EL PASO, Texas (Border Report) – An industry expert says a strong peso and the aftereffects of strikes at U.S. automotive factories last year continue posing challenges for manufacturing operations in Juarez, Mexico.
“The maquiladora industry has been slow in the first few months of 2024, and that translates to fewer jobs, less money circulating,” said Thor Salayandia, board member of the Mexican Chamber of Industry and coordinator of Bloque Empresarial Fronterizo (Border Business Bloc) in Juarez. “It’s not just (assembly) operators; it’s engineers, suppliers, everything associated with cost centers.”
Salayandia says Juarez manufacturing operations have reduced payroll in the past eight months and cut back 1,900 jobs in March. The worst came during the United Auto Workers’ six-week strike at GM, Ford and Stellaris plants. Some automotive components assembly plants cut back from two shifts to one or reduced employee hours during that stretch, Salayandia said.
A strengthening peso also makes operating in Mexico more expensive, he said. according to Federal Reserve Bank data, one dollar bought U.S.-based businesses 18.28 pesos in October; now it only gets them 16.66.
Despite recent challenges, cross-border trade in the Juarez-El Paso region remains in the billions and new maquiladoras are coming to take advantage of near-shoring – the practice of companies transferring production from Asia to countries nearer to the U.S., analysts say.
“Juarez is one of the cities benefitting the most from near-shoring. There’s four major Taiwanese campus programs and the vacancy rate is still low (at Juarez industrial parks) – it’s booming,” said Jerry Pacheco, president and CEO of the Border Industrial Association.
That’s not to say there’s no flipside.
Juarez maquiladoras are struggling to fill vacancies. That’s a trend that’s been going on for years due to the proliferation of manufacturing operations in Central Mexico catering to the same U.S. companies as Juarez. “The Bajio region north of Mexico City has really industrialized, with aviation and automotive production that has kept a lot of people there that normally would have come to supply jobs” in Juarez.
There’s also such a thing as too much growth.
“The big issue in Juarez is the electrical system. With all the construction going on, at what point does the system hit a wall?” Pacheco observed.
Juarez municipal and Mexican federal officials are working on that issue.
The latest report from the Borderplex Business Barometer at the University of Texas at El Paso puts things in perspective. The March report titled “Not bad for a slowdown” addresses monetary policies in the U.S. and Mexico, rising shipping costs, the employment rate and fewer Americans buying cars whose parts are assembled in Mexico. The report characterizes binational trade volumes as “flat.”
But if the dollar doesn’t go as far as it used to south of the border, the strong peso could encourage more northern Mexico residents to visit and shop in El Paso.
And UTEP researchers agree U.S.-China trade tension is bringing new plants to the border.
“Trade war-related nearshoring has led to substantial investment in manufacturing in Juarez and Chihuahua City,” according to the Borderplex Business Barometer. “Because the slowdown is proving to be fairly benign, additional economic growth is predicted for the region in 2024 and 2025.”
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