Maquilas dodge THE VIOLENCE:

Juárez plants hurt more by recession than drug violence

By Vic Kolenc / El Paso Times

Posted: 03/07/2010 12:00:00 AM MST 

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

 

K. Alan Russell, president of The Tecma Group, says the 17 Juarez maquilas the El Paso company operates have not been hurt by the violence in Juarez. Above, he stands in a Tecma warehouse in El Paso last week. (Victor Calzada / El Paso Times)«1»

“I’m not saying our industry ignores the problem. That’s not a smart thing to do,” Russell said. “It has an effect on the way we conduct ourselves, but not on the economics of our business.

“Our clients have plants in other parts of the world with political unrest and other challenges. As long as the executives and work force are safe, business takes its own road.”

Xóchitl Díaz, a spokeswoman for Delphi Automotive, one of Juárez’s largest maquila operators with 12 plants and a technical center employing about 15,000 people, said production at the plants had not returned to 2008 levels. That was because of the recession and decreased auto sales, she said, and not because of the violence.

The violence has made “people more careful and smarter about how they come to work,” and it is a constant topic of conversation among the workers, Díaz said. She said it had not hurt production or increased worker absenteeism.

An El Pasoan, who has owned a maquila in Juárez for more than 25 years, said the violence was not hurting his plant. But it has made everyone more cautious, he said.

He did not want his name published for fear that “some petty criminal” may take advantage of the drug war and do something to him or his family, he said.

Others in the industry did not want to be quoted for similar reasons.

The maquila industry is important not only for Juárez. It also brings millions of dollars and thousands of jobs into the El Paso economy, including jobs for several thousand maquila managers and other professionals who live in El Paso and commute to Juárez daily.

El Paso retail sales also get a huge boost from maquiladora workers who travel to El Paso to shop.

Thousands of maquila jobs have been lost. and some maquilas have closed since January 2008, when the violence began to escalate.

But those in the industry said the jobs were lost because of the recession, not the violence, which has claimed more than 4,700 lives since January 2008.

Tom Fullerton, an economics professor at the University of Texas at El Paso, agreed that the recession had caused the maquiladora’s latest slump.

But it’s “unquestionable that the violence makes doing business (in Juárez) more difficult and more costly,” Fullerton said.

Moving in

Bill Parisen, 42, vice president for an international manufacturer, said his company took the violence in Juárez into account when it started looking for a place to move its California plant this year.

“We did our due diligence. We found the border violence left maquiladoras unaffected in terms of employees needing to move in and out of Juárez,” Parisen said.

Low labor costs, the availability of well-trained workers and good logistics made Juárez the choice for the company over other areas in the region, Parisen said. In February, the company began moving production from a California factory to a plant operated by Tecma.

Parisen, who has been traveling frequently to Juárez in recent weeks, said he has no qualms about going to what has become known as one of the world’s most dangerous cities. He is familiar with the city because he traveled there frequently when he worked for a different company from 2003 to 2006.

“As a U.S. businessman, I know I have to be careful. When we go to restaurants at lunch, we go to a place fairly populated and not off the beaten path. We don’t go there (Juárez) at night,” he said.

“My co-workers had initial concerns, and some of their wives didn’t want them to travel (to Juárez).” But after the executives visited Juárez several times, they’ve become comfortable and even fond of the area, he said.

No flying bullets

Toby Spoon, 52, executive vice president at Tecma, said, “The main thing I want to get across is I don’t feel unsafe. It’s not like a Clint Eastwood movie — dodging bullets. É I still stop to buy a soda at 7-Eleven. I still go to eat at restaurants.”

“I use safe practices every time. I travel mostly in the safe corridors” established for the maquilas, said Spoon, who commutes daily between his El Paso home and Juárez.

Commuting is a concern for maquila professionals. But many maquilas, including Tecma and Delphi, provide contracted buses to take production workers, who live in Juárez, to the plants.

Future prospects

Lucinda Vargas is an economist and director of the Juárez Strategic Plan Association, which in 2004 completed a plan to improve the city’s quality of life by 2015. She said the violence was not driving maquilas out of Juárez, as companies have investments too big to leave. But, she said, she is concerned that the violence is making investments by manufacturing companies more precarious.

“I think corporate executives are trying to size up how significant Juárez should be,” she said. “Sure, it produces the raw, cold numbers of productivity. But will it fit into future strategy (of corporations) because of the risks involved?”

Vargas said her association determined, even before the violence escalated, that the Juárez plan could not be carried out until Mexican government and judicial institutions were reformed so the “rule of law” becomes a guiding principle of governance.

Recruitment picture

Mike White, senior partner for TeamNafta.com, an El Paso commercial real estate company that does industrial leasing in Juárez, said his firm is having more trouble recruiting companies to Juárez than at any other time in his 17-year career.

“It’s very sad. Until Juárez can prove it’s a stable place, I don’t think we’ll be recruiting many companies.”

Bob Cook, president of the El Paso Regional Economic Development Corp., or REDCo, which recruits companies to El Paso and Juárez, said companies continue to show interest in Juárez despite the violence.

“We’re now working with about 50 companies evaluating Juárez — about 60 percent more than a year ago,” he said.

All the companies are evaluating the violence along with the business benefits of Juárez, Cook said. Most have not made decisions. One company recently decided to locate in El Paso instead because of the violence, he said.

Some problems

The maquilas — most located in huge, modern industrial parks — have not been immune from the crime surrounding them. Some were hit by ATM bandits in late 2008.

