Mexican workers pay for job success

Friday, June 21, 2002

TIJUANA, Mexico -- Cesiah Ruiz Brena came to Tijuana in 1989, deliriously happy to get a job at a new Japanese factory. Her work space was grand, the lights were bright and the pay was unimaginably good: $100 a week to start.

But after 13 years during which her wages rose to $200 a week, Ruiz Brena lost her job on June 1. Her Canon inkjet printer factory shut down. She and her co-workers shared a cake, snapped photos of one another and said goodbye. The factory, they were told, was moving to Thailand and Vietnam, where wages are as low as $15 a week -- less than what she earns in a day.

All along the Mexican border with the United States, once-busy factories are closing. Since the end of 2000, tearful farewell parties have been held for 250,000 factory workers in Mexico. Some of the same jobs that left North Carolina textile plants and Ohio auto-parts assembly lines for Mexico in the 1980s are now moving to Asia. The reason is the same: cheaper labor.

Reflects economic trends

The loss of jobs here in part reflects the slowdown in the U.S. economy. But many of the plant closings are just the globalized economy at work. Factories came to take advantage of low wages; now that success has driven wages up, they are moving on. Mexico is left with a bittersweet legacy: higher wages, but fewer jobs.

More than 500 foreign-owned assembly-line factories in Mexico, called maquiladoras, have closed in the past two years, in part because wages have doubled in the past 10 years and are no longer considered low in the world economy. An entry-level factory worker in Tijuana earns $1.50 to $2 an hour, compared with 25 cents an hour in parts of China.

International companies once wary of China are increasingly inclined to invest there. Those include a golf-club manufacturer that laid off 1,500 employees in Tijuana and an electronics factory in Guadalajara that left 4,000 workers jobless when it moved. Suddenly Mexican workers feel that China is their fiercest competitor, sucking their jobs east.

"It's a reality of globalization," said a Mexican economist, Rogelio Ramirez de la O. As he surveys companies in Mexico, he said, they increasingly talk of moving to China.

The factory closures are a jolt to an industry that until 2001 had never known a year in which it did not grow. Started in the mid-1960s, the maquiladora industry had been expanding steadily, with double-digit annual growth after passage of the North American Free Trade Agreement (NAFTA) in 1994. The pact meant that designer jeans could be sewn and television sets assembled here cheaply, then shipped tax-free to the United States, the world's largest consumer of goods. From 120 export factories in 1970, the industry swelled to more than 3,700 in 2000. In Tijuana, a border city of 1.5 million residents just south of San Diego, one new industrial park after another opened over the last 15 years. Today, sprawling factories making electronics, auto parts and medical supplies ring the city. The maquiladora industry produces half of Mexico's $143 billion annual exports of manufactured goods.

But in responding to the new reality of overseas competition, the industry is trying to shift from labor-intensive assembly, in which China and other Asian countries now have the edge, toward higher-skilled, higher-tech manufacturing. As a result, the number of factories has receded to about 3,200.

Unprepared for transition

"It's similar to the reinventing that had to be done in the United States" in the 1980s, said Ramirez de la O.

But, he said, Mexico is ill-prepared for the transition. The government has been lax about monitoring wage increases and supporting worker education and training programs, preferring to believe that the factory problems will disappear with the U.S. recession.

Wages in Mexico have risen faster than inflation, and at a faster rate than those in the United States and Asia. Rolando Gonzalez, president of the National Maquiladora Association, said that is not all bad. Fatter salaries mean better housing and better living conditions for workers, he said, and Asian competition is forcing an improvement in workers' skills.

It is cheaper to truck most goods from Mexico to the United States than to ship them from Asia. But the wage differential between China and Mexico is so great that the bottom line usually tips to production in China.

Still, for some large items that are the most costly to transport, such as automobiles, Mexico has an advantage. Toyota recently announced plans to open a new pickup truckbed factory here.

Narrowing the salary gap between Mexico and the United States is a goal of the Mexican government. Most U.S. factory jobs pay six to 10 times more than similar jobs in Mexico.

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