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Made in Mexico

Reagan Administration Encourages U.S. Businesses
to Move Jobs South of the Border

by Michael Moore

ACAPULCO, Mexico - High above the beaches of Acapulco on the penthouse floor of the Excelaris Hyatt Regency, 700 business executives listened intently as Rex Maingot of American Industries, Inc. laid out his blueprint for the second industrial revolution on the large overhead screen.

"The bottom line is this: your cost per Mexican worker is 69 cents an hour versus at least $9 an hour in the States - a savings of $15,000 a year per worker. You can see how down here a GM car can be made competitive with the Japanese."

The slide on the screen showing a hand holding two quarters, the average salary minus benefits, faded out as the new graphic appeared: a giant map of North America with large red arrows swooping out of Mexico toward destinations in the United States - St. Louis, Pittsburgh, Detroit. "Only 1,546 miles to Detroit," the slide proclaimed.

"If you are currently driving a Ford Tempo," Maingot concluded, "there is a 50 percent chance that your engine was built right here in Mexico. We project that there will be one million new jobs coming to Mexico from U.S. companies in the next 14 years."

The slide show ended with the likeness of an eagle, albeit not an American bald eagle. Emblazoned above it were the words "Hecho en Mexico" - Made in Mexico.

Welcome to Expo Maquila '86, a three-day exclusive conference held in Acapulco, Mexico. Organized by the U.S. Commerce Department and the American Chamber of Commerce in Mexico, the December extravaganza was held to assist and encourage U.S. companies interested in moving their assembly operations to Mexico.

Maingot shared the podium with dozens of other corporate presidents, bankers and consultants in urging U.S. businesses to take advantage of the golden opportunities awaiting them south of the border. Executives from HewlettPackard, General Electric and hundreds of other U.S. corporations listened.

The conference was closed to the press.

The Commerce Department came under fire for its part in the Expo in November when the United Auto Workers (UAW) objected to U.S. taxpayer's money going to fund an event which UAW President Owen Bieber characterized as "truly shocking." Bieber charged the Reagan administration with "sponsoring a meeting to help U.S. firms push more workers into unemployment lines while taking advantage of exploited Mexican labor."

Early in the fall the Commerce Department sent out 120,000 invitations to U.S. businesses informing them of the Expo and the opportunities available to them in Mexico. But the Commerce Department had to withdraw its support after congressional hearings held by Rep. John LaFalce's, D-NY, Subcommittee on Economic Stabilization revealed a provision in the law prohibiting tax money from being used to promote off-shore jobs. The Commerce Department stepped aside and the Mexican firm of Montenegro, Saatchi and Saatchi took over.

Expo Maquila '86 was designed to educate American businessmen about the booming off-shore assembly industry in Mexico known as the maquiladoras - translated literally it means "golden mills." In the 15 Mexican cities that adjoin the United States along the 1900-mile border, American corporations have built 865 factories to produce televisions, air conditioners, automobile engines - even top secret components for the U.S. army. They employ 320,000 Mexican laborers who last year assembled $3 billion in dutyfree parts into products that were then sold in the United States.

Mexico, while at the mercy of multinational banks that are demanding debt repayment, has become what many believe to be a slave labor camp for U.S. corporations. The wages are incredibly low: about $22 a week for 48 hours of work. About 70 percent of the workforce is made up of women under the age of 21. Labor strikes are rare.

Gonzalo Gomez-Mont, a labor attorney from Tijuana, told the gathering in Acapulco that "unions here in Mexico work in cahoots with management - and sometimes without the workers knowing."

American executives maintain that they cannot remain competitive with the Japanese and other foreign companies because of labor costs in the United States. The maquiladora program, which Expo organizers euphemistically refer to as "production sharing," can cut their labor costs by up to 90 percent.

"I'm a 'buy American' kind of guy," said Richard Bemier, an executive who was staffing the booth for Dynacast, a company that produces everything from spark plug caps to flame adjusters on cigarette lighters. "I want to save American jobs. Do the maquiladoras eliminate those jobs? Yes. But even though you might lose 40 employees, you'll save the jobs of 140 people who supply them from the U.S."

