Mexico & Nafta - 10 August 2004

The detailed information from Inegi does not make for happy reading. While the number of hours worked has increased by 4.4% in the first five months of this year compared with the same period of 2003, pay has only gone up by 1.7% in real terms. Worryingly, the demand is strongest for manual labour, rather than skilled labour. This indicates that the industry is still tying to compete as a cheap labour operation.  

At the end of May, the maquiladora industry employed 1.11m people, 77% of whom worked in factories in border states. The most buoyant sectors are electronic equipment, where employment rose by 24% in the year to May. Employment in the transport equipment industry was also up significantly (by 22%). Another industry in which employment rose strongly was textiles, where the number of people employed was up by 14% over the past year.

• One looming problem for Nafta is the bumper sugar harvest in Mexico. The 2003/04 crop came in at just over 5m t which was the highest figure for the past five years. Under Nafta, Mexico should be allowed to export any 'surplus' sugar it produces to the US. The US argues that the surplus should be calculated after imports of other sweeteners, notably high-fructose corn syrup, have been netted off.  

The Mexicans say that the wording of the Nafta treaty makes no mention of other sweeteners. The Cámara Nacional de la Industria Azucarera y Alcoholera says that Mexico should not need to import any more sugar this year to meet national demand.  

• Taiwanese textile companies are focusing their businesses in preparation for the elimination of US textile quotas in 2005. Companies such as Makalot Industrail, Tainan Enterprise and Roo Hsing Garment are building up their Central American production facilities which will use US produced semi-finished materials. Roo Hsing says that it will expand its production in El Salvador and Nicaragua which use US inputs and whose products can be re-exported back to the US free of tariffs.  
• The capacity utilisation index for maquiladoras hit 96% in April. In 2002 and 2003 the index had slumped to 92% because of the slowdown in the US economy. Over the eight months to April there has been a net increase of 32,645 people employed in maquiladoras. The number of maquiladoras increased by 45, as some companies brought their businesses back from China. This recovery does not, however, make up for the number of maquiladoras which have closed since 2000. The number of maquiladoras has fallen from 3,590 in 2000 to 2,810 in February this year.  
• At the end of June two companies, Kyocera from Japan announced that it would spend US$7m on expanding its cellular telephone plant in Tijuana. Hunter, a plastics company, from the US announced that they would invest US$20m in building a new plant, also in Tijuana. The Kyocera expansion should create 1,630 new jobs while the Hunter investment will create 350. Both companies are taking advantage of a tax break introduced by the state government last year which exempts companies which maintain or increase staff at their plants in the state from state taxes.