Maquilas Dodge the Violence

JUAREZ PLANTS HURT MORE BY RECESSION THAN DRUG VIOLENCE

EL PASO -- The drug war in Juarez has prompted an estimated 10,000
small businesses to close or move across the border to Texas. But it
has not slowed Juarez's biggest economic engine -- the maquiladoras,
or manufacturing plants, largely operated by international
corporations.

"The economy has had much more effect (on the maquila industry) than
any of the violence," said K. Alan Russell, co-founder and president
of The Tecma Group, an El Paso company that operates 17 Juarez
maquilas with 3,000 employees.

"I'm not saying our industry ignores the problem. That's not a smart
thing to do," Russell said. "It has an effect on the way we conduct
ourselves, but not on the economics of our business.

"Our clients have plants in other parts of the world with political
unrest and other challenges. As long as the executives and work force
are safe, business takes its own road."

Xochitl Diaz, a spokeswoman for Delphi Automotive, one of Juarez's
largest maquila operators with 12 plants and a technical center
employing about 15,000 people, said production at the plants had not
returned to 2008 levels. That was because of the recession and
decreased auto sales, she said, and not because of the violence.

The violence has made "people more careful and smarter about how they
come to work," and it is a constant topic of conversation among the
workers, Diaz said. She said it had not hurt production or increased
worker absenteeism.

An El Pasoan, who has owned a maquila in Juarez for more than 25
years, said the violence was not hurting his plant. But it has made
everyone more cautious, he said.

He did not want his name published for fear that "some petty criminal"
may take advantage of the drug war and do something to him or his
family, he said.

Others in the industry did not want to be quoted for similar
reasons.

The maquila industry is important not only for Juarez. It also brings
millions of dollars and thousands of jobs into the El Paso economy,
including jobs for several thousand maquila managers and other
professionals who live in El Paso and commute to Juarez daily.

El Paso retail sales also get a huge boost from maquiladora workers
who travel to El Paso to shop.

Thousands of maquila jobs have been lost. and some maquilas have
closed since January 2008, when the violence began to escalate.

But those in the industry said the jobs were lost because of the
recession, not the violence, which has claimed more than 4,700 lives
since January 2008.

Tom Fullerton, an economics professor at the University of Texas at El
Paso, agreed that the recession had caused the maquiladora's latest
slump.

But it's "unquestionable that the violence makes doing business (in
Juarez) more difficult and more costly," Fullerton said.

Moving In

Bill Parisen, 42, vice president for an international manufacturer,
said his company took the violence in Juarez into account when it
started looking for a place to move its California plant this year.

"We did our due diligence. We found the border violence left
maquiladoras unaffected in terms of employees needing to move in and
out of Juarez," Parisen said.

Low labor costs, the availability of well-trained workers and good
logistics made Juarez the choice for the company over other areas in
the region, Parisen said. In February, the company began moving
production from a California factory to a plant operated by Tecma.

Parisen, who has been traveling frequently to Juarez in recent weeks,
said he has no qualms about going to what has become known as one of
the world's most dangerous cities. He is familiar with the city
because he traveled there frequently when he worked for a different
company from 2003 to 2006.

"As a U.S. businessman, I know I have to be careful. When we go to
restaurants at lunch, we go to a place fairly populated and not off
the beaten path. We don't go there (Juarez) at night," he said.

"My co-workers had initial concerns, and some of their wives didn't
want them to travel (to Juarez)." But after the executives visited
Juarez several times, they've become comfortable and even fond of the
area, he said.

No flying bullets

Toby Spoon, 52, executive vice president at Tecma, said, "The main
thing I want to get across is I don't feel unsafe. It's not like a
Clint Eastwood movie -- dodging bullets. E I still stop to buy a soda
at 7-Eleven. I still go to eat at restaurants."

"I use safe practices every time. I travel mostly in the safe
corridors" established for the maquilas, said Spoon, who commutes
daily between his El Paso home and Juarez.

Commuting is a concern for maquila professionals. But many maquilas,
including Tecma and Delphi, provide contracted buses to take
production workers, who live in Juarez, to the plants.

Future Prospects

Lucinda Vargas is an economist and director of the Juarez Strategic
Plan Association, which in 2004 completed a plan to improve the city's
quality of life by 2015. She said the violence was not driving
maquilas out of Juarez, as companies have investments too big to
leave. But, she said, she is concerned that the violence is making
investments by manufacturing companies more precarious.

"I think corporate executives are trying to size up how significant
Juarez should be," she said. "Sure, it produces the raw, cold numbers
of productivity. But will it fit into future strategy (of
corporations) because of the risks involved?"

Vargas said her association determined, even before the violence
escalated, that the Juarez plan could not be carried out until Mexican
government and judicial institutions were reformed so the "rule of
law" becomes a guiding principle of governance.

Recruitment Picture

Mike White, senior partner for TeamNafta.com, an El Paso commercial
real estate company that does industrial leasing in Juarez, said his
firm is having more trouble recruiting companies to Juarez than at any
other time in his 17-year career.

"It's very sad. Until Juarez can prove it's a stable place, I don't
think we'll be recruiting many companies."

Bob Cook, president of the El Paso Regional Economic Development
Corp., or REDCo, which recruits companies to El Paso and Juarez, said
companies continue to show interest in Juarez despite the violence.

"We're now working with about 50 companies evaluating Juarez -- about
60 percent more than a year ago," he said.

All the companies are evaluating the violence along with the business
benefits of Juarez, Cook said. Most have not made decisions. One
company recently decided to locate in El Paso instead because of the
violence, he said.

Some Problems

The maquilas -- most located in huge, modern industrial parks -- have
not been immune from the crime surrounding them. Some were hit by ATM
bandits in late 2008.

"We removed our ATM machines," as did other maquilas, and the
robberies stopped, Tecma's Russell said.

A Lear Corp. plant executive, kidnapped from his Juarez neighborhood
in January, was rescued by Mexican soldiers. He told a Juarez TV
station his captors thought he owned the Lear plant.

Spoon, who oversees personnel issues, said almost all of Tecma's
workers who live in Juarez know someone affected by the violence. But
the "work force continues to march on," he said.

The Mexican chamber of commerce estimates more than 10,000 small
businesses, including restaurants, bakeries and other service
businesses, have closed in Juarez as extortion attempts and other
crimes increased. The economy also probably plays a role in some of
the closings.

But the maquilas, most operated by large corporations, also march
on.

Russell said if maquilas became targets of the violence, it "would
take the whole issue to another level. I think the maquila reaction
would be greater than anyone would want."

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MAQUILA DATA

Juarez had 339 manufacturing plants with more than 170,000 employees
at the end of last year, reported INEGI, a Mexican government agency.
Most of those are maquilas. That was a loss of more than 44,000 jobs
since January 2008, the data show.

The Association of Maquiladoras in Juarez has different numbers. It
reported Juarez maquila employment slid from 249,837 workers in
January 2008 to 166,454 in June 2009. That was a loss of more than
83,000 jobs during 18 months.

The number of maquilas operating has remained fairly constant in
recent years, as some plants close and others open, the data indicate.
In January 2008, Juarez had 327 manufacturing plants, INEGI reported.