ometimes it's hard to tell which way the wind is blowing in Mexican manufacturing. At the same time that some large maquiladora users were pondering pulling out for greener pastures, Ford Motor Co. committed to producing its Futura model in Hermosillo. And at the same time there's talk in the air of a Chinese kickback toward Mexico, the number of maquilas and manufacturing production in general were sliding backwards in late 2003.
        Year-over-year manufacturing production fell 3.7 percent in July 2003, with double-digit losses in such jurisdictions as Coahuila, Yucatan and the federal district of Mexico City. Yet some of the most pronounced new project activity is also taking place in these regions, and merely waits for its production to count. Meanwhile, as global foreign direct investment plummeted in 2002, Mexican manufacturing held its own, according to the United Nations Conference on Trade and Development (UNCTAD).
        Mexico's year-over-year production of motor vehicles – a traditionally strong segment – was down 14.1 percent in October 2003. Yet the suppliers keep building, and major projects by Toyota and Ford continue to spin their own webs of project activity.
        Business, energy and infrastructure reform efforts sought by President Vicente Fox have been thwarted by his party's mid-term election defeats in 2003. Seeking to bounce back from a U.S. economy-tied loss of some 300,000 jobs over the past two years, Mexico has seen rising wages, but not necessarily rising production or productivity. Some companies, like Whirlpool Corp., have not fled for China at all, but have backtracked all the way to the U.S., of all places.
        Benton Harbor, Mich.-based Whirlpool is investing $100 million in improvements to seven of its U.S. plants. In fact, production of a certain washer has come back to Clyde, Ohio, with some of the product actually being exported back to the Mexican market.
        "The top-loading washing machine factory in Clyde is the largest of its kind in the world," says Whirpool spokesperson Christopher Wyse. "The sheer scale of that site and the capacity we have there made that determination, in part, for us, as did our need to create some space for the new product in Mexico."

The recently completed US$120-million expansion of the Port of Progreso-Yucatan is a fundamental platform of southeast Mexico's economic growth. The port, which boasts transit times of four to seven days to ports in Texas, Florida and New Jersey, projects shipments totaling 4 million tons in 2005.

        Manufacturing of that new mystery laundry product will start by 2005, the same year Whirlpool plans to complete another new Mexican plant for the manufacture of refrigerators. Wyse says the new refrigerator plant won't necessarily be in Monterrey, and that the site selection process is just getting under way. Once complete, the new plant will then see the transfer of some production from the company's 4,500-worker operation in Fort Smith, Ark., which is in the midst of a $40-million expansion and promises of 700 new jobs.
        Confused yet? Or is the true picture of the meaning of NAFTA just growing more clear?
        Either way, Mexico the maker and Mexico the market play prominent and increasingly varied roles.

Getting the Numbers

Since they began popping up in the 1980s, the Mexican maquiladora has been the country's economic bread and butter. But that drive south has gone south. The maquila directory indicates that the number of maquilas in August 2003 was 2,830, down 12.9 percent from the year before, after an 11.8-percent dropoff between 2001 and 2002. Apparel and textiles – replicating the experience of the U.S. Southeast – has seen the steepest decline, losing some 22 percent of operations between 2001 and 2002, although the rate of attrition has slowed. Cone Mills, even as it fights off creditors amid mounting losses, continues to operate a mill in Parras and is seeking financing of between $60 million and $90 million to build or retrofit a denim facility elsewhere in Mexico.
        Durango, with a 30-percent drop in maquilas, leads the hardest-hit states by a large margin, followed by Baja California (17.3 percent), Coahuila (16.3 percent) and Chihuahua (12 percent).
        Almost all sectors have shared in this dropoff, except these: machinery and equipment assembly plants, which continue to inch upward; services, which has broken the 250-facility barrier; tools and equipment; and transportation equipment.
        After some rumblings about moving operations to China, Delphi has done some consolidation and remodeling at its Mexican plants, said Delphi spokesman Xochilt Diaz Porras in August 2003. Critical mass has to be one thing in Mexico's favor. The company has 11 plants in China with 5,000 total employees. Its 55 Mexican plants – a third of the company's entire portfolio – employ some 70,000, with 15 facilities in Juarez alone employing up to 19,000. After 25 years of operations there, production will continue, including at its new door latch actuator plant in Matamoros.
        The maquila mayday seems to have hit bottom. According to an August newsletter from the Mexican Association of Business and Industrial Parks, the dive that saw maquila employment fall from its 2000 peak of 1.3 million to under 1 million jobs is now leveling out. And in September 2003, the Mexican Secretary of the Economy issued reforms designed to streamline maquila paperwork and processing hassles. The decrees spoke of eliminating obstacles to the operation of companies and giving "legal certainty to the exporting community." Such pronouncements are sure to hold some sway over wavering companies.
        Claims by some Delphi officials and others that Mexico's transportation costs to the U.S. barely beat China's are backed by an A.T. Kearney estimate that, for every dollar of product produced, Mexican costs only hold an advantage over China of $0.05. Still, that's a lot of nickels, but lagging investment in engineering, IT and basic education has done nothing to help win over fence-straddlers.
        Other operations are also looking on the U.S. side of the border, driven there primarily by Mexico's persistently high utility costs. Still moldering under state control despite calls for private investment, those utilities drive energy costs some 20-percent higher than Mexico's competitors.