Proceso
January 2002
By Julio Aranda

From Torreon to Juarez, from Matamoros to Puebla, the maquiladora industry is showing its true face: that of a mirage that is fading away. In one year, the sector that formed the backbone of the Mexican export industry has passed from its prime into decay, leaving 150,000 unemployed workers in its wake.

This special report, based on investigation by reporters and correspondents in Proceso, recounts the Taiwan-style crisis that Mexico is suffering.

A couple of years ago, over 1000 city buses would pass through the ejidal, or collective farming, zone of Torreon, Coahuila each day. The area was full of farmers who had become factory workers, and they rode the bus each morning to their jobs at one of the 500 maquiladora companies. At that time there wasn't enough transportation to get them all to work. Now, however, there are buses to spare and what is lacking are jobs: 200 plants have closed overnight.

The unemployed workers remaining in the area line up at the company offices in hopes of jobs that will never materialize. Eventually they become one of masses that, driven by circumstances, attempt to cross the border to the United States.

But this state of affairs is not unique to Torreon. The same thing in happening in Juarez City, Chihuahua, in Matamoros, Tamaulipas, and, to a lesser extent, in Baja California. The maquiladora industry crisis is being felt in the states of Puebla and Guanajuato as well.

After reaching its peak in the mid-seventies, the sector is languishing: Approximately 150,000 workers were laid off between January of 2000 and December of 2001. The lay-offs are due to the recession in the United States, the market contraction, the plant headquarters' production adjustments, the lack of other local industries that might attenuate the crisis, and the inevitable opening of the border, according to businessmen, researchers, and local authorities. The federal government proposes to solve the problem with the Plan Puebla Panama (PPP). This plan, which has been questioned by numerous social organizations, provides for the establishment of a maquiladora zone that would range from the south-southeastern region of the country through Central America. Textile, electronic, auto parts, and other industries would be installed throughout the zone.

Florencio Salazar Adame, formerly of the PRI, heads the program. The plan involves regions in nine states: Yucatan, Campeche, Quintana Roo, Veracruz, Guerrero, Oaxaca, Tabasco, Chiapas, and Puebla. Hidalgo is considered an ideal site to install industrial parks, although the plan's documents do not explicitly mention this region.

To date the plan has created 71 projects, which will result in 31,720 jobs. The private finance initiative will invest 2,750,000,000 pesos.

In Campeche, there are 9 projects; in Chiapas, 10; in Veracruz, 17; in Oaxaca, 24; in Guerrero, 6; in Tabasco, 5; and for the moment none have been planned for Quintana Roo, Yucatan, or Puebla.

The risk of Taiwanization

In at attempt to alleviate the current crisis in the border zone, the businessmen are opting to support more complex industry, such as the metal-mechanic, automotive, electronic, and electric industries, over the maquiladoras, according to the director of Program Planning and Control in Torreon, Alejandro Guidi Abugarade.

He also maintains that while investors plan to restore the sector with high technology, the PPP administration has encouraged regional industrialists to relocate their plants further south, even offering them incentives to do so.

However, the president of the Congressional Social Security Commission, Samuel Aguilar, warns that if the companies move to the south-southeastern zone, state governments there will force regional ejido farmers to give land away to the maquiladoras, under the pretext of creating jobs. For example, they might be made to turn over their warehouses for the maquiladoras to use as factories, install their electricity, build their infrastructure (roads, wells); that is, give them whatever they want and receive nothing in return.

The maquiladora, warns the legislator, is only a mirage of development

For his part, Jorge Carrillo, a researcher from the Colegio de la Frontera Norte with 20 years of experience in this area, believes that the maquiladoras are not a solution to the problem of unemployment in rural areas, but rather a Taiwanization of the economy.

He says that a false image of this industry has been perpetuated in Mexico, because of which many businesses have chosen to move to China.

In terms of the industrial relocation within Mexico, he explains that the exodus to the southeast began around 1980. The PPP's objective is to accelerate this movement, which he considers to be positive, although he notes that the region's development depends on the attitude of the current administration.

In spite of opposition from over 150 social organizations, the PPP is becoming a reality. Congress approved a 962 million peso budget for the plan. The first stage of the project provides for construction of highways and general infrastructure for the new companies.

The plan will especially promote the capture of investment in service and regional infrastructure as well as in regional niches that drive agriculture, agroindustry, and biotechnology; textile; electronic and auto parts, etc., according to an official document describing the PPP.

For the federal government, this zone has major advantages, including abundant human and natural resources. It also presents promising investment opportunities, especially in the petrochemical sector.

