Mirroring the maquila boom

New Mexico looks to build its border industry by attracting suppliers for Mexican manufacturers across the border in Juárez

 

On this stretch of county road in southern New Mexico, dunes edge out onto the pavement, and two men in cowboy hats move slowly around a small herd of Holstein cattle. A double-long trailer backs up against a chain-link fence topped with loops of razor wire, where a sign announces that this border crossing is for livestock only; pedestrians must head to the Santa Teresa Port of Entry, at the end of the Pete V. Domenici International Highway.

On that main road, leading north from the border, there are even fewer signs of life. The Domenici Highway runs 12 miles from New Mexico’s newest border crossing to Interstate 10. Although it offers two wide lanes in either direction, the highway’s mid-week traffic is nonetheless light: A minivan with Texas plates roars north, a black-and-yellow truck with Chihuahua plates idles on the side of the road.

Overlooking the city of El Paso to the east, Santa Teresa has a rail line, the Doña Ana County Airport, 2 million square feet of industrial space, an estimated 3,500 residents and not much else. Dunes and desert scrub now dominate this no-man’s-land where Mexico, Texas and New Mexico converge, but many say it soon will bloom — with modern development. “It looks like it’s just about to take off,” says David Majors, vice president for marketing at El Paso-based Verde Corporate Realty Services. “We’re pushing on all fronts to develop it responsibly in a very planned manner.” And the plans aren’t small: Verde hopes to build some 4,000 homes within the next 10 years and foresees an ultimate future of 100,000 residents.

“We think, if there’s going to be an industrial area, it’s going to be the Mexican border, and we’re focused on development on both sides of the U.S./Mexico border,” he says. “It all fits together; residential development is the catalyst that’s going to help all of it grow.”

 

Forty years ago, in an effort to boost employment in the northern part of the country, the Mexican government began its maquiladora program, which allows manufacturing plants access to goods that move duty-free across the U.S./Mexico border. Today, there are more than 2,800 maquilas — most of which assemble manufactured goods, from electronics to appliances and beyond — supporting 1.2 million jobs. Historically, manufacturing hasn’t been a strong component of New Mexico’s economy, which was dominated for decades by government employment and natural resource extraction. But in the past few years, the state has hustled to recruit manufacturers that would serve the maquiladora industry in Juárez via what the state’s Economic Development Department calls the “maquila supplier program.”

“We have never fully taken advantage of the Mexican market,” says Jerry Pacheco, former director of the state’s Mexican Affairs and Trade Division and current executive director of the Santa Teresa-based International Business Accelerator, a trade counseling center funded through the state. “The population of the city of Juárez is almost the size of the entire state of New Mexico, and it’s right across the border.”

Pacheco points out that maquiladoras in Mexico import about $88 billion in goods from U.S. companies each year, and there are 300 maquiladoras in Juárez alone. “If we could get even 10 percent of that business,” he says, “we could create jobs in New Mexico and industrialize a very poor area.”

Already, the state has jumped at the chance to supply appliance manufacturer AB Electrolux, which recently shut down its Frigidaire plant in Greenville, Mich., and moved it to Juárez. By convincing three Electrolux suppliers — Stanco Metal Products, Pennant Molding and Grand Haven Technical Sales — to relocate, New Mexico has gained some 130 jobs (though, if the license plates in the parking lot are any indication, almost all the new employees commute from Texas).

Companies relocating to southern New Mexico get a good deal for any number of reasons: Corporate franchise fees are low, as are property taxes. The state offers a variety of incentives, including grants, loans, bonding authority and tax exemptions. Land is cheap, and so is labor: According to the Mesilla Valley Economic Development Alliance, the umbrella marketing organization for Doña Ana County, manufacturing wages are 48 percent lower here than the national average. And if it’s true that wages are even lower in Mexico, where workers earn an average of $3 an hour, New Mexico’s economic development officials point out that American workers are more highly skilled and electricity supplies are typically more reliable in the U.S. than across the border.

Even as Mexico has bled manufacturing jobs to countries with lower labor costs — China, most notably — it has been able to retain certain industries, among them large-appliance assembly. Refrigerators, for example, are too expensive to ship from China to the United States, says Steve Vierck, president and CEO of the Mesilla Valley Economic Development Alliance. Transportation costs have also helped New Mexico recruit suppliers for appliance maquiladoras.

“Companies really can’t continue to be located in say, Grand Rapids, Mich., and take three days shipping parts to Juárez,” Vierck says.

Tanner
Tanner
May 15, 2007 04:58 PM

And where would 100,000 more residents get their water from? The Rio Grande between Las Cruces and Santa Teresa is more mud than water. As a resident of New Mexico, I would hate to see the brown smog that covers El Paso/Juarez encroach any more towards Las Cruces than it already does. Are we really so short sighted?