It will happen here too - Factories leave Mexico to find cheaper labor

Tuesday July 09, 2002 15:45

by Blisset - SI (IV)

Bubbleheads to be followed by 'real' workers?

I kind of enjoyed meeting crestfallen newly unemployed bubbleheads around Dublin the last few months. From masters of the universe to rent allowance in a year must be sobering. As must their savings being whittled away by the euro-inflation scam of the decade. It'll be different when the inflation makes china seem a good idea to the US. We are their friends till it is a problem to pay decent wages. I remember the closures of the early eighties right thru and it was like Mexico and nearly Argentina here. Ansbacher brought it all back. Loot em and then ship out says the US. Loot em and ship them (and the money) out our new landed gentry will reply.

Factories leave Mexico to find cheaper labor

By Mary Jordan
The Washington Post

THE WASHINGTON POST

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 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 work, 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 Mexico's 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. 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.

The loss of jobs in Mexico in part reflects the slowdown in the U.S. economy. But many of the 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.

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 view China as their fiercest competitor, sucking their jobs east.

"It's a reality of globalization," said Mexican economist Rogelio Ramirez de la O.

The 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 designer jeans could be sewn and television sets assembled in Mexico 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, one new
industrial park after another opened during the past 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 have the edge, toward higher-skilled, higher-tech manufacturing.

As a result, the number of factories has receded to about 3,200.

"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 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, 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, such as automobiles, Mexico has an advantage. Toyota recently announced plans to open a new pickup-truckbed factory here.

Tijuana has a long history of reinventing itself to respond to economic changes.

In the 1980s, the city took advantage of a pre-NAFTA free-trade zone to create what many called the "perfume capital of the world." Companies
imported perfumes from Europe, then took advantage of free-trade benefits to sell them duty-free to large U.S. retailers.

When NAFTA provided tax-free incentives for maquiladoras, Tijuana substituted crates of electronics components for perfume bottles and became one of the world's leading television-set assembly sites.

So many Sony, JVC, Panasonic and Hitachi sets are assembled in Tijuana - more than 15 million a year - that some call the city "TVjuana."

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.

The government hopes rising wages will slow illegal immigration to the United States and keep more of the country's most ambitious and entrepreneurial workers at home.