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NEWS
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 Sustained growth in Maquila Industry
(31 de Octubre)- Local maquiladora industry keeps the good rhythm it has had in 2006; the last report issued by the Mexican Statistics Agency, INEGI, for the month of August showed that employment went up, and expenses made in adding value were also increased. Upon closing August, jobs generation equaled 23 thousand 125 more jobs when compared to August 2005, and one thousand 726 more jobs when compared to the previous 30 days, statistics show.
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Second Annual Hyperborder Conference - 2006 An International Trade Conference
Cd Juarez. Chihuahua- Mission of the Conference: To create a forum to bring the US/Mexico border community stakeholders together with internationally recognized experts in order to increase awareness of the region’s challenges and opportunities and outline steps to foster its growth and development.
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Maquila worried about US deceleration
(October 31) - Deceleration of US economy for three quarters in a row has. started to worry maquiladora industry, because if the trend down continues the sector would suffer from the impact in 2007, according to economists and business managers. Karla Ericka Donjuan Callejo, Economy Analyst, said that the drop in US Economy growth during this year is not something that just relates to the present, but is more serious; if indicators keep their trend down this would most surely have a negative impact on maquiladora industry in employment
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Decree for export sector presented
Mexico City (November 1, 2006) As of next November 13 even Call Centers, considered services exporters, will enjoy the benefits of the Decree to Foster Manufacturing, Maquiladora and Export Services Industries (Decreto para el Fomento de la Industria Manufacturera, Maquiladora y de Servicios de Exportación - IMMEX) presented by the Ministry of the Economy. The new Decree, published today in the Official Gazette, will not only cover the activities of export maquiladora industry, but will also be the legal framework for companies working under the temporary import for export program (Pitex) and for the industry of exported services, which was not considered previously.
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Tariff for fibers will drop to zero
Mexico City (November 1, 2006) - The Ministry of the Economy will soon reduce to zero the tariff applied to fibers that are not produced in Mexico, assured yesterday Rafael Zaga, president of the Mexican Textile Industry Chamber (Cámara Nacional de la Industria Textil - Canaintex). "We appreciate the commitment made by the Ministry of the Economy to eliminate in the next few days the tariff applied to supplies required by the textile industry
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Bombardier wants to invest more in Mexico
Monterrey, Mexico (October 31, 2006) - Bombardier wants to attract more capital to Mexico. in order to build an aerospace industry in the next six or seven years, informed Pierre Beaudoin, President and General Director. While speaking in the meeting about strategies for global business held during the Fourth Business Summit
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Baker & McKenzie organizes a manufacture seminar
Monterrey, Mexico (November 9, 2006) - The. seminar Selected Legal Aspects of the Decree for the Promotion of the Manufacturing, Maquiladora and Export Services Industries (the IMMEX Decree), which is organized by Baker & McKenzie Abogados, S.C. (Monterrey Office), will be held at Oficinas en el Parque, Torre 1 (Penthouse 1), Col. Santa María, Monterrey, Nuevo León, Mexico, at 8:00 a.m. on Tuesday, November 14, 2006.
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ARTICLE OF THE WEEK
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| NAFTA, Trade Diversion and Mexico’s Textiles and Apparel Boom and Bust (Part 2) |
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By William C. Gruben
Federal Reserve Bank of Dallas
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 Maquiladora Jobs
The NAFTA-created trade diversion benefited Mexican textile and apparel workers. Comparing employment indexes for textiles and apparel and other maquiladora industries since 1990 shows jobs surged when Mexico had a NAFTA edge and increased its U.S. market share (Chart 3). As the U.S. economy gained momentum after July 2003, employment in all other maquiladoras climbed steadily. Textile and apparel job growth, however, has faltered (see box).
But the sector's employment since NAFTA belies fears of an industry on the brink of demise. The early NAFTA-driven boom gave the industry a big lift, but the gains could not be sustained. Even with the recent declines, however, the number of textile and apparel jobs remains much further above its pre-pact level than other maquiladora employment.
