Love ‘Em, Hate ‘Em, Border Industries Are Enjoying Boom

In this border city’s northeast industrial neighborhood, construction is booming these days. Throughout the expansive mesa adjacent to the United States, work crews are busy putting up spacious, one-story buildings--identical to those in American industrial parks--to house the growing number of mostly U.S.-owned assembly plants that are setting up shop in Tijuana and other Mexican border cities.

Although the so-called maquiladora industry is not new, these days it is expanding at a boom town rate in border cities from Tijuana to Matamoros on the Gulf of Mexico. Already spurred by a declining peso that makes for very favorable dollar exchange rates, the maquiladora business has recently benefited from a public embrace by Mexican officials who are eager for any source of foreign exchange to bolster their nation’s sagging economy.

“The maquiladoras are viewed as an essential resource for the opening of new jobs during this period of economic crisis,” said Jorge Bustamante, director of the Tijuana-based Center for Border Studies of Northern Mexico, whose views often reflect official government policy. “It’s seen as something very positive when there is an urgent need for jobs.”

Shedding historical Mexican reticence about foreign investment, the government has even provided land and tax incentives for maquiladoras to expand their operations to the Mexican interior. In addition, the government has offered some plants limited access to Mexican markets--another potential source of expansion for an industry that was set up strictly to do export business to the United States. Other non-U.S. firms, notably from Japan and Western Europe, have been encouraged to set up maquiladoras in Mexican border cities.

While the Mexican government has always supported the maquiladora program, observers say officials in Mexico City have traditionally viewed the industry as a necessary evil--a somewhat undignified concession to Mexico’s powerful neighbor to the north. On occasion, officials have seen fit to denounce the “exploitation” of Mexican workers in the maquiladoras, emphasizing the nationalist strain that permeates Mexican politics. (Mexico still celebrates as a national holiday the date marking the government’s expropriation, in 1938, of foreign oil companies.)

These days, though, Mexican officials offer few negative comments about the maquiladoras, a term that originates from the Spanish word maquila, which in colonial times was the toll millers collected for processing someone else’s grain. In English, the maquiladoras are often referred to as “twin plants,” an inaccurate throwback to a time when U.S. officials hoped the program would spur industry in U.S. border cities. Much to the chagrin of policy-makers in U.S. border areas, the benefits have weighed decidedly in favor of the Mexican side.

In poor Mexican border areas, officials point to the maquiladoras as one of the few hopeful signs for the fast-growing cities overwhelmed by a steady stream of migrants from the Mexican interior. They boast of their commercial parks and new “industrial cities,” such as the sprawling Mesa de Otay area in Tijuana. Ciudad Juarez, across the Rio Grande from El Paso, is the center of the industry, employing some 80,000 workers in 180 plants, according to industry figures.

“The maquiladoras are very important to our development,” said Luis Manuel Serrano, a spokesman for the mayor’s office in Tijuana, where some 30,000 people work on the maquiladora assembly lines that once characterized American industry. “They create jobs, open up new sources of employment and provide training that otherwise would not exist.”

In just two decades, the maquiladora industry has grown from an amorphous concept to a booming business of some 750 plants--including many run by U.S. Fortune 500 companies such as General Electric, General Motors and RCA--employing 250,000 Mexicans, according to industry estimates. The products range from the high-technology components for aircraft, computers and cars, to more mundane items such as blue jeans, leisure suits and furniture. Virtually all of the goods are bound for U.S. markets.

The maquiladora firms, mostly wholly-owned subsidiaries of U.S. companies, were attracted by cheap and abundant Mexican labor. The fruits of labor were made accessible by tariff breaks and other concessions offered on both sides of the border.

For Mexico, the firms have generated jobs, much-needed foreign capital and a rare glimmer of hope during a gloomy period of economic crisis. On both sides of the border, the movement has generated considerable controversy: On the U.S. side, critics say the program has amounted to putting Americans out of work to benefit Mexico and private industry. In Mexico, detractors have assailed the plants as low-wage, exploitative facilities with harsh working conditions where few Mexican nationals have the opportunity to rise in the managerial ranks.

