Interview with Homero Galindo, Viasystems, by Michael Hissam. 

Published in the March 2012 issue of Juarez-El Paso Now magazine.

Viasystems in Ciudad Juarez recently encountered a nice problem: Growth and newer technology required a change of address in the same city. These precision metal fabricators provide for several industries from a location which has gained further strategic importance within their corporate structure. Homero Galindo, General Manager, North American Operations EMS Systems, Viasystems, sees a bigger picture, one that recognizes lessons learned concerning China, one that includes a look beyond Mexico and to the south as those markets continue to emerge.

FOR VIASYSTEMS, WE SEE POSITIVE REPORTS FROM CIUDAD JUAREZ, AS WELL AS MEXICO. LET´S TALK ABOUT THE RANGE OF PRODUCTS FROM CIUDAD JUAREZ. 

We do a lot of metal fabrication: Parts with different progressive metal presses, different sizes. We do lots of different welding configurations, using different technologies for welding. Primarily our parts are used to make cabinets that are used in a variety of industries, with different requirements. They may go into the medical devices. They can go to telecommunication cabinets. They can go to automobile chassis. We do the electronics or the electromechanical integration along with it to support key OEMs worldwide.

YOU TALK ABOUT A POSITIVE SITUATION FOR YOUR BUSINESS IN CIUDAD JUAREZ, THE LARGEST CITY IN MEXICO´S LARGEST  GEOGRAPHIC STATE.  WHAT ABOUT THE ENCOURAGEMENT AND SUPPORT FROM THE STATE CAPITAL OF CHIHUAHUA?

They are excellent. I think the state of Chihuahua clearly under-stands that it’s got to emerge from light manufacturing to medium and heavy manufacturing. We are very good in light manufacturing. That is small components, mass production. You emerge to medium and heavier manufacturing, so this is more attention to more complex assemblies, high- reliability products, high-end products that have a performance function for any industry where your products go. The skill set is different, from just producing mass productions in the thousands per day. You go to the tens or twenties per day of units and they are high reliability products. You have more complex met-al forming, die casting, electronics, and it elevates the capability manufacturing to another competitive sector.

WHAT ELSE HAS HAPPENED THAT MAKES YOUR LOCATION IN JUAREZ STRATEGIC FOR YOUR COMPANY?

There are many factors. First of all you have to talk about Juarez which has around 40 years of manufacturing experience. You have first-, second- and third-generation employees in the family that are grouped into the manufacturing industry. And more recently the sup-ply chain in the last twenty years. You are looking into a city that has the discipline to understand manufacturing and it is passed on to generation to generation. You also look into a city that has a lot of supply base and services available in the El Paso area and in Juarez to come and sup-port. There’s equipment, raw material, service technicians and equipment technicians that can support your manufacturing on your internal base with engineers and technicians inside your plant. You also look into the schools, the vocational schools available, some are private. Some are sponsored by the state government to prepare technicians to industry needs and the engagement that you have with them, in their own classrooms or in co-participation coming into your facility and you design courses for the needs of processes.

THE BOTTOM LINE FOR INDUSTRY IS THE TOTAL COST OF DOING BUSINESS. YOU ARE IN JUAREZ, YOU ARE IN CHIHUAHUA AND YOU ARE IN NORTHERN MEXICO. HOW DOES ALL THAT FIT IN WITH THE BEST TOTAL COST OF DOING BUSINESS?

It works well when you look at the total landed costs. Let’s say when you are comparing yourself to another area, you look into the wait structure, Mexico and another country and you look into the logistics, the 3PL field expenses. You look into the tariffs and the permits for products coming in from another country. You put all that into balance plus the value of money and the interest rates. You have to compare all those aspects to truly determine your total landed cost for producing in one country over the other one. In our equation, yes sometimes you’re a few points more expensive. Sometimes you are better positioned. But then you add another factor for Juarez: That is the proximity to North American markets. So how much inventory do you have in the pipeline in addition to your landed costs? How fast can you turn around a change on your manufacturing as requested by the customer? You can implement the change in Juarez and within 48 hours your customer can have it on the dock.

