MAQUILADORAS IN MEXICALI, MEXICO JANUARY 2005
In January of 2005, I went on a fieldtrip to Mexicali, Mexico, just across the border from Calexico which is 120 miles inland from San Diego, California. I accompanied a business administration class taught by a colleague, called Managing Multinational Corporations. The class went there to visit multinational businesses, and I went along because I enjoy learning more about Mexico.
We spent three full days there and visited six corporations and two universities. The corporations included two assembly plants for television sets, a factory which makes integrated circuits for cellphones and satellites, a factory which makes glass, a factory which makes huge trucks, and a supercenter of a company which is the largest retailer in the world. I will discuss some of things I learned and experienced.
COMPETITION IN THE GLOBAL ECONOMY
At one university, we heard a lecture from a government official in the Secretariat of Economic Development, who told us about their efforts to make Mexicali competitive in the global economy. Many of the factories in Mexicali are called maquiladoras and were created as a result of the North American Trade Agreement which was signed a decade ago. That agreement allows multinational companies to import components and supplies from the US into Mexico without tariffs, and export finished goods back to the US without tariffs.
Since then there has been increased competition from other parts of the world where wages are even lower. But Mexicali has the advantage of being close to the US, which reduces not only the cost of transporting goods, but also the time to bring in supplies and deliver finished products, which reduces the cost of maintaining inventories. The employees also have technology skills which have been promoted by collaborations between the corporations and the universities. The second university we visited is an engineering school where we visited a graduate course in business administration and found that many of the students in the class were engineers and mangers that we had met on our tours!
TYPES OF MANAGERS
Originally the multinational corporations had foreign managers, which often resulted in language and culture difficulties in communication. Increasingly, however, they are now being managed by Mexicans. The Mexican managers have been very effective and some have been transferred to improve factories in other countries.
I was very impressed with the government official and the managers that we met. They are very knowledgeable, and they have instituted quality control procedures which are close to achieving Six Sigma, which means fewer than six defects in one million products. This was a wonderful opportunity for our students to dispel any stereotypes they might have had about Mexico and Mexicans.
DINING AND A DISCO
While the students chose to eat at a taco stand across the street from the hotel, I ate dinners at nice restaurants with the business administration professor who was leading the tour, and his Mexican colleague who helped him make local arrangements. I had met the colleague before on a fieldtrip to Tijuana, which is across the border from San Diego, when I had accompanied a Sociology class on Urban Studies! After our dinner at a seafood restaurant the second night, we were offered a drink of tequila from a large glass jar which had an eviscerated rattlesnake in it. I decided to try it since my friends were trying it! That reminded me of the bottles of liquor with snakes in them that I had seen in Southeast Asia, but had not tasted then.
After dinner each night I walked three blocks from the hotel and a disco. I danced, of course, and met a few Mexicans. I left at midnight so I could get some sleep and breakfast before having to be on the bus at 7:20 AM. I was pleased that all of the students were on the bus on time too, in spite of staying out later. At the second university, I ran into the owner of the disco on campus!
IMPACTS OF WALMART
The retail business that we visited was Walmart, the largest retailer in Mexico as well as in the world. I was impressed with the manager, as well as the store. The grocery area had wide aisles that were not cluttered. The produce and fish looked fresh. The manager explained that when the store first opened they tried to sell the same goods as in US stores, but quickly learned that they needed to cater to local tastes. Now the head of each department is able to order goods for the local market including locally produced goods. An example is the pan dulce (sweet bread) which varies from region to region.
A student asked the manager whether having an Optometrist in their store put local Optometrists out of business, and he replied that it was a local Optometrist who asked to be in their store. Wal-Mart has been expanding in southern California, and some communities welcome the low prices and new jobs, while others object to their low prices putting local stores out of business and their non-union low wages. In Mexicali they have to pay higher than minimum wages because there are factory jobs available.
With its huge purchases, Wal-Mart can demand lower prices of suppliers, and its decisions about where to buy goods can affect small nations' entire economies. An example concerns clothing. Until recently there were worldwide quotas on the textiles that could be purchased from particular developing countries. Those quotas have just been eliminated, which means that shifts in purchasing to countries with lower wages can cause massive unemployment in countries with slightly higher wages.
Another big impact on developing nations is the export of food from the US. While this might seem like a good thing, the farm subsidies in the US allow big producers to sell food abroad below cost, which puts the local farmers out of business in developing countries. The farm subsidies were supposed to save family farms, but in fact most of the money goes to large multinational corporations, so their profits come from our tax dollars. These farm subsidies have been strongly criticized by other countries in world trade talks. There are farm subsidies on certain crops in Europe as well.
TEMPERATURE AND TOURISTS
It rarely rains in Mexicali and it is very hot in the summer. ItŐs basically a dessert, but land developers a century ago created canals to divert water from the Colorado River for irrigation. They brought laborers from China to dig the canals and to build railroads to transport the agricultural products grown in the valley. As a result, there are more Chinese in Mexicali than anywhere else in Mexico. And there are many Chinese restaurants.
Unlike Tijuana, there are not many US tourists in Mexicali, and so there were not many hawkers selling goods as we waited to cross the border back to the US. In the past, US citizens could cross the border into Mexico and return without a passport, with the US border guards simply asking where you are from and listening to your accent. Now you must show a passport or birth certificate and have your belongings x-rayed.
We were all exhausted when we got back to Whittier. But it was a great trip. I learned a great deal and had a lot of fun.