate that those companies will be back as the economy turns.

Q: How were revenues in 2010 compared to previous years?
We started down in 2008, probably 30 percent. Our goal was to be back to 2008’s equivalent by the end of 2010. We fell just short of that. I believe that by the end of the first quarter of 2011, we will be back at the same pace we had at the end of 2008.

Q: And employment?
We went from a high in 2008 of about 4,000 employees, to a little bit below 3,000 during the middle of ‘09, and then we started back up again, and now we are just short of 4,000 again. We started hiring again in June 2009 and we have reached an average of hiring 20 people a week since then.

Q: What’s your turnover rate?
We boast the lowest employee turnover of anyone in the industry. I don’t mean just in our contract manufacturing or shelter industry, but in the maquila industry. We had about 1.1 percent per month employee turnover for 2010.

Q: Do you have plans to expand?
We anticipate that we’ll start up an entirely new plant this year, just to handle our existing clients and production. Based on the amount of inquiries and flow that we’ve had, I would expect that we’ll start a second new plant this year with new clients.

We are busier responding to inquiries from new clients right now than we have been at any other time in the 25-year history of our company.

Q: You’ve said that those who survived the last two years are going to see the greatest opportunities of their lives in the next five years. How will those opportunities materialize?
I’ve been doing this for 25 years and that has given me a lot of experience and a lot of ways to see how all the stars have lined up.

And with the recovery of the economy, with the advantages of Mexico over the other low-cost options such as China, the attitude of the public and businesses to stay in North America to protect intellectual property rights, as well as the many advantages of being here, I see it as a launching pad.

We have 8-million square feet of empty manufacturing space in Juárez, and some say that’s terrible, but look at the opportunities we have to fill that space. It’s there and it’s ready. Our industry laid off 60,000 to 80,000 people; all those people are ready to get back to work.

We tell our clients everyday that whatever talent they need, whether it’s plastic injection molding, engineering for welding or precision machining, there is a talent pool in Juárez that can fill that slot.

Q: What advantages does Mexico have over China?
For the first time in modern history, China is not your obvious answer for your low-cost initiative. Mexico tips the scale and actually provides a lower-cost advantage for many product categories than China does.

The North American Trade Agreement provides favorable conditions between the United States, Mexico and Canada, which gives us an advantage over China when it comes to tariffs. The minimum wage is also up in China because of world pressure.

The Chinese are becoming a consumer nation. The currency exchange between the United States and China is causing things from China to be more expensive. And all of those things are the opposite for Mexico.

The peso-dollar exchange rate is very attractive now, compared to China. The minimum wages have remained stable. When it comes to transportation, what we produce today can be on a dock in Denver tomorrow morning.

And the amount of available employment is plentiful, so the advantages of working in Mexico keep getting greater all the time.

Q: What kind of precautions do you take when you go to Juárez?
I’m probably there three days a week. I have offices on both sides of the border and we are not coy about security issues. The data is there that says you need to take precautions.

First we go through training, and we do it frequently, to learn how to handle ourselves in the event we encounter an act of violence, whether it be a carjacking, getting caught in a crossfire, or just being victims of a robbery at the plant.

The idea is to walk away, survive and continue with our lives, so we don’t want anything in our cars that we aren’t willing to walk away from. We don’t want to drive a car we are not willing to walk away from. But how do you conduct yourself when someone comes up to you at a stoplight and wants to steal your car?

You should rehearse what you’re going to do. You answer “yes sir, no sir,” you keep your head down and you walk away as rapidly as possible. And you make sure you don’t have any material items that are worth risking your life about, period.

Q: Is it common now for Americans who work at maquiladoras to work part-time in El Paso?
It is. A lot of those executives have taken offices in El Paso, as well as a lot of Mexican businessmen, attorneys and accountants who have offices on both sides and spent most of their time in their El Paso offices.

We still go to meetings in Juárez, but we do our socializing on the U.S. side of the border. We cross back over before it gets too late, so we’re not exposing ourselves to a greater degree than is necessary.

Q: What’s it like working in Juárez?
There are more patrols and more evidence of security. So far there have been no documented cases of any expatriate being kidnapped or killed. The data tells us it’s a safe place to conduct business, but there are definitely times of the day and places where you shouldn’t be if you’re working in the maquiladora.

The data also shows us that the casualties that we see are for the most part hits, not random shootings. That’s not what the environment is like at all. You cross over the border and there’s something short of two million people going about their daily business and conducting life as if absolutely nothing is going on.

