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Business Booming While Rest of Nation Suffers Slump : Border Plants Give Boost to Mexican Economy

May 06, 1986|STUART AUERBACH | The Washington Post

CIUDAD JUAREZ, Mexico — In a country where unemployment is rife, this city just over the Rio Grande River from El Paso, Tex., suffers from a labor shortage.

The employment boom is due to an explosion in the number of assembly plants set up here by American companies taking advantage of Mexico's $1.30-an-hour wage rates and low energy costs to make products to send back to the United States.

About three-fourths of Juarez's work force of 266,000 are either directly or indirectly supported by more than 180 \o7 maquiladora \f7 plants in this city, the fourth-largest in Mexico. (The name comes from the Spanish word \o7 maquila, \f7 which is the amount of grain paid to the miller to grind the corn.)

The \o7 maquiladora \f7 program allows American companies to own plants on this side of the border without Mexican partners, as required elsewhere in the country; to equip them with American machinery, and to bring in supplies from the United States to be worked on here.

Both the supplies and equipment stay here "in bond" under Mexico's protectionist import restrictions, and only limited amounts can be sold in the Mexican market.

The plants specialize in labor-intensive assembly processes for products that largely are returned to the United States, and U.S. customs charges duty only on the value that was added by the Mexican operation.

Thus, General Motors sends its wiring harnesses--the strands of wires that connect a car's electrical system to the battery--to be assembled by Mexican women in factories here. These assembled strands of wires and plugs are then shipped north to GM factories in Michigan.

Employment Jumped

The \o7 maquiladora \f7 plants employ more than 80,000 Mexicans, twice as many as four years ago, with a payroll of more than $160 million a year. As many as 130,000 other Mexicans work here to support the manufacturing operations, which produced an estimated $10 billion in goods that moved across the river from Juarez to El Paso last year.

The \o7 maquiladoras, \f7 which are strung along Mexico's 2,000-mile border with the United States, are seen by the government of President Miguel de la Madrid as the salvation for this country's sagging economy, which has been buffeted by high debt and plunging oil prices.

Besides jobs, the plants provide an influx of American technology and capital as well as help Mexicans seeking a better life who otherwise would join the stream of illegal immigrants coming to the United States.

The border industries have become Mexico's second-largest source of foreign exchange, far behind oil but surpassing tourism for the first time last year, when they brought $1.8 billion in hard currency into the country.

The Mexicans see the border strip as a potential rival to the high-growth states of Southeast Asia, with U.S. companies locating nearby to produce goods both for the American market and other countries. On a recent trip to Mexico, Sen. Lloyd Bentsen (D-Tex.) praised a change in attitude toward foreign investment and trade on the part of the Mexican government and applauded this new spirit of cooperation as a benefit to both countries.

Closer to Home

"It doesn't make any sense for U.S. companies to be going to Taiwan or to South Korea," he told reporters in his home town of McAllen, Tex., a border city where the International Trade Commission held the first of a series of hearings earlier this month on the trade impact on the economies on both sides of the Rio Grande.

"The wage scale on the Mexican side is competitive with that," Bentsen said. "We have an infrastructure here that complements the other side."

That's good for America, he said, because "whatever is done that helps one side spills over to the other side" of the border, which, north of the Rio Grande, is a strip that lags in development and suffers from some of the higher unemployment rates in the United States.

Among the U.S. beneficiaries is El Paso, one of the faster-growing cities in Texas, which is located just across the 50-foot-wide river from here.

Cecilia M. Lang of the First City National Bank of El Paso estimated that the Mexican plants generated $300 million for the El Paso economy last year and said that amount would triple during the next 15 years.

Jonathan W. Rogers, El Paso's mayor, added that the 80,000 manufacturing workers in Juarez directly support 5,000 mostly white-collar jobs in his city.

"With 24,000 people out of work, I am concerned about jobs for El Paso," he said at an ITC hearing.

Unions Oppose Plants

The major opposition to the \o7 maquiladoras \f7 comes from organized labor, which sees them as a management tool for exporting jobs overseas.

"By moving across the border to take advantage of low wage rates, companies left thousands of Americans unemployed," said Antonio Sanchez, manager of the El Paso joint board of the Amalgamated Clothing & Textile Workers Union. "I wonder if that is good for the country and for the economy, or only for the companies who profit from it."

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