What is Mexico offering to American companies?
HOUSTON – With President Donald Trump pledging to curb the number of jobs leaving the country; Channel 2 Investigates traveled to Mexico to find out what type of deals the country is offering to American companies.
We spent two days in Chihuahua City, a metropolis of more than 900,000 people nestled into a desert that is a four-and-a-half-hour drive from El Paso.
Despite the rural vistas and historic feel, Chihuahua City is home to a massive manufacturing base with plenty of recognizable names like, Ford, Honeywell, Cessna and Bell Helicopters.
Index Chihuahua, a manufacturing association in northern Mexico, reports there are 300 manufacturing companies operating in the region.
(Editor’s Note: KPRC’s parent company, Graham Holdings, also owns a company with operations in Mexico. Group Dekko is an electrical solutions company and one of its operations is located in Juarez.)
The city also hosts a huge aerospace cluster, which is just one of several such clusters in Mexico.
“How many companies are operating in Chihuahua?” asked Channel 2 Investigator Robert Arnold.
“We have 45 different operations and divisions in aerospace,” said Rene Espinosa Terrazas.
Espinosa is president of the Chihuahua Aerospace Cluster, an industrial organization tending to the needs of aerospace companies operating in the city. Espinosa is also the general manager for The Metal Finishing Company in Chihuahua. Metal Finishing is based in Kansas.
“We opened the operation because of Beechcraft, when they moved,” said Espinosa.
“Most people think, 'well, of course they're going to Mexico; it's cheap labor,'” said Arnold.
“No, Mexico is not, is not anymore a cheap labor country,” said Espinosa. “Right now we consider Mexico as a 'best cost' country.”
Espinosa bristled at that term because he says Chihuahua made an investment in having a skilled work force. Several universities and technical colleges are located in Chihuahua City; all with programs tailored to teach residents the skills needed to work in one of these operations.
“It's really a trained and certified labor force,” said Espinosa.
However, low wages can't be denied. In aerospace, Espinosa said an operator, a person with the lowest level of skill, makes between $5.92 a day and $14.81 a day. Espinosa said a technician, someone with education, advance training and experience, makes between $493.64 a month and $666.41 a month. Espinosa said the manufacturing sector works a 45 hour week.
Outside of aerospace, Sergio Ochoa told us an operator can make up to $16.78 a day, but most make and average of $10.86 a day. Ochoa said a technician with several years of experience and advanced training can make up to $2,221.37 a month. Ochoa is president of Desarollo Economico del Estado de Chihuahua. This is a private organization that lobbies for pro-business policies in Mexico and works to foster deals with American companies.
“Of course, it is a lot cheaper to live here than in Detroit or anywhere else in the United States for that matter,” said Ochoa.
The director of Desarollo Economico, Alejandro Casa Limon, did admit most people in Chihuahua still live “at the base of the pyramid,” but added many companies are starting to pay for some level of training to ensure they have an ample work force.
Lower salaries are only part of the equation that helps lure American companies south of the border.
“They solved the whole business model,” said Ochoa. “They can offer somebody coming from the outside the whole solution.”
Ochoa is talking about shelter companies. In Chihuahua City there's two; Intermex and American Industries, both Mexican companies. Ochoa said these companies will take an American or foreign company “by the hand” to help set up an operation.
“To shield the American company from the risks and responsibilities,” said Ochoa.
Ochoa said these shelter companies will find an interested company a building. If a building can't be found, one is built and leased back to the company. Ochoa said rental rates go as low as $2.50 per square foot a year.
Ochoa said these companies also hire the workforce, help set up the manufacturing line, do the permitting, customs, taxes, accounting, legal, human resources; even shield foreign companies from liability if a worker gets hurt.
“If you don’t know where you want to be, or where you should be, they’ll help you,” said Ochoa.
Ochoa also points to the IMMEX program as another enticement. This program allows foreign companies to avoid paying import taxes on the raw goods brought in to make a product.
In the aerospace cluster, this is referred to as a "soft landing."
“We open the operation in three months,” said Espinosa.
“How much lower would it be to produce a fuselage here, than it would be in the U.S.?” asked Arnold.
“Significantly, I mean significantly,” said Espinosa.
“30-40 percent?” asked Arnold.
“Probably, I would say at least 30 percent,” said Espinosa.
Chihuahua has prospered from these deals. Yes, there's poverty in many parts of the city, but there's also a housing boom. We saw everything from cinder block homes to larger homes in gated communities under construction in numerous parts of the city. We also saw several hiring signs on the front of factories, many of which offer workers two meals a shift and transportation to and from work.
We also spoke with a worker at an American company. The only condition was that we not name her employer.
“It’s everything, they helped us buy a new house. All of our income comes from manufacturing,” Claudia Reyes said in Spanish.
Reyes is a supervisor at her company and said her $112 a week salary, along with her husband's salary, has given the family of six a more secure life.
“It’s hard, it's hard, there weren’t many jobs. Mexican companies weren’t bringing jobs in,” said Reyes.
However, everyone from the workers to the executives have heard President Donald Trump's comments on this subject.
“We will follow two simple rules, buy American and hire American,” President Trump said during his inaugural speech.
“Is there a concern that may have a freezing effect on everything we're seeing this city?” asked Arnold.
“Yes, we're actually pretty concerned,” said Ochoa. “Mainly, and I have to say it, we live on that.”
While declining to provide names, both Ochoa and Espinosa said some American companies have already said they will hold off, at least for the time being, on either opening or expanding operations in Mexico.
“I think there is just kind of uncertainty,” said Espinosa. “It's the same comment, ‘we're just going to wait and see.'”
Still, Espinosa believes the uncertainty is temporary.
“I think there is still interest, even despite President Trump’s comments,” said Espinosa. “There’s still a lot of companies that are interested and I think Mexico is still open.”
Espinosa also points to Mexico’s trade agreements with several European countries. Chihuahua City hosts sprawling operations for France-based Safran and Dutch-based Fokker.
While President Trump has mentioned a border tax as a possible way to slow American manufacturing jobs from leaving the country, some lawmakers have other solutions. KPRC will have that part of the story on Tuesday, starting at 5 p.m.
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