Mexico: North and South

Electronics manufacturing has largely moved to the Guadalajara area in Mexico, says Caine, because of the region's high quality of both air and surface transportation. And Toyota's $140-million investment in a Tijuana manufacturing plant is luring additional investment to that area. When assembly begins in 2005, the plant will be capable of producing 20,000 Tacoma pick-up trucks and about 170,000 truck beds annually for use at a plant in Fremont, Calif. The Budd Co., Troy, Mich., has announced a $16-million, 115,700-sq.-ft. (10,750-sq.-m.) production facility for the manufacture of plastic bed linings for the Tacoma truck. "Suppliers of all parts of the truck will come to the area now," says Caine.
        Toyota also operates plants in Fremont and Long Beach, Calif., which is part of why the Tijuana location, just south of the border, was chosen. Toyota managers wanted the "San Diego lifestyle," adds Caine, which includes plenty of golf courses and a Japanese school for their children. "It's a natural for them to be here," he relates.
        Investment in the U.S. border region will likely remain robust, but southern Mexico is now emerging as a viable alternative to the more industrialized north. The federal government has initiated a "Going South" program – Marcha Hacia el Sur (March to the South) – that is designed to spur investment in the southern states of Campeche, Chiapas, Guerrero, Oaxaca, Puebla, Quintana Roo, Tabasco, Veracruz and Yucatan. During the site selection process, the government makes available feasibility studies and economic support, access to other government programs, cost information and other resources.
        Federal and state incentives for direct investment include up to approximately $500 for each new job created for training employees and developing facilities for industrial, commercial and service operations. State incentives also may include higher-level, specialized training for employees. Yucatan offers extra incentives for the aerospace, agribusiness, furniture, information technology, medical and textile/apparel industries.
        Stein Steel Co.'s Seal and Metal Products of Latin America, a supplier to manufacturers of aircraft engines and other industries, chose a site in a Yucatan Industrial Parks development in Merida, the Yucatan capital, after considering a location in the industrial city of Monterrey, in Nuevo Leon. Site selectors at the company felt that labor would eventually be an issue in the largely automotive industry city to the north.
        "There was a real effort on the part of the Yucatan government to grow industries other than strictly textiles," says Nora Gettliffe, assistant to the president of Stein Seal, which is based in Kulpsville, Pa. "They wanted companies that would come with more of a commitment to the area. They had developed some technical and engineering schools and had some training programs – even though they didn't have jobs or industries necessarily to put those people in when they finished their training."
        Gettliffe says turnover seemed to be substantially lower in Yucatan than in other areas of Mexico the company had reviewed. "The facilities – electrical power and telephone service – seemed to be a lot more stable and the infrastructure seemed to be good," she relates.
        Recognizing the need to expand manufacturing capacity, Munire Furniture, Clifton, N.J., recently opened a plant in Yucatan, according to Munir Hussain, the company's president. Besides labor costs, Mexico was chosen mainly for its proximity to the U.S. and the ease of getting manufactured goods back into the U.S.
        "Even by road, it just takes six or seven days," he says. "We've been to many places in Mexico, including Guadalajara and Ocaltan in the state of Jalisco – the latter is a center for carpentry and furniture manufacturing. That's where we were initially planning to build."
        But Yucatan was able to lure the company with incentives to invest there instead. Under certain conditions, a 100-percent corporate income tax deduction is available, among other federal and state incentives.
        Hussain also feels that for the time being, he will not have to compete with other companies in his industry for labor, which he says would be the case in the Guadalajara area. Safety was also a factor, he notes. "It seems like a cleaner, safer environment than other locations in Mexico."