NAFTA no longer provides Mexican textiles and apparel much benefit. The trade diversion has ended. To show this, we created an economic model that compares how the industry's employment would fare in two scenarios—one assuming NAFTA continued to give Mexico the same edge it had before 2001, the other assuming NAFTA didn't exist.
We needed to control for other variables that can affect apparel trade. The first is manufacturing wages in Mexico, the U.S. and a sample of Asian countries. If Mexican pay fell relative to U.S. or Asian wages, the country's textile and apparel maquiladora employment would likely rise. In a global world, when the cost of doing business in one place becomes cheaper than in another, producers migrate. The second variable is U.S. apparel output. As production increases in the U.S., it will also go up in Mexico. This occurs whether Mexican apparel factories are suppliers to U.S. producers or Mexico's industry is swept higher by the same retail demand that boosts U.S. apparel employment.
Using our model for 1980–2000, we can estimate what happened in 2001–03 under two scenarios. We find that Mexico's textile and apparel manufacturing employment would have continued to rise sharply if other trade agreements hadn't eroded Mexico's preferred position in the U.S. market (Chart 4). Taking away NAFTA, however, produces an estimate of textile and apparel maquiladora employment that nearly matches the actual experience of 2001–03.
The same supply, cost and demand variables that once explained fluctuations in Mexico’s maquiladora employment still seem to pick up much of what happens. Mexico’s export industries will continue to benefit from being on the doorstep of the greatest consumer market on earth. But for textiles and apparel, NAFTA isn’t what it used to be.
It’s hard to predict what will happen to Mexico's textile and apparel maquiladoras now that China and the Caribbean countries have increasingly open routes to the U.S. market. Many analysts argue that Mexico maintains a competitive advantage based on its ability to deliver products to the U.S. quicker than China can. Because both countries stitch garments under contract with U.S. labels, it may be that the more trendy clothes will be made in Mexico. Any way you look at it, competition will be intense.
Textiles Aside, Maquiladoras Back on Growth Path
Textile and apparel maquiladora employment has continued to decline at a time when the rest of the industry is expanding. Overall, Mexico’s assembly-for-export sector has been adding jobs since it bottomed out at a seasonally adjusted 1,042,085 workers in July 2003. The most recent employment count stood at 1,213,841 in June.
The strongest sector has been chemicals, up 67.8 percent since January 2003, followed by services at 45.1 percent, electronics at 25.4 percent, machinery at 21 percent, furniture at 17 percent and transportation at 14.9 percent. By contrast, textiles and apparel declined 15.6 percent over the same time span.
The maquiladora sectors’ varying fortunes have geographic implications. The industry is growing in Mexican border cities that cater to mainstream U.S. manufacturers. Since January 2003, for example, maquiladora employment is up 40.9 percent in Reynosa and 25.8 percent in Ciudad Juárez. Elsewhere, border cities’ maquiladora industries have been held back by various impediments, such as infrastructure difficiencies. Matamoros’ job gains were 2.8 percent. Employment fell by 30.8 percent in Piedras Negras and 13.6 percent in Ciudad Acuña.
Because maquiladoras supply U.S. companies, their employment ebbs and flows with industrial production in the United States. The 1990s boom helped propel jobs to a record 1,332,147 in October 2000, right before the U.S. economy tumbled into recession. Maquiladoras resumed hiring as U.S. industrial production picked up in 2003.
About the Author
Gruben is a vice president and senior economist at the Federal Reserve Bank of Dallas.
About Southwest Economy
Southwest Economy is published six times annually by the Federal Reserve Bank of Dallas. The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System.
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MEXICO'S WEEKLY HEADLINES
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| » PEMEX increases production |
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| » Productive investment grows 10.8 % in the year |
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| » Inflation will go down in December |
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| » Mexico’s exports to Canada increase 9% |
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| » Mexico achieves second major surplus in history over USA |
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EVENTS
2006
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NOVEMBER
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MOUNTAIN REP "HIT & GIGGLE" CHARITY EVENT & INTERNATIONAL MANUFACTURING EXPO
Chandler, AZ, USA
14 Nov.
AMCON
Toronto, CANADA
14 - 15 Nov.
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