The U.S.-Mexico border region is a hotbed of global competition that began with the creation of the maquiladora program in 1964. In the past 40-plus years, the twin-plant concept has certainly pumped enormous amounts of money. It has also led to the creation of thousands of jobs benefiting both countries, and there is no sign it will slow down.
Established by Mexico as the Border Industrialization Program, a maquiladora is a plant Mexico permits to import raw materials duty free. These materials are for manufacturing, assembly, repair or other processing, according to maquilaproperties.com.
Keith Patridge, president and chief executive officer of the McAllen Economic Development Corporation, said the maquiladora program has helped transform the Rio Grande Valley economy.
“I have been doing this for 31 years, since 1988 when the EDC was formed,” Patridge said during a recent presentation hosted by the Rio Grande Valley Hispanic Chamber of Commerce. “At that point the economy was much different than it is now. The unemployment rate in Hidalgo was in the mid 20-percent range, Starr County in the 50-percent range. The peso was in a freefall. The economy was in shambles. There was a real need to diversity from the traditional retail and agriculture base.”
During the years before the North American Free Trade Agreement, the maquiladora program began to attract some of the top companies from the United States and other countries. “We have really focused on developing that cross-border relationship, bringing the two economies together, depending on the strengths of Mexico and the strengths of the U.S. to grow our economy.”
Maquiladora plants today number about 3,000 in Mexico with more than one million employees, Patridge said. In Reynosa alone, 215 plants with 148,000 workers operate under the program.
“Foreign companies can come in and set up assembly plants, bring components from around the world and ship out without paying duties,” Patridge said. “It has helped U.S. companies find a way to compete without moving to Asia or other far-flung places.”
Companies with plants in Reynosa include LG and DeWalt, Panasonic, Black & Decker and Delphi. Patridge said furthermore, the Valley has advantages that help attract maquiladoras over other cities along the border. The two biggest factors are geography and population.
“We happen to be in the middle between the U.S. population centers and the Mexican population centers,” Patridge said. The I-69 highway project in the United States and infrastructure improvements in Mexico create a land bridge that is efficient and consolidates the supply chain, he said.
With some 2.7 million people in the Valley on both sides of the border, the demographics are ample to supply a workforce. On the U.S. side, more than 61 percent of the population is between 18 and 64 years of age. About 30 percent is younger than 18, Patridge said.
“We are growing at a birth rate of 2.5 percent a year,” he said. “Doctors Hospital at Renaissance in McAllen delivers between 750 and 850 babies a month. That’s an elementary school a month being born.”
While most of the jobs may be in Mexico, the impact on the U.S. side is significant.
More companies are establishing a larger footprint in the McAllen area. “GE Aviation repairs jet engines here,” Patridge said. “Alps Electronics, a Japanese company that makes car stereos and other auto electronics, has its North American headquarters here, with 98 engineers that do design work.”
Most of the maquiladora managers live in the United States and commute to Mexico. However, U.S. labor statistics do not provide a full reflection of their economic impact. “They work in Reynosa,” Patridge said. “They live here, they buy houses here, they shop here, but because they are not working here, they are not indicated in the numbers. So as a result, we have about 2,500 managers that cross every day into Reynosa that don’t exist from a data standpoint.”
Plants represent 18 countries in Reynosa. “They are world-class plants,” Patridge said. “These are jobs that are very high-tech now. You walk in there and you will see things being done that are not done anywhere else in the world.” Patridge hinted that the McAllen EDC is on the verge of making deals to bring in more companies in what is a very competitive process.
“They can go to any city in the world,” he said. “We are competing against China, we are competing against other cities in Mexico, we are competing now against Vietnam, we are competing against India, so we have to compete for every one of those companies.”