In both nations, observers question the wisdom of fostering a dependency on highly mobile multinational firms that can quickly transfer operations to any part of the world where labor costs are advantageous.

“The Mexican border areas are now very heavily dependent on the maquiladoras,” said Oscar Martinez, director of the Center for Inter-American and Border Studies at the University of Texas at El Paso. “One has to wonder what might happen if conditions would decidedly change. . . . The consequences could be severe.”

Despite the controversy, the maquiladora industry has triggered a fundamental change of the dynamic of the 1,900-mile-long U.S.-Mexico border region. In an area best known in the United States for seedy bars, illicit activity and industries such as the quickie divorce, the maquiladora program has created mini-Hong Kongs and Taiwans that businessmen hope will one day challenge the Far East as a manufacturing center.

“The change has been dramatic,” said Martinez. “The maquiladoras have influenced the border area in very significant ways.”

At a conference in San Diego last week, industry analysts and officials gushed about an expansive future for the booming industry.

“It’s the biggest success story of the U.S.-Mexico relationship,” said Mollie Shields, assistant commercial attache for the U.S. Embassy in Mexico City.

The industry, Shields noted, now represents a foreign investment of about $2 billion--about one-quarter of the foreign investments in Mexico. In fact, the industry is perhaps the only bright spot for the beleaguered Mexican economy, bedeviled by a ballooning foreign debt, falling oil prices, high inflation and rapidly declining standards of living. In 1985, according to U.S. Embassy figures, the maquiladoras overtook tourism as Mexico’s second-largest source of foreign revenue after oil, generating some $1.4 billion.

There is an irony here: For decades, bureaucrats in Mexico City have looked with some suspicion on the border areas, largely because of the region’s distance from the capital, its distinct history and its close cultural and economic ties to the United States. The maquiladora program would seem to go against the many efforts aimed at integrating the border region into the national economy.

The maquiladora industry dates from 1965, at a time when officials in Mexico City feared social unrest in the northern border cities following the end of the bracero program. Under the bracero concept, which ended in 1964, hundreds of thousands of migrant laborers from Mexico were allowed to enter the United States legally to work on farms and ranches nationwide.

In order to help establish the maquiladoras, the Mexican government liberalized laws prohibiting foreign ownership of land and also exempted the industry from certain duty payments. In the United States, the industry took advantage of two special tariff provisions that allow for largely duty-free import of U.S.-made components that are assembled “offshore” and returned to the United States for final production.

The industry works in a very basic fashion: Computer board components, for instance, are shipped from the United States to the Mexican border facilities for the labor-intensive assembly process. Once assembled, the boards are returned to the United States--with minimal duty payments--for inclusion into larger computer units. About half of the maquiladoras produce electronic or electrical goods, although the industry includes firms producing automotive goods, clothing, toys, furniture and a vast range of other goods.

For industry, the plan presents a major advantage in labor costs: Maquiladora workers typically earn $4 to $5 a day. In the United States, the minimum hourly wage is $3.35. In addition, the plants’ proximity to the United States offers an advantage for the many U.S. managers, who often live on the U.S. side and commute to Mexico.

With the value of the Mexican peso plummeting, maquiladora operators say their industry is increasingly competitive with Asian firms. Because of devaluation, wages in the Mexican assembly plants are now said to be competitive to those in many Asian countries. In 1983, the industry took out a full-page advertisement in the Wall Street journal warning, “Move Over, Hong Kong.”

But despite the prospects for expansion, the maquiladora industry remains a controversial one.

In the United States, labor leaders deplore the maquiladoras as “runaway” shops that pursue cheap labor by shamelessly abandoning the U.S. communities where they have been based for years. Union leaders have persistently lobbied--with no success--for legislation that would remove the special tariff provisions that allow the companies to flourish.

“It’s an attempt to use low wages of another country to take jobs away from Americans,” is how Arthur Gundersheim, assistant to the president of the Amalgamated Clothing and Textile Workers Union in New York, characterized the maquiladora program.

