Investment money pours in from Mexico
Mexican money is making a run for the border -- the northern border.
Gruma, the world’s largest tortilla company, unveiled plans Friday to build a major factory in Panorama City, part of a growing influx of Mexican spending in the U.S.
In an announcement timed with a visit here by Los Angeles Mayor Antonio Villaraigosa, Gruma said it would spend $51.5 million to build the tortilla and chip plant, which is expected to employ about 350 workers and open in 2008.
The factory, which would operate under the Mission Foods brand, would be about the same size as the firm’s facility in Rancho Cucamonga, billed as the world’s largest tortilla factory, with the capacity to crank out more than 300 million pounds of tortillas and chips a year.
The proposed tortilla behemoth is the latest example of U.S. investment by Mexican businesses searching for new customers and faster growth. In the process they have defied predictions that pacts such as the North American Free Trade Agreement would send all jobs and investment south.
Falling trade barriers have forced Latin firms to raise their games to take on foreign competitors. Long obsessed with protecting their domestic markets, some have gone on the offensive, taking advantage of an open U.S. investment climate to stake a claim in the world’s biggest economy.
Mexico’s Cemex, the No. 1 cement maker in the United States, is poised to grow even stronger in the U.S. with a tentative $15.3-billion deal reached last month to acquire Australia’s Rinker Group, which has substantial American holdings.
U.S. government figures show that foreign direct investment from Latin America totaled $87.3 billion in 2004, the most recent year for which data were available. That was more than double the $40.8 billion of 1999. Mexico has been one of the top investors.
In addition to Cemex, other big operators in the U.S. have been Banorte in banking and Grupo Bimbo in baked goods.
Investment also is increasing from other Latin American countries, whose companies are following their customers north.
Foreign food makers, for instance, have found a lucrative U.S. niche peddling brands familiar to expatriates while converting American palates to Latin tastes.
Lovers of Pollo Campero, the Guatemala-based chicken chain, can now find outlets in the United States. And salsa, guacamole and tortillas have become as American as spaghetti and pizza.
Free-trade agreements and market liberalization have played a role.
Cemex was once a small, regional cement maker that had to learn to compete internationally or risk getting swallowed up by foreign competitors, Chief Executive Lorenzo Zambrano told The Times in an interview last year.
Brazilian petroleum giant Petrobras is drilling for oil in the Gulf of Mexico while the country’s aircraft maker Embraer is servicing planes in Nashville. Argentine conglomerate Techint is acquiring a Texas-based maker of oil and gas equipment.
Already, Gruma is the largest tortilla maker in the U.S., according to the Tortilla Industry Assn. in McLean, Va. The 200,000-square-foot Panorama City plant, to be built on the site of a former General Motors Corp. factory, would be Gruma’s 20th in the U.S. The company, based in Monterrey, Mexico, also owns six U.S. cornmeal plants. It employs more than 6,600 U.S. workers.
Gruma’s investment comes at a time when U.S. tortilla sales have leveled off after a period of rapid growth.
Americans consume about $6 billion in tortillas annually, according to Packaged Facts, the publishing division of MarketResearch.com. Tostada and tortilla chips account for an additional $1.9 billion in sales.
In a conference call with investors last week, a Gruma executive said that U.S. sales had slowed in recent months. Lilia Gomez, a Gruma spokeswoman, blamed the slowdown on price increases.
“We’ve seen competitors following us. And we’re expecting this kind of ... temporary slowdown,” Gomez said. “Hopefully, for the second, third, fourth quarter of the year, we’ll see improvements on that.”
Gruma, with 2006 revenue of $2.8 billion, has manufacturing operations on five continents, and its products are sold in more than 50 countries. Last year it opened its first plant in China.
Today Gruma controls about 70% of the Mexican market for corn and tortillas, which has been roiled by rising prices and allegations of price manipulation. Mexican authorities in January launched an investigation that has turned up no evidence of wrongdoing by industry players here.
Gruma entered the U.S. market in the late 1970s, spotting an opportunity to create a strong national tortilla brand in a country where none existed. It began purchasing small U.S. manufacturers. Among them were two Los Angeles-area firms, Mission Foods Corp. and Guerrero Mexican Foods Products Inc. The company’s Mission, Guerrero and Buena Comida labels now dominate U.S. supermarket shelves.
A group of 18 small U.S. tortilla makers filed an antitrust lawsuit against the company in 2001. They accused Gruma of unfairly wresting control of the market by paying grocery stores to stock its products and eliminate competing brands. A federal judge threw out the case in 2004.
Dickerson reported from Mexico City, Hirsch from Los Angeles.