Supporters of the maquiladora program insist that if U.S. companies weren't allowed to move their assembly work to Mexico, their entire operation might be in financial jeopardy. GM chairman Roger Smith told Fortune magazine recently that "moving to Mexico was a matter of survival."

GM is expected to open 12 additional plants in Mexico, bringing its total to 29 and making it the largest U.S. employer in Mexico, followed by Zenith, General Electric/RCA and the A.C. Neilsen Company.

Free Enterprise, the Best Defense

In the exhibition hall of Expo Maquila '86 Sergio Arguelles is showing two American businessmen a videotape of the Finsa Industrial Park in Matamoros, Mexico, just across the border from Brownsville, Texas. The park houses three GM facilities, including a large Delco factory that produces 28,500 car radios a day.

"People in the U.S. don't understand that the maquilas will save their jobs," Arguelles told the businessmen. "Mexican workers in those factories spend most of their money in the U.S. stores across the border."

Indeed many conference participants echoed this argument. Some reported that Mexicans who work in the U.S.-owned plants spend up to 70 percent of their wages in the border towns of El Paso, Laredo, and Yuma. But critics question the validity of this argument. If 70 percent of the money these companies expend in Mexico is then pumped back to the United States, how do these new jobs help the already impoverished Mexican economy? And what can Mexican workers afford to buy in the United States if they make only $22 a week?

These concerns do not stop the border states from being among the biggest boosters of the maquiladoras. Al Cisneros, of the Texas Economic Development Commission, sees a need for U.S. firms locating in Mexico.

"Free enterprise is the only thing that's going to save Mexico from a communist revolution," he contended. "If we don't help Mexico develop, we're going to have another Nicaragua at our doorstep."

Cisneros' theory of turning Mexico into one big industrial park to stop the "Red Tide" on our southern border was echoed last summer by Paul D. Taylor, U.S. Deputy Assistant Secretary of State for Inter-American Affairs. Taylor was speaking at a maquiladora promotion dinner in San Diego, California.

The U.S. plants in Mexico, Taylor said, are helping the country "reorient" its economy from its socialist tendencies to the bulwark of capitalism.

"These factories provide profits for U.S. business, goods at reasonable cost to U.S. consumers, and income and employment to Mexican citizens. ["this] benefits the 'neighborhood'," said Taylor.

Manuel Fernandez, a representative of Nacobre Industries which makes seatbelts for Ford, radiators for Chrysler and shock absorbers for Monroe, stood proudly in front of the quality award plaque that Ford had presented to his company.

"If you Americans don't take advantage of Mexico, the Japanese are going to close you up," he warned. "If we work together as neighbors we can destroy the Asian competition."

The "Asians," though, have already arrived. Ten Japanese corporations have recently built factories along the U.S.Mexican border and more are being planned. These factories will supply both their own subsidiaries in the United States and other American firms.

Yoshicazo Kameyama, an executive with the Long Term Credit Bank of Japan - the institution which bankrolled the GM-Toyota joint venture in California - was one of the most sought after individuals at the Expo.

"I believe more Japanese production should be moved u Mexico," Kameyama said. "Our bank hopes to see many more factories built here." He added that because the Japanese see "little difference" in the quality of work between minimum wage American and Mexican workers, Mexico is the preferred location because of low labor costs.

The Michigan Connection

Of all the industries represented at Expo Maquila '86, the most noticeable were the companies which supply parts to the, automobile manufacturers. Ten companies from the Detroit area alone which had executives attending the Expo said that they were giving serious consideration to moving assembly work to Mexico.

Arthur J. Goodsel, president of Huron Plastics which operates 10 plants and employs 585 people around Michigan and the United States, described the bind he feels he is in.

"[The automakers] are moving to Mexico and they'r, putting it to us that 'if you want to do business with us, you'd better move closer to us' - and in the next five years, that means down here."

