Maquiladora Plants Look For Safer Countries

by Pilar Franco

"The situation with respect to public security has become so critical that it is beginning to be reason enough for the company to decide to reduce its investment or move plants to a more secure country," Sony Corporation's representative in Mexico, Shin Takagi, warned at an event held by the National Council of the Export Maquiladora Industry May 8.

Mexican President Ernesto Zedillo, whose six-year term -- which ends in December -- has been characterized by a strong commitment to liberalizing the economy, attended the meeting of industrialists from Mexico's "zona franca" or low-tax zones, where maquiladora plants operate.

From 1995 to 1999, the number of people employed in Mexico's low-tax zones doubled from 600,000 to 1.2 million, and the maquiladora plants operating in those areas, in 38 cities, posted 19 percent annual growth in exports, according to official data.

Maquiladoras are tax-free plants that assemble foreign-made components or raw materials for export, mainly cars, electronic goods and textiles.

The number of maquiladora factories operating in Mexico, mainly Asian or U.S.-based transnational corporations, has climbed in the past 20 years, from 620 to 3,384 today. The number soared by around 1,000 since the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico went into effect in 1994.

More than 61 percent of maquiladora plants operate in northern Mexico, along the U.S. border. But in the past few years, there has been a growing trend among transnational corporations to set up shop in the Yucatan peninsula in southeastern Mexico.

The maquiladora industry set up 43 new companies in the northern state of Baja California from 1996 to 1999, most of them in Ciudad Juarez, which adjoins El Paso, Texas. U.S. firms like Ford, General Electric and Delphi operate in 18 industrial parks in Ciudad Ju‡rez.

Sony Corp opened its first factory in Mexico in 1979, in Nuevo Laredo, next to Laredo, Texas. It also has plants in the border cities of Ciudad Juarez, Mexicali and Tijuana.

Since 1986, a Sony factory producing television sets and VCR's has been operating in Tijuana, which has become the capital of organized crime in Mexico, as the headquarters of one of the world's most powerful drug cartels, headed by the Arellano Felix brothers.

Takagi complained that the soaring crime rates had pushed up Sony's operating costs. He said the cost of security for Sony executives in Tijuana had doubled from $500,000 to $1 million a year from 1998 to 1999.

Several weeks ago, 250 TV sets were stolen just outside the doors of the factory, he added.

Non-governmental organizations point out how dangerous it is to live or work in Tijuana, where rings of smugglers of stolen vehicles and weapons and immigrants attempting to enter the United States operate alongside the drug cartels.

According to official statistics, the number of homicides in the state of Baja California has risen from 514 in 1997 to 578 in 1998 to 657 last year. Up to March this year, 153 people had been murdered in the state.

Mexico's Center for Economic Research (CIDE) stated in a study released last week that with an average of eight murders a day, Mexico City is one of the most dangerous cities in the world.

Takagi said that at this time Sony does not have plans to move to other countries, but warned that it would have to consider the possibility if the situation did not improve.

Humberto Izunza, chair of the National Council of the Maquiladora Export Industry, said more attention must be focused on the question of insecurity.

Zedillo pledged to address the concerns raised about safety.

Mexico's trade secretary, Herminio Blanco, stressed that the boom in maquiladora activities in Mexico made the country a strategic manufacturing center for foreign firms.

Foreign companies pledged to invest close to $12.4 billion this year in Mexico, 24 percent more than last year.

Mexico's exports amounted to $136.7 billion last year, 89.4 percent of which consisted of manufactured goods, and 7.3 percent of petroleum and by-products.