U.S. businesses' hopes of easy money dashed NO FAST BUCKS SOUTH OF THE BORDER

March 21, 1993|By Ginger Thompson | Ginger Thompson,Mexico City Bureau

CIUDAD JUAREZ, Mexico -- The promise of cheap labor wa enough to move Cal Kessler to open a tiny furniture-manufacturing operation south of the border more than years ago.

"My wife and I only had $250 in savings when we first started out," said Mr. Kessler, a broad, rambunctious man. "We figured we could spare $20 a day without going hungry. And for $20, we could hire three Mexican workers."

Today some 600 workers are employed by Mr. Kessler's maquiladora -- a Spanish word that roughly translates to mill. But he says the bigger his operation gets, the less he makes. Now, he says, it would be cheaper for him to run the same plant in the United States.

"The Mexican government keeps coming and adding expenses. They come to us and say, 'Hey, now that you are this big, you have to pay housing taxes,' " he says with some agitation. "Then they tell us we have to provide meals to the workers. Then they tell us we have to have a doctor on the premises at all times and that we have to pay for all medicines given out to workers."

Over the past 25 years, hundreds of manufacturers like Mr. Kessler have been lured to Mexico by cheap labor costs and the elimination of import duties on raw materials shipped here. Many are successful, even though they say that the road has been full of setbacks and hardships.

Others have abandoned Mexico after their plants were crippled by low worker productivity, border delays, cultural misunderstandings, poor service by utility companies, an unsophisticated infrastructure and difficult union leaders.

"Let me tell you," says Mr. Kessler, whose main operations are in El Paso, Texas, "business people coming down here in search of cheap labor and other big savings are in for a rude awakening."

These voices of experience are sought out more and more as the U.S. Congress prepares to vote on the North American Free Trade Agreement.

The proposed agreement among the United States, Canada and Mexico would eventually remove tariffs on all goods and services, creating the world's largest trading bloc with some 370 million consumers.

Mexico actually began to curtail its protectionist trade policies several years ago, attracting foreign investment to help rein in its debilitating inflation rate -- which went from close to 160 percent in 1987 to 12 percent last year -- and to bring its foreign debt under control.

The trade agreement, known as NAFTA, would wipe out all remaining tariffs on products shipped here from the United States and Canada, giving U.S. businessmen a distinct advantage over the Japanese and Europeans.

And the Mexican market, with its 88 million consumers, is considered ripe for cultivation for products ranging from telecommunications systems to industrial chemicals to household appliances and cosmetics.

"Mexicans love U.S. products," says Chuck Cross, a Timonium trade-show organizer who held two shows in Mexico last year. "They look to us as the world's leading country in industrial products."

Proponents of NAFTA, which was negotiated by the Bush administration, also say that the trade pact will cause a sharp drop in the number of Mexicans who illegally enter the United States by raising their standard of living and increasing job opportunities.

Opponents to the agreement, including U.S. union leaders, point out that more jobs for Mexican workers means fewer jobs for Americans.

Human rights monitors say that U.S. companies will take advantage of Mexico's lax enforcement of labor laws, and environmentalists predict that U.S. plants in Mexico will be run -- as many are now -- with little regard for existing regulations to protect Mexico's air and water from contamination.

These are issues that the Clinton administration wants to discuss again with the Mexicans before the NAFTA is ratified. Pressure on the administration is domestic.

Unrealistic expectations

But the maquiladora owners and managers who have confronted the same issues for years indicate that their own vision of NAFTA is murky and that some of the expectations it has aroused may be unrealistic.

While they have enjoyed the benefit of paying their Mexican workers less than a third the average salary of U.S. workers, maquiladora managers say the difficulties they have encountered were far worse than expected.

"If I were a businessman in the States, and I knew what I know now, I would not come here unless my business was extremely labor-intensive," says Juana Maria Orozco, manager of the Falcon Industries maquiladora in Ciudad Juarez.

"The costs for labor are going up, and they will keep going up. Besides that, there are many hidden costs."

Ciudad Juarez, a city across the Rio Grande from El Paso, has been transformed by the maquiladora industry from a dusty town of street vendors to a bustling industrial center of some 800,000 people.

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