Riding the Ripples of a Border Boom

Camilo Manrique has only a sixth-grade education, but he can quickly reel off the giants of Yucatan history. There were the ancient Mayas, who built soaring pyramids. There were the 19th century hemp barons, with their vast haciendas. And there is Eddie Bauer.

“The maquiladora is the biggest thing that’s happened to us,” said Manrique, strolling out of a giant factory where modern Maya Indians stitch jeans for Eddie Bauer, the Gap and Banana Republic.

He hopped on his bike to head home through this sweltering village, where horse-drawn buggies rattle past stone houses with thatched roofs.

“Now, with what you earn, you can buy the necessities,” he said.

This blue-jeans oasis represents a striking change in Mexico. Fueled by the North American Free Trade Agreement and increasing globalization, maquiladoras are booming. And increasingly, the assembly plants that once symbolized the U.S.-Mexican border are appearing in the country’s interior.

This “second wave” is reviving towns throughout Mexico--from old woodworking cities to Mayan-speaking hamlets--providing an alternative to unemployment or, sometimes, illegal migration to California.

But if the factories are helping Mexicans, they could hurt some Americans. With lower wages and lower turnover than at the border, these maquiladoras could tempt more and more U.S. companies to move production to Mexico, especially in such labor-intensive industries as clothing manufacturing.

“The number of [Southern California] companies looking down there has grown dramatically in the last couple of years,” said Raul Hinojosa, a UCLA professor who has studied the California garment industry. So far, however, only a limited number have relocated.

Since the 1994 signing of NAFTA, which lowered tariffs, maquiladora jobs in Mexico have soared almost 60%, to 860,000.

Many plants are still going up in border cities like Tijuana, poised to import U.S. parts, assemble them and quickly ship them back. But nearly 1,000 maquiladoras--about 40% of the total--have now set up shop away from the congested border, according to the U.S. economic consulting firm Ciemex-WEFA.

‘Green Gold’ Fades

Perhaps nowhere has the impact been greater than in the Yucatan, in Mexico’s south.

Just consider Manrique’s case. His family, like other local Indians, long cultivated hemp, the local “green gold,” which was made into rope. But with the rise of synthetic fibers, the industry collapsed. Three-quarters of the region’s 53,000 hemp workers have lost their jobs in the past five years.

For a while, Manrique searched for construction work in the city of Merida. But the hourlong bus commute ate up whatever meager amount he was able to earn. Increasingly desperate, he considered joining his uncle, a car wash attendant in Buena Park, Calif. (“He has an immense house--and it’s not even cardboard,” Manrique boasts.)

But then came Monty Group, a Hong Kong-owned maquiladora that produces jeans for the United States.

These days, Manrique sorts pre-cut denim from 7:15 a.m. to 5:45 p.m., earning $28 a week plus benefits.

Back at the one-room shack he shares with his wife and two daughters, he proudly showed off a new double bed and washing machine, bought on an installment plan. Next, he’s going to buy cinder blocks to replace the walls--currently, thick black cardboard lashed together with wire and Coke-bottle caps.

“There is a lot of work, and they don’t pay us much,” admitted the 24-year-old worker, who earns the minimum wage. Even with overtime, he still doesn’t make enough to pay for the minimum food, energy and household needs of a family of four, according to Mexican academic studies. “But what else is there?” the worker asked. “You’re here in Motul.”

Factories such as Monty are a far cry from what Mexican and U.S. officials envisioned when they set up the maquiladora program in 1965. Then, the idea was to create jobs at the border, especially for Mexican farm workers returning from the United States.

The maquiladoras were allowed to import materials and components duty-free. Tariffs were paid only on the value added to the products.

In the ensuing years, the maquiladora industry exploded as competition from Asian imports forced U.S. firms to seek cheaper sites for manufacturing. Today, globalization and their low wages continue to drive the growth in maquiladoras. But NAFTA is also playing a role.

The treaty, for example, eliminates quotas on textile exports to the U.S., making Mexico more attractive than the Caribbean for many clothing manufacturers. And it requires that products benefiting from it--from cars to television sets--be made mainly of North American parts.

“Maquila-type plants that were located in the Far East are now being moved to Mexico” to assemble components that go to other factories, said John Christman, a maquiladora expert at Ciemex-WEFA. Asian-owned plants are especially thick in Baja California, including Tijuana.

Mexican officials see great potential in what some call the “southernization” of maquiladoras. The phenomenon, they say, could be a way to hitch the rest of Mexico to the booming border economy.

“It distributes the technical proficiency and labor preparation for the export markets around the country,” said one official.

The maquiladoras brought approximately $1.5 billion of direct foreign investment to Mexico last year.

But most important in the short term, the maquiladoras have brought employment. In the woodworking state of Durango, the plants accounted for half of all new jobs last year.

