Ready to Rebound – Maquila Industry Expected to Weather Recession Well
By Darren Meritz / El Paso Times
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.