Industry representatives assert that the U.S. labor movement has failed to recognize the changing world marketplace. Maquiladoras have actually saved jobs in the United States, according to industry officials. They point out that computer parts and other components assembled in Mexico typically originated in the United States and the parts are generally returned to U.S. facilities for final construction.

“We keep people employed in the United States,” said Harry L. Veroba, president of Vertek International Inc., which assists U.S. firms seeking to relocate to Tijuana. “We have to think on a worldwide basis now, and we have to stay competitive.”

Meanwhile, in Mexico, while the maquiladoras have created many jobs, the assembly plants have done little to alleviate the pressing problem of unemployment among male heads of family. A great majority of the maquiladora workers hired are women--a fact industry executives attribute to females’ supposely superior manual dexterity. But others see the hiring imbalance as a deliberate policy of an industry seeking to employ a docile population that is unlikely to agitate for change.

“Women are less likely to organize; they allow more control than men,” noted Bustamante, a supporter of the maquiladora program. “The maquiladoras are here to stay. And if we want to do anything about male unemployment, we shouldn’t expect anything from the maquiladoras. . . . That’s a fact of life.”

Socially, the massive entry of young women into the work force in Mexican border cities has had profound but, social scientists say, still little-understood implications in a traditional male-oriented society where machismo still flourishes. Some have said the movement has contributed to the breakup of the family along the border and a rise in cholismo, or juvenile delinquency. Others say that is nonsense.

“That’s a reversal of roles, and socially that created some problems,” said Joseph Grunwald, president of the Institute of the Americas, a San Diego academy that studies Latin America. “Men began to depend on them (women). Women became independent.”

Because the maquiladoras are largely foreign-owned, there is also considerable concern in Mexico that little technology is being transferred and few Mexican managers have opportunities to advance. Such shortcomings, Grunwald noted, heighten the image of the maquiladoras as a foreign enclave in Mexico--something apart from the ideal situation of an independent, indigenous industrial structure. Noting the shutdown of many maquiladoras during the U.S. recession of 1974-75, observers say the highly mobile industry could quickly pull out of Mexico if the economic incentive became less inviting.

But industry representatives note the the maquiladoras do have a substantial investment that would not be easy to walk away from. And they insist that some technology is being transferred to the Mexican employees.

“We have people operating equipment that costs more than $200,000,” said Howard C. Boysen, president of IMEC Corp., which runs seven maquiladora firms in Tijuana. “We’re not interested in a fly-by-night, short-term, exploitative type of activity.”

Apart from the economic questions, a number of studies of maquiladoras have found evidence of substandard working conditions--including exposure of workers to toxic substances, assembly line speed-ups, sexual harassment, blacklisting and inadequate protection from dangerous machinery. Although Mexico has many worker-protection laws on the books, critics say they are rarely enforced against the maquiladoras.

“I don’t think employers have much incentive to improve working conditions,” said M. Patricia Fernandez-Kelly, a Mexican social scientist who has done extensive research on the maquiladoras and is currently a research associate at the Center for U.S.-Mexican Studies at the University of California, San Diego.

Industry officials tend to dismiss these and other criticisms as off base.

“The people we employ, I think that they get a better deal in the factory than they get at home,” said Lee Hill, an official of IMEC Corp.

Nonetheless, high turnover rates among employees remain a serious problem for the maquiladora industry. Annual turnover of more than 100% is not unusual. As a result, employers have increasingly offered incentives such as free transportation, longevity bonuses, insurance plans and the like.

But many say turnover is likely to remain a problem as long as maquiladora wages remain low--particularly in comparison to wages on the U.S. side. In fact, real wages at the maquiladoras have declined substantially since the major peso devaluations of 1982.

“Women simply cannot afford to care for a family on (maquiladora) wages,” said Fernandez-Kelly. “It’s just not cost efficient to work in one of those plants when you can earn so much more as a maid” in the United States.