Mexico’s Manufacturing Sector Will Survive With or Without America

AP Photo/Ivan Pierre Aguirre

In the late 1960s, Jaime Bermúdez Cuarón, an engineer from a wealthy family, decided to build factories on his cotton fields in northern Mexico. Over time, he, low wages and trade agreements helped turn Juárez into a city of 400 factories that employ 300,000 people, and gave rise to similar industrial areas along the border. People call Cuarón the godfather of Mexico’s manufacturing sector.

At Bloomberg Businessweek, Lauren Etter tells Cuarón’s story and the way American manufacturers came to rely so heavily on Mexico’s factories, called maquiladoras, to build everything from medical devices to car parts. Trump called NAFTA “the worst trade deal ever made,” but Juárez’s industries are starting to rely less on America as they used to, so Cuarón believes Mexico will fare well despite president Trump’s loco rhetoric about border walls and NAFTA.

Martinez says the city is undergoing perhaps one of the most uncertain periods in its history. And that largely has to do with a man to the north.

Maquiladoras haven’t been a direct topic of the recent Nafta negotiations, but the industry is in the crosshairs of the administration, whose trade delegation argues that Mexico’s low wages and poor working conditions create unfair competition for American business. Even the slightest upward adjustment to wages in the maquiladoras or tweak in labor laws could threaten the industry’s advantages. But Juárez has strengths it lacked even a few years ago. Companies around the world are constantly prowling for lower production costs, and it’s now cheaper to hire a worker in Mexico than in China. In 2000, Chinese workers earned half of what Mexican workers did, adjusted for productivity. By 2014, Mexico’s adjusted labor costs were 9 percent lower than China’s, according to an analysis by the Boston Consulting Group.

For decades almost every maquiladora in Juárez was owned by a U.S. company. Today the figure is 63 percent. Japanese companies own 8 percent, German companies 7 percent. Other owners are from China, France, South Korea, Malaysia, Sweden, and Taiwan, according to María Teresa Delgado, president of Index Ciudad Juárez, a trade group that represents the maquiladora industry. “The Trump experience, it really opened our eyes,” she says. “At first we were all kind of nervous because we thought the world would come to an end. But there is a bright side to every dark side, and that’s what we found out. … We’re more global than we were a few years ago.”

 

Read the story