“We removed our ATM machines,” as did other maquilas, and the robberies stopped, Tecma’s Russell said.

A Lear Corp. plant executive, kidnapped from his Juárez neighborhood in January, was rescued by Mexican soldiers. He told a Juárez TV station his captors thought he owned the Lear plant.

Spoon, who oversees personnel issues, said almost all of Tecma’s workers who live in Juárez know someone affected by the violence. But the “work force continues to march on,” he said.

The Mexican chamber of commerce estimates more than 10,000 small businesses, including restaurants, bakeries and other service businesses, have closed in Juárez as extortion attempts and other crimes increased. The economy also probably plays a role in some of the closings.

But the maquilas, most operated by large corporations, also march on.

Russell said if maquilas became targets of the violence, it “would take the whole issue to another level. I think the maquila reaction would be greater than anyone would want.”

Vic Kolenc may be reached at vkolenc@elpasotimes.com; 546-6421.

Maquila data

• Juárez had 339 manufacturing plants with more than 170,000 employees at the end of last year, reported INEGI, a Mexican government agency. Most of those are maquilas. That was a loss of more than 44,000 jobs since January 2008, the data show.
• The Association of Maquiladoras in Juárez has different numbers. It reported Juárez maquila employment slid from 249,837 workers in January 2008 to 166,454 in June 2009. That was a loss of more than 83,000 jobs during 18 months.
• The number of maquilas operating has remained fairly constant in recent years, as some plants close and others open, the data indicate. In January 2008, Juárez had 327 manufacturing plants, INEGI reported. 

TECMA: NAFTA in Motion Since 1986

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

By Stephanie Sanchez / El Paso Times

Posted: 12/26/2009 12:00:00 AM MST

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This voluntary program was started by Tecma’s Environmental Engineering Department in an effort to implement a series of parameters that would assist its Management in measuring the effectiveness of the department, as well as the level of overall corporate commitment to comply with and exceed all environmental requirements of the Mexican Government aimed at maintaining a safe environment for the community.

“This voluntary undertaking is one more step in our corporate self-improvement programs. We are honored by this Recognition by the Mexican Ministry and we maintain our commitment to the highest environmental standards for our clients, employees and our community.” K. Alan Russell, Tecma’s President said.

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

EL PASO — Though the maquila industry and border trade in the El Paso-Juárez region has been hard hit by the global recession, the peso’s devaluation and drug-cartel violence, industry and economic experts said Tuesday that the border has seen tougher times and the industry is well positioned when the economy rebounds.

Experts gave a tempered, yet optimistic assessment of cross-border manufacturing at the State of the El Paso Economy, a joint presentation by the El Paso Chamber of Commerce and the University of Texas at El Paso that emphasized that this, too, shall pass.

The devalued peso and fears among U.S. businesses about violence across the border has caused a ripple effect in El Paso, where business people in sectors such as real estate and manufacturing are keenly aware of the intertwined economies of El Paso and Juárez.

“I think they’re too optimistic, but there’s light at the end of the tunnel, I know,” Angelica Zweig, a Realtor at ReMax, said about Tuesday’s economic forecasts. “I see a lot of people who want to get out of the violence and come here, but there’s no financing for foreigners.”

The bad news includes the loss of about 42,000 manufacturing jobs in Juárez in the past year; the peso falling to 15.33 on the dollar after it peaked at about 10-1 last year; and 1,600 people slain in Juárez last year, mostly the result of warring drug cartels.

Alan Russell spoke about the state of the maquiladora industry during the State of the El Paso Economy Conference on Tuesday at the El Paso Natural Gas Conference Center at the University of Texas at ElPaso. (Mark Lambie / El Paso Times)

Even so, that’s only part of the story, said K. Alan Russell, president of TECMA Group, a contract manufacturing company headquartered in Juárez.

While cartel violence in Juárez and the global recession have dominated the world’s attention, Russell said he is confident the U.S. and Mexican governments have strategies that will quell the killings. He said the violence has had minimal impact on manufacturing businesses across the border and they are well poised for growth as better economic times return.

What’s more, the El Paso-Juárez region has weathered harsher downturns. In the recession of 2000- 02, about 60,000 manufacturing jobs were lost in the region as many manufacturers moved operations to Asia, particularly China.

“This is not a ghost town where buildings are empty all over the place,” Russell said about Juárez.

Manufacturing businesses in Juárez also have planned well to emerge from the recession perhaps better poised for business growth than before.

Maquilas have avoided more significant layoffs by transitioning to four-day and even three-day workweeks during the economic slowdown. As the United States and Mexico emerge from recession, maquilas could ramp up their production quickly and efficiently.

While the devalued peso is painful to the economy, it could make the region more attractive to the automobile industry’s parts manufacturers that may try to expand when the economy rebounds and auto sales improve, Russell said.

Bob Cook, president of the El Paso Regional Economic Development Corp., or REDCo, said Tuesday that auto-related companies already are closely watching manufacturing in Juárez.

About 35 percent of all maquila industry is auto-related, he said, and companies are preparing to make a move once the economy starts looking up.

REDCo has identified 12 to 15 auto industry suppliers that are looking at Juárez as a potential market for expansion, he said.

“We’re seeing a lot of activity but not a lot of decisions right now,” Cook said. “We’ve already had several companies in the auto industry that have come into our market.”

Darren Meritz may be reached at dmeritz@elpasotimes.com; 546-6127.

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