Mexico Looks to Cash In on <i> Maquiladoras</i> : Trade: Peso’s bust led to boom in foreign-owned factories. Now Mexicans hope they will start using local suppliers.

Mexico is rethinking its maquiladoras, and it got a good look at the potential of the foreign-owned factories with the government’s recent disclosure that the peso’s collapse has helped to spawn 89,000 new maquiladora jobs and nearly 400 plants.

The booming plants have hardly offset the effects of Mexico’s deepening recession: More than 830,000 jobs have been lost since the peso crashed last winter. But the government has launched an effort to elevate the maquiladora program--and its job creating power--to a new level.

Last week, the government held a conference that brought 50 top maquiladora operators as diverse as Sony, Kenner Toys, Baxter International and Plantronics to Mexico City to rub shoulders with representatives of about 2,000 Mexican manufacturers. The idea: to turn Mexico’s manufacturers into major suppliers to the maquiladoras, which get 98% of their components from foreign countries.

It’s too soon to tell whether the meeting was successful--large manufacturers take a year or more to test and accept new vendors--the government’s effort illustrates that it is no longer happy with just providing cheap labor to the booming maquiladora industry.

The meeting convened as the government was announcing that the number of maquiladoras, which are situated mainly along the border with the United States, had grown to 2,815 at the end of September, a 13% increase since the end of 1994. Jobs shot up to 689,420, a 15% increase over nine months.

The maquiladora boom is the flip side of the country’s brutal recession: The cheaper peso has made the maquiladora’s primary appeal for foreign companies--cheap labor--even more appealing, since wages are paid in pesos.

The result has been one of the biggest spurts in maquiladora growth since the plants were made legal in 1965 under a U.S.-Mexico agreement that foreign-owned plants could set up shop along the border to produce for export as a way of providing jobs for Mexicans to stem illegal immigration to this country.

Maquiladoras now generate more than a third of Mexico’s manufacturing output.

And they are increasingly important to Mexico. In addition to jobs, the government said the maquiladoras generated a dollar surplus of $3 billion over the first nine months of the year--the difference between the value of the parts shipped into the maquiladoras and the dollar value of the finished goods leaving Mexico.

Maquiladoras now rank second only to the petroleum industry as a source of Mexico’s foreign currency. The fastest growing categories of maquiladoras are those in textiles, wood and metal products and electronics.

“They make an important contribution to Mexico’s supply of dollars and employment. The rationale for legalizing maquiladoras was to absorb labor before it came illegally to the United States, and to some extent they are doing that,” said Darryl McLeod, senior Latin American economist at Lehman Bros. in New York.

But the Mexican government wants to see Mexican suppliers take a much greater role. At present, only 2% of the material used to make the products at the foreign-owned plants comes from Mexican factories, with the bulk coming from the United States or the Far East.

Interest and activity at last week’s conference was high, and U.S. companies expressed interest in Mexican packaging, plastics and automotive firms.

“We talked to 100 companies and maybe 10 or 12 are very strong, and we will end up doing business with them,” said Tony Ramirez, vice president of Made in Mexico, a San Diego-based maquiladora services company that operates Mexican plants for 15 companies.

Would-be Mexican suppliers also were eager. Like many other Mexican firms, Aeroplex, a plastics and vinyl automotive parts maker in Mexico City, is trying hard to find foreign markets for its products to generate dollars.

“Things are difficult in Mexico, so we are looking for other ways to promote ourselves,” said Juan Mauser, logistics director for Aeroplex, which already sells directly to Ford Motor Co. and BMW but is looking to expand operations through foreign joint ventures.

Mexican companies face many hurdles if they are to forge vendor relationships. Chief among them is the high cost of financing in Mexico, where commercial loans carry interest rates of 80% or higher. That adds to production costs and makes it more difficult to compete.

Mexico will also face stiff competition with the states of California and Texas, which are trying on behalf of their home-based industries to sell more parts to maquiladoras.

And many foreign companies that operate maquiladoras prefer “just-in-time” delivery, in which suppliers deliver components several times daily as needed so customers do not have to pay for material until it is used. The concept is a foreign one to most Mexican companies, Ramirez said.

* BOLSA RISES: Mexican stocks again soar as investors anticipate falling interest rates. D3