FOR VIASYSTEMS IN CIUDAD JUAREZ, AS WE MOVE THROUGH 2012, WHAT WILL BE MILEPOSTS THAT SAY, “SUCCESS?” 

Viasystems is putting a lot of investment and trust in the Juarez operations. This is for execution, for customers with higher reliability products in key industries. These include telecommunications, energy, aerospace, industrial instrumentation, automobile industry. In those as with others the expectation is the high performance on the products that we manufacture for our OEM’s. It’s constant. It’s day- to-day and for that as we grow this expansion and as we are landing these new accounts, that we outperform our customer’s expectations.

WE NOW SEE A HUGE INCREASE IN EXPORTS FROM THE U.S. TO OTHER COUNTRIES IN LATIN AMERICA, WE ALSO SEE MEXICO POSITIONING ITSELF FOR EXPORTS TO THE SOUTH, WHAT SHOULD THE U.S. AUDIENCE UNDERSTAND ABOUT MARKETS SOUTH OF MEXICO?

It is very simple when you look into the economics. You find out what economies are growing, what economies are contracting. We live in a global environment and that’s where you put your focus and that’s where you want a share of that business opportunity. You have to understand that every country is in a different position, whether it’s at a mature level or you have an emerging market. If we have an emerging market, you want to be there.

TEN YEARS AGO MANY COMPANIES LEFT FOR CHINA THINKING LABOR COST WOULD BE EVERYTHING NEEDED FOR SUCCESS. THINGS HAVE CHANGED, WHAT ARE THE LESSONS THAT MEXICO NEEDS TO UNDERSTAND AND MIGHT NEED TO DO BASED ON WHAT YOU ARE SEEING IN CHINA?

In our industry, one fundamental thing that China has done very well is they’re doing manufacturing for OEM’s to support components in other geographies outside of China. It is equally important how the economy has opened up and how the country’s mission has to elevate this standard of living of all the people in China. They have to have more access to products in a country with very protective borders. When you go to China you see the emerging markets already available to them. So in our case, for Viasystems, we have big customers in China — automotive manufacturing plants. Mexico has got to sense that impact as well and open up commerce a little more, pay more attention to tariffs. When you look at it, it is easier to do business in China for China. China has put a mission to do the supply chain — the components that go into a finished product. You find them; you find them in their own cities where you are operating. When you come to Mexico a lot of the components — look at electronics — we have to import everything from Asia. So not a lot of electronic manufacturing, it’s more capital investment, more process, more environmental processes that are involved to make more electronics. I think that’s an area where the government in Mexico should pay more attention and improve the local base of components that go into finished goods to be made in Mexico and also to be available for the Mexican economy as well as outside. When you look into the manufacturing strategy for 30 or 40 years, primarily the focus has been for customers outside the borders. I’m not saying it’s a totality but that’s an area where we all know the Chinese came to learn our model in Mexico for manufacturing. When they went back to China they improved it. I think there are a lot of lessons learned to do reverse engineering. Auto Parts Manufacturing

WHERE DO YOU SEE THE OPPORTUNITY FOR MEXICO FOR CONTINUOUS IMPROVEMENT?  

I think the more you use tech­nology you can eliminate non-value added activities and tasks. Just think everywhere: think academics, think laboratories, think manufacturing. More and more you depend on technology for better accuracy and doing it right the first time. But you must have access to technology.

YOU HAVE BEEN AN EXECUTIVE; YOU HAVE BEEN A LEADER IN ORGANIZATIONS, SUCH AS THE MAQUILADORA ASSOCIATIONS, AND AT THE NATIONAL LEVEL. FOR FOREIGN INVESTORS, ESPECIALLY THOSE FROM THE UNITED STATES THINKING ABOUT DOING BUSINESS IN MEXICO OR SUPPLYING MEXICO, WHAT SHOULD THEY UNDERSTAND ABOUT YOUR COUNTRY?