Now all of us know someone that has been a victim of violence, whether it’s a carjacking or had loved ones killed. Like I said, the data is there and we don’t want to ignore it. But it’s not a failed state. It’s a much different environment. This war is not about ideals, religion or any historic grudges from years past, this is purely economics.

Q: Just last month a Black and Decker manager was killed in Reynosa. Isn’t it a little hard to believe that people in this industry are not high-risk targets?
Well, let’s reflect on that news report. That person lived in that area, worked in Reynosa, was a mid-level manager, and he was strangled. That does not sound like a hit of the kind we’re used to, and doesn’t sound like it has anything to do with the drug business.

The fact that he happened to work at Black and Decker probably has nothing to do with the reason he was killed. Somebody seemed to be angry enough at him to strangle him. That’s all we know. And there are other maquila workers that fall victims to shootings, but with the number of employment in the maquilas that we have in Juárez, some of them are going to be casualties in this war.

Q: What lessons have maquilas learned from the November attack on employee buses from the Eagle Ottawa plant near Juárez that resulted in four deaths?
There are probably investigations and information that we don’t know, so we can only respond to what we hear. Evidently a worker or some workers at the Eagle Ottawa operation were involved in criminal activities, and this was a hit on those people.

So if there was a lesson to learn, it’s for us as employers to do better background checks and try to make sure that we don’t hire people and bring them into our fold that have criminal backgrounds or have criminal intentions from their employment.

Q: The security manager at a large manufacturer in Juárez recently told me that in the last three years, he has had to deal with extortion cases and that every maquiladora that he knows of has dealt with these cases. Has this been a problem for you?
Absolutely not and I couldn’t disagree more. Now, everything I’m telling you does not relate to a Mexican businessperson. They have another set of preoccupations. I know of no single case of expats being extorted, and I don’t believe this person distinguished among them.

We have experienced none of that in our operation. Out of a couple of hundred management level people in our company, we’ve not had any of that.

Q: When Electrolux and Whirlpool announced they wouldn’t expand operations in Mexico, they mentioned the violence. What has been the impact of the violence in the decisions maquiladoras make?
Very little. I think the economy has been making the decisions. Now with Electrolux I understand they chose another city, they just didn’t choose Juárez. I don’t believe the violence was a factor in that decision, you’d have to ask an Electrolux person more specifically.

It’s like the rumor that companies said they were leaving because of the violence. I know of no company that has left because of the violence. That might be a convenient thing to say if the economy has worn your business down and you have to close your plant.

I think businesses make their plans based on long-term visions. I don’t think any of us sees any of this as permanent. When you build a factory, you’re building it for the next 10 years. You’re not building it based on what’s going on today or even next year.

Companies like Electrolux or Foxconn that have huge operations tend to look at geographic diversity, in case there’s an earthquake or a border closing or some catastrophic event close to their plants. They want to spread the risk.

Q: You’ve said it’s against organized crime’s interest to target maquiladoras. Why?
Well, there’s no money inside those maquilas, and for the most part, no assets that are quickly exchanged for money. All of us that used to have money in our plants for the most part have eliminated.

The workers don’t bring anything of value to work with them, they can’t even bring jewelry. Plus it’s more difficult. If you’re going to rob something, you can find a much easier target than a maquiladora.

Q: What about drugs smuggled with goods shipped back to the U.S?
We all have tightened up security in our factories, we’re just making sure that our docks and transportation systems are secure. We use certified transportation companies and most of us are CTPAT certified, meaning that we have upper security access to our docks, video security surveillance, and when our trucks leave the plant with seals on them, we track them all the way to the border, either with a car escort or with GPS tracking.

Q: Tell me about your biplanes.
I have an affinity for aviation and own several airplanes. My fondest are vintage war birds. I have a 1945 and a 1941. One’s a biplane that was used for executive transportation that is fondly referred to as Lady McGregor. It was named after its previous owner, Malcolm McGregor, a well-known attorney here in El Paso and an aviation enthusiast who had the airplane for 35 years.

After his passing, my wife Patty and I were able to buy the airplane from his sons and we named it after him.

We take it everywhere, it’s extremely fast. We have traveled the country in it and have been as far north as Canada. It was the fastest executive transportation of its day.

Q: You fly the corporate plane?
I always fly the corporate plane. It’s kind of a deal I made with myself when the company could afford to have an airplane. That’s one of my passions, so I get to fly.