'Twin plants': do they create jobs or take them away?
Juarez, Mexico — Mexico's ''maquila'' program is controversial.
The Mexican government launched it in 1965 to create jobs by enabling 100 percent foreign-owned companies to import raw materials duty free for export-manufacturing operations. Under US customs regulations, only the labor content added to reimported ''in bond'' goods is dutiable.
Currently some 130,000 Mexicans work in 600 maquila factories, sometimes referred to as ''twin plants,'' along the border. The term maquila derives from the Spanish word for ''grist mill'' because these plants work on other people's raw materials as a miller grinds other people's grain. This work added a badly needed $2 billion to Mexico's dollar earnings last year. With over 40,000 maquila jobs in 115 factories in Juarez, studies of the program have centered here. But so far, there is no agreement on whether Juarez's maquila plants improve economic conditions overall by creating jobs or add to overcrowding and poverty by luring more unemployed workers here.
US labor unions accuse the maquilas of stealing jobs from US workers. Criticism is also voiced south of the border, with some Mexican studies charging that the program encourages US firms to pay exploitation wages far below US levels.
William Mitchell, marketing manager for Juarez's showpiece 350-acre Antonio J. Bermudez Industrial Park, argues that the program benefits both the US and Mexico. He says that with Mexico's tourism earnings down sharply, maquila earnings have become second only to oil exports as a source of US dollars. He adds that the maquila program is wholly privately financed, relying on the Mexican and US governments only for enabling regulations, never for funding. This private-industry effort, he insists, ''offers Mexico its greatest potential for creating new jobs.''
Mr. Mitchell predicts the current low-skilled, low-wage maquila operations will lead to increasingly skilled, higher-paying work. He expects abundant supplies of Mexican natural gas will lead US firms to set up ceramics factories and metal foundries in Mexico.
Mr. Mitchell, an Ohio native whose military career landed him in El Paso, says the Bermudez Industrial Park's 20,000 jobs are not jobs stolen from US workers but instead have created additional US employment. ''For every job that goes out, there are two to three jobs created in the US to support the job that went offshore,'' he insists.
Rex Maingot, assistant general director of the Omega Group, is one of Bill Mitchell's competitors. Both can provide US firms with everything needed from the ground up to open a maquila plant in Mexico. While a construction crew worked next door on new office space to handle Omega's rapidly expanding business, Mr. Maingot explained that ''the US is not losing jobs to Mexico, because jobs are created on both sides of the border when a US firm makes a move which allows it to remain competitive in the world market.''
To remain competitive, says Mr. Maingot, the choice facing US firms is between moving their labor-intensive assembly operations far offshore to Korea, Taiwan, Hong Kong, or Singapore - or to neighboring Mexico. ''By assembling in Mexico, the US continues in manufacturing.''
Chuck Dodson, president of the 75-percent Mexican owned Elamex SA, which carries out maquila assembly work on a contract basis for US and European firms, agrees. Showing off a work force sorting US grocery coupons, wiring loudspeakers, and assembling coils, Mr. Dodson says that ''if you assemble here, you use American-manufactured components.'' He explains that the major difference between a TV set assembled in Japan and one assembled at the RCA plant in Juarez is that the Japanese set is built with components from Taiwan and Korea while the Mexican equivalent is assembled from parts manufactured by US workers located throughout the US.
Dodson estimates that his factory can assemble a variety of electrical equipment at ''a total burden cost of $3 an hour'' per employee covering all building, equipment, and management overheads. This, he says, compares with perhaps $10 an hour just north of the border in El Paso and up to $30 an hour in California. Given such wide cost differentials, Dodson expects more US manufacturers to switch assembly work to the Juarez/El Paso metroplex.
Chuck Dodson, Rex Maingot, and William Mitchell all admit that many US firms have launched maquila operations to take advantage of Mexico's relatively low wage scales. This advantage has increased as the peso has been devalued, cutting labor costs sharply in dollar terms over recent months. But all insist that the maquila jobs not only employ 130,000 Mexicans directly but create twice that number of spin-off jobs for other Mexicans.
One measure of spin-off effects, says Maingot, is that ''the amount of power being used to run Juarez's maquila plants is greater than what we're using to run the rest of the city.''
Another longer-term and less measurable benefit, Maingot adds, may come from preventing the spread of social unrest. ''That problem will be solved,'' he says, ''if we are quick enough in providing jobs in Mexico, and we look at the maquila program as the quickest way to provide jobs.''