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Worldwide Recession Impacts Mexican Manufacturing - 2001-12-08


The worldwide recession and the slump in the U.S. economy in particular, have had a deep impact on Mexico's manufacturing sector. Both government officials and industry representatives are hoping for a quick recovery next year in order to avoid a devastating drop in revenue and employment.

The once-booming maquiladora sector is now facing its first real downturn in Mexico. Maquiladoras are plants that import raw materials from the United States tax free to make products such as clothing, circuit boards, televisions and auto parts, most of which are then exported back to the United States.

Industry representatives say thousands of jobs have been lost in the past year or so to more competitive labor markets in Asia and as a result of the U.S. economic slowdown that deepened following the September 11 terrorist attacks. In all, some 150,000 jobs are expected to be lost before the expected recovery sometime next year. That would represent about 12 percent of the more than one million jobs maquiladoras had created in Mexico over the past two decades.

One industry that has managed to cushion the impact of the slowdown is automotive parts. Michael Hissam, a corporate representative for Delphi Automotive, which operates 54 plants throughout the country and employs more than 70,000 people, says his company has made an effort to keep its trained work force intact.

"We have reduced our total employment in Mexico by about 11,000-12,000 that is primarily through attrition," he says. "As far back as July of 2000, we saw a decline in the overall orders for our products. Here in Mexico, by using attrition, that is employees voluntarily leaving and then not replacing them, we have been able to balance our employment to the product demand from our customers."

Mr. Hissam says Delphi has had a good experience in Mexico over the past 25 years and plans to continue its operations here. He says competition from other nations with cheap labor could draw away some jobs, but that, so far, the company has found Mexican workers to be highly productive and the Mexican government highly supportive.

"In Mexico we have seen some increase in costs and that is something we continue to monitor as we do in every country around the world," he says. "We are in contact, we have been in contact, with the Mexican government so that all of us can work together, to focus on five and 10 years down the road to assure our presence here in Mexico."

Delphi Automotive directly contributes more than $1 billion to the Mexican economy each year and Mr. Hissam says that impact can be multiplied by three to determine the indirect impact. The automotive manufacturing sector is one of Mexico's top three export industries and is considered one of the nation's most important growth industries for the future.