Maquiladora Plants Stage Recovery
http://www.reuters.com/newsArticle.jhtml?type=reutersEdge&st...
Jun 8, 2004
By Tim Gaynor
TIJUANA, Mexico (Reuters) - Munching potato chips on a lunch break at a Tijuana industrial park, factory worker Azucena Villegas mulls an upturn in
her fortune.
The assembly line packer is among more than 1,600 workers hired in the Mexican border city in the first two months of the year as the country's
"maquiladora" factories stage a recovery.
Maquiladoras, a mainstay of the Mexican economy, import raw materials and then re-export assembled products duty free, mainly back across the border
to the United States.
"The plant took me on in February, and it's a good job," the 22-year-old said of her shifts at Legris, a French plant that assembles valves and
fittings for the auto and packaging industries. "There are plenty of companies hiring right now."
Exporting everything from cars to flat-screen televisions, output from Mexico's maquiladora sector rose 3.1 percent in the 12 months to March as it
pulled out of a three-year slump helped by rising U.S. demand.
The sector shed about 200,000 jobs between the end of 2000 and December 2003 as scores of firms relocated to China lured by labor costs around half
the $1.70 per hour paid to Mexican workers in maquiladoras.
But local factories are clawing back ground from China as manufacturers prioritize geographical advantages such as time to market and freight costs
and also implement good business practices like maintaining lean inventories.
BAD TIMES FADING
Maquiladora exporters in Tijuana -- which is home to around one fifth of the country's 2,800 duty free factories -- say an average of 11 new factories
have opened each month this year, and forecast output to grow by 5 percent in 2004.
Among firms investing in the city is car and truck maker Toyota . Japan's biggest carmaker has spent $140 million to build an assembly plant in the
city, which will start rolling out its Tacoma pickup truck for the U.S. market later in the year.
"We feel like we are coming out of the bad times and into a period of recovery," said Cesar Lopez, the president of the Tijuana Maquiladora Industry
Export Association.
"We are attracting new technologies, new lines of production and new investment, and employment levels are picking up," he told Reuters in an
interview.
Tijuana has more maquiladoras than any other city along Mexico's 2,060 mile border with the United States, and is within a four-hour drive of more
than 20 million consumers in southern California.
While Asian electronics makers JVC, Sony and Samsung helped put the city on the map as a center for high-tech manufacturing in the 1990s, sector
sources say the current recovery is being driven by small-scale, low-tech companies from the region.
DOWNGRADING TO LOW TECH
"The companies starting up are mostly U.S.-based firms that feel they are too small to be a player in China, but for whom Mexico makes sense," said
Tony Ramirez, an executive with San Diego-based maquila management services firm Made in Mexico.
"What we are seeing at the moment is a downgrade from high tech to low tech ... (which is contributing) to a mild net recovery," added Ramirez, who
has 19 years experience helping foreign manufacturers set up in the city.
Among firms either moving to Tijuana or raising production are companies assembling bulky products for re-export to the United States.
Lopez, the city's maquiladora association president, says leisure goods manufacturers and furniture makers are showing significant interest.
"It's not convenient to produce large items ... and weighty and bulky goods far (from market) on account of the transport costs," Lopez said.
California-based toy and leisure manufacturer Wham-O, which makes hula-hoops, Frisbees and sporting goods is ramping up production in Tijuana as it
prepares to meet an order for 600,000 snowboards in time for next Christmas.
"We are looking to double our work force to 440 employees to meet the order, but right now it's hard to find people as a lot of companies are
increasing production at the same time," Wham-O plant manager Rene Romandia told Reuters.
"China is a competitor, but with considerations like freight costs and time to markets, we are doing well where we are, right here in Tijuana," he
said.
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