TIJUANA, MEXICO -- Wearing a white smock designating him as a company executive, Jesus Luis Zuniga padded down the Sony television assembly line and pointed out the huge 46-inch stereo TVs being assembled here from Japanese and U.S. components.
"There are a lot of myths about the maquiladora industry," he said.
Instead of taking jobs away from Americans, he argued, "we're really creating jobs in Mexico and the United States that would have gone to the Orient."
Zuniga, senior vice president of the Sony Corp. plant here called Video Tec de Mexico, was referring to the assembly operations, known as maquiladoras, that set up shop on Mexican territory, import materials from the United States, assemble them with cheap Mexican labor and export the finished products back across the border. Under Mexican law, the components come in duty free, while under U.S. customs regulations the finished products are taxed only on the "value added" in Mexico.
For several years, the maquiladora industry has been the bright spot in an otherwise stagnant Mexican economy. According to Alejandro Bustamante, the Tijuana-based president of the National Maquiladora Association, annual growth in the industry has been 17 percent to 19 percent for the last six years, "and we feel it's going to increase in the future."
There are more than 1,800 plants throughout Mexico, but most are concentrated along the 2,000-mile border with the United States. Last year, the maquiladora industry employed nearly 500,000 workers, 17 percent of total manufacturing employment in Mexico and earned the country nearly $3 billion. Those earnings made the maquiladora sector the second-largest source of foreign exchange for Mexico after oil exports.
Now, as the United States and Mexico move toward talks on a free-trade agreement, the maquiladora industry hopes to benefit from its position on the cutting edge of bilateral trade between the two countries. Industry officials say it stands to attract increased foreign investment, notably from Japanese and other Asian companies eager to cash in on greater access to the U.S. market.
U.S. maquiladora activities range from stuffing junk mail in envelopes and processing American supermarkets' discount coupons to building yachts and home appliances. Toymakers such as Mattel Inc., Fisher-Price and Tonka Corp. operate maquiladoras in Mexico, as do defense contractors such as Hughes Aircraft Co. and Rockwell International Corp.
There now are even maquiladora farms, which bring U.S. seeds and agricultural equipment into the Mexican interior and produce frozen vegetables for such firms as General Foods Corp., parent of Birds Eye; Green Giant Co.; and Campbell Soup Co.
Mexican officials say interest in maquiladoras is increasing, especially among investors from Japan, South Korea, Hong Kong and Taiwan.
Already there has been significant Japanese investment in Tijuana, a popular site with Japanese executives for its proximity to the "golf course heaven" of Southern California. Although Japanese firms account for fewer than 60 of the 1,800 maquiladoras, they rank as some of the biggest. Of the five largest maquiladoras in Tijuana, three are Japanese. They are led by Sanyo Electric Co., which has invested $300 million in six plants employing 2,800 workers.
Thanks to companies like Sanyo, Sony, Hitachi Ltd., Matsushita Electric Industrial Co. and the South Korean firm Samsung Electronics Co., Tijuana has quietly become the TV assembly capital of the world. According to U.S. government estimates, 70 percent of all televisions sold in the United States are now made here.
At the three-year-old Sony plant, which employs 1,700 workers and produces 100,000 sets a month, Zuniga said he sees the maquiladora industry as "a natural progression in the world economy" that has "helped the United States as much as Mexico."
Although U.S. labor unions have opposed the plants on grounds that they take away American jobs, Zuniga and other proponents argue that they preserve "high end" U.S. jobs making components, jobs that might otherwise have gone overseas.
"U.S. business is using the maquiladoras to go head to head with Japan, Korea and the other dragons," said an American official who monitors the industry. "To meet the competition, a company has two choices: Reduce wage costs or take the whole operation to the Orient."
In the maquiladoras, Mexican workers typically earn in a day what U.S. workers make in an hour. The maquiladoras have succeeded in holding wages down to about $1.25 an hour, which is still about 20 percent above the Mexican minimum wage. The relatively low wages (compared with the United States) and the heavy competition for workers has led to monthly employee turnover rates of 10 percent to 20 percent -- and sometimes as high as 50 percent.
Labor relations have grown uneasy, however, with union leaders complaining of unfair salaries and mistreatment of women, who make up the majority of the industry's employees. One group, the Association of People's Committees, recently protested the maquiladoras' policy of firing pregnant women and described as "degrading" a medical examination that female job applicants were required to take to prove they were not pregnant.
Maquiladoras also have come under criticism on environmental grounds. According to a recent U.S. government report on the industry, despite "much talk" about cleaning up pollution and toxic wastes produced by border maquiladoras, "little has been done to implement and enforce stricter environmental regulations." Of particular concern have been woodworking firms that have left the Los Angeles area to avoid environmental restrictions, only to set up on the Mexican side of the border and spew air and water pollution back into the United States.
Among the newcomers to Tijuana is General Dynamics Corp., which announced plans earlier this year to open a plant employing 200 workers to make electrical components for its defense contracts.
One of the latest Far Eastern investors is the giant South Korean firm Hyundai Motor Co., which plans to build 3,000 shipboard containers a month on a 28-acre site now under development outside Tijuana. The plant, the first heavy manufacturing industry in Baja California, is to employ about 1,500 workers at an average wage of $1.30 an hour, compared with the average of $12.60 an hour that Hyundai paid about 300 employees at a plant in Long Beach, Calif. The company had been cutting operations at the U.S. plant for the last few years and finally closed it in October.