Juarez maquiladoras recovering despite bloodshed

January 23rd, 2011
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By WILL WEISSERT – Jan 23, 2011
By The Associated Press

CIUDAD JUAREZ, Mexico (AP) — Despite a weak U.S. economy and a drug war that has turned this city into Mexico’s deadliest, the maquiladoras are on the rebound.

These assembly-for-export plants that crank out everything from brake pads to plasma TVs for U.S. companies are opening new facilities, expanding existing ones and hiring more employees. Some firms looking for lower costs have even begun shifting production from China back to Juarez.

The recovery of the about 350 maquiladoras is the single bright spot in a city where drug violence has killed 7,000 people in three years. The maquiladoras may also be a sign that the economy in the region is finally turning the corner, after gross domestic product for Mexico shrank by almost 7 percent in 2009, the worst contraction in decades.

“There’s some real competing realities in Juarez at the moment,” said Bob Cook, president of the Regional Economic Commission in El Paso, Juarez’s cross-border sister city. “The violence has not targeted our industry, and the cartels … have not destroyed all the advantages of doing business there.”

Unemployment for Juarez is high, at 7 percent compared to Mexico’s national average of 5.4 percent. But plants that furloughed employees in 2008 and 2009 are now offering overtime as well as jobs.

The Juarez maquiladoras added about 26,000 new jobs from July 2009 until August 2010, when they employed more than 192,000 people. But there’s still ground to make up — three years ago, the sector employed about 250,000 out of Juarez’ population of 1.3 million.

Cook said that since 2008, 106 new permits for maquiladoras were granted in Juarez. An additional 15 companies have notified the commission of plans to locate or expand in the city, which would create up to 11,400 more jobs.

It’s difficult to compare Juarez to other border cities because, starting in 2006, the Mexican government began simply listing maquiladora jobs nationwide under “manufacturing.” There has also been anecdotal evidedence of a recovery in the Baja California city of Tijuana, Mexico’s other major maquiladora hub, according to Dale Robinson, president of the Western Maquiladora Trade Association. He could not provide figures.

Carlos Pascual, the U.S. ambassador to Mexico, said a record 12 maquiladoras returned from China last year to locations along the border, often states with heavy drug violence such as Baja California, Tamaulipas and Chihuahua, home to Juarez. It is unclear how many plants have headed to China over the same period.

Nationwide, the maquiladora sector has shed hundreds of thousands of jobs since peaking at 1.3 million employees in October 2000, but Mexico is now catching up fast with China. U.S. imports from Mexico exceeded $168 billion through November, expanding by 35 percent over the past year, according to the U.S. International Trade Commission. Imports from China, meanwhile, were up nearly 24 percent to about almost $264 billion through November.

With credit less available globally, some companies can no longer afford to wait for profits delayed by lengthy shipping times as goods travel from Asia to the U.S. It may work out cheaper to use Juarez, Tijuana and other Mexican locales a stone’s throw from American soil.

Pascual said Mexico also is increasingly attractive compared to China because of the devaluation of the peso and the strengthening of China’s currency. And the disparities in wage rates are shrinking: China’s labor costs have increased as the government works to adhere to environmental regulations, especially after criticism during the 2008 Beijing Olympics.

“The difference was about $1.50 to 40 cents (per hour) in 1996 and $3.50 to $3 now. Mexico is still more expensive, but not that much,” Pascual said in an interview.

Juarez has been Mexico’s leader in maquiladoras for decades. Other companies increasing their presence here include:

- Swedish appliance manufacturer Electrolux, which is closing two Iowa plants, laying off 850 workers and shifting nearly all its production to Juarez — where it already employs around 6,000 people.

- Delphi Automotive LLP, a parts supplier for General Motors, which has 12 Juarez plants and a technical center employing over 12,000 people. Production is still a long way from the days when Delphi had 20,000 workers in Juarez, but the company added about 700 new jobs through late 2010.

- Taiwan-based Wistron Corp. is also expanding in Juarez. The company produces components for Blackberry, made by Canada’s Research In Motion Ltd., which declined to comment.

The maquiladora industry ran into the drug violence in Juarez on Oct. 28, when gunmen opened fire on a trio of buses carrying nightshift maquiladora workers to communities outside the city. Four people were killed.

Investigators suggested the attack was tied to a dispute involving the bus company. No arrests have been made — not unusual in a city where almost no murders are solved.

Since the shooting, employees say vans of armed guards have provided security escorts. Converted American school buses, painted green-and-white and marked “Transporte de Personal,” rumble everywhere in Juarez, bringing workers to and from maquiladora shifts that run around the clock.

Some maquiladora workers have pooled their money and bought jalopies driven south from the U.S. and sold without registration, forming makeshift carpools to avoid company buses. But not everyone can afford that.

“Of course you’re scared, but you’ve still got to go to work,” said Luis Garcia, 36, who makes 800 pesos, about $65, a week cutting car-seat leather for the Eagle Ottawa company of Michigan, and who rides the same bus route where the shooting occurred.

