| | |  Business News 
Profit Outweighs Risk in Juárez Factories
 Julian Aguilar - Texas Tribune
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December 16, 2010
| | Factories managed by Tecma, an outsourcing company based in El Paso, assemble Christmas ornaments and hair dryer parts, in Ciudad Juárez, where 2,600 were killed in 2009. (Julian Aguilar/The Texas Tribune) | |
In 2009, more than $42 billion in trade value moved through the ports that Ciudad Juárez shares with El Paso, representing 15 percent of the total trade between the United States and Mexico. That number is estimated to be even higher in 2010.
Since June 2009, more than 24,000 manufacturing jobs have been added in Juárez, on the Texas-Mexico border, and the amount of tractor-trailer traffic hauling goods through the region increased by 22 percent from January to June of 2010 compared with the first six months of last year.
At the same time, there were more than 2,600 killings in Juárez in 2009, the byproduct of a battle between the rival Sinaloa and Juárez drug cartels, and the city is on pace to exceed 3,000 homicides in 2010.
So much for the deadening economic impact of headline-making violence. The psychological impact, however, is something different.
While the killings and threats of extortion have forced thousands of retail businesses in Juárez to close and tens of thousands of residents to flee their homes for the safety of Texas, border business experts say the vibrancy of the city’s manufacturing industry is due to what is and has always been the bottom line: money. Not even an unshakeable fear instilled in most of the 1.3 million Juárez residents can curb the success of the factories, or maquiladoras, where assembly-line workers earn, on average, $1.60 to $2 hourly.
“Juárez is open for business,” said Toby M. Spoon, the executive vice president of Tecma, an outsourcing company based in El Paso that will celebrate 25 years in business next year.
A shelter operation that provides factory space, employees and legal expertise to businesses with a manufacturing presence in Mexico, Tecma had one of its best years in 2009, Mr. Spoon said. The company signed five new clients and netted an estimated $45 million in profits.
“I have discovered maybe an unsavory part of human nature: If we can make money, and it’s not just too bad, then we are going to go for it,” Mr. Spoon said.
Yet it is not business as usual in Juárez. The jobs added in the last year and a half are only a quarter of what was lost during the height of the recession, said Bob Cook, the president of the El Paso Regional Economic Development Corporation. But Mr. Cook echoed his fellow business leaders in arguing that drug-related violence posed no real threat to commerce.
The job loss “is in the manufacturing and distribution side,” Mr. Cook said. “You absolutely see a complete tie-in with the economy and not with the violence.”
All of the development corporation’s clients are concerned about the violence, Mr. Cook said, and all are conducting “due diligence.” Yet 15 companies have notified the corporation of their intent to expand or move their operations to Juárez since 2008. Only one potential newcomer opted out of setting up shop in the area, and two have chosen El Paso instead. The trend, Mr. Cook said, will help restore the region to prerecession levels, when more than 50,000 jobs in El Paso, in retail or manufacturing, were the result of Juárez’s manufacturing industry.
Companies in the United States realized they had very thin inventories, “and so producers began to arrive to Mexico’s maquila plants very fast, and the well turned around very strongly,” said Roberto Coronado, an economist in the El Paso branch of the Federal Reserve Bank of Dallas. “That happened in the summer of last year. The maquilas grew very strong in the first few months, and what we’re seeing is that they’re still growing but at a much slower pace.”
As of August, there were 338 maquiladoras in Juárez, up from 336 in December 2009.
The violence has had some effect on the way business leaders conduct their daily affairs. Mr. Spoon said he tried not to take the same route to Tecma’s Juárez factories from one day to the next. Traveling in an armored vehicle or with an entourage, he said, would be too flashy and would only draw the attention of people who might wish him ill, so instead, he simply does not share his schedule with anyone, even his colleagues. If someone called Mr. Spoon’s Juárez office and asked what time he would arrive for work, he said, the receptionist would be telling the truth if she said she did not know.
“The more fuzzy you can make the details, the better,” he said.
The government-mandated aguinaldo — the lump-sum savings deducted from maquila workers’ paychecks and then distributed during the holiday season — has also been affected. Mr. Spoon said there were discussions about disbursing the money quarterly after criminals were rumored to have threatened factory supervisors into handing over the savings or face retribution.
“It used to be given on a certain day — now we don’t announce it,” he said of distributing the savings, which equal about 15 days of wages.
Despite the precautions, Tecma’s employees have suffered the consequences of the chaos in Juárez. Some of their relatives have died, and others have been extorted. Mr. Cook and his colleagues at the development corporation have a 49-slide presentation, called “Conducting Business in the Current Security Environment in Ciudad Juárez,” that highlights the retail gains, commercial movement, real estate occupancy and migration issues, as well as the territories for which the cartels in Mexico are vying — and killing one another.
“It’s not our job to convince a company that it’s safe to operate there,” Mr. Cook said. “Our job is to make sure that if a company is evaluating the potential of locating in the City of Juárez, they have all the information they need to make an informed decision.”
Inside the gates of the maquilas, the precautions, the analysis and the concerns are hidden from the majority of the factory workers — if not forever, then at least for the duration of their shifts, said Blanca Estela Prieto, a supervisor at Portage Electronic Products.
“We live in a different world here,” she said. “The violence exists outside for us. I feel the fear when I leave, but inside, no.”
jaguilar(at)texastribune.org
Expanded coverage of Texas is produced by The Texas Tribune, a nonprofit news organization. To join the conversation about this article, go to texastribune.org.
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