Recovering despite the US
Employment in maquiladora plants is continuing to pick up. Over the first half of 2004, the number of people working in maquiladora plants rose by 2.1%. In June 2004 there were 1.12m people working in maquiladoras. This was 6.7% more than at the end of June 2004.
The pick-up in maquiladora business has been faster than most private sector economists had expected. A poll by Infosel found that they expected maquiladora employment to increase by 4.1% year-on-year. What is interesting is that the biggest demand is, once again, for unskilled labour. According to figures from the official statistical agency, Inegi, the number of unskilled labourers working in maquiladoras was 7.9% higher in June 2004 than it was in June 2003. There was a 2.3% increase in skilled staff and a 2.2% increase in administrative staff.
The pick-up in maquiladora business is largely due to a recovery in nine of the 12 maquiladora sectors. These nine sectors account for 80% of maquiladora employment. The most buoyant sectors were services (up 26% year-on-year) and chemicals (up 19%). Other manufacturing (a catch-all) was up by 11.6% while the two electronics and electrical sectors were up by between 10% and 11% each.
Less impressive recoveries were enjoyed by furniture and other wood manufacturing (up 5.7%); construction and repairing of transport equipment (up 4%) and selecting, preparing, packing and canning food (up 3%). The declining industries were: shoes and leather (down 6.8%); toys and sports equipment (down 3.8%) and clothing assembly (down 3.2%).
Looked at by state, the figures are badly distorted by Zacatecas, where a new factory for building and repairing transport equipment was opened. This plant increased maquiladora employment in the state by 81%. What is interesting about this is that the state is a major source of migrants to the US: one of the ideas behind maquiladoras and Nafta is that the US should try to help Mexico create jobs in Mexico. The argument is that this is cheaper than spending money on trying to prevent economic migrants crossing from Mexico to the US in search of jobs.
The key maquiladora states, along the border with the US, such as Nuevo León (up 14%), Baja California (up 12%) and Sonora (up 10%) all saw significant increases in jobs over the 12 months to June. Interestingly Chihuahua, where law and order is a major concern, and Tamaulipas lagged behind the other border states, seeing a 7% increases in job numbers.
On the downside, the Estado de México saw its number of maquiladora jobs more than halve after several textile factories closed and some of the motor industry companies saw less demand for their products and thus forced short-time working on their plants. Wages are maquiladoras biggest contribution to the local economy: wages account for 45% of maquiladoras' value added; other expenses (rent, telephone, leasing of machinery, electricity and other logistical services) account for 31%; profits 13% and inputs of raw and semi-finished goods another 11%.
The two big sectors in terms of value-added exports are making parts for electrical and electronic goods (which accounted for 23% of total maquiladora exports in June) and the motor industry (aka transport equipment) which accounted for 22% of maquiladora exports in June. Textiles and clothing is the third biggest sector with 14%; other manufacturing is 12% and assembling electrical and electronic products 11%. These five areas account for 82% of the country's total maquiladora exports.
Although the number of paid hours worked by maquiladora employees was 11% higher in June 2004 than in June 2003, real wages were actually 0.1% down, year-on-year. This indicates that the labour market in key maquiladora zones is still pretty slack. Indeed pay of unskilled workers has actually fallen over the past year, while pay for skilled staff is up by only about 2% in real terms.
Over a shorter period things look considerably brighter. In the first six months, the number of people employed in maquiladoras increased by 2.1% while the number of hours worked was up by 5.4%, compared with the same period of 2003. Wages and other benefits were up by only 1.4%, however.
- VF Jeanswear, a company that makes Lee and Wrangler jeans announced at the beginning of September that it would shut its two plants in El Paso, Texas and move production to Mexico. VF, which is based in Greensboro, North Carolina, claims to be the world's largest apparel company. It will shut its jeans factory in El Paso, throwing 640 people out of work and close its jeans washing plant which will cause another 56 job losses. The company is also cutting staffing to the bone at its only remaining US plant, in Fabens, southern Texas. In 2001, VF employed 5,000 people in and around El Paso: when the layoffs are completed it will employ only 550. Of these 380 will be at the Fabens plant and another 150 will work at the Rojas distribution centre. VF is reckoned to pay around US$10 per hour to its Texas workers: workers in Mexico will do much the same sort of job for a fifth of the cost.
- The government claims to be close to shutting down Asa Barantz who runs the biggest smuggled-textiles business in the country. He was arrested in Toluca on 2 September. Coincidentally, the Agencia Federal de Investigación raided a store, Dos Banderas, close to the colonial centre of Mexico City and seized M$3m (US$250,000) worth of clothing. Most of the clothing was children's sportswear. The AFI said that none of the staff at the store knew who supplied the goods: few of the staff had been employed for more than a month. The AFI said that the owner of the store, almost certainly Barantz, was facing a fine of between M$15m and M$20m for tax (more accurately, tariff) evasion because the labels showing where the products had been manufactured had been removed. The products appear to come from China.