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Maquila sunrise: Jobs headed back to Mexico

Marketplace Staff Sep 14, 2006

BOB MOON: Think back to more than a decade ago and recall a phrase that was coined by a presidential candidate named Ross Perot. He was the one who talked about “that giant sucking sound” of jobs heading south to Mexico.

A lot of companies did cross the border in search of cheap labor. And manufacturing plants known as “maquilas” sprang up all over the region, assembling everything from TV sets to blue jeans. In recent years, though, it was Mexicans who started hearing “that giant sucking sound.” Companies found workers came cheaper in China and India. The “maquilas” have been in a slow and painful decline. But lately, those plants have been making a comeback of sorts. From Mexicali, Laura Belous reports:

LAURA BELOUS: If there were a Bible of outsourcing, the first words would go like this: In the beginning, there were the maquilas, and American corporations saw that they were good for profits.

But China proved that it could manufacture at a third of the cost of Mexican labor. Between 2000 and 2004 the maquilas sector lost about a quarter of a million jobs. Industry expert Jose Arroyo says that companies didn’t waste any time shutting their doors.

JOSE ARROYO: I remember a long time ago companies that would overnight disappear. Overnight a number of trucks would line up, load up the stuff, sometimes without their employees’ knowledge.

The maquilas had trouble beyond competition from Asia: sagging productivity, spotty quality, and high turnover. In short, the marriage of convenience between the maquilas and the U.S. had hit the rocks.

But it turns out that there’s one thing that will never come between the U.S. and Mexico: the Pacific Ocean. Shipping time from Asia can take up to six weeks, enough to make high-tech products like jet engines and microprocessors obsolete by the time they dock.

But a truck full of products from Mexico can arrive in the U.S. the same day it’s shipped. Steve Colontuoni with the Offshore Group says that the kinds of companies that need speed like that are high-tech, specialized manufacturers.

STEVE COLONTUONI: What we see in Mexico today are things that have more engineering. And the reason why that is occurring is that it’s good to have your engineers in proximity to your manufacturing due to the fact that changes can be implemented much more quickly than if your center for manufacture is halfway around the world.

Today, Mexico’s pumping out more jet engines, semiconductors, and engine harnesses than its old staples like textiles and basic electronics. And that’s creating jobs for Mexican engineers inside the maquilas, like the Gulfstream Aerospace plant in Mexicali.

Dan O’Malley, the general manager at the Gulfstream plant, says he needs more engineers at his plant to keep up with rapid industry changes.

DAN O’MALLEY: We’ve started creating ourselves as a self-sufficient organization as opposed to being spoon fed everything from an assembly plant in the U.S. And that’s they way it was in the past.

And the Mexican government is trying to make sure its labor force can fuel that growth. For the last 10 years, Mexico has poured money into engineering programs at universities. Right now, there’s about 450,000 Mexican engineers in undergraduate programs, almost 100,000 more than in the U.S. Neftali Amador, an engineer here at Gulfstream, says that he’s doing the same work as engineers in the U.S.

NEFTALI AMADOR: We had the opportunity to go to the U.S. and work with engineers there, and we had the same level, that was great for us, we can do the same thing. We are cheaper, that’s one of the reasons they are looking to mexico. It’s very different, the salary in the U.S. It’s like 1 to 7, something like that.

Did you catch what he said? He earns about one-seventh of what his counterpart across the border makes. A newly graduated engineer in Mexico working for an American company can expect to bring home about $12,000 a year, a bargain basement price for corporations that usually start their American engineers off at about $60,000 a year.

ARMANDO ZABRANO: There’s a lot of people who want to go to the U.S. and work, American dream, you know, but it’s pretty much the same.

Armando Zabrano is another engineer at Gulfstream.

ZABRANO: If you earn U.S. dollars and live in U.S., same as Mexican pesos and live in Mexico. The pay we have is enough, you feel comfortable.

Pretty soon, more engineering jobs will be headed south. Honeywell will be hiring 300 Mexican engineers to work at its new facility in Mexicali. A project called Silicon Border is trying to make Mexicali the semiconductor capital of the world.

There’s some worry that Mexico is producing more engineers than its economy can absorb. But for now in Mexico, it’s more of a maquila sunrise than maquila sunset.

In Mexicali, I’m Laura Belous for Marketplace.

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