Mortgaging the Future

With mortgages out of reach for blue-collar workers in Mexico, Adrian Trejo ordinarily would have to salt pesos away for 15 years before he could buy a house with cash.

Then he’d have to find something suitable, a tall order in this booming desert city across the border from El Paso, where prosperity and population growth have has caused a 60,000-unit housing shortfall.

The entire border region from Matamoros to Tijuana suffers a similar lack of basic housing, streets, sewers, water and services--a byproduct of the border boom fueled by the North American Free Trade Agreement.

But Trejo, 23, is lucky. His employer, General Motors Corp., trying to cut into the severe employee turnover rate that plagues border factories, is helping him and 7,000 other workers become homeowners.

Now the Mexican government has persuaded a dozen other companies to follow GM’s lead, seeing it as part of the solution to Mexico’s mushrooming infrastructure crisis.

Trejo, a three-year employee of GM’s Delphi parts-making subsidiary, qualified for a new mortgage program subsidized by GM and packaged by Infonavit, a Mexican government agency, that will spot him a $10,000 home loan next year. GM is effectively paying two-thirds of his down payment through a company-matched savings program.

And a joint venture of Pulte Corp., a Bloomfield Hills, Mich.-based home builder, and a Ciudad Juarez builder, Condak, is going to construct a two-bedroom house especially for him. The joint venture has arranged with GM to build 7,000 homes for employees in Mexico over three years, nearly half of them in the Ciudad Juarez area.

“This is something good because it helps those who don’t have the resources to buy a house,” said Trejo, who now lives in Colonia La Esperanza, a sprawling collection of cardboard and plywood shacks east of Ciudad Juarez with no running water or sewage. GM will spend up to $10 million in loan subsidies over the next three years.

Infonavit general coordinator Antonio Gonzalez-Karg credits GM for kick-starting the mortgage program. “They see this as a way to solve their personnel turnover problem, of rooting people to the company,” he said.

Sony Corp. and a dozen other foreign employers have embraced the loan program in recent weeks. For now, Sony is only offering the loans to 500 employees at its Nuevo Laredo floppy disk drive plant.

Sony’s 7,000 employees in Tijuana and Mexicali are not yet eligible. But the Japan-based company says it is mulling a similar venture for its workers in Baja California, where there is also a housing crisis for workers in the booming maquiladora factories.

If enough other employers jump on board, the Infonavit program could provide mortgages to 120,000 Mexican factory workers (supervisors and managers are not eligible).

The loan program is seen as a way for employers to develop more loyalty among Mexican workers, who change jobs at an astounding rate: The annual turnover rate at maquiladoras, the border plants that make goods chiefly for export to the United States, averages 100% per year. GM says its turnover rate is closer to 60%.

In an interview at the plant where he assembles wire harnesses that are sent to Tennessee and installed in Saturn cars, Trejo said he feels “more committed” to GM Delphi because of the loan.

Pulte executive Bill Crombie said his joint venture is in discussions with two big maquiladoras in Tijuana to build worker housing. “Because of the scarcity of mortgage products in Mexico, this opens it up to lot of people who would at best have to wait a long time and at worst might not qualify for a home loan at all,” Crombie said.

There are risks. There is no guarantee the home buyers won’t turn around and sell their houses at a profit or that they will stay with their employers after taking possession of their houses. In short, the $10 million that GM is investing won’t necessarily buy it a happier, more stable work force, although it is betting that it will.

But the fact is, local officials say, private initiatives such as GM’s may be the salvation for a region whose basic services have been overwhelmed by population growth.

While free trade has attracted a host of foreign employers and new jobs to the border, the prosperity has also attracted masses of Mexicans migrating from the interior of Mexico seeking jobs and relief from Mexico’s ongoing financial crisis.

“This is the best option to be able to address the housing deficit, not only in our city but other important Mexican cities. The budgets of the states and cities don’t suffice to cover the problem, “ said Gerardo Holguin, coordinator of a Chihuahua state economic development program called Projecto Chihuahua Siglo 21.

Infonavit’s Gonzalez-Karg said the Mexican government expects the mortgage program will catch on with many other of the country’s 3,000 maquiladoras. GM’s Delphi division, Mexico’s largest private employer, with 72,000 workers, should be a bellwether for other foreign firms, he said.

“General Motors likes personal loyalty, and they know that when workers have this house it is an anchor to the job. With its profile as the largest private employer in Mexico, private industry will watch what they do,” Gonzalez-Karg said.

Employees who participate in the program save between 8% and 13% of their gross income, which is matched by GM. After a savings period, GM makes up the difference between the amount saved and a 20% down payment on a house, said Lee Crawford, executive director of GM’s Delphi subsidiary in Mexico.

Crawford said the directive for the program came from GM Chairman John F. “Jack” Smith who, on a visit to Ciudad Juarez to tour factories two years ago, saw some of the squalid colonias and told Crawford that he wanted better housing for his employees.

“So we developed this program with Infonavit because these people are at the low end of the scale in Mexico and they have no real ability to get financing to move into acceptable housing,” Crawford said. GM workers in Chihuahua, Nuevo Laredo, Monterrey, Matamoros and Reynosa are also being offered the loans.