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Foreign-Owned Plants Thrive on Mexico’s Border

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San Diego County Business Editor

Boosted by the low cost of labor and heightened competitive pressures in the United States, the number of foreign-owned manufacturing plants called maquiladoras operating in the Tijuana region grew by 45% in 1988, the largest single-year increase ever, a Mexican official said Monday.

The rapid expansion of maquiladoras , now Mexico’s second-leading generator of foreign currency after oil, is an indication of the plants’ importance to the Mexican economy as a generator of jobs and foreign exchange. The rapid rate of increase, which shows little sign of abating, came despite growing concerns about the area’s overburdened power, water and transportation systems.

Maquiladoras are foreign-operated plants where goods destined mainly for the U.S. market are manufactured or assembled with low-cost Mexican labor. Favorable U.S. import laws instituted in 1965 mean that U.S. manufacturers using the plants pay duty only on the value added to their products in Mexico.

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Maquiladoras operating in Tijuana, Tecate and Ensenada totaled 579 as of Dec. 31, up 45% from the 400 in operation a year previous, said Jose Luis Ascolani, the Baja California delegate of the federal secretary of commerce and industrial development, the agency responsible for approving maquiladora permits.

Employees numbered 52,957, up 44% from the 36,672 employed at maquiladoras a year previous. Another 15,000 workers are thought to be employed at “shelter” plants that foreign firms use on a contract basis for assembly or manufacturing tasks.

In the Tijuana region alone, maquiladoras are now bringing in $23 million monthly to the regional economy, nearly twice the dollar amount two years ago, Ascolani said.

The year saw the arrival of several more giant Japanese consumer electronics manufacturers in Tijuana, including Pioneer Speakers, Casio Computer, Canon, Kyocera and Scripto Tokai. The Japanese firms see maquiladoras as an essential means of competing in the U.S. market, said James Reid, a executive vice president of Iget Corp., a U.S. subsidiary of Mitsui & Co. that assists Japanese firms considering plants in Baja California.

American manufacturers, who operate more than 90% of the maquiladoras, also increased their presence. Among the notable newcomers was box manufacturer Container Corp. of America.

Tony Ramirez, a vice president of Made in Mexico, a Chula Vista company that helps U.S. companies considering a move to Mexico, said U.S. furniture and cabinet manufacturers were frequent founders of Baja plants in 1988. Southern California furniture makers have been under strong pressure from air pollution authorities to reduce some pollutants produced by their painting facilities.

“The growth in 1988 was much higher than anyone anticipated,” Ramirez said. “But we’re seeing the same old problems crop up, specifically a strong burden on the availability of power. It’s taking a long time (for maquiladoras ) to get hooked up because of high demand.”

Sean Doyle, a broker with Coldwell Banker commercial real estate in San Diego who tracks the Tijuana real estate market, said there was a slowdown of interest by U.S. firms in maquiladoras in mid-1988 because of the political uncertainty after the election of Mexico’s president. But demand picked up by year’s end and continues strong.

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Doyle expects about 2 million square feet of industrial buildings to be leased or bought by foreign firms in Tijuana in 1989, up from about 1.5 million square feet in 1988.

Ascolani said the Mexican federal government will make greater efforts in 1989 to improve the strained infrastructure but said the government will lean on the developers of industrial parks and their tenants to help fund the improvements. Ascolani said he expects the number of maquiladora permits in 1989 to equal those of 1988.

Total maquiladoras in Mexico totaled about 1,500 at year’s end, up from 1,250 at the end of 1987, Ascolani said.

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