First of all, we’ve been neighbors for so many years and even though we speak different languages, the culture base is so similar. Our meth­ods are the same, our focus for per­forming is good, getting up in the mornings to work, understanding the rules of the game, understand­ing the code of ethics, understand­ing that you get up and you do a good day of work.

You understand there is a very positive attitude with the Mexican workforce, the very young. It’s an emerging country with young people and they want to do better. They get excited about industry processes and their opportunity to participate on it. Then you look at the engage­ment from different government, lo­cal or federal level departments for the Mexican government. They’re all engaging on how best they can support industry. They spent a lot of time looking into the academics, traditional classroom academics, to more laboratory-oriented train­ing. That’s very, very good for the North American investor thinking about doing business in Mexico. You would assess those benefits or that engagement already put in place to support your processes.

THERE´S ALWAYS THE CONCERN ESPECIALLY IN NORTHERN MEXICO ABOUT THE EFFECTS OF VIOLENCE ON DOING BUSINESS, WHAT ARE YOU THOUGHTS AS TO HOW TO KEEP BUSINESS SUSTAINED IN SPITE OF THAT SITUATION?

Nobody likes the fact that vio­lence has increased in all of Mexico. For some reason the press has fo­cused to talk about Juarez, but it is all across the country. It is a problem that has been there for many, many years. Recently it has escalated more one city over the other ones and it’s put the attention worldwide. For the industry purposes, industry has not been affected. There are some isolated cases, like in any city in the world where somebody gets into the wrong doing activity, not ac­ceptable. But overall trade, people showing up to work, finished goods leaving the country, your support technicians coming into help you, is not affected when it comes to industry. When it comes to other activities, social aspects of living in Mexico, doing business in Mexico, you have to be more cautious but the economy is strong with all the maquiladoras. 

WHEN WE TAKE A LOOK AT VIASYSTEMS ACTIVITIES IN MEXICO, WHAT ARE SOME OF THE THINGS OF WHICH YOU ARE MOST PROUD IN ADDRESSING THE CHALLENGES OF COMPETITION?

Competitiveness is very fierce in my industry and we always have to understand what our customers are looking for from us and espe­cially in our industry, where we are doing contract manufacturing for them, they have alternatives. The alternatives, we want to deliver the best service and the best quality at the best price. In order to do that you have to pay attention every single day to your supply base and your cost of supply base, to your lean manufacturing, to your quality levels and to continuous education on your workforce and you have to delight your customers and it is so simple but it is just so much detail oriented and so much key manage­ment to the point with your people in your organization. 

WHEN YOU WORK WITH SUPPLIERS, WHAT ARE YOU EXPECTATIONS FROM THEM, REALIZING PRICE IS NOT EVERYTHING?  

I expect a lot of process con­trols, a lot of self-audits, a lot of quality metric reviews with them. I expect them to understand their weak points and how they address them, also business continuity, emergency response, disaster re­covery, training for their employ­ees and sustainability. Those are all key areas.

WHEN IT COMES TO JOB TRAINING AT VIASYSTEMS, I SENSE THAT IN ADDITION TO THE JOB SPECIFIC YOU ARE TRYING TO TEACH A PHILOSOPHY OR AN UNDERSTANDING OF THIS GLOBAL BUSINESS SITUATION.

It is very simple. Education can sometimes be confused with academics in the classroom with basic learning of traditional academics. But in our industry we need experience and to put together what you learn in the classrooms and how it affects technology that you build.

Now you are putting variables together; you are putting units; you are putting process flows; you are putting some testing of the parts you doing; you are assessing lot variations from suppliers. All of those components or those variables must tie together with some judgment when you are doing manufacturing. For that purpose you have to spend a lot of time with your employee and your workforce and understand them that even though we are doing assemblies, you are solving variables from so many different fields that come to you. That’s key in manufacturing.

CONCERNING EDUCATION, IF YOU HAD A CHANCE TO ADVISE STUDENTS ABOUT OPPORTUNITIES AND THE EDUCATION TO GET THERE, WHAT WOULD YOUR MESSAGE BE?

