While TECMA’s business took a dip over the last 3 years because of the global economic crisis and the drug violence in Juárez, since the middle of 2009, the company has been recovering. Despite the
shocking brutality of the drug war, Russell says he is confident that the maquiladora sector is not a target of organized crime, and that the city can still provide a safe environment for business.
Choice excerpts from the El Paso Inc. interview include the following:
Q: What advantages does Mexico have over China?
For the first time in modern history, China is not your obvious answer for your low-cost initiative. Mexico tips the scale and actually provides a lower-cost advantage for many product categories than China does. The North American Trade Agreement provides favorable conditions between the United States, Mexico and Canada, which gives us an advantage over China when it comes to tariffs. The minimum wage is also up in China because of world pressure.
The Chinese are becoming a consumer nation. The currency exchange between the United States and China is causing things from China to be more expensive. And all of those things are the opposite for Mexico. The peso-dollar exchange rate is very attractive now, compared to China. The minimum wages have remained stable. When it comes to transportation, what we produce today can be on a dock in Denver tomorrow morning. And the amount of available employment is plentiful, so the advantages of working in Mexico keep getting greater all the time.
Q: You’ve said that those who survived the last two years are going to see the greatest opportunities of their lives in the next five years. How will those opportunities materialize?
I’ve been doing this for 25 years and that has given me a lot of experience and a lot of ways to see how all the stars have lined up. And with the recovery of the economy, with the advantages of Mexico over the other low-cost options such as China, the attitude of the public and businesses to stay in North America to protect intellectual property rights, as well as the many advantages of being here, I see it as a launching pad. We have 8-million square feet of empty manufacturing space in Juárez, and some say that’s terrible, but look at the opportunities we have to fill that space. It’s there and it’s ready. Our industry laid off 60,000 to 80,000 people; all those people are ready to get back to work. We tell our clients everyday that whatever talent they need, whether it’s plastic injection molding, engineering for welding or precision machining, there is a talent pool in Juárez that can fill that slot.
Q: What’s it like working in Juárez?
There are more patrols and more evidence of security. So far there have been no documented cases of any expatriate being kidnapped or killed. The data tells us it’s a safe place to conduct business, but there are definitely times of the day and places where you shouldn’t be if you’re working in the maquiladora. The data also shows us that the casualties that we see are for the most part hits, not random shootings. That’s not what the environment is like at all. You cross over the border and there’s something short of two million people going about their daily business and conducting life as if absolutely nothing is going on. Now all of us know someone that has been a victim of violence, whether it’s a carjacking or had loved ones killed. Like I said, the data is there and we don’t want to ignore it. But it’s not a failed state. It’s a much different environment. This war is not about ideals, religion or any historic grudges from years past, this is purely economics.
Q: What kind of precautions do you take when you go to Juárez?
I’m probably there three days a week. I have offices on both sides of the border and we are not coy about security issues. The data is there that says you need to take precautions. First we go through training, and we do it frequently, to learn how to handle ourselves in the event we encounter an act of violence, whether it be a carjacking, getting caught in a crossfire, or just being victims of a robbery at the plant. The idea is to walk away, survive and continue with our lives...
Q: The security manager at a large manufacturer in Juárez recently [said] that in the last three years, he has had to deal with extortion cases and that every maquiladora that he knows of has dealt with these cases. Has this been a problem for you?
Absolutely not and I couldn’t disagree more. Now, everything I’m telling you does not relate to a Mexican businessperson. They have another set of preoccupations. I know of no single case of expats being extorted, and I don’t believe this person distinguished among them. We have experienced none of that in our operation. Out of a couple of hundred management level people in our company, we’ve not had any of that.
Very little. I think the economy has been making the decisions. Now with Electrolux I understand they chose another city, they just didn’t choose Juárez. I don’t believe the violence was a factor in that decision, you’d have to ask an Electrolux person more specifically. It’s like the rumor that companies said they were leaving because of the violence. I know of no company that has left because of the violence. That might be a convenient thing to say if the economy has worn your business down and you have to close your plant.
I think businesses make their plans based on long-term visions. I don’t think any of us sees any of this as permanent. When you build a factory, you’re building it for the next 10 years. You’re not building it based on what’s going on today or even next year. Companies like Electrolux or Foxconn that have huge operations tend to look at geographic diversity, in case there’s an earthquake or a border closing or some catastrophic event close to their plants. They want to spread the risk.
Q: In the last few months of 2010, 14 plants closed in Juárez.
Certainly 14 plants closing is not good news, but it’s part of the great recession. This is the worst one that we have seen in modern history, so some of those plants probably closed as a result of worldwide restructuring. And some of that was that they just didn’t have enough projection to justify keeping the plant open. But I would also anticipate that those companies will be back as the economy turns.
