Tijuana Maquila Assembly Plants Fueling Local Economy
Wednesday, December 27, 2006
This segment originally aired November 28, 2006.
Tijuana’s maquiladora industry has grown into an important part of Baja California’s economy, employing more than 170,000 workers and bringing more than $1 billion of foreign investment into Tijuana’s economy. At its peak in 2001, over 850 maquilas were in operation. But 9/11 and the rise of manufacturing in Asia caused a slump that the industry is still recovering from. The new maquila industry has a changed, and the benefits are being felt here in San Diego. Independent producer Marianne Gerdes reports.
Baja California, and its 1.6 million residents, lies just 14 miles south of San Diego. Concerns over illegal immigration, drug cartels, pollution, and border fences dominate the headlines. But look beyond the problems and you’ll find a thriving cross-border economy.
The San Diego-Baja California region is the most prosperous of all the border regions between the U.S. and Mexico. According to the San Diego Association of Governments, retail spending alone brings in one-point-six billion dollars to San Diego annually. And each year $25 billion worth of goods are imported and exported at the Otay Mesa Point of Entry.
But still there remains a lack of understanding and interest in the economic benefits the border brings to San Diego.
Kenn Morris, Cross Border Business Associates : A lot of effort was brought in trying to attract an economic benefit to the region like the Super Bowl. It was a significant benefit but it was very short term. We have the equivalent of a Super Bowl happening from the economic interchange between San Diego and Baja California happening on a regular basis.
The most striking growth is in maquiladora industry, the assembly plants that the border region has become known for. Most maquilas are owned by U.S. companies, but Asia and Europe are also represented. They come here for the competitive advantages, Baja California’s cheap and plentiful labor force, and its close proximity to American markets.
One such company is DJO, Inc. a Vista, California, firm that manufactures its DonJoy-brand braces and orthopedic medical devices in Vista and in Tijuana.
In 2002, under new management, the company moved some of its manufacturing operations and 250 jobs, about 30 percent of its workforce, to Tijuana.
Mark Francois, DJO Inc. Investor Relations Director: Anytime you move a job out of the U.S. and into a foreign country, there are always people worried that this is taking the available jobs from that location to somewhere else. As a result of moving those jobs and a lot more over the course of the last few years, the company has grown. That’s had an enormous positive effect on how we can employ people in Vista.
Chad Dale, DJO Inc. Vice President Operations : These individuals are building products on demand. We may build a large, the one behind it may be a medium, maybe another medium, then a small. The whole key is to build and replace whatever is sold on a regular basis.
What DJO, Inc. knew, and many companies have discovered, is that although labor is cheaper in China, there are many advantages to manufacturing in the border region.
Chad Dale: The advantage of manufacturing here in Mexico over manufacturing in Asia is we don’t have to put as much inventory on the water and have as much inventory in our pipeline to make sure our customers have what they need. By being roughly 10 to 15 miles away from the US we produce products and get them in to domestic channels within a matter of hours rather than days or months.
DJO, Inc utilizes the strengths of both countries, and the results have been dramatic.
Mark Francois: Several years ago we had 300 people in Vista and 200 people in Mexico. We now have 1700 people in Mexico and 600 people in Vista and moved from being a $200 million company to hopefully being a half a billion dollar company.
And DJO, Inc. is not alone. More than 120 San Diego-based enterprises have operations on both sides of the border.
And it’s not just San Diego’s economy that benefits. According the Industry Week Magazine, the average maquiladora worker earns the equivalent of $350 and $400 American dollars a month, depending upon skill level. While low-paying by American standards, these wages have helped drive Tijuana’s prosperity, making its gross domestic product the third largest in the entire country, behind only Cancun and Mexico City.
And nowhere is Tijuana’s economy growing faster than in the housing sector.
Alejandro Rivera, Tijuana Economic Development Corporation: These developments where we’re standing right now are for the maquila worker, so he can be close to work and have a decent, affordable and good-looking house.
Tijuana’s population has been growing at a rate of six percent a year as workers migrate to the city in search of factory jobs. The need to provide housing close to work, coupled with higher wages, and a government program that helps workers save a down-payment for their first home has created a housing boom.
This prosperity is a two-way street, a fact that business seems to have grasped, but most politicians have not.
Surprisingly, there has never been an economic impact study of cross-border business in the San Diego-Tijuana border region.
Kenn Morris: We’re faced with a global economic shift. We’ve allowed the debate to focus only on a wall when really we need to figure out how we can compete against global changes.
Alejandro Rivera: We see this in Eastern Europe and Western Europe, we see it in China and Hong Kong, we see it all over the place, so we have to act together and go out to the world and tell the story right. We are the platform for success.
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