Low labor costs draw US companies to Mexico
Tijuana, Mexico — Nodding toward a half dozen Mexican women in smocks, perched on stools as they file burrs from aluminum castings, the general manager of this new factory -- an American -- makes an observation: ``This is exactly the same work force we used up north.''
But ``up north'' in Cypress, Calif., the work force of Hyatt Die Cast & Engineering was once decimated by raiding immigration officials, unionized by the Teamsters, and picketed by strikers for six weeks. And the work force there costs as much as eight times more than the one here in Tijuana.
Part of a minor flood of American companies opening plants in Mexico during the last eight months or so, Hyatt is testing the waters south of the border.
The aerospace contractor is moving part of its casting operation from just south of Los Angeles to an industrial park in Tijuana. In the bargain, Tijuana gets some badly needed jobs. Hyatt's Mexican partner in the plant, Covimex, supplies the labor. Hyatt supplies the capital equipment, the training, and the order contracts.
As a result, there are now some 720 ``maquiladoras,'' or factories like Hyatt's new plant that use Mexican workers to manufacture American goods. That's 49 more than last July.
By the end of last month, the maquiladoras employed 235,000 people and dominated the industrial scene in northern Mexico.
A major reason: Since peso devaluations in 1982 cut Mexican wages virtually in half, Mexican labor costs have become competitive with those of the world's other cheap-labor countries -- chiefly in Asia.
American labor officials look disconsolately at the maquiladora boom and see lost American jobs. ``Every time you set up a producing unit in Mexico,'' says Sol Chaikin, president of the International Ladies' Garment Workers' Union, ``you are exporting American jobs. . . . There's no way we can compete (in wage levels) with the three-and-a-half billion people in this world living in abject poverty.''
William Bywater, president of the International Union of Electrical, Radio, and Machine Workers, estimates that his union has lost at least 30,000 existing jobs to Mexican maquiladoras, including the entire black-and-white television industry. The only hope these labor leaders see is using legislation to limit the flow of goods across borders.
The maquiladora, or twin plant, industry has also not turned out quite the way either the United States or Mexico imagined it would.
It exists because both countries let twin-plant materials and products cross the border paying customs only on labor costs. This way plants in the US and another country would both work on the same goods at different stages.
What was meant, in the 1950s, to give American automotive parts better access to Canadian factories, has instead become a ticket to cheap labor for companies. What was meant, in 1965, to cut unemployment in northern Mexico, instead brought thousands of Mexican women into the work force for the first time.
The Hyatt/Covimex factory is a good example of how the profile of the maquiladora industry is shifting. The work force here is split nearly evenly between men and women. Labor costs are dwarfed by the die-casting machinery (worth at least a million dollars) that Hyatt is setting up on the shop floor.
Despite the sophistication of the machines, it will take only an hour or two to train unskilled men to use them. ``The skill is all in the machine,'' says Alfonso Erdmann, Covimex operations manager and a Mexican.
Before 1982, most maquiladora workers were women. They worked in the garment industry sewing buttons, stitching collars, or, increasingly, they did unskilled work in electronics assembly.
The theory of Maria Patricia Fernandez Kelly, a researcher with the University of California, San Diego, Center for US-Mexico Studies, is that women worked at maquiladoras to support their children while husbands and brothers headed north across the border for far more lucrative wages. Dr. Fernandez Kelly worked at a Ciudad Juarez garmentmaking plant for several months in the late 1970s.
But now an increasing share of the maquiladora ranks are filled by men. Both the garment industry and electronics industry are being outpaced by automotive parts, machining, woodworking, plastics, and other kinds of manufacture, according to Homero Reyes, a maquiladora broker between US business and the Mexican bureaucracy and a former economic official with the Baja California Norte state governor.
The up-and-coming industry in Mexican maquiladoras is the auto industry. According to Jorge Carrillo, a researcher at the Center for Border Studies in Northern Mexico (CEFNOMEX), Mexico will become a major source of American engines in a few years.
Although maquiladoras mostly seek unskilled labor, there is another benefit for Mexico. More than half the graduates of the region's largest technical institutes in Monterrey and Chihuahua work in these plants as well.
To Mr. Reyes, it is crucial to the future of Mexico's economy to develop its pool of middle managers and engineers. ``Mexico has always had owners and workers,'' he says. ``It hasn't had a managerial class. That's been one of Mexico's biggest problems.''
American business has a bad image of Mexican bureaucracy, says Reyes. ``Paper work in Mexico is horrendous,'' he admits. But the country has the advantages of easy access and relative political stability over much of Southeast Asia.