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The Life and Death of a Border Town

by David MartinezSpecial to CorpWatch
June 12th, 2007

cartoon by Khalil Bendib

In the town of Nuevo Laredo, Mexico, close to the U.S. border, two streets intersect: one is called Progreso (Progress) and the other is Fabrica (Factory). They are aptly named streets because they are thoroughfares that only house manufacturing plants called maquiladoras - giant mall sized buildings ringed with fences and with guardhouses posted out front. There are no houses or shops here – indeed, the sidewalks on Progreso and Fabrica are empty, and the only noise that can be heard during a workday are the trucks that drop off supplies and pick up finished goods.

Some of the factories belong to well-known companies like Caterpillar or Sony, others to less well-known companies like Delphi. Early every morning at the beginning of the workday, special buses arrive from specific neighborhoods carrying workers, while others arrive in their own vehicles. They are smartly dressed young women and men whose jobs range from assembling videotapes to refurbishing defective machines. The factories are huge, employ thousands of workers and do brisk business. It is hard to imagine that they could ever pack up and leave, but it is a distinct possibility in the chaotic world of border economics.

The number of maquiladoras began increasing in Nuevo Laredo and other border towns after the North American Free Trade Agreement, or NAFTA was signed in 1994. At the time there was much ado about NAFTA, and "free trade" entered the popular lexicon, with its proponents claiming it would bring prosperity to the impoverished population of Mexico, and its detractors predicting doom for U.S. workers and their Mexican counterparts.

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What, then, is the reality of "free trade" more than a dozen years later? Did thousands of jobs come to Mexico, as promised by the NAFTA boosters? Or was it a disaster for Mexicans, driving them deeper into poverty and dependence? The answer, as usual, is more complex than can be explained on the nightly news, and is best told in the plain words of the people who experienced it first hand.

Jeans Held Hostage By Angry Workers!

Morelos is a clean, quiet, small Mexican town in the state of Coahuila, just across the Texas border, a day's drive and a world away from the bustle of Nuevo Laredo, where a U.S. company named Sights Systems Denim set up a maquiladora a few years ago.

Sights is a 20 year-old family owned business from Henderson, Kentucky, that specializes in "grunge" clothing - taking new jeans and making them look old and used, which are then sold at a premium. The company shipped already-manufactured jeans to Morelos, where they were stone-washed, ripped, torn and shredded at the plant, then loaded onto trucks to be hauled away again and sold in the U.S. to companies like Levi Strauss.

E.J. Bernacki from Levi Strauss told CorpWatch that this practice is fairly common, but completely depends on the style of the jeans. "Sometimes they can be cut in one factory, sewn in another, and finished in a third," he says, "other times it's all done in one plant." He said Levi's uses around 35 different factories in Mexico, all of which are contract facilities.

Former Sights worker Rodrigo Castro lives on the southern side of Morelos. His house is small and sits on a corner lot, with an earth yard cluttered with childrens' bikes and parked cars out front. I rap on the door and a small man in pajama pants and a T-shirt answers.

He takes me into his living room, which looks more like an office – with walls covered by bookshelves and a desk with a computer humming in the corner. Indeed Castro is an organizer who lived in Minneapolis for 18 years working as a store manager. A couple of years ago, he returned to his hometown where he took a job with Sights. "I took the job at the Sights plant because it was fun," Castro tells me. "I enjoyed the work because I was in charge. And I have to say I liked it because they treated the workers with some respect."

In September 2006, Sights factory management informed workers that the plant would be closed for three days over the Mexican Independence Day weekend.

On Saturday, Castro went into the plant to look at some invoices. "I noticed something was not right. The manager kept calling me and impatiently asking if I was finished yet, whereas it seemed he wouldn't care on a long weekend. When I was finished, at about 3 p.m., the security guard almost pushed me out the door," he said.

Castro also heard from other townspeople that strange trailer-trucks had been spotted in the plant's parking lot, not the usual company trucks. The next day the local people noticed even more activity inside the building.

"One lady went in to check what was happening and she was stopped by the security guards," said Castro. "We called the manager, Shane Smithart, and asked him what was going on. He assured us nothing was changing."

No one believed Smithart, and word spread like wildfire throughout town. "The radio stations announced it, people went to the plaza and yelled through loudspeakers, come to the plant! In minutes the front of the plant was crowded with people. 800 employees, all out front, " Castro continued.

"At that point we figured out that six trucks had already left, but there were still five inside. We blocked those from leaving, and called the electric company and told them to shut off the power to the plant and they did."