The PPP's director of Social Communication has argued that the plan is already bearing its first fruits. For example, President Vicente Fox has inaugurated two new maquiladoras in the Montaña zone in Guerrero.

But while the PPP paints a future of progress and development for the south-southeastern zone, the maquiladora sector continues to suffer in the north.

Here in the north there is no stable industry. When these companies originally lobbied for their installment here, it was never mentioned that they would continue to seek out lower production costs and relocate to wherever those lower costs were found. Now they are moving to the central region of the country, and soon they will leave there too and relocate to China or Central America, according to Cirila Quintero Ramirez, researcher for the Colegio de la Frontera Norte (Colef) in Matamoros. She summarizes the industry: the maquiladora pays nothing (taxes, etc.). It comes, it assembles its products, and it takes them, leaving unemployment in its wake.

The textile industry, she says, is already installed in the south, for instance in Atlixco, Puebla. Meanwhile in the Yucatan and Hidalgo the automotive and electronic plants have already claimed their territory.

The crisis in the north is exemplified by the world capital of pants, as Comarca Lagunera has come to be called. This city is located between Coahuila and Durango, and it sews pants for Levi's, the Gap, Banana Republic, and Old Navy. At one point, it suddenly reduced its weekly production of 5 million units by half, and the cuts continue. During the textile crisis suffered throughout the past two years, at least 30,000 workers have lost their jobs.

Francisco Pamanez Fernandez, director of the La Laguna maquiladoras, says that Pres. Fox's lack of support is as much to blame for the sector's collapse as the companies' lack of foresight or the worldwide recession. Pamanez claims that Fox failed to respond when the sector asked for aid.

Our business will never be the same. The peak has passed. It was like a volcano erupting: lava is still flowing, but it's not the same, is the complaint.

1996 seems far away now. At that time a weak peso allowed U.S. businesses to invest in the region. There was also the support of the federal government's maquiladora program to facilitate the development of job centers.

At its peak, the demand for jeans production was so great that there were not enough workers to satisfy it. In 1998, the ejido farmers began to join the workforce, eventually coming to occupy 60% of the posts. The rural sector, therefore, is the most affected by the recent crisis, says Pamanez.

Mexican and foreign investment accelerated during that period. But the recession in the U.S. at the end of 2000 provoked a sudden deceleration in the sector. In 201 this resulted in the elimination of nearly 45% of these jobs.

The La Laguna delegation of the National Chamber of the Clothing Industry offers eloquent statistics: Until 2000, there were 550 plants in the zone, nearly 250 of which have now closed. In addition, the 80,000 jobs generated by the plants have been cut to 30,000. An extreme example is the company Libra, which went from 15 plants to only 4.

The mayor of Torreon, Salomon Juan Marcos Issa, argues that the arrival of certain U.S. companies, such as Wal-Mart, John Deere, and Caterpillar, have prevented a major unemployment crisis.

Chihuahua, the most impacted

In the seventies, companies like RCA Thomson, one of the largest television set manufacturers in the world, arrived in Juarez City, Chihuahua. This company is currently facing serious problems. It recently laid off 900 workers as part of production adjustments that also included substituting new technology for old.

The success enjoyed by the maquiladora during the past 37 years began to fade by the end of 2000. Twenty-one companies left the industrial park, leaving 60,000 workers on the sidelines.

The worst part is that the eliminated positions will not be replaced by others. This makes Chihuahua the area of the country most affected by the job cuts in this sector, says Francisco Uranga Thomas, secretary of industrial development of Chihuahua State.

Bernardo Escudero, president of the Maquiladoras Association (Amac) of Juarez City -- which includes 180 of the 316 companies registered in that zone -- summarizes: the maquiladora scheme has not been exhausted. However, there we did not react strongly enough our competitiveness given the recent market changes. NAFTA was approved, and China entered the market with some very attractive incentives.

Yes, we were caught asleep on the job, in some senses, according to Jose Luis Rodulfo, president of the Maquiladoras Association of Chihuahua, which represents 85 companies in Chihuahua, Delicias, Meoqui, Camargo, and Jimenez. We failed to cut costs competitively. In Chihuahua costs are equivalent to 18.5 pesos per hour (as compared to 50 cents in China).

To make matters worse, first there was the recession in the United States. Then the U.S. signed the International Technology Agreement with several Asian countries, allowing them to import certain electronics products duty-free, while Mexican maquiladoras continue to pay import taxes. This caused an immediate negative reaction, says Uranga.

