ALTHOUGH capitalism is a latecomer to Mexican agriculture, the border does not otherwise want for evidence of its power. Three hundred miles east of the Imperial Valley lie two towns named Nogales. They stretch along a narrow valley about an hour's drive south of Tucson. The one in Arizona is gray and disheveled, but it has grown to about twenty thousand residents. Though the people are poor, by some standards the town has prospered. According to Governor Fife Symington, who mentioned Nogales last year in a Wall Street Journal article, taxable retail sales there exceed $300 million a year, which is 50 percent more than in a town of the same size near Phoenix. The taxes impress the governor. What is more, much of the revenue comes from shoppers who do not live in Arizona -- Mexicans, who stream through the port of entry to buy brand-name goods in U.S. stores. They are allowed through the port because they have steady jobs, and thus qualify for short term border-crossing cards. They prefer brand-name goods for the reasons we all do. They shop in the United States for the cachet, and because the prices are lower. Then they go home.
Home is the other Nogales, across the line in Sonora, a city of a hundred thousand that fills the valley and climbs the slopes on either side. The growth there is vigorous and new. In a reversal of the Arizona pattern, the rich live near the central district and the poor occupy the suburban high ground. The poor are called parachutists, as if they had floated down from the sky and dug into the steep hillsides. The reality is less exotic: they come on the bus, seeking employment; they trudge up the hills dragging suitcases, and find a spot to live near family or friends. Slowly their camps have grown together. The poorest neighborhoods are chaotic, streetless, and so dense that the eye has trouble taking them in. There is no electricity or plumbing. Steep paths wind between the shelters, which are built of scrap plywood, packing crates, car doors, salvaged tin, worn tires, and cardboard. People suffer from malnutrition, disease, parasites. Rainstorms slicken the hillsides and scour the garbagestrewn gulches. Down in the valley the Nogales wash runs with sewage and industrial waste. The mixture flows north into Arizona, carrying sickness and poison. Last year it caught fire. For all this, some people blame the maquiladoras.
Maquiladoras, also called maquilas, are a peculiarly Mexican invention -- foreign-owned factories that import all their materials from the United States, employ Mexican workers (mostly young women) to assemble them, and ship the finished merchandise back north again. Import codes in both countries allow this to happen almost duty free. The scheme was devised in the 1960s as an exception to Mexico's traditional exclusion of foreign companies; it was meant to create employment along the border while protecting Mexican industries from damaging competition. The arrangement boomed after 1982, with the collapse of the peso. Mexican labor was suddenly among the cheapest in the world; it still is.
Nearly two thousand maquilas operate in Mexico today, most within a few miles of the border. They do not look like much -- windowless warehouses in industrial parks -- but they employ half a million people and constitute a multibillion-dollar industry that has become Mexico's second largest source of foreign revenue, after oil. Definitions have blurred: as part of his reforms, Salinas has eased the laws that restricted the maquilas' access to the Mexican market; for want of more-conventional investors, he can use the maquilas to force competition on a lethargic economy. Free trade and liberalization may eventually eliminate the maquilas, but only in the most technical sense. To the extent that Mexico ties its future to ours, industry will continue to concentrate on the border. The maquilas will shed their skins but live on in similar forms. This is an unhappy prospect for people who worry about, for instance, disease and fire in the Nogales wash.
Critics in the United States have used the publicity surrounding the prospect of free trade to strengthen their attacks on the maquiladoras. They accuse the industry of undercutting U.S. labor, exploiting Mexican poverty, and abusing the environment. The existence of maquilas raises a difficult question: we talk about progress, but if Mexico took care of its poor or cleaned up after itself, would our companies still invest there? The maquila managers would rather not answer this question; they are business technicians, not advocates, and they are paid to get on with the job. But they are proud that they have created employment, and some even feel they have pioneered a Mexican recovery. Most are not sophisticated thinkers. They respond to critics by excluding them, a reaction that has given the industry a reputation for secretiveness.
FRANK McGinley talked openly to me nonetheless. He is the Nogales plant manager for Coventry Manufacturing, a young Los Angeles-based company that specializes in plastic foams. McGinley lives with his wife and children in a comfortable house in Tucson, and commutes daily to his work in Mexico. At age forty he is an unassuming, thoughtful man, with a trace of the world-weariness that Americans and Europeans develop in poor countries. I met him in central Nogales on a stormy afternoon, during a gubernatorial campaign in Sonora. Ubiquitous Institutional Revolutionary Party (PRI) posters proclaimed ¡VAMOS POR MAS PROGRESO! McGinley smiled wryly and said, "Sure, why not?"
"You're not convinced?"
"Tell it to the people living in these shacks -- yeah, let's go for more progress." He works too close to the ground to care for slogans. He said, "It's been an education in political power. They talk about the new Mexico, but where's the opposition? I've seen only one [National Action Party] poster, on the window of a shop, and now that guy's out of business."
