The maquiladora industry in Juárez is growing at a pace not seen in years.
Maquiladora employment has exceeded 2007 pre-crisis levels, when Juárez was hit by both the global economic downturn and a violent cartel turf war.
This year from January to September, industry added 31,162 jobs, according to a report by the Juarez maquiladora association, or INDEX.
Claudia Troitiño has worked in the maquiladora industry for more than 25 years, through both the bad times and the good. Next month, she finishes her two-year term as president of the association, which represents Juárez’s export industry. It celebrates its 40th anniversary this year.
The growth of the maquiladora industry has created its own set of challenges. So far, maquilas in Juárez have been able to find workers as they expand, but Troitiño is worried that may not be the case next year if industry keeps expanding at the same rate.
She is also worried about the impact of Mexico’s fiscal reforms, which have rocked the maquiladora industry.
El Paso’s economy is tied closely to its neighbor’s, and the maquiladora industry is one of the region’s biggest economic engines and one of the largest sources of employment.
One of every four jobs in El Paso is dependent on Mexico’s maquiladora industry, according to the Federal Reserve. So good news for the Juárez economy, Troitiño said, is good news for El Paso’s.
Big corporations like Johnson & Johnson and Taiwanese electronics giant Foxconn have manufacturing facilities in Juárez where the cost of labor is low but American consumers are only a border crossing away.
Maquilas produce everything from electronics to car parts. Earlier this year, BRP Inc., a global manufacturer of motorsport vehicles, announced that it would invest $55 million to build a facility in Juárez. It will manufacture Can-am off-road vehicles and employ 900.
Troitiño grew up in Mexico City and moved with her family to Juárez when she was 8 years old.
She has a bachelor’s degree from the Autonomous University of Ciudad Juárez and a master’s degree in management from the University of Phoenix’s Santa Teresa campus.
Troitiño got her start in the maquiladora industry in the late 1980s as a secretary for Johnson & Johnson. She is now a human resources manager for Spectrum Controls.
“That’s why I’m very proud of the maquiladora industry in Juárez. It has developed the people and helped us have a better life,” Troitiño said.
She lives in El Paso and is married with two children, ages 10 and 11.
Troitiño sat down with El Paso Inc. and talked about why the maquiladora industry is growing, what could hamper that growth and why Juárez needs to attract an automotive assembly plant.
Q: What challenges would you highlight from the past two years?
The main challenge was Mexico’s fiscal reforms. The federal government wants the maquiladoras to pay a 16 percent tax for imports. Last year, imports totaled $24 billion for the maquiladora industry, just in Juárez. If you apply the 16 percent tax to the $24 billion, it’s a lot of money.
Q: Beginning in January, less than two months from now, the exemption to the value-added tax, or IVA, for maquiladora companies is eliminated.
To help mitigate the impact, President Enrique Peña Nieto issued a decree that maquiladora companies that go through a certification process by the end of this year can still be exempted from the tax. This was the main thing that the association had been lobbying for.
The maquiladora industry has opened the doors to the treasury department to show them that we are doing things right. But if you don’t receive the certification by January, you are going to start paying 16 percent on all the raw materials that you import to Mexico.
Q: Has the certification process solved the problem? How many of the maquiladora companies in Juárez have received the certification?
In Juárez, there are 310 maquiladoras. The last I checked there were 108 maquiladoras who have received the certification.
At least we have the opportunity to not pay the tax. It’s good because the maquiladora industry employs hundreds of thousands of people.
Q: What is the state of the maquiladora industry in Juárez?
Right now, it is doing very good. Maquilas in Juárez created 31,000 new jobs from January to September this year alone.
Q: What sectors are most active?
The most active right now is the automotive sector, which has recovered as the car business has recovered in the United States.
Q: I understand that automotive suppliers in Juárez manufacture nearly everything but the car itself. What is it going to take to get an auto assembly plant in Juárez?
It is important that we attract an auto assembly plant, because more than 60 percent of the items that you need to assemble a car are built in Juárez. Those companies are going to migrate to the south of Mexico, where the auto assembly plants are, if we don’t start doing assembly in Juárez.
Q: BMW and Kia have announced plans to establish auto assembly plants in Mexico. What is preventing such companies from locating in Juárez?
We just didn’t promote ourselves as much. We have the quality of the labor force, we have all the suppliers that they need and we have the space.
The Chihuahua governor has said that there is a company from China that builds electrical cars, which is very interested in Juárez, but we’ll see.
Q: “Reshoring” has become a buzzword. There are stories of production returning to Mexico, including Juárez, from Asia. Is it real?
There is an important growth in the Chinese companies in Juárez. They want to sell more to the United States so they are expanding operations in Juárez to be closer to the market.
Q: Is Mexico, and Juárez specifically, becoming more competitive compared to China?
We are more competitive than China right now in the cost, in the quality of our labor and the quality of our products. It can be cheaper to build here in Juárez because of the reduced logistics costs.
Q: But is the reshoring trend only temporary?
That’s a very hard question to answer. Our economic strategy depends on our government.
Q: Juárez was hit by both a global recession and a surge in cartel-related violence at the end of 2007. How close is the Juárez industrial market to recovering?
We are at a 100-percent recovery. We’ve hit a record level of jobs. Maquiladoras in Juárez employed 257,467 people in September.
Q: It is good news for El Paso’s “sister city,” but does it have any impact on El Paso?
Our cities are tightly connected. If Juárez grows, then El Paso is going to improve too. El Paso is the logistic center for us and some manufacturing is done in El Paso.
Q: Can the connection be improved?
We need to have better integration. There are a lot of things we can do together to push our economies closer.
One thing would be to improve the movement of goods across the bridges. We try to talk to Customs and Border Protection, but they are focused on security and don’t understand the importance to having a fluid crossing.
Q: Are there enough skilled workers in Juárez to satisfy the labor demands?
We have enough right now. But if we continue with this growth, if we were to, for example, add another 30,000 new jobs next year, it’s going to be hard.
What we don’t want is to bring people from the south of Mexico, which has happened in the past. That is not good for El Paso or Juárez, because Juárez isn’t prepared to handle an influx of families to the city.
Q: Are the colleges and technical schools producing the type of workers the maquiladora industry needs?
Yes, we work closely with them. We are very integrated.
Q: Companies are attracted to Juárez, in part, because of the low cost of labor. Can it remain competitive if wages continue to rise?
That’s the thing: What do you want? People with better salaries or people with jobs? I think what we really need are jobs. Unemployment can lead to crime.
We push for a fair increase to wages, but there are some political parties in Mexico City that want to increase the minimum wage 23 percent. That would bankrupt companies.
Q: What is the outlook for the Juárez maquiladora industry next year?
Well, if the negotiations go well with the federal government and if the economy in the U.S. continues growing, then it’s going to be a good year for Juárez.
Email El Paso Inc. reporter Robert Gray at firstname.lastname@example.org or call (915) 534-4422 ext. 105.