I would advise them that they need to pay a lot of attention to science classes. Everybody is in business but you have a product with some function and you must under-stand it. When you look into the best contributions in the economy of the world, it all comes back to science. Science classes and the ability to understand core classes, the contribution for biology, microbiology and electronics are important. Know semi-conductors, know metals. Know about automation. They need to get excited and there is so much a classroom can teach you through formal academics but there’s so much now that you can learn online. The internet has opened the doors for students everywhere in the world to access — even if they live in a small village — what the opportunities are elsewhere. That’s my advice to students: get excited about science.

IF A CUSTOMER WERE TO VISIT YOUR JUAREZ OPERATIONS, WHAT ATTITUDES WOULD THAT CUSTOMER PICK UP FROM YOUR WORK FORCE?

They would see a very exciting and very committed workforce. The workforce is very excited, to-tally dedicated because they are seeing the technology products that we are making and how they contribute to society. You’ll see all the commitment to raise the Via-systems’ logo and those of our customers and our goal is to be very efficient to them and that will open up the doors for better opportunities.

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Financial Frontera: Delays on bridges cost region big money

by Michael Hissam / Guest columnistelpasotimes.com

Posted: 02/19/2012 12:00:00 AM MST

Bridge wait times continue to drive accounting, economic and opportunity costs — and not for the better.

Nearly 15 years ago, riding in a bus full of investors looking to build in Ciudad Juárez and El Paso, the good vibrations continued until — you guessed it — northbound traffic came to a standstill near the monument on the other side of the Chamizal.

“I’ll be damned if I am going to put my people through this every day,” muttered someone the next row up. To the best of my knowledge, that person — as with many others on the bus –never returned. The investment and jobs and ripple effect into the local economy went to parts unknown.

Earlier this month, Alan Russell, president and CEO of Tecma, based in El Paso, and a delegation of business, political and legal leaders took the wait-time concerns to Washington. They wasted no time putting costs to the issue, while encouraging the government and the public to do a better job in addressing the problem:

Q It is a pain to be waiting in those lines, but you’re saying there’s a big economic impact. Tell us more.

A It’s amazing when you break it down into dollars and cents. Today, border wait times at the five busiest southern ports of entry average over one hour. The economic impact is amazing. This results in an average output loss of a $116 million dollars per minute of delay. In 2008, these delays cost the U.S. economy nearly 26,000 jobs and $6 billion in output; $1.4 billion in wages and $600 million in tax revenue.

By 2017, average wait times will probably increase to 100 minutes or more, costing the U.S. more than 54,000 jobs, $12 billion in output, $3 billion in wages and $1.2 billion lost tax revenue annually. This is not some local study. This is from the Department of Commerce and a 2008 study.

Q Who went with you from El Paso to deliver that very strong message?

A Mayor John Cook from El Paso headed the delegation along with the Greater El Paso Chamber Chairman Chuck Harre, and Chamber President Richard Dayoub and two of the chamber’s very capable staff; additionally El Paso County Judge Veronica Escobar, and Kathleen Walker and Jack Chapman, two very prominent El Paso lawyers who deal in border issues; 10 of us in all.

Q With whom did you meet in the nation’s capital?

A We started with the U.S. Customs and Border Protection, then we went to the U.S. Chamber of Commerce, on to the Department of Homeland Security; we went to Sen. Tom Udall’s office, senator to New Mexico; and the final was the Department of Commerce.

Q What specific cost areas did you present?

A Our focus was truck crossing times, pedestrian crossing times, visa processing times and what these delays cost, as I mentioned before, in real dollars.

Q Others have tried to send the message over the years to the governments, both in Washington and in Mexico City. But taking a look at this effort, to what extent do you believe progress was made?