Castro smiles at the memory, leans back in his chair, and lights a cigarette. "Boy, when you get people all together like that and moving, you can do anything."

Soon the mayor arrived, and the workers organized a delegation to go inside the plant and negotiate. At the same time, the people who worked in the import-export office had figured out that the trucks that had departed were in Piedras Negras. The mayor called the governor and he ordered the trucks back to Morelos.

"We assured them we would not harm the trucks or the drivers. I tell you we were moving," says Castro.

"We had trucks filled with 250,000 pairs of jeans. That is worth more than a million dollars, as some of these jeans sell for $300 new. We wanted 11 million pesos, which was the amount of everyone's termination pay based on their seniority. Sights Denim Systems was under pressure from Single Source, which is who they contracted under, and they in turn were under pressure from Levi's to whom they were contracted. Single Source was looking at millions of dollars in losses, and so they contacted us with an offer. It was too little and we refused."

He pauses again to explain. "You see, in Mexico there are strong labor laws. A foreign company signs a contract when it sets up here which guarantees the employees something if they leave, three months pay, arranged depending upon seniority. Now Sights wanted to leave to the Dominican Republic without paying us our due."

Eventually Sights gave into the workers’ demands and paid them. But they also shut down the factory, putting 800 workers out of jobs.

"What hurt me most was that it was a good company. We treated them well. I just never expected them to do that, to leave like they did," says Castro.

"I talked with the owner of Sights Denim Systems, Bart Sights, and I told him, "You didn't have to leave like this." You know what he said? He told me, "These plants never last."

Sights Denim Systems did not respond to multiple CorpWatch requests for comment.

Detroit In The Desert

The town of Ramos Arizpe, which is also in the Mexican state of Coahuila, lies hundreds of miles to the south of Morelos. Some call it the Detroit of Mexico, after an influx of car manufacturers that set up shop in the last decade.

The General Motors plant is outside of town and is the size of a small town itself. There's a huge blue industrial building with a giant GM logo. Surrounding the main buildings are acres and acres of newly minted automobiles sitting in fenced off lots. In between the giant outdoor car-storage facilities are more, smaller factories that make things like steering wheels and trunk doors.

It is a sight to behold, and I can't help but chuckle as I watch trains arriving nearby, ready to transport the cars north to the U.S. market, thinking of my cousin Luisa and her husband selling cars brought down from Texas. New cars sent north, used and slightly-used ones sent back south, sold to the people who just made them. U.S. workers are angry at their jobs disappearing to foreign shores, while Mexicans buy their old vehicles illegally in the very country they were manufactured. That is the bizarre logic of the market at work.

The heavy automobile industry arrived here in the 1970's. Some plants have closed, others have opened, and the town grew. To most people I talk to, they believe the car factories will stay. To them it seems like the auto industry will have to remain close to its biggest customer, the U.S.A. But I am not so sure: Japanese car companies did brisk business in the 1970's, and they had no plants in the Americas then. The ability to move products around the world at with ease has made production more flexible than ever. Companies like Toyota try and situate production as close as they can to their markets, but still maintain a high degree of flexibility to take advantage of cheap labor or even expensive but experienced labor. For example, the Lexus, the most popular luxury car in the U.S., is still made in Japan.

Elias Sanchez Jimenez lives in the town of Ramos Arizpe. He is 73 years old and has lived in Ramos most of his life. I ask him about how the town has changed.

"Well," he says,"It was really fifteen or sixteen years ago that it really started to change. Originally, you know there was only a match factory and a brick factory here. Then the auto plant came, and then all the other plants, and the town really grew. The biggest thing I miss is the water. The factories and all the new people use much more water. You used to be able to draw it out of the ground, from wells, but now we have to buy it."

Like most of the folks I've talked to here, Elias approves of the factories, despite the changes they have brought. "My son has a good job, he works for Delphi. They treat him well and he is happy. The car plants bring jobs, and without that, the young people would have no work."

I ask Elias where I might find people who work in the plants, and he points me to a couple of cantinas along the main road where workers go after hours. The first one I enter has a bar decorated with stickers from U.S. states like Idaho, Nevada and Wyoming.

Most of the men at the bar wear large plastic ID tags hanging from their belts, identifying them as employees of a company called Magna, that in turn houses other companies. They themselves spend their days making the interiors - the inside roofs - of GMC Yukons and Chevy Tahoe Sport Utility Vehicles.