Others problems included the fact that Vicente Fox's policy towards the maquiladoras was less than clear throughout much of his first year in office. There were problems involving judicial ambiguities and a double taxation, because the maquiladoras were not considered fixed establishments. There have been conflicts within the automotive, electronic, and telecommunications industries on an international level.

Uranga thinks that there ought to be other types of transactions, like high technology projects which need qualified workers with more than three decades of experience.

The big international consortiums still located in the state of Chihuahua are seeking to refocus their production processes and, as a result, have begun to get rid of some workers.

In the capital Chihuahua, Motorola decided to stay. However, at the end of December they rescinded the contracts of 849 employees, so as to remain with 1100 on the payroll.

On the other hand, Secosa, a producer of harnesses for automobiles, closed its doors and left 1000 workers jobless. The same thing happened with Champion, which produced sports clothing.

The figures from the Social Security Institute of Mexico (IMSS) clearly show what is happening in all kinds of industries including the assembly factories (maquiladoras). Of 780,018 policy-holders in October of 2000, the highest number of employees recorded in that city, by November of 2001 there were88,735 fewer, a drop of 11.4 percent.60,821 of these were from the maquiladoras. This means that in these maquiladoras the present workforce has been reduced to 273,000 .

According to data from the Department of Industrial Development of Chihuahua and its Center for Economic and Social Information, and from the associations of maquiladoras in Ciudad Juárez and Chihuahua, the rate of unemployment in the area went from 1.9% in October, 2000, to 2.5% in November, 2001. In ciudad Juárez, the rate of unemployment at the same time, was at 2.7%.

The state of Chihuahua has 444 maquiladoras registered with the National Institute of Statistics, Geography and Information Technology (INEGI). This number does not include about 20 Mexican businesses involved in the production of articles for export through the project Temporary Importation Programs (Pitex) or Altec.

Miguel Angel Calderón, director of the National Chamber of the Transformation Industry in Juárez, assures us that among the businesses in Juárez, there are in operation 100 plants belonging to consortiums listed in the magazine Fortune 500.

Of the 60 billion dollars worth of export items from the maquiladora industry in the country, 25% comes from Chihuahua. In addition, more than 70% of the total manufactured exports come from this area. This industrial branch of exports had many years of record growth, up to 22% annually, between 1985 and 1990.

The principal types of industry served by the maquiladoras of Chihuahua are those connected to the automobile and electronic industries, and to telecommunications, especially aerospace, explains Uranga.

Rodolfo, of Amac Chihuahua, maintains that 60% of the 85 businesses in the central and southern part of the state are related to the automobile industry, and that a rate of increase of 17% in 1999, and 15% in 2000, became a decrease of 12% in 2001.

As the indices of production in the United States fell, we saw that we had to take certain steps such as: not contracting workers to cover the rotation of personnel; not creating new jobs; programming technical stops, like not working on one weekday. These measures were taken even further in the first semester of 2001.

Escudero, of Amac Juárez, notes that in that city alone, 40 businesses shut down, and that the big consortiums which are still in operation, have reduced their workforce by 10 to 20 percent. Taken together, this amounts to a loss of 45,000 jobs.

Tamaulipas: The Disappeared Plants

One day, the businesses Midwestco of Mexico, located in Matamoros, and Competitive Industrial Processes, of Ciudad Victoria, both disappeared. All of a sudden there were no investors nor executives. The machinery left behind did not begin to cover the compensation owed to hundreds of workers.

The companies Ranco and ECC, with 30 years in Matamoros, couldn't keep making their payroll for 500 workers: they fired them all, only to hire them back on new contracts with fewer guarantees and at much lower salaries.There was a similar experience at Magnetet: they paid off their employees and negotiated with another union for lower salaries as a condition for reopening their plant.

According to the Department of Economic Development and Employment, 95 maquiladoras in Tamaulipas in 1986 increased to 220 in 1995, and to 350 in 2001.

A few years ago, plants came into Matamoros demanding 1000 to 1500 workers. Now they install plants with only 100 to 150. According to the investors,the reason for the above is that they are high-salaried positions.

In 2001, after the number of consortiums had increased, the plants began to close.

This was what happened to Estrella de Plata, Ideal Equipment, and LEPCO, while Kement fired 1200 workers.Autotrim announced that it would change the municipality of Valle Hermoso- where wages are lower- as a result of which 2300 workers will become unemployed.

Figures from IMSS show that during last year in Matamoros, 19,000 jobs were lost, 12,000 of which were in the maquiladora industry.

In order to stay in business, some factories have made deals with the unions to take early vacations, to reduce salaries by up to 50%, and to work only 3 or 4 days a week.

