If Mexico's economy is changing its image as it recovers
from the 1994-95 peso devaluation, the new look must be in the clothing.
Foreign investment in apparel and textile production across Mexico is spreading
like never before. The sector may not be the country's largest export, but it has
become a vital part of the nation's development as a leading world exporter.
The growth can be attributed to the North American Free Trade Agreement.
Not only did NAFTA give Mexico the advantage once enjoyed by the Caribbean in
investment, tariffs and quotas; the peso devaluation that occurred a year after NAFTA's
enactment also made investments in Mexico that much more attractive to foreign companies.
At least eventually. Capital and start-up costs fell immediately, but foreign investments
hesitated until the economic situation stabilized.
As a prelude to NAFTA in 1993, the United States had established favorable conditions
called the Caribbean Basin Initiative.
U.S. apparel and textile companies moved to the Caribbean to take advantage of
lower labor costs and tariff and quota incentives as the United States sought to
build up the economies of the nearby island nations.
But NAFTA evened the advantages for Mexico, and because of its closer proximity
to the United States, Mexico has gained the upper hand.
"There's still a really strong apparel presence in the Caribbean; some companies
have been in the Dominican Republic for a long time," said Kathy Pettit, a consultant
for Columbia, S.C.-based Bobbin Blenheim, a trade show organizer specializing in
apparel and textile trade. "The Caribbean nations are trying to keep what they
have and are still trying to gain parity with Mexico through Congress. But it's on
the back-burner for now."
As NAFTA gets older, and lower tariffs and higher quotas are phased in, Mexico
will become even more attractive.
According to NAFTA, import quotas for "originating" textile and apparel
goods were lifted upon the trade agreement's enactment and are being phased out of
non-originating goods.
Moreover, tariffs and other barriers covering 80 percent of textile and apparel
trade between the United States and Mexico will be eliminated by 2000, and possibly
earlier.
So it's little wonder that Mexico this year surpasses China in textile and apparel
imports to the United States. Last year, Mexico's $3.5 billion in exports to the
United States was a close second to China's $3.6 billion. China apparel and textile
exports still face 16 percent duties, compared to 8 percent for Mexico.
Yucatan is rising
The state of Yucatan, perhaps because of its nearness to the Caribbean, has been
quick to capitalize on Mexico's rise in textile and apparel production.
"We have noticed that more companies are coming because of the NAFTA advantage,"
said Arturo Lopez, director of industrial development for Yucatan. "This year
we have had a 40 percent increase in maquiladoras. There are 17 companies that have
placed plants or are about to build in Yucatan, and I'd say about 95 percent of those
are textile companies.
"We offer land for free if the company installs its building outside of Merida
(Yucatan's state capital). We supply the utility lines and roads. The state of Yucatan
has 100 municipalities, and we are placing companies in these cities that have a
good and stable labor pool," Lopez said.
The state also offers companies training scholarships for two months.
"We pay those two months," said Lopez. "We offer the stability
of the state, the labor pool and the quality of life here in Yucatan."
Foreign companies operating in the Yucatan include Lee Jeans; Bali, a Sara Lee
division that makes Maidenform products; La Perla of Italy, making women's bathing
suits; Monty of Hong Kong, producing women's sports clothing for Liz Claiborne and
Oxford Industries in Atlanta.
New companies coming include the Russell Corp. of Alabama, making sports clothing,
and Poughkeepsie Corp. of New York, producing fabric and golf shirts, Lopez said.
Abundance of labor
Another region of Mexico utilizing the same strategy of placing new plants singularly
in cities is the interior colonial area of the states of Queretaro and Guanajuato.
"There is no problem with labor there," explained Aaron Castillo, assistant
director of D.D.V. Division, a Queretaro-based consulting firm that helps U.S. companies
locate or find matches in the two states. "If you are the only company in town,
your turnover is going to be very low. There's nowhere else to work.
"Sometimes, if you are in an industrial park, and there's another plant in
the same industry, if that plant offers five or 10 more pesos a day in pay, the workers
will jump to the other plant," Castillo said. "Americans who have set up
on the border understand that now, after years of working on the border. But even
in a large city in Queretaro and Guanajuato, they will not have that problem."
U.S. companies that D.D.V. Division has assisted in the two states include Woolrich,
L&L Manufacturing, Traci Lynn, Marlo Manufacturing, Levi's, Lee, Wrangler, Gap,
Guess and Baby Guess.
Although Queretaro once was known for knits and woven clothing, and Guanajuato
for denim, the two states are diversifying with plants that manufacture both types
of apparel.
Confirming this is Jose Natra, marketing director for the Guanajuato trade office
in Dallas, who pointed to the state's rising star in apparel manufacturing, the small
town of Moroleon. One plant there makes sweaters for New York-based Phillips-Van
Heusen.
"The sweaters are sold all over the world and the quality of the products
is very high," Natra said. "Guanajuato has many things to offer. First
is location. We are in the central part of Mexico. We are in the industrial corridor
of Mexico. We are 14 hours from the border by truck.
"The government of Guanajuato is willing to do whatever it takes. What do
you need? Facilities studies? Specific training? A plant site? The government will
do what it takes."
Guanajuato promotes itself to outside industry through its agency COFOCE, Coordinator
de Fomento al Comercio y las Exportaciones.
The northern state of Coahuila also has an aggressive program to attract textile
industries, mainly to the capital city of Saltillo, the border city of Piedras Negras
and to Torreon.
Coahuila already has attracted Sara Lee and Wrangler to San Pedro, near Torreon,
and Red Kap to Torreon. Hanes is in Allende, and Fruit of Loom operates in Saltillo.
Coahuila also offers to pay minimum wages for 60 days to workers being trained,
as long as the company agrees to use at least 70 percent of the trainees. The state
labor tax of 1 percent also is waived for one year.
Construction permits may be negotiated with municipalities for favorable terms,
said Mauricio Rivera Navarro, head of the Coahuila Department of International Promotion.
Meanwhile, Bobbin Blenheim will continue its trade shows to encourage textile
and apparel investment throughout the Americas.
Late this summer, the firm announced two 1998 trade shows. Expotela, the Textile
Expo for the Mexican Market, will be held February 24-26 at Mexico City's World Trade
Center. And the Apparel Show of the Americas will be held March 18-20 at the Miami
Beach Convention Center.
David Hendricks is a business columnist for the San Antonio Express-News.
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