A It was Washington, we have to take the approach that it is one voice and one ear at a time. It is hard to measure the success of these type meetings, I admit, but we must be persistent. We must assure with every security measure established on this border that commerce is taken into account. I will say that every office I mentioned gave us their full attention and listened to what we had to say. However, the raw facts: Physical security trumps economic security and no greater is that division evident than when we are in an election year.

Q You mention the community, this border community, over one city, the two cities across from each other, El Paso and Ciudad Juárez, if it were one city in the U.S., it would be in the top five or six in population. We know about the economic and trade data, but when it comes to those border crossing issues for the commercial and noncommercial sectors — then what’s the answer, what did your group suggest be done to alleviate this problem?

A I don’t think we will ever alleviate it; I’ve got to be realistic. We are 26 years into this from my perspective alone, and in some cases we are talking about the same things over and over. However, progress is being made with the one ear at a time that I mentioned.

First, we use the facilities that we have more efficiently. Technology has evolved. The bridges and ports of entry that we have were never designed to facilitate the kind of commerce that we are seeing today. We have the technology to improve what we have without going to the expense of brick and mortar.

Homeland Security, very proactive, I was impressed. They’ve made improvements; they have added security measures and fast lanes that we are not taking advantage of. In El Paso alone we are down in the 30 percent utilization of some of the capacities of these programs they’ve put in place. There’s a system called the Pedestrian Gate System at the Bridge of the Americas, Ready Lanes in all three bridges and others. We have got to get the word out. We’ve got to educate the public and the importers who are using the bridges to use them more efficiently through the facilities that we have and we must improve the technology.

Michael Hissam is president of Trans-National Executive Communications. He may be reached at michael.tnec@ymail.com.

Alan you just returned from Washington D.C. You went as part of a joint delegation from the Greater El Paso Chamber and the city of El Paso. This delegation with whom you traveled went to the capital for the purpose of addressing border wait times and other trade obstacles related to commerce with Mexico. It is a pain to be waiting in those lines but you’re saying there’s a big economic impact. Tell us more.

Alan Russell: It’s amazing when you break it down into dollars and cents. Today border wait times at the five busiest southern ports of entry, average over one hour. You ask what is the economic impact of that? This results in an average output loss of a $116 million dollars per minute of delay. In 2008 these delays cost the U.S. economy nearly 26,000 jobs and $6 billion in output; $1.4 billion in wages and $600 million in tax revenue, annually. Now think of this, by 2017 average wait times will probably increase to 100 minutes or more, costing the U.S. more than 54,000 jobs, $12 billion in output, $3 billion in wages and $1.2 billion lost tax revenue annually. This is not some local study. This is from the Department of Commerce and a 2008 study.

Those numbers are serious but taking a look at the roster within your delegation, you would have to say this is a high powered group, who went with you to deliver that very strong message?

Russell: Mayor John Cook from El Paso headed the delegation along with the Greater El Paso Chamber President, Richard Dayoub. Additionally Judge Veronica Escobar and Kathleen Walker and Jack Chapman, two very prominent El Paso lawyers, that deal in border issues, such as visas and immigration were also along, 10 of us in all.

With whom did you meet in the nation’s capital?

Russell: We started with the U.S. Customs and Border Protection, then we went to the U.S. Chamber of Commerce, on to the Department of Homeland Security; we went to Senator Tom Udall’s office, senator to New Mexico and the final was the Department of Commerce.

No doubt you had a daunting schedule. You went through that list but what about the focus of those discussions. What can you tell us?

Russell: Our focus was truck crossing times, pedestrian crossing times, visa processing times and what these delays cost as I mentioned before in real dollars.

Your team has sent the message. Others have tried to send the message over the years to the governments, both in Washington and in Mexico City. But taking a look at this effort, to what extent do you believe progress was made?

Russell: It was Washington, we have to take the approach that it is one voice and one ear at a time. It is hard to measure the success of these type meetings, I admit, but we must be persistent. We must assure with every security measure established on this border that commerce is taken into account. I will say that every office I mentioned gave us their full attention and listened to what we had to say. However, the raw facts: Physical security trumps economic security and no more greater is that division evident than when we are in an election year.