Goodsel said that he is "probably going to build a facility: on the Texan border within the next two or three years."

Rudolph Eschbach, president of Iroquois Die an( Manufacturing, operates three plants producing cross members brackets and other stamping supplies for the auto companies.

"There is good potential in Mexico because labor is very very cheap," Eschbach said. "I've talked to a lot of bankers am related people here and the possibility of our company entering into a joint venture in Mexico looks fairly promising."

Some of the businessmen at the conference were no anxious to talk openly about their plans.

"I'd rather not have any publicity on this," said Stephen Grand of Deco Grand, a supplier of small engines to Detroit' automakers. "This [exporting jobs out of the United States] is a controversial issue in Detroit."

Tom Manning, president of Fabex, a brake component company with three Detroit-area plants, pulled his booth from the Expo when the UAW began to protest.

"I'm not here to antagonize the UAW," Manning said. M; fight is with the unfair trade policies of this country.' Manning, who calls himself a "staunch Republican who': voting Democratic in '88 so we can get content legislation,' has already set up a factory near Monterey, Mexico, producing parts for GM and Ford and employing 46 people.

"I have a maquila not because I think it's right," Manning contended. "I'm doing it for my survival. Cost is the bottom line." He declined to provide details about his company': earnings or the number of people he employs in Detroit.

Un-American Activities

Critics of the U.S.-owned factories south of the border believe that the cost of the maquiladoras to American worker: far outweighs the benefit of increased profits for American business. But more baffling to them is why the federal government is actively supporting the transfer of U.S. jobs to Mexico.

Rep. Joseph Kolters, D-Penn. traveled to Acapulco with two fellow members of the House Subcommittee or Commerce, Consumer and Monetary Affairs to assess the situation. He didn't like what he saw.

"I'll tell you what these Mexican factories mean to my district - more divorce, more mental illness, more hunger. A: far as I'm concerned, GM, Ford and Chrysler are un-American They have no concern with what's best for America. Their only concern is to build cars at the lowest cost possible."

Kolters, who represents the depressed steel area of Beaver Falls, Pennsylvania, believes that the Commerce Department': involvement in the Expo will only further erode the already, ravaged economy of the industrial north.

"The Commerce Department, instead of inviting 120,000 businessmen down here should have brought 120,00( unemployed to Acapulco to see what that looks like," Kolter said.

"What's sad is that the unemployed of America would be the first in line to be sent off to a war to protect the U.S. Bu protect it for whom? The banks? Wall Street?"

Although Rep. Kolters was angry about the situation, he said there was little that could be done.

"It's a free country and they have a right to spend their money where they want," Rep. Kolters said. "I'm afraid we just can't stop this. It's all just another part of the Reagan policy to eliminate the unions."

By the afternoon of the second day, Rep. Kolters am company left the conference, did some shopping, and headed home to the States.

Work Means Freedom

By the final day of Expo Maquila '86 most participant were tanned and sporting the conference's most popular lapel sticker: WORK MAKES EVERYTHING POSSIBLE. This prompted one entrepreneur from Orange County, California t( remark on the similarity between that slogan and the inscription that appeared over the entrances of the German concentration camps, "Albeit Mach Freit" - Work Mean Freedom. He suggested that they come up with a new motto.

Those opposed to the maquiladoras - the unions, some church groups and others - make comparisons nearly as harsh. They claim that these Mexican jobs are no better than other forms of "slave labor." The maquiladora workers, though earning more than the average Mexican, still do not have enough money to meet their basic needs of food, shelter and clothing - a fact that a number of conference participants acknowledged. Malnutrition is such a problem that the factories have set up breakfast and lunch programs because, as one manager put it, "a hungry belly does not make for a productive worker."

