Low-wage Mexico too expensive

By Ron French
Detroit News

JUAREZ, Mexico — Rush hour in Juarez begins at 5 a.m. with a convoy of pale buses creaking down the Ejercito Nacional, their white paint barely covering the names of the U.S. schools that discarded them.

Mexican workers like Arturo Hernandez Castruit, shown at KenSa's Juarez plant, may lose their jobs to China, where labor is cheaper. Max Ortiz • Gannett News Service

Leonardo Acosta rides a bus headed for KenSa, one of the factories that make this the wire harness capital of the world. Acosta works in a clean, bright plant with lively music playing over loudspeakers. A free breakfast buffet includes omelets cooked to order. Later, the lunch buffet will include beef and chicken entrees, soup, rice and beans, salad, dessert, soda and a sandwich bar.

Those free lunches are costing Mexico a lot.

Mexican factory workers, while far from living the middle-class life of their American counterparts, have still been priced out of the market. In Honduras, workers earn half the pay of Mexicans; Chinese workers earn even less.

The controversial 1994 North America Free Trade Agreement, which removed trade barriers in the region, was expected to foster sustained economic growth in Mexico and raise wages. But Mexico's proximity to the United States has lost cachet as trade barriers have fallen around the world.

Once China joined the World Trade Organization in 2001, it became easy to import Chinese auto parts and other goods into North America.

As a result, predictions of a sustained post-NAFTA job surge in Mexico never materialized. Factories that sprang up virtually overnight have closed or laid off hundreds almost as quickly, leaving thousands of unemployed Mexicans with little money and hope.

In the front offices of Mexican factories like KenSa's, frustration and anxiety abound. Executives look at the numbers on their spreadsheets and see that the same factors that drove jobs from the United States to Mexico are now driving jobs elsewhere.

"Jobs are going," said Charlie Hill, Juarez plant manager for KenSa. "It's going to keep happening as long as customers force the suppliers to cut costs."

KenSa once employed 570 workers in Juarez. By 2003, 70 percent of those workers were gone.

The river that separates the United States and Mexico goes by different names on each bank. In El Paso, it's the Rio Grande, meaning large river; in Juarez, it's Rio Bravo, or valiant river. Neither name fits the ankle-deep thread of brown water that trickles through this stretch of the border.

From the fetid slum of Anapra, where thousands live in tar paper and cardboard huts, labor lawyer Susana Terrazas can look across the river to Coronado, one of El Paso's wealthiest neighborhoods. Anapra residents can hike across the mud flats of the Rio Grande and, if they're not caught by immigration patrols, climb the mountainside to work as maids and gardeners in the $500,000 homes.

"The American dream is a popular expression in Mexico," said Terrazas. "If you go to that mountain, you can see that life is different, but you can't get it."

The struggles in Juarez have become a symbol of the limits to which U.S. companies have benefited their Mexican workers.

Workers often make a tenth of what they would earn across the river in El Paso, while paying American prices for consumer goods. A Whopper, French fries and soft drink costs 55 pesos, or almost $5. A new pair of Wrangler jeans costs 180 pesos, or about $15.

"They say the factories helped Mexico, but it is a lie," Terrazas said. "They send buses to the interior (of Mexico) and tell people, 'Come to Juarez, we have good pay, live the American dream,'" Terrazas said. "When they come here and see the reality, there is no bus to take them back home."

While the rest of the auto industry is highly automated, wire harness factories still depend on hundreds of nimble-fingered workers building one harness at a time. A full-body harness can run the length of a car and be touched by 50 pairs of hands.

Thus, cheap labor can make a big difference for wire harness manufacturers.

That's why wire harness factories were among the first to come to Juarez, taking advantage of a special commercial zone allowing U.S. companies to import raw goods to Mexican factories and export finished goods back to the U.S. without being taxed. The factories are called maquiladoras — a Mexican word meaning "to process for free."

Today, there are more than 3,000 factories in Mexico.

By the time KenSa opened its Juarez plant in 2000, there was a labor shortage. The company had a turnover rate of 12 percent per month — in effect hiring and training a complete new work force every eight months.

"A worker could quit his job at 8 a.m. and have a new job across the street at noon," said Rudy Robles, chief accountant at the KenSa Juarez plant.

To attract workers, KenSa and other companies offered subsidized bus transportation to and from employees' homes. When that didn't work, they made the bus rides free. Factories offered free breakfasts and lunches.

Soon, KenSa was offering bonuses for coming to work, and more bonuses for coming to work on time. Employees with good attendance and punctuality could increase their pay by 81 percent. Companies pay 100 percent of health insurance for minimum-wage employees, and most of it for those making more.

"There's a misconception about pay," with Americans thinking wages are unconscionably low in Mexico, said Robles. "With the other compensation, it's very attractive."

NAFTA and the new foreign-owned factories have failed to narrow the chasm dividing Mexico's rich and poor. In the past decade in Mexico, the number of billionaires has multiplied and the incomes of working people have fallen.

"The maquiladoras are an industrial success and a social failure," said Harley Shaiken, a professor specializing in labor in the global economy at the University of California-Berkeley. "Productivity and quality have gone up, but real wages have declined."

Yet Mexico dares not raise its minimum wage or increase taxes on the foreign-owned factories because the nation is already losing jobs to countries where people are willing to work for less.

That economic reality was driven home for Frank Noble in June, when the 19-year veteran of the KenSa plant in Harbor Beach was in Juarez training workers to do his job.

At a souvenir stand, he bought a Mexican-style blanket, ashtrays and ceramic trinkets for his co-workers in Michigan. All were made in China.

"I thought, what is going on?" Noble said. "If they can't keep this stuff, they're in trouble, too."