The maquiladora industry in Tijuana: characteristics and advantages
Despite the difficult test of the coronavirus pandemic that 2020 and 2021 represented for the different productive regions of the Mexican republic, Tijuana is experiencing a time of historical growth. According to various economic and sectoral reports, the export maquiladora industry in Tijuana is at its peak.
For example, in the last quarter of last year, it ranked as the third city country in measures of unemployment. On the other hand, Tijuana achieved an enviable rate (2.9%). This is according to figures provided by the Mexican National Institute of Statistics and Geography (Inegi).
As a further sign of the vibrancy of the maquiladora industry in Tijuana, Class A industrial inventory increased by 8%, and the vacancy rate stands at 2.2%. This figure is one of the lowest nationwide, according to CBRE.
Factors like these can explain why Tijuana’s international sales in 2021 reached approximately 21.7 billion dollars. This number represents a growth of 22.9% compared to the previous year.
Because of the unique characteristics and advantages that have caused the maquiladora industry in Tijuana to flourish on Mexico’s northern border, the city is now home to approximately 540 production plants from a wide diversity of countries.
The historical roots of the maquiladora industry in Tijuana
According to Edna Patricia Hernández, director of Economic and Industrial Development of Tijuana (DEITAC), a private organization that promotes foreign investment in the border city, the size of the maquiladora industry in Tijuana has tripled in the last thirty years.
Undoubtedly, this success was due to the proliferation of the companies whose nearshore production model emerged in Mexico in the mid-20th century. A maquiladora plant is established when a global company decides to initiate and maintain operations in the country by installing a factory or plant dedicated to manufacturing goods for export (mainly to the United States).
According to Jorge Carrillo Viveros, director of the Department of Social Studies of El Colegio de la Frontera Norte (Colef) and a pioneer in the study of Mexico’s export industry, the maquiladora industry in Tijuana has gone through three stages. They are:
- First-generation. This stage is characterized by small and trial operations geared toward niche production. Products such as toys, clothing, and electronics were manufactured during this period that covers the 1960s to the early 1980s.
- Second-generation. This stage reaches the 1990s and represents the manufacturing of “intelligent” work, where universities gain strength and companies deal more with inventories, quality, logistics, and spaces.
- Third generation. The Japanese arrive with strong long-term investments. Specific sectors are consolidated –such as televisions. In the 1990s, Tijuana was the mecca of world production – and others are expanding. This favored the appearance of R&D (research and development) and the growth of clusters.
Thus, diversity is increasing in the maquiladora industry in Tijuana, and almost all sectors have intensive, intelligent capacities and centers for research. With this, Tijuana has managed to consolidate production chains in various sectors. This is particularly the case for manufacturing medical devices (No. 1 in the world) and the aerospace cluster (No. 1 in Mexico).
Infrastructure with unique advantages
It is commonly noted that one of Tijuana’s most significant advantages is its advantageous geographical location. The city straddles the busiest border crossing in the western world. In addition, the San Ysidro and Otay ports of entry connect Tijuana with the Californian city of San Diego in the United States.
Thus, links between Tijuana and San Diego constitute 30% of all crossings between the two countries, with an annual average of 7.3 million pedestrians and 25.55 million automobiles.
An efficient local highway network allows for quick and efficient travel to the main urban areas of northern Baja California, which in turn facilitates access to qualified labor.
Tijuana also greatly benefits from its proximity to the port of Ensenada. This deep-water port is just a couple of hours away. This helps reduce shipping costs. In addition, there are three airports with international connections that serve the maquiladora industry in Tijuana.
Economic and competitive labor
Recent data from the Boston Consulting Group (compiled by the UC San Diego Center for US-Mexico Studies), the labor force in Mexico is 13% cheaper than in China.
Additionally, experts predict that the labor competitiveness of the region will not be affected by increases in the minimum wage nor by the labor content provisions of the United States-Mexico-Canada Agreement (T-MEC). This is because most of the companies in the region today offer salaries above the legal minimum set by the Mexican government.
Manufacturers that have facilities in the city have noted that the region’s educational system has strengthened the value of human capital in Tijuana and, currently, offers skills that go significantly beyond the simple assembly of parts.
Diversity and specialization
Both efficiency and the consolidation of the maquiladora industry have been achieved in Tijuana. This has made the city a manufacturing, export, and innovation platform. It has also has enabled companies from almost all industrial sectors to establish themselves within the city’s boundaries. These include:
- Steels and metals
- Food and drinks
- Aluminum and glass
- Sports articles
- Cables and harnesses
- Electric and Electronics
- Renewable energy
- Medical Devices
- Injection molding
The Tijuana area offers conditions for establishing new companies, with guaranteed and reliable service coverage (water, electricity, gas, broadband internet).
The city also has more than 50 industrial parks with a total inventory of approximately 6.8 million square meters. Despite this level of development, the maquiladora industry in Tijuana still has room to grow.