U.S companies in Mexico employ mostly women - "they're just easier to train," one participant remarked - who work a minimum of nine hours and 35 minutes each day. A total of four tardies or absentee days results in being fired. And because pregnancy "interferes" with the production process, U.S. companies have joined with the Mexican government in distributing birth control pills to female assemblers. One Mexican businessman at the conference noted that the Catholic Church, eager to assist in bringing in U.S. dollars, "has turned its head the other way," on the birth control issue.

At the Acapulco conference, David Bartholomew of the First Atlantic Investment Company seemed a little concerned with what he was hearing.

"If the Mexicans were well off, they'd probably treat us like they used to - and as well they should."

Other participants weren't as kind. When one speaker mentioned that a Mexican employee can quit at any time, a portly businessman in the audience rose to express his indignation.

"You mean they can just quit? They can just get up and leave and go work somewhere else? I don't have the right to fire them whenever I please but they can just leave me!" By this point his face was red and he decided to sit down, shaking his head and adjusting his golf shirt to reach the point where his shorts began.

A plantation mentality and overt racism were recurring themes at the conference. Speaker after speaker used the generic name "Pancho" when referring to a hypothetical Mexican worker. "Pancho will do this for you," "Pancho won't join a union," "Pancho is an obedient worker," and so on.

"Pancho," was not present at the conference and therefore was unavailable for comment.

The moving of U.S. assembly jobs to Mexico is expected to sharply increase in the next few years, absent any congressional action that may stem from hearings to be held this month. Thousands more jobs in the United States will be lost.

This, though, didn't appear to bother the keynote speaker at the farewell dinner, Rep. Jim Kolbe, R-Ariz. Kolbe received an expense-paid trip to Acapulco to tell the businessmen exactly what they wanted to hear.

"The maquiladoras do not take away jobs from the U.S.," Kolbe intoned from the podium stationed in front of what was left of a roasted pig. "They save jobs."

Kolbe echoed much of what had been said over the previous three days, speaking of "allowing U.S. businesses to compete freely" and of the "unlimited potential" for both the U.S. and Mexican economies. He chastised the three Democrats who had come down to the conference.

"What my well-intentioned but misinformed colleagues fail to realize," said Kolbe, "is that without the Mexican maquiladoras, these products would have been 100 percent made in Asia."

At the end of his speech the Mexican emcee made a motion to nominate Rep. Kolbe for President of the United States. The audience responded with enthusiastic applause while Rep. Kolbe's junior aide passed out transcripts of the just-completed speech.

Later, the Japanese banker Kameyama held court at a nearby table.

"What you see here is just the beginning," Kameyama observed.

"GM will close nine U.S. plants next year and at the same time open up twelve new ones in Mexico," he remarked as the last row of tables was being dismantled. "You figure it out." 0

Largest Maquila Employers in Mexico

1. Zenith18,000
2. GM13,000
3. GE8,000
4. RCA6,000
5. AC Nielson5,500
6. North American Phillips4,500
7. American Hospital3,500
Source: Hewlett Packard de Mexico

Maquiladora Hourly Wages v. Average Manufacturing Wages in Other Countries

  1986 1985 1984 1983 1982 1981
5-day week
1.07 1.45 1.24 1.17 2.69 2.18
6-day week
.88 1.20 1.03 .96 2.22 1.80

United States   13.09 12.59 12.04 11.52 10.79
Brazil   1.27 1.23 1.46 2.16 1.90
Hong Kong   1.78 1.60 1.52 1.67 1.55
Japan   6.64 6.35 6.13 5.70 6.18
Korea   1.38 1.36 1.30 1.25 1.17
Taiwan   1.68 1.70 1.46 1.40 1.35
Singapore   -- 2.43 2.19 1.94 1.79
United Kingdom   6.06 5.85 6.26 6.76 7.13
France   7.69 7.42 7.92 8.01 8.15
West Germany   9.75 9.55 10.33 10.38 10.53
Spain   4.87 4.68 4.64 5.35 5.60
Italy   7.67 7.46 7.73 7.36 7.39
Source: COSTEP

Michael Moore was editor of the Michigan Voice.

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