We navigated the flooded streets to the cement-block warehouse where he runs his maquila. It is a small operation, employing ten men and twenty women to produce foam pads for electric car polishers, and the cloth bonnets to go with them. McGinley values efficiency: in addition to the weekly output of 6,300 pads and 30,000 bonnets, the plant produces about 1,200 industrial towels from the scraps. The men who work there are energetic teenagers, wiry street kids wearing T-shirts and crucifixes; they form, cut, and glue the pads, and stack them on heavy pallets. The women, some of whom are older, sew the bonnets on industrial sewing machines arranged in rows under fluorescent lights. Monday through Friday, work starts at seven and ends at five, with fifteen minutes for coffee in the morning and afternoon, and a half hour for lunch. Coventry gives the workers two weeks' vacation a year, two weeks' bonus pay at Christmas, a production bonus for high volume, and a solid lunch every day. The base wage is about eight dollars a day, which is twice the standard of other maquilas in Nogales.
I asked McGinley why he paid such high wages, and he answered, To reduce turnover. An unstable work force is one of the greatest problems for U.S. companies in Mexico; at some of the large plants the annual turnover approaches 60 percent. Industry blames this on the immaturity of the workers, which is nonsense: in truth, their lives are insufferable, and they escape if they can. Many of the most courageous move on to the United States. McGinley said that Coventry has a greater sense of responsibility than do other maquilas, but he did not claim to have rescued his employees from poverty. He mentioned their large families. When he described the misery of their dirt-floor hovels, I did not ask him to reconcile his dismay with the eight dollars a day. The problems facing even his own employees are too deep for Frank McGinley to solve, and he felt no guilt. Hardly pausing for breath, he told me about a seamstress he had hired, a malcontent who tried to organize the workers to strike for still higher wages. McGinley made a few phone calls, found she had caused trouble at other maquilas, agonized over it, and confronted her. She quit after the other women warned her that if she continued to agitate, she would not easily find another job. I said to McGinley, But they have the right to organize. He answered, But look what we pay already -- she was trying to take advantage of us, and the others knew it.
We talked about SEDUE, the Secretariat of Urban Development and Ecology. Mexico's environmental regulations are as complete as those in the United States, and were written with the guidance of our Environmental Protection Agency. In the political heat of free trade there is a new emphasis on enforcement. McGinley described it as "permits for permits' sake." He said, "The enforcement is full of holes."
I asked, "Does money change hands?"
He denied that it happened -- at least at Coventry. "We operate by the letter of the law. Most maquilas do. Once you start paying la mordida ['the bite'], it never ends." He pondered this, and continued. "Of course, sometimes you might not have a choice. I've heard they come to you and say, 'You need to buy these filters, and from this man. If you do, your plant will be in compliance."'
I brought up the maquilas' reputation for environmental recklessness. He said, "There are how many plants now? Sure, some of the shops are dirty, like the chromeplaters who moved to Tecate just so they could dump into the river. But it's too easy to blame the maquiladoras. The problem in Mexico is ignorance." He took me to the back room, where the pads are glued together and the molds are washed in acetone. He said, "For instance, we give these guys masks and respirators, but as soon as we turn our backs, they take them off. They get mad. They think safety equipment's not macho."
COVENTRY is the creation of a charismatic salesman named Simon Burrow, who remains its president. When he visits Nogales, he gives short inspirational speeches in English to the assembled employees, and they applaud politely without understanding. In delicate recognition of the similarity between "Burrow" and "burro," they call him Señor Simon. He founded the company, in 1981, on the idea of die-cut adhesive-backed shipping pads, which he sold to glass manufacturers to separate their panes. His next idea was even better: a way of cutting foam and putting it on a plastic stick to make a high-tech swab for the computer industry. IBM came through with a huge order, and Coventry prospered, manufacturing the swabs in Los Angeles. Three years later disaster struck when a competitor with Korean-made swabs underbid the company and won the contract. Forced to lay off most of its employees, desperate to lower its costs, Coventry moved its production to Mexicali, into an old building next to the boundary fence.
The swabs were a perfect product for Mexicali -- the manufacturing was repetitious and labor-intensive. In 1987 Coventry made No. 283 on Inc. magazine's list of the fastest-growing private U.S. companies. Mexico was Coventry's salvation. The company found other work that could be done there. "Tedious things like packaging," McGinley said. And fishing leaders. "Have you ever wondered what poor soul had to tie those things together? It's us."
Today Coventry employs a hundred and twenty production workers in Mexicali and keeps a few technicians in Los Angeles for the more difficult special jobs. This is the sort of everybody-works arrangement that supporters of free trade dream of. They say that Mexico can be to the United States what Thailand is to Japan -- a low-cost production machine in an arrangement that has strengthened the economies of both countries. Some observers disagree, believing that it is dangerous to view the Thai-Japanese relationship as a model of unfettered trade. They say Thailand has been crafted by Japan as a platform from which to export to the rest of the world. The crucial difference is this: Left to the efficiencies of unregulated trade, Mexico will be used, even by U.S. companies, mostly to export to the United States. This will widen the U.S. trade deficit and further weaken our economy. It is an argument for government intervention, resisted by the Bush Administration.