According to the National Institute of Statistics, Geography, and Information Technology (INEGI), in the last ten years the population of Matamoros doubled. In Reynosa, for example, 70,000 people, attracted by the boom in maquiladoras, came from Vera Cruz.Due to the high percentage of unemployment, there is no work for these people.

Baja California: Total Crisis

Guadalupe Ruiz came to Chiapas from Baja California looking for any kind of work. She started to work assembling toys from 7am to 3pm, and from 5pm until 2 in the morning. Her salary: 1500 pesos a week, most of which she sent to her mother who was taking care of her children.

However, in December, the situation changed. After paying the (December) bonus, they were given a rest. Today, she cleans houses.

During almost 4 decades, Baja California was the envy of the industrial sector, and one of the main economic supports of the northern border.

Although, speaking in a social context, the maquiladoras were an escape valve which avoided unemployment and delinquency with the offer of low-paying jobs, today, for the first time, they are in crisis.

During 2001, more than 60 plants pulled out, some of them without paying wages, seniority, or bonuses. In sum, more than 20,000 jobs were lost.

In spite of this, we're doing better than Ciudad Juárez or Reynosa, says the State Secretary of Work, Rafael Ayala López, and he counts off the losses: The plants of Componentes Técnicos of Baja California, Juguetrenes, Saft, and Sanmex, among others..

Plainly, for the president of the Chamber of Industry of Transformation in Tijuana, Francisco Sandez, this is not just a slowdown, it's a full-blown crisis.

In Tijuana they produce dialysis bags to rechargeable batteries, stereos, televisions, toys, telephones, optical lenses, trailer chassis, steel containers and other goods which amount to an income of about 2 billion dollars.

In the industrial parks there are 910 maquiladoras employing 340,000 people, mainly women, but now the cuts affect between 15 and 20 percent of the labor force in every factory.

Rafael Ayala López recognises that in the past there was an economic policy which bet on the maquiladora industry without considering the apparent risks: dependency, in regards to other countries; the use of obsolete technology; the investing of capital in the arms industry; although he is hopeful that the electronic industry will bounce back, especially that part which supplied component parts, of radars and pagers, for example.

Effects in Puebla and Guanajuato

In third place among the states which contribute most to the national GDP from textiles, and in fourth place in the production of clothing, the maquiladora industry of Puebla is far from being the dream applauded seven years ago by the government of Ernesto Zedillo and Manuel Bartlett.

The recession in the United States, the worldwide crisis in the textile industry, and the competition which comes with the low wages paid in countries in Central America and in Asia, produced a difficult scene in the industry from 2000.This is accepted by the Secretary of Economic Development (Sedeco), Antonio Zaraín García, and he stated that, according to IMSS figures, 20,483 jobs were lost in the state in the past year, 90% of them in maquiladoras.

But, Erato de Ita, president of the Chamber of Textiles in Puebla, warns: the numbers could be higher as there are many shops with sub-contracted workers. We calculate that in one year, at least 110 factories were closed in different parts of the state, mostof them in Tehuacán.

In the state of Guanajuato, the situation is the same, since the shoe industry as well as textiles are facing problems which,according to IMSS figures, mean the laying off of 4,252 workers.

The chief delegate of Afiliación and Cobranza of the IMSS, Luis Bravo Zamora, assures us that the textile maquiladoras, principally located in Irapuato and León, are practically shut down. They subsist on Mexican piecework and some scant work sent them by their main client, the United States. They also maintain an important productive plant in addition to generating important management incomes for the institute.

This civil servant has on register in León, plants of up to 800 employees. At the end of 2001, these had half as many or fewer employees.

While in the north we observe the collapse of maquiladora industries like the textile, automotive, and electronic, in the south-southeast, new niches of development are being carved out.

The investigator for Colef of Matamoros, Cirila Quintero, reminds us that behind the Puebla Panamá Plan is the intention of creating a corridor of maquiladoras, and alerts us to what that might bring: the producers and the landowners may be converted into mere laborers.

Florencio Salazar Adame, manager of the PPP, says that no one is trying to exploit the people, but to bring them development.

And how can he guarantee that they won't be paid the same 40 cents (of a dollar) which they pay in China?

At this moment, there are many people living in the south-southeast who have no job or income. I agree that the salaries which maquiladoras may pay are not the best, nor are they what we would wish for the population, but the choice is between eating and not.

The PPP adds that it's a 25 year plan, and assures us that no one will be coerced into anything. We're not talking about a concentration camp, more like, here's the maquiladora, to the sewing machines!

Translated from Spanish by Jennifer Struna and Errol Comma on January 28, 2002.