Others work for WinMex, a company that just makes the electric motors and hand-cranks that raise car-windows. Still others make electric harnesses, power drive systems, transmissions. Some ship parts to the U.S. while others are assembled into finished vehicles in Mexico itself.

The workers say the companies treat them well, and they are glad to have the jobs but they are aware that the industry is fragile. German Narvaez, who works for WHO, says: "When the U.S. sneezes, we in Mexico get a cold. Like after 9-11, it was terrible. They cut lines of cars, and everyone felt it. On other models, orders stopped for one or two months, and people were cut to half time-work. We were all scared we'd lose our jobs permanently."

I tell them I am writing for a U.S. website and ask if they have anything to say to its readers. One man's comment was simple: "Please keep buying cars so that we we'll have more jobs here!"

Ramos seemed to be a world away from the experience of the people of Morelos and I wondered if the same could come to pass for Ramos Arizpe. Can auto plants as like GM pack up and leave just as the denim company did?

NAFTA: Success or Failure?

The U.S. government's Trade Representative's office extols the benefits of NAFTA, claiming on its website that Mexico exported $143 billion to its NAFTA partners in 2001, an increase of 232 percent from 1993… "twice as fast as export growth to the rest of the world."

A report issued by Global Insight, a Boston-based trade economic research consultancy, estimates that the number of maquiladoras on the border increased from 2,267 to over 3,400 in the first five years after NAFTA started, while employment at these factories almost doubled, from 681,000 to 1.31 million by 2004. But over the next five years, the overall trend has reversed, falling to 2,800 factories with 1.13 million workers by late 2004. Economic investment has also drifted downwards after peaking in 1999.

Others point out that one has to look beyond employment and export statistics. Economist John J. Audley, a former trade policy coordinator at the U.S. Environmental Protection Agency, who now works at the Carnegie Endowment for International Peace since 2003, says: "NAFTA has been neither the disaster its opponents predicted nor the savior hailed by its supporters.... damage to the environment is greater than the economic gains from the growth of trade and of the economy as a whole." He also points out that while manufacturing jobs have increased, the economy has not generated enough jobs to match demand, and thus migrants continue to head north to the U.S.

Doug Henwood, editor of the New York-based Left Business Observer, notes that border employment actually began before NAFTA. "In one sense it began in 1982 when the debt crisis hit Mexico," he says. "This put the country in a very vulnerable position, and the Reagan administration decided to exploit it. Things like "Debt Restructuring Agreements" and "Multi-Year Rescheduling Agreements" were basically forced on Mexico during the 1980's to pay off its international debts easier, but they were really just ways to require that Mexico's economy be turned into an export engine for the U.S. market."

The problem, says Henwood, is that the U.S. has set up similar programs all over Latin America, resulting in many countries competing for the U.S. market. Thus the initial burst of investment and production in Mexico that followed NAFTA has slowed. Eventually entire factories have packed up and left, like Sights Denim, which moved to the Dominican Republic. Other textile manufacturers have moved even further away, to countries like China and Vietnam.

Wave Theory

In physics, wave structures are pictured as repeatedly undulating and changing form, while the material of which the wave is made, such as water, air or oil, remain the same.

The wave form model and the maquiladoras resemble each other. Even if the waves stay the same, they shape the cliffs and shores they collide with, grinding rock slowly into sandy beaches. Likewise Mexico's social geography is changing with the waves of industrialization that are impacting the country.

Contemporary success stories like Ramos Arizpe exist in the peaks of the waves of industrialization, while the failures like Morelos make up the valleys. Since NAFTA was signed, waves of industry have rolled across Mexico, particularly in the north of the country, creating boomtowns like Ramos Arizpe over night and then just as quickly the businesses vanish as in Morelos Coahuila. Little village pueblos have become small cities and fields of dry grass become sprawling colonias (settlements) in a few short years.

While waves come and go, they leave the workers high and dry when they break on the shore. Waste is dumped into rivers, land is developed, lives are changed, and everything is rendered more fragile, unpredictable, and ever more precarious.

To the Mexican workers leaving their jobs at the end of another day on the corner of Progreso and Fabrica Avenues in Nuevo Laredo, all of this comes as no surprise: they know that there are no guarantees and no promises of work the next day, other than those made by the factories to the market, which, like the proverbial wild goose in autumn, may take off as soon as they hear of cheaper labor somewhere else, anywhere else, on the planet.

This article was made possible by a generous grant from the Hurd Foundation.