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Maquiladora manager Cal Pacifico is feeling squeezed by NAFTA and the tight economy

This isn’t the greatest time to be a go-to guy for manufacturing in Mexico.

Just ask Jose de Jesus Calleros, who heads up Mexico operations for Cal Pacifico, a Newport Beach-based production management company that serves U.S. companies that produce in and around Tijuana.

The eight plants Cal Pacifico helps manage have laid off about 200 people so far this year, according to Calleros. And he said he expects more cuts to come. In all, the plants employ about 3,700 people.

Maquiladoras, or border plants, are getting hammered on several fronts,from unintended consequences of the North American Free Trade Agreement to the U.S. economic slowdown.

“The current economic deceleration in the U.S. is being felt here in Tijuana,” said Calleros, Cal Pacifico’s Tijuana-based director and a former president of the region’s maquiladoras association.

Cal Pacifico does everything from managing border plants for companies to handling accounting, human resources, permits, export paperwork and other details.

The company runs the facilities under contract from big names such as Minneapolis-based medical device maker Medtronic Inc., the medical device arm of East Hills, N.Y.-based Pall Corp. and Baltimore-based Polk Audio, a maker of stereo speakers.

Other facilities served by Cal Pacifico include a plant that makes receivers for GM Hughes Electronics Corp.’s DirecTV Inc. and a factory that makes parts for passenger and military aircraft for Los Angeles-based Northrop Grumman Corp.

Only one company has quit Cal Pacifico’s services so far this year: a 13-year client elected to go out on its own managing its Tijuana operations. And Calleros said he still has prospective U.S. clients looking to move production to Baja, including a company that wants to set up a data processing center there.

With the border plant slump, though, Calleros said Cal Pacifico is stepping up its marketing in the U.S. and has started courting Canadian companies as well. Up to now, the firm has relied largely on word-of-mouth for new business, Calleros said.

The border region is home to more than 1,000 big-name electronics makers and other companies with production and assembly plants in Tijuana, Mexicali and Tecate. Orange County businesses among them include Newport Beach-based chipmaker Conexant Systems Inc. and Irvine-based Mitsubishi Digital Electronics America Inc., which makes TVs there.

Baja plants produce many of the televisions, computer monitors and other electronics sold in the U.S.,Apple Computer Inc. makes its iMacs in the area,and the economic slowdown on our side of the border is hitting Mexican plants hard.

But there’s more at play than just the economy. At the beginning of the year, new NAFTA rules went into effect requiring goods produced at border plants must be 51% or more made with components from Mexico, the U.S. or Canada to continue qualifying for duty exemption. Add to that the relatively strong peso, and manufacturing in Mexico isn’t what it used to be.

Some companies have gotten around the new content rule by using a temporary duty-deferral program. But that’s no fix. Rather than meeting the new content rule, some companies such as Sony Corp., Sanyo Electric Co., NEC Corp. and others have shifted some production to China and other places where factory wages run as low as 50 cents an hour, vs. an average among Baja factory workers of about $3 an hour.

The latest unofficial estimates count about 37,000 factory layoffs in Baja’s maquila sector this year.

“A lot of Asian companies are lobbying the Mexican government to absolve them of duties on non-NAFTA material imports since many of those materials are simply not available in Mexico,” Calleros said. “We are working to convince the Mexican government to salvage the old duty rules and regulations.”

Like other border plant officials, Calleros now stresses proximity to the U.S. as the selling point for Baja manufacturing. Inexpensive labor and NAFTA benefits are secondary points.

“For us in Mexico the big challenge is to make ourselves more competitive in the global market,” he said.

Each day, Cal Pacifico’s plants send out 3,000 trucks full of finished goods and receive another 3,000 deliveries of components and other goods. The number hasn’t fluctuated since Mexican officials began checking U.S. shipments more thoroughly this year under new NAFTA rules, Calleros said.

Calleros was born and raised in Tijuana and splits his time between the border city and Newport Beach. Much of his competition comes from similar consulting firms such as San Diego’s Made in Mexico and Border Assembly Inc.

Cal Pacifico started out 36 years ago with a few dozen employees managing a plant owned by Micro-Ohm Corp., an electrical resister maker that once was headquartered in Santa Ana and since has shifted operations to Duarte. n

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