Propping Up the Peso : Maquiladora Owners Get Creative to Help Out Workers

Under normal circumstances, a 40% drop in the cost of labor would make any business owner jump for joy.

But several operators of foreign-owned maquiladoras here say they are ambivalent about the cost savings resulting from the peso devaluation. Good for profits, the peso’s fall has been devastating for employees’ finances and morale and created a potentially volatile workplace climate.

As a result, many maquiladora managers are giving some of the peso’s decline back to workers in other ways to get around the Mexican government’s 10% limit on wage increases--a pay hike that the maquiladoras granted in January.

Mattel, whose 2,000-employee toy plant is one of Tijuana’s largest, has been giving away food and clothing since the peso began dropping last Dec. 20. Honeywell, which makes heating systems controls here, instituted a free breakfast program. Sony, which has a huge television assembly plant, helps employees with transportation costs.

And KSC, a manufacturer of stereo speakers, is awarding bonuses to employees for punctuality, one of many special cash bonus awards that have cropped up since December.

The extra benefits don’t come near to making up for the loss in buying power suffered by maquiladora workers, who receive wages in pesos but pay dollar-based prices for many of life’s essentials in this border town, from rent and gasoline to milk and clothes.

In dollar terms, the devaluation has lowered Mexico’s minimum wage from $1.20 an hour to 70 cents an hour, although most maquiladora workers average roughly twice that.

Several employees interviewed Friday said they are still staggering from the peso’s fall.

“All of us are disgusted by the government. They are the ones who robbed us, not the companies,” said Juana Hernandez, a worker at KSC. “The government messes up and we pay the bill,” said Pablo Mendoza, a worker at Aci-Mex, a manufacturer of orthodontic equipment.

Many operators of maquiladoras say they feel compelled to offer special income supplements and provisions to try to ameliorate the peso’s collapse. A second 10% pay hike, meanwhile, has been authorized by the government for April.

Plant operators worry they may develop an image of feeding off Mexico’s misery. And many fear that employees will begin leaving for El Norte for higher paying jobs, threatening the relative stability that had finally settled over the maquiladora industry here after years of high turnover and worker scarcity.

“We found many of our employees were just devastated,” said Robert S. Jezak, vice president and general manager of Mattel’s Tijuana plant. “So we tried to do some things to make up for the loss.”

Angelica Mueller, who helps run Honeywell’s plant in southeast Tijuana with 850 employees, said her Minneapolis-based company has been able to give back half of the 50% loss in buying power caused by the devaluation.

“We are committed to the country,” Mueller said. “It’s a sensitive situation for Honeywell wanting to comply with the government guidelines but wanting to do everything we can for employees.”

The Mexican and U.S. governments established the maquiladora program in 1965 to try to stem illegal immigration and create jobs for Mexicans. It allowed foreign-owned plants to open in Mexico to take advantage of low-cost labor as long as the plants’ output, for the most part, was sent back to the United States for consumption.

There are now 2,300 maquiladoras employing 650,000 workers in all of Mexico, including about 725 in Baja California with more than 100,000 workers.

The company aid programs are in place along the entire U.S.-Mexico border. In McAllen, Tex., “Companies are trying to compensate employees with special bonuses by increasing the travel allowance and some other things,” said Mike Allen, an executive with the McAllen Economic Development Corp.

The programs demonstrate compassion but also good business sense, said Tony Ramirez, vice president of San Diego consultants Made in Mexico and a board member of the National Maquiladora Assn., a Mexican trade group. But the supplements, which are more numerous and visible than in past Mexican peso devaluations, are also delicate issues.

“The programs are causing some consternation to the employers because they know they can’t over-give, so to speak, because they wouldn’t be following the government’s mandate to maintain a certain level of control over inflation,” Ramirez said.

Plant operators are also wary about the giveaways because one day they will have to end, and that could cause resentment among workers, he said.

But Ubaldo Corral, a maintenance worker at Aci-Mex maquiladora in Tijuana’s Mesa de Otay area, isn’t thinking that far down the road. He is getting by day to day.

“The devaluation has meant less fun, less food, less movies, less hamburgers at McDonald’s for my kids,” Corral said.