You mention the community, this border community, over one city, the two cities across from each other, El Paso and Ciudad Juarez, if it were one city in the U.S. it would be in the top five or six in population, we know about the economic and trade data but when it comes to those border crossing issues for the commercial and non-commercial sectors – then what’s the answer, what did your group suggest be done to alleviate this problem?

Russell: I don’t think we will ever alleviate it; I’ve got to be realistic. We are 26 years into this from my perspective alone and in some cases are talking about the same things over and over. However, progress is being made with the one area at a time that I mentioned.

   First, we use the facilities that we have more efficiently. Technology has evolved. The bridges and ports of entry that we have were never designed to facilitate the kind of commerce that we are seeing today. We have the technology to improve what we have without going to the expense of brick and mortar.

   Homeland Security, very proactive, I was impressed. They’ve made improvements; they have added security measures and fast lanes that we are not taking advantage of. In El Paso alone we are down in the 30 percent utilization of some of the capacities of these programs they’ve put in place. There’s a system called the Pedestrian Gate System at the Bridge of the Americas, Ready Lanes in all three bridges and others. We have got to get the word out. We’ve got to educate the public that are using the bridges and the importers that are using the bridges to use them more efficiently through the facilities that we have and improve the technology.

One thing that happens in El Paso as people try to be more efficient, they turn to the media. The media says the bridge time is this or the bridge time is that, depending on the bridge. And then you get in one of those lines and you are in a rush and you’re finding that, “No, I’m in a situation and I can’t get there in time!” What about that?

Russell: It’s hard to go to a government agency and tell them we’ve got to improve bridge wait times and they will say, “What are the wait times?” You go ask someone and they’ll say “I listen to a full CD on my car stereo before I got through.” Witnesses are the worst possible accounting measure. It’s got to be valid data for any government agency because we have to measure the success of the programs that are put in place. There are whole lot of discussions around how do you measure border wait times. We measure it when our truck or our car comes to a stop and then that’s when we start waiting. That might be a half a mile inside the Mexican border. How is a U.S. government agency going to measure that time? But there’s technology abound that is doing so. Secure Origins here in El Paso has the technology through GPS to immediately start delivering data live on border wait times.

One thing that we take a look at is about border wait times, and the economists say that here in El Paso we are actually into expansion let alone we’ve past recovery. But let’s go back further to the depths of the great recession, to what extent did it fall in line with the thinking that business is down therefore the wait times had to be down.

Russell: That didn’t happen that way. Part of it is increased security, increased staffing along the border. Security threats have slowed the border down even though the economy has slowed down. However when we look at actually the trade numbers, trade has not fallen in direct proportion to the economy or our great recession. In contrast as we start coming out of this recession we’re going to see wait times increase exponentially beyond our expectations if we don’t take action now.

I want to build from your references to the economy. I’ve heard you talk about something called a “perfect storm” as related to opportunities here in El Paso and our neighbors in Ciudad Juarez and Las Cruces. What does “perfect storm” mean in this case?

Russell: Let me clarify, in this connotation it’s a good thing. All of the stars have aligned for the first time that we we’ve ever seen. China is no longer the logical choice or the obvious choice when it comes to a U.S. company’s or a North American company’s manufacturing needs. Cost is going up in China. Every one of our clients that have plants both in China and in Mexico is seeing increased cost, as much as 20 percent last year. They expect 12 percent this first quarter and they don’t see it changing. The reasons: The currency exchange rate between China and the United States currency, transportation costs. Nobody is going to believe transportation costs is really going to go down any time soon, wage increases — minimum wage in China is going up. The Chinese people are demanding more. They are becoming a consumer nation which is driving cost up and then you take into account time on the water, the cost of money, the cost of inventory, near-shore is a much more viable option than off-shore.

