Outlook Brightens a Bit for Tijuana Border Plants
By MANDY JACKSON
After a devastating 2001, industry experts expect a stronger 2002 for Tijuana’s manufacturing sector thanks to a rebound on this side of the border.
“The U.S. economy is going to get a little better this year,” said Tony Ramirez, executive vice president of San Diego-based border-plant management services company Made In Mexico.
Companies considering moving production out of Mexico probably will put off those decisions until after they see how U.S. sales improve, Ramirez said.
Last year, 12 companies left Tijuana and about 65% of the remaining 780 plants laid off workers, according to Daniel Romero, president of the Tijuana Maquiladora Association.
About 35,000 jobs were lost, leaving about 165,000 people employed at the plants, also known as maquiladoras.
Several Orange County businesses have plants in Tijuana or elsewhere in Baja California, including Newport Beach-based Conexant Systems Inc., Irvine-based Mitsubishi Digital Electronics America Inc. and Kwikset Corp., a Lake Forest-based unit of Black & Decker Corp.
In March, Costa Mesa-based Canon U.S.A. Inc., part of Japan’s Canon Inc., said it was closing a Tijuana printer plant and moving work to Thailand and Vietnam to cut costs. Canon has 417 employees in Tijuana, according to figures as of December.
A lot of the maquiladora industry’s problems started two years ago. In October 2000, financial planning for the next year was completed and that was based on declining sales in 2000, Romero said.
Last year was the first year the North American Free Trade Agreement’s Article 301 took effect for the maquiladora industry. Previously, parts brought in from countries outside the trade pact were not affected by tariffs, but that changed in 2001. That made it more effective for some companies to move production to Asia where labor is cheaper.
The Mexican government is working on a program in which companies can avoid duties on imported parts as long as the parts can’t be found in Mexico and the practice doesn’t hurt Mexican distributors, according to Ramirez.
Adding to Tijuana’s troubles is the peso’s rise in value vs. the dollar in the past four years, costing companies more pesos to earn more dollars, Ramirez said.
Also, a number of recent tax changes have affected maquiladoras.
“Mexico just can’t seem to develop a plan that sticks,” Ramirez said.
With tax laws changing yearly, it is difficult for maquiladora operators to do any tax planning.
A new tax is the export entry tax, based on the number of shipments a company makes.
“When you tie all those issues together, the cost has increased and they are looking for other avenues to manufacture their product,” said Enrique Mier y Teran, president of Tecnomex Industrial Park in Tijuana and co-founder of Mexico’s first maquiladora.
But since Sept. 11, many midsize companies have shied away from moving their manufacturing too far abroad. Mier y Teran said more U.S. companies are looking at Mexico because it is close to home.
Small technology, consumer product and textile makers could do well in 2002, said Richard Jaime, a principal at Del Mar-based North American Production Sharing de Mexico. Those companies have a big management pool to draw from because of layoffs at larger maquiladoras, such as Sanyo Electric Co. and Sony Corp., he noted.
Toyota Motor Corp. announced plans in January to open a plant in Tijuana in 2004 to make truck beds for Tacoma trucks.
That operation will have a huge impact on Tijuana’s maquiladora industry, Jaime said. His company already has seen interest in being near Toyota from at least 25 automobile parts suppliers.
But long waits to cross the border into the U.S. because of increased security after Sept. 11 also have affected maquiladoras.
Maquiladora managers are able to cross the border quickly because of their SENTRI, or Secure Electronic Network for Travelers Rapid Inspection, passes, which are used by prescreened commuters in a dedicated lane at the border crossing.
President Bush and Mexican President Vicente Fox have agreed that the SENTRI program should be expanded. n
Jackson is a staff writer at the San Diego Business Journal.
