Ask Nancy Boultinghouse why fewer Mexican border factories are moving to China and she quickly turns to her computer to pull up a PowerPoint presentation. "Logistics," said Boultinghouse, the...
McALLEN, Texas — Ask Nancy Boultinghouse why fewer Mexican border factories are moving to China and she quickly turns to her computer to pull up a PowerPoint presentation.
“Logistics,” said Boultinghouse, the McAllen Economic Development marketing director, tracing burgeoning trade routes from the tip of the Texas to the U.S. interior.
“Logistics plays a big part in the final cost of something,” she said. “There are a lot of products it makes no sense to produce in China.”
McAllen credits much of its growth to factories set up for the cheap labor across the border in Reynosa. With them come managers who settle in the United States and support operations for transportation of raw goods and the finished product.
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For McAllen, it’s a $4 billion annual economic impact.
But like cities across northern Mexico, Reynosa has teetered amid the competition of even cheaper labor elsewhere in the world — especially in China.
Between 2000 and 2003, about 900 manufacture-for-export operations — or maquiladoras — closed, at a cost of more than 292,000 jobs.
But the China threat suddenly seems to have ebbed, with companies saying they’ll invest $4.5 billion in new or expanded maquilas during the year, restoring or replacing some two-thirds of the lost Mexican jobs.
The sector picked up in 2004: In June, some $7.7 billion worth of goods was exported, an all-time monthly high.
Analysts say the comeback is tied to resurgent U.S. consumer demand, the strong Mexican peso, and the headache factor of China’s still-young industry infrastructure.
Mexico also moved to postpone tariffs that could have been imposed under the next phase of the North American Free Trade Agreement.
Then there’s the theory that China’s currency is overvalued, and the country is subsidizing commodity prices that are artificially low.
Boultinghouse said the biggest reason for the comeback is distance. She has long argued the Pacific Ocean is a costly obstacle. For large goods, such as cars and side-by-side refrigerators, shipping prices can outrun savings on labor.
Reynosa suffered less than other Mexican border cities, losing four plants but gaining others, including a Maytag plant much criticized for taking jobs from Illinois.
Boultinghouse said Reynosa and McAllen established themselves early as an obvious choice for Midwestern automobile manufacturers.
Small, labor-intensive parts are produced in Reynosa, then sent by truck or rail north to Detroit’s assembly points.
But cities elsewhere suffered severely. Tijuana, across the border from San Diego and home to the most maquilas, lost 258 plants — 20 percent of the total.
Twenty-three percent of maquila workers, or about 67,000, lost their jobs in Ciudad Juarez, across from El Paso. Some 18,000 workers lost their jobs in Matamoros, across from Brownsville.
The plants that left were producing low priced, labor-intensive goods such as clothing, small electronics and toys.
Those cities now are concentrating on bulkier items, motor-vehicle parts and assembly, goods that are copyright-sensitive (China’s stance on trademark law is murky) and items that are bound primarily for the United States.
Kyocera Solar recently announced plans to add a maquila in Tijuana to produce solar panels, for which California is the world’s third-leading market.
It’s an addition to Japanese-owned Kyocera International’s three Tijuana production facilities for cellphones and semiconductors.
Tijuana also is getting a new Toyota assembly plant.
“The big talk is yes, there are certain areas where they are more competitive,” said Rudy Fernandez, director of economic development and binational affairs for the mayor of San Diego.
“Mexico is still next to the market that everyone wants to sell to.”
Ninety-percent of Mexican-produced maquila goods go to the United States.
In Matamoros, companies are snapping up recently vacated space and churches are again being asked for referrals to good workers.