   Take Mexico for instance. We’re coming out of the recession. The peso has weakened against the dollar. Our region has laid off, right here in Juarez, we’ve laid off a 150,000 workers and they’re ready to come back to work. We have more than 9 million square feet of empty manufacturing space. The lights are on. We don’t have to build buildings. We are near-shore, we are not offshore. All we’ve got to do is bring these companies into these border cities and start production.

That’s a compelling list of economic factors, but I think you have some further thoughts on that.

Russell: For the first time in modern history, the lines have crossed. In most product categories Mexico competes head-to-head with China in landed cost and it’s time to seize the moment.

When we take a look at this economic activity, rebound maybe to expansion, we see a lot of trucks crossing that border. What about the significance, especially of the northbound trucks — and those things are not deadhead — and the significance into the local economy as well the national economy?

Alan Russell: If something is produced in China, I would say that 98 percent of the content of that product comes from the Asian rim; some rare situations U.S. companies are exporting to China for component parts. When we produce in Mexico 90 percent of the content of the products that we are producing are being done with component parts and materials coming from the United States. Right here in El Paso, as stated by the University of Texas, for every five jobs created in Juarez, one job is created in El Paso. That does not take into account all the jobs being created by the production of materials, raw materials, component parts and direct materials that are put into these products. It has a tremendous economic impact on not just El Paso, not just on the border region, but all the states across the nation.

Economics can be complex, business can be complex, the wait-time issue for sure is complex. But if there is one single message, you would deliver to the U.S. and Mexico government agencies about the issue, what would it be?

Russell: Let us, the private sector put up the cost through joint public private partnerships, let us participate. Budget restraints are intense but bridges can be built, highways can be built, systems can be used. On our Canadian border today the Ambassador Bridge is privately operated and it is more efficient, more secure than we were seeing in any other possible mechanism. Let us move forward with more private sector-public sector joint partnerships to improve this situation.

We are recording this just one day after your return from Washington. Those airline flights between here and there give some time for thinking. Let’s wrap it up with some final thoughts.

Russell: We want the border protection agencies including Homeland Security to advertise more the initiatives they are taking to improve our cross border commerce. They are taking into account, they are giving it their best shot, but in some cases they’re not communicating very well. For instance they are beginning a radio broadcast at the Bridge of the Americas which cross border commuters and trucking companies can use to understand the wait times, understand the alternatives, how to use the Ready Lanes, how to apply for Sentri passes and improve the crossing times. We need to make the public more aware and move forward with these public private partnerships.

That is Alan Russell, President and CEO of Tecma. Tecma Speaks is a frequent presentation of Tecma. Tecma has been on the ground with border commerce for more than 26 years. Alan has led a relentless pursuit of developing this commerce in direct competition with the China alternative. Tecma currently performs manufacturing services for more than 30 U.S. companies in northern and central Mexico.

From Trans-National Executive Communications, El Paso, this is Michael Hissam.

TECMA President and CEO K. Alan Russell, as part of a joint delegation from the Greater El Paso Chamber and the City of El Paso, this month told Washington officials of the real expense and job losses caused by border wait times.  In this premiere edition of Tecma Speaks, Russell also points to the need for more efficiency with current border facilities, as well as more public awareness concerning border crossings in this metropolis of more than 2.5 million.

Russell also tackles the issue of Mexico’s competitiveness with China and what that means for U.S. suppliers.

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

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

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

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

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

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

Mexican President Calderon tours Dorval Challenger Plant with Bombardier Inc. president Beaudoin in Montreal (Christinne Muschi/Courtesy Reuters).

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

A worker at a maquila measures wire used in weed whackers and motors for boats. The maquiladora is part of TECMA, a business that manages maquilas and businesses in Juarez for companies around the world.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Mexican peso
Mexican peso devaluations and their presidents:

1975: -29.4 percent, Luis Echeverria Alvarez.

1982: -56.1 percent, Jose Lopez Portillo.

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

1994: -26.9 percent, Carlos Salinas De Gortari.

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

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

By TIM JOHNSON

McClatchy Newspapers

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sinaloa and the Zetas have vastly different histories.

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

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

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

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

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

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

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

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

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

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

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