The violence may be taking a toll even on companies. Electronics giant Epson, a division of Japan’s Seiko Epson, pulled 25,000 jobs out of Juarez this fall. The company says it closed its printer cartridge plant because of the global economy, not violence.

El Paso Mayor John Cook said some other firms have devised “exit strategies” and are ready to put them in action if violence gets worse. But Alan Russell, president of El Paso-based Tecma Group, feels safe enough to operate maquiladoras in 18 Juarez plants for 33 companies. All 33 firms have added jobs since 2008, he said. Four clients shut down production in Juarez in 2009 due to the poor U.S. economy, but the group added five companies in 2010.

Unlike Eagle Ottawa, Cook’s company recommends not traveling with armed guards, and his security personnel don’t carry guns.

“This is not a war of ideals or a war of religion,” he said. “It is purely financial and these killings are targeting players involved in the drug business.”

Maquiladoras have increased security, but they would not discuss specifics or say how much such measures cost. Russell said his company recommends clients eat at their Juarez factories rather than go in the city and spend the night in El Paso.

“You don’t play golf in a thunderstorm. You take precautions,” he said.

Bill Parisen is vice president for an international manufacturer that moved a California plant to Juarez, reaching full operation with 60 employees in July. He asked that the firm’s name not be published because he is not authorized to speak for it.

“China’s costs just don’t make sense for us to be manufacturing there anymore,” he said.

Parisen said that none of the 71 Fortune 500 operations in Juarez were withdrawing, despite drug violence. He himself spends two weeks a month in Juarez but sticks to “executive safe routes” created by the government of President Felipe Calderon amid spiking violence and fortified by federal police and the Mexican army.

“People ask me, ‘how can you travel to Juarez?’” he said. “But then I cross and there are people jogging, people walking their dogs.” He’s even gotten used to soldiers at roadblocks: “They’re very friendly.”

Product tester Alberto Hernandez has worked at a Cisco Systems Inc. plant in Juarez since he was 15. He said many workers who lost their jobs to the recession have found work at his factory, which never went through layoffs.

“At work, you are safe,” Hernandez said, now 22. “Outside, there’s no control. No laws.”

The Critical Role of Infrastructure in the Third World

January 17th, 2011
The world’s infrastructure – water and electricity distribution, road and rail, and airports and seaports – is woefully inadequate and in need of repair. A recent study, The Cohen & Steers 2009 Global Infrastructure Report, concludes that over the next 25 years, the world should spend $40 trillion on such projects. That’s $1,600 billion each year.
Modern and capable infrastructure is to a country as the bloodstream is to a body. India’s finance minister estimates that the country’s inadequate infrastructure has restricted economic growth by 1.5 to 2 percent per year. In addition, the health of a country’s population depends crucially on an infrastructure network supporting the necessities of life. The problem is particularly acute in developing countries.
According to the World Bank, one in six people worldwide, mostly the poor, have inadequate access to water, more because of limited access to infrastructure than because of water scarcity. In India, the treatment of waterborne diseases resulting from inadequate access to water infrastructure is estimated to cost the government $15 billion-$20 billion. In Shanghai, only 3/5 of the population live in buildings connected to sewage systems.
Insufficient access to electricity can also prove devastating to public health. HIV/AIDS medication, for instance, must be refrigerated, so the insufficient supply of electricity in rural areas impedes the delivery of basic health care services to the poor.
Poorly maintained or nonexistent roads also inhibit access to health care and medicines in the developing world. In South Asia, more than a third of the rural population lives more than a mile from all-season roads. Inadequate transportation infrastructure is also a major factor behind road traffic deaths. Globally, road crashes are now the top cause of death for people aged 10 to 24, according to the World Health Organization (WHO). Eighty-five percent of traffic casualties occur in developing countries, mostly children, pedestrians, and cyclists.
Mexican president Felipe Calderon is implementing a 5-year National Infrastructure Program, calling for $39 billion annually (4 percent of GDP) to be directed toward infrastructure. At the beginning of 2007, the Brazilian government initiated a four-year, $235.8 billion (5 percent of GDP) program, financed largely through the public sector, to promote large-scale infrastructure development.
India’s central bank recently reported that infrastructure bottlenecks are emerging as the single most important constraint on India’s economy. The Indian government estimates roughly $500 billion is needed by the end of 2012 to sufficiently upgrade roads, ports, airports, and power and increased its expenditure on infrastructure from 3.6% of GDP in 2005 to 8% of GDP in 2008.
The living standards in China, as measured by GDP per capita, overtook those in India more than 15 years ago, and its GDP per capita is now more than double India’s. Investment in infrastructure is recognized as one of the main ingredients of China’s success. The country quadrupled capacity of its generators between 1990 and 2003, and is currently aiming to triple the amount of power it generates by 2020. By 2020 China also plans to build 55,000 miles of highways, more than the total length of the U.S. interstate system.
This pending investment will create substantial wealth for entrepreneurs and companies meeting these challenges and could change the competitive face of the world.