You can call them poorly paid jobs with long hours. But considering that at least one-third of all Mexican workers are in an underground economy--from street vendors to plumbers--a steady maquiladora paycheck and health insurance can be a treasure.

Of course, the maquiladoras alone won’t propel Mexico out of poverty. Because they use nearly all imported parts, they have a limited ripple effect on other businesses. Efforts to establish Mexican suppliers have produced few results so far. And workers don’t have much spending money.

But in towns like Motul, even $35-a-week jobs are enough to spark a turnaround.

Since Monty and another clothing maquiladora arrived here, 20 stores have opened, officials say. Everyone from the tortilla maker to the butcher is benefiting from growing sales to the 2,000 maquiladora employees.

“People have something to spend,” said mango vendor Ileana Guerra, rocking her baby in a hammock in the central vegetable market. “Before, there was no money.”

For Mayor Luis Emir Castillo, the benefits go well beyond increased commerce in this town of 20,000. Ten years ago, he said, the decline in the hemp industry forced the town’s young people to start leaving for California--or, as locals uniformly refer to it, Los Angeles.

“We still have many people in Los Angeles,” said the mayor, whose office is decorated with a picture of hemp harvesters. “But now, with the possibility of having a steady job, and the chance to be back in your own land, some have returned.”

The arrival of industry is gradually changing the rhythms of agricultural life in Motul.

“Before, people would hold dances on Monday nights,” said the mayor. “Now, if you hold a dance on Monday, no one goes. The discos are only open Friday and Saturday. We are developing new habits.”

Decline in Alcoholism

There also has been a decline in the alcoholism that used to be common among hemp workers here and that intensified as unemployment grew.

Such changes are taking place in towns throughout Yucatan state. About 15,000 residents now turn out Liz Claiborne slacks, Maidenform bras, Lee jeans and other goods in maquiladoras. Fernando Lopez, the state’s economic development director, estimates that jobs will grow by 30% a year as new factories arrive.

“Every month, we get one or two more,” he said proudly.

Maquiladoras started looking south, in part, because of overtaxed services such as electricity and water at the border. They found improved infrastructure in the interior--for example, the upgraded Yucatan port of Progreso, which has regular ship service to New Orleans and Miami.

Perhaps more important, the Mexican interior offers a stable work force. That’s a big change for clothing manufacturers. In border towns, they had to compete for employees with higher-paying electronics plants. Garment workers were about as reliable as the Mexican phone service.

In the Yucatan, labor costs are about 25% lower than at the border, and many workers won’t budge from jobs, officials say.

‘Hungry for Work’

“The people weren’t working before we got here. It was like the gold rush,” said Anamaria Brannon, manager of a Lee jeans plant that employs 400 in the Yucatan town of Izamal. “They were really hungry for work.”

That desperation, of course, also has a way of limiting labor demands. Asked whether employees at his factory had considered forming a union, Manrique laughed.

“If you do that, you’ll lose your job,” he said.

The maquiladora boom underway in interior Mexico has hardly bypassed cities such as Tijuana. In fact, the number of plants on the border has grown about 13% in the past two years. But more companies are definitely looking farther south--perhaps the best-known being Guess Inc. The apparel company announced in January that it was shifting some of its Southern California work to Tehuacan, a booming clothing-maquiladora center about 150 miles southeast of Mexico City.

“It was cheaper to produce in Mexico, period,” said Bill Barnes, a Guess spokesman.

UCLA’s Hinojosa says few Southern California garment makers have followed the Guess example--so far. But if the first ventures prove successful, “it could have a significant effect on a relatively large segment of the industry,” he said.

Local Mexican officials are aggressively courting the new investment. Yucatan’s state government, for example, offers maquiladoras such freebies as land and worker training. It has energetically promoted low-cost labor--to the point where Texas billionaire Ross Perot attacked the state a few years ago for trying to siphon U.S. jobs, officials say.

But there isn’t necessarily going to be a great sucking sound of jobs leaving the U.S. for the Mexican interior. There are some disadvantages to manufacturing in places like the Yucatan. Transportation costs are higher; technicians are often scarce.

For Monty, the biggest difficulty was adjusting to the region’s agrarian world. Even after the hemp business began to decline 20 years ago, locals survived on government subsidies until this decade.

“The system we have here is oriented toward production. That was the first shock,” said a Monty manager, Reynaldo Perdomo, leading a visitor through a football-field-sized plant full of workers bent over whirring sewing machines.

Even after a year’s operation, the maquiladora and the Mayas are still getting used to each other. The factory, for example, sometimes suffers from a lot of absences the day after a big party in town. Fathers are often jittery about their daughters going to work; the plant gives the men tours. To reinforce punctuality, factory doors close 15 minutes after starting time.

“The most difficult challenge,” Perdomo said, “has been changing people’s mentality.”