Timber Firm Threatens to Scuttle Mexico Project

Mired in a labor dispute with the Mexican government and unions, Louisiana-Pacific Corp. has suspended construction on its huge maquiladora plant near Ensenada and is threatening to pull out of the project altogether.

A Louisiana-Pacific spokesman confirmed reports in the Tijuana newspaper El Mexicano that the company has laid off more than 400 construction workers. The workers were helping to build the first, 200,000-square-foot phase of a redwood planing and drying facility on 80 acres that Louisiana-Pacific bought last year at El Sauzal, north of Ensenada.

Louisiana-Pacific stopped construction June 14 after it said the Mexican government reneged on a promise to let it use its employees to unload rough-cut timber from barges transporting redwood from its Northern California mills. The government now insists that Louisiana-Pacific use longshoremen to unload the timber, the company says. Government officials were unavailable for comment.

Its own employees are cheaper than unionized labor, and the promise that it could use its own workers was one of the main reasons that Louisiana-Pacific decided to become the first U.S. lumber company to set up a large maquiladora operation in Mexico, spokesman Shep Tucker said Thursday.

Unless the dispute is resolved in the next two or three weeks, Louisiana-Pacific will “pull out” of its El Sauzal project, Tucker said, despite having spent $7.8 million for land, construction and port improvements at El Sauzal.

While leaving the door open to future negotiations, Tucker said the suspension was “appropriate so as to clear up this important issue before more capital is invested.” Portland-based Louisiana-Pacific, the nation’s largest redwood processor, announced the purchase of the El Sauzal site last year. The idea was to ship the lumber back across the border for sale mainly in Southern California.

Tony Ramirez, a vice president of Chula Vista-based Made in Mexico, which advises foreign manufacturers setting up plants in Mexico, said Louisiana-Pacific’s problems are indicative of the “mine fields” that U.S. companies can encounter in Mexico if not attuned to political and cultural differences there.