AFTER YEARS OF MISTAKEN ECONOMIC POLICY, BORDER SHOULD WEAN ITSELF OF THE MAQUILA INDUSTRY

By Juan Montoya

At long last someone has said it: The border communities' dependence on the maquiladora industry was a siren song to economic disaster.

How long will we have to go on seeing the maquiladora flight to India and China before South Texas academics and policy makers realize that putting all our eggs into the maquila basket has been incredibly shortsighted economic policy?

In August, Roberto A. Coronado, an El Paso-based economist with the Federal Reserve Bank of Dallas, explained to a group of investors and border officials in Mission how the maquila industry came about.

He said it started in the 1960s as the twin plant concept, with capital intensive production largely taking place in the United States and labor intensive production taking place in Mexico. He said things have changed drastically since the 1960s, however, with capital intensive production, such as metal stamping or plastics injection molding, also moving to Mexico.

“At the beginning of our analysis in 1990 there was a significant impact on manufacturing jobs in cities like McAllen. That went away and turned negative. Today, manufacturing jobs substitute each other. When they (Mexican manufacturing jobs) grow, we lose jobs here,” Coronado said.
Npw, Coronado told the group, the prize to be sought by border economies is to provide services to the maquilas. He did not deny, however, that the wage scale for those services are comparatively low in comparison to the maufacturing jobs that left.
“The impact has moved from manufacturing into services," he said. "Today, Texas border cities continue to be big suppliers to the maquilas but they supply business services such as transportation, finance, real estate, insurance, etc. That is a painful transition, but also a good one. If you were a manufacturing worker you were displaced. You were not happy. But on the aggregate, I am positive that service jobs pay higher wages than manufacturing.”"
One of the last shoes to drop in the Matamoros-Brownsville area was the announcement a few years ago that Littelfuse – which employed  950 workers in Matamoros – would leave at the over the next two years, leaving these workers out of a job. Before that it was Delphi announcing cutbacks and plant construction in China, and prior to that it was National Coil, etc.
Just two short years ago, tremors had shaken the Matamoros business community after local newspapers reported that Delphi Automotive Systems, the largest automotive-accessory manufacturing company in the city was planning to move its operations to China. It wouldn’t be the first manufacturer to seek the Chinese route. Since 2000, Mexico has lost more than 268,000 maquiladora jobs, with most going to China.
The result has been a flight of maquila manufacturers to China that has concerned Mexico government officials and economic developers. With wages even lower than Mexico, China has been able to mitigate the cost of transporting its low-priced goods to the United States and to Latin America. Labor costs in China average about 48 cents per hour, compared to Mexico’s hourly rate of $1.20.
At its peak, in the year 2000 the Brownsville Herald reported that Matamoros had 69,000 maquiladora jobs. Today, there are some 53,000 remaining – a net loss of 16,000 jobs in seven short years.

That should concern us across the U.S.-Mexico border, too. With our local academic and economic development planners intent on luring manufacturing companies to the border, this pattern of industrial flight should give us room to pause.

When will local leaders learn that the granting of tax abatements and a policy of “incentivizing” (I swear they use this term) won’t keep them here once they hear the China siren song? But the University of Texas-Brownsville-TSC keeps training engineering “techs” to keep the remaining plants humming faster in an effort to impose a “speed-up” of local maquilas and fight the wage differentials.

So far, it hasn’t worked.

In 2006, the last year figures have been available, the U.S. shortfall with China was a staggering $103 billion, nearly a quarter of the total U.S. trade deficit. US officials say the figure could reach as high as $130 billion dollars or more in the coming years.

Mexico changed its definition of maquila employment, making it difficult to make valid comparisons.

Likewise, China currently runs a trade surplus with Mexico of more than $5 billion. China also displaced Mexico as the second-largest supplier of goods to the U.S. market. Canada remains first.

Analysts say that as Delphi and other maquilas eye the China card, economic development leaders and educators should prepare for the day that they will no longer be around.

“We shouldn’t put all our eggs in one basket,” said Beto Gutierrez, who works for a Brownsville nursery outlet. “Our economic development should be based on industries that will stay here. That means we must look at our surroundings and ourselves and invest in ourselves. Depending on other people has not worked. They take what they need and leave.”