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Mexicali Puts Heat on Tijuana in Effort to Lure U.S. Companies

September 29, 1987|CHRIS KRAUL | San Diego County Business Editor

MEXICALI, Mexico — This scorching Imperial Valley city of 800,000, situated 120 miles east of Tijuana, finishes a poor second to that neighboring city in attracting American and other foreign manufacturers setting up maquiladoras , the plants where goods for the American market are made or assembled with cheap labor then shipped back across the border.

Mexicali's disadvantages in its competition with Tijuana are obvious, starting with the heat. The mercury often tops 115 degrees in the summer, which is great for the cotton, wheat and sorghum grown here in abundance but not so attractive for executives accustomed to more hospitable climates.

The city also lacks the cultural amenities of a neighboring U.S. metropolis where executives can live and commute from, if they choose. Mexicali's U.S. neighbor is Calexico, an agricultural hamlet of 14,400. Tijuana, on the other hand, is 20 miles south of San Diego, a major cultural and recreational center.

And finally, Mexicali is relatively isolated. Although daily air service to Calexico was inaugurated by the Sun Pacific airline in July from Long Beach, the city still lacks regular air service to and from Tijuana, San Diego and Los Angeles--making commutes to and from home offices in the United States difficult.

U.S. Firms Plan Expansion

But Mexicali is making a strong new push to attract foreign firms and has chalked up some successes, due in part to the city's cheaper land costs, more stable work force and concerted efforts by local politicians and business leaders to make the process easier.

Shape Inc., a manufacturer of plastic cassettes for video- and audiotapes, will open a plant here next year in a joint venture that will employ up to 300. Several U.S. manufacturers that have operated plants in Mexicali for several years, including Baxter Travenol, Rockwell, Emerson Electric and Allied-Signal plan significant expansion in the next year.

Mexicali business leaders say the city also may soon attract the Japanese and South Korean consumer elctronics firms that have already increased their presence in Tijuana. Kuron, a supplier of electronic television subassemblies to Hitachi, will open a plant in Mexicali next month that will employ 40, increasing to as many as 200 during the next two years, said Ruben Aguilar, executive director of Mexicali's Commission for Industrial Development.

Gold Star, the Korean manufacturer of television sets and other consumer electronics goods, is, according to several Mexicali sources, close to signing an agreement to build a 20,000-square-foot plant for television circuit boards. Gold Star is known to have been scouting Baja manufacturing locations for several months. Mexicali officials say such a plant may be a precursor to a much larger facility. They cite the example of Sony, which started small in Tijuana in the early 1980s, and then a year ago announced plans to build a mammoth 800,000-square-foot TV manufacturing and assembly facility in Tijuana.

After two years of little new development, construction on seven new Mexicali business parks and expansions will begin during the next 12 months to fill what developers clearly see as a spurt in demand.

One of the largest new parks planned, the 540,000-square-foot Las Californias, will be developed by Mexico City-based Industrias Unidas Agropecuarias. According to park manager James Roberts, IUA is one of Mexico's largest cotton and coffee exporters. Their development is an example of the increased interest of Mexico City investors in maquiladoras.

The Mexicali Industrial Park, currently the city's largest industrial development, will expand in phases of 150 acres from 50 during the next three years, enough for an additional 1.4 million square feet of industrial buildings, said the development's executive director Xavier Rivas.

As the peso has dropped in value during the past five years, the cost of Mexican labor has become cheaper for foreign manufacturers, hence their heightened interest in Mexicali and other Mexican cities as potential plant sites. And the Mexican government has made foreigners' entry increasingly easier. Why? The maquila industry now is the Mexican economy' second-largest generator of dollars, second only to petroleum sales.

But even as Mexicali seems poised for growth, it still pales in comparison with the kind of explosive interest American and other foreign manufacturers have shown during the past year in Tijuana. More than 120 maquila permits have been issued in Tijuana in the past year alone, bringing the city's total of foreign-owned plants to 350. Thats compared to the 25 new plants added during the same period in Mexicali for a total of 125, according to the Baja California office of commercial and industrial development.

Lower Labor Costs

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