Mexico Reaps Jobs, Currency : Maquiladora Permits Multiply

Despite a growing strain on power and water resources, the boom in maquiladoras in Tijuana and other Mexican border cities is likely to continue indefinitely because of the plants’ success in generating jobs and foreign currency, a prominent Mexican political figure said last week.

Sen. Raul Salinas Lozano, 71, former Cabinet minister and father of Carlos Salinas de Gortari, picked to be Mexico’s next president, said in an interview that the 1,250 maquiladoras now in operation in Mexico will attract $1.5 billion in U.S. dollars to the Mexican economy this year, second only to petroleum sales as a dollar generator.

Maquiladora employment is now 360,000 nationwide, he said, up 34% from 268,000 at the end of 1986. “We need employment,” Salinas said, in reference to maquiladoras. “We don’t have enough of it.”

At the end of 1986, there were only 986 maquiladoras, which are manufacturing plants set up by foreign companies to take advantage of Mexico’s low labor costs.

The importance Mexico gives the plants is reflected in the accelerated pace at which the federal Secretary of Commerce and Industrial Development (SECOFI) is approving new ones. An average 12 maquiladora permits a month are being issued in Tijuana, more than twice the rate last year, Tijuana SECOFI representative Jose Luis Ascolani said last week.

In all of last year, 60 new maquiladoras were approved for Tijuana and Tecate, Ascolani said. That 1987 total has already been surpassed in 1988, with 66 new maquiladoras approved thus far.

But Mexican officials acknowledged that the growth has put strains on utilities and transportation in Tijuana and other border cities. Shortages of water and power are already being felt in some developing areas of Tijuana, a situation likely to worsen as companies continue to relocate there.

One reason for the shortages of power and water is that business parks have sprung up in Tijuana without full government approval, Ascolani said. Only five of the 13 major business parks in Tijuana have full governmental sanctions, he said, and those are the parks most likely to have adequate utilities.

There is growing concern among companies already in Tijuana and among those thinking of moving there about “the ability of the existing infrastructure to support all this growth,” said Tony Ramirez, vice president of Made in Mexico, a Chula Vista firm that advises U.S. companies setting up operations in Tijuana.

“It’s going to take better long-term planning and cooperation from all concerned, meaning the public and private sectors, to adequately address the problems,” Ramirez said. “Someone coming in (to Tijuana) should be very wary about (which industrial sector) they are going to go in and to be sure the power and water supply is going to be adequate.”

Salinas said the federal government is aware of the problems brewing in the border cities and was taking measures to address them, saying the significance of the maquiladora industry to Mexico makes such measures imperative.

“Maquiladoras have been very important to Mexico’s economy, are now important, and will be in the future,” said Salinas, who was interviewed in Tijuana after his address to a group of Baja California economists.

As of Dec. 31, maquiladoras in Tijuana numbered 343, up from 297 a year previous. At the current rate the total will increase by more than 35% by year’s end. Employment at the Tijuana and Tecate plants is now 34,000, up from 29,900 a year previously. An average of 24 more foreign companies a month is setting up shop in Tijuana through “shelter programs,” or Mexican manufacturers who contract with foreign firms to make goods, Ascolani said.

Ascolani said the maquiladora growth is being fueled by the devalued peso and higher U.S. minimum wages, as well as by tougher penalties against U.S. manufacturers for hiring undocumented laborers to work in U.S. plants. He said foreign manufacturers are pumping $10 million a month into the Tijuana economy, mainly through wages paid to workers.

Although the move or expansion of Japanese manufacturers such as Canon, Hitachi, Sanyo and Sony into Tijuana in recent years has grabbed the headlines, most of the new companies relocating there are from the United States, Ascolani said. Ninety percent of the goods made in the plants end up being sold in the United States.

However, the Japanese generally are the largest employers, illustrated by the fact that only 11 Japanese plants operating in Tijuana generate 17% of the dollars pumped into Tijuana. Ascolani expects more Japanese and Far Eastern electronics companies to move to Tijuana and other Mexican cities as they gain “confidence that they can make things here without problems.”

About 60% of the maquiladoras in Tijuana are run by electronics firms, 23% by woodworking and furniture businesses and 12% by textile companies, Ascolani said.

Salinas, who represents the state of Nuevo Leon, is a former Mexican ambassador to the Soviet Union. He is now president of the Mexican Senate’s commission on industry and commerce.