McGinley does not generalize. He described a few simple truths to me: Coventry was forced out of Los Angeles by high wages. If it had moved to Korea or the Philippines, it would have bought its supplies there. Because it moved to Mexico, it buys its supplies in the United States. That may change as Mexico develops. Coventry keeps the Los Angeles operation going because the Mexican workers can't handle the special equipment. That may change too. In the meantime, the company is still trying to persuade them not to fix production machinery with baling wire.
CIUDAD Juárez is the cradle of the maquiladoras. At a North American Philips plant the personnel director led me onto the production floor, where nine hundred young women in white T-shirts sat on stools along semi-automated assembly lines. The personnel director was a middle-aged American, a company man with a neutral face, easily forgotten. He said, "I ask you, does this look like a sweatshop?" The hall was cool, bright, pristine.
I answered, "Impressive." With no standard by which to judge television assembly, what I meant was the presence of so many young women -- white shirts, red lips, combed black hair, erect backs, quick eyes, row upon row. They perched their feet on the rungs of the stools in a dazzling display of footwear.
"Seven thousand sets a day," the man said. "Vertical integration. Sylvania, Magnavox, Philips. Top quality."
The women worked in silence, shielding their thoughts as we walked among them. Their fingers flew nimbly through the repetitive motions. The machines hissed and clanked. My host explained the details of production.
I interrupted him. "Why women?"
"Concentration and dexterity."
He was not unaffected by them. He said proudly, "The white shirts were my idea." He stopped behind one worker and, in a fatherly gesture, laid his hands on her shoulders. "Our plant beauty queen." She was about eighteen, and had delicate features coarsened by makeup. She turned to smile. We walked on. He said, "Juárez has developed a skilled labor force. The changes in just the last five years are incredible. People who think the Mexicans don't do good work are out of date. Productivity is as high here as anywhere in the world."
Well, almost. Productivity is about 80 percent as high as in the United States. But the labor costs are less than a tenth as much. (The "fully loaded" wage of the Philips workers is $1.88 an hour, including taxes, social services, one hot meal a day, and transportation from the slums.) This combination of low wages and big results is what worries the U.S. labor unions. They disagree with the theory that only low-skilled jobs go to Mexico. They say free trade will add fuel to the fire.
The Mexicans are counting on it. By their most optimistic model, the border industrialization will slowly spread south, bringing development and wealth with it. Mexican companies will be invigorated by competition. The pioneering enterprises will reshape Mexico around themselves, improving the roads and telephones, training the work force, and raising the standard of living. They will bootstrap Mexico out of the Third World.
In a Juárez hotel I met an American engineer who ridiculed the idea. He was a ferretlike man, badly frustrated. He had been sent by the home office to solve yet another failure on the maquila production line. In Mexico "the corruption kills you," he said. "Someone is always demanding a fee. You can say it's unethical, but if you don't pay, after a while you notice that things just aren't happening. These reforms won't amount to much. The comparison to Asia is a pipe dream. Take Korea -- you can go there and say, 'Copy this,' and they'll do it, and do it better and cheaper. You don't even have to go there; they come to you. Mexico?" He snorted. "Mexico lacks the midlevel management. Mexico lacks the infrastructure. Most of all, Mexico lacks the entrepreneurial spirit."
I took his doubts across town to Frederico de la Vega, a patrician businessman who was instrumental in bringing the first maquilas to Juárez. De la Vega was an affable, thoughtful man in an open- necked shirt. We sat in a polite restaurant, where many of the patrons knew him. He said, "Nothing is certain. Mexico is built on a system of patronage that will take generations to undo. I myself am worried because the PRI won so overwhelmingly in the last regional elections -- we need a strong opposition if for no other reason than to keep the party in line." He smiled reassuringly. "But don't let people convince you that nothing can change in Mexico. Juárez is the perfect example."
I asked him to explain. He said, "Forty years ago, when I came home from college in the U.S., I saw my city with fresh eyes. It was nothing but an entertainment center. I don't want to use harsher words."
"The Tijuana syndrome," I said.
"Women, liquor, quick divorces, good times for American soldiers. We fought it for decades and finally won. The irony is that El Paso is still pushing us to develop our tourism. To hell with it. One good factory will provide more jobs than the entire tourist industry."
Another wealthy Mexican I met in Juárez spoke of the future. He was in the commercial real-estate business. He said, "We have a slump now because of the U.S. recession, but I am not worried. The maquilas are just the beginning. Your labor unionists, your environmentalists, think they can control the process, but their power is like this." He showed me an inch between thumb and forefinger. "They can play politics. They can squeeze words from us. But we don't need the free-trade agreement to have foreign investment. We have only to invite industry, and it will come."
"That hasn't proved exactly true," I said.
"Not true? In 1979 there were seventy-five maquilas in Juárez, and now there are three hundred and twenty. In ten years there will be twice as many. Salinas is doing what anyone would have done. Time will show that Mexico was the great void waiting to be filled."
"If so, it's understandable that American workers are unhappy."
"Yes, of course. History has turned against them."
Copyright © 1992 by William Langewiesche. All rights reserved.
The Atlantic Monthly; June 1992; The Border; Volume 269, No. 6; pages 91 - 108.