Transcript Document

Business Leadership Along the
U.S.-Mexico Border
The Honorable Lucy Killea
Senior Fellow
International Community Foundation
Kenan Institute Cornerstone Conference
Chapel Hill, North Carolina
November 14, 2002
Presentation Overview
About ICF
 An Overview of the U.S.-Mexico Border
 A Review of the Maquiladora Industry
 Making the case for Business Leadership

– Case Study: Sempra Energy

Conclusion
About ICF




A community foundation committed to assisting U.S.
donors with international giving.
Assets over $1 million and 41 funds.
Over $895,000 in grants during FY-02.
Geographic focus: the Americas and Asia with an
emphasis in Mexico.
– Over 46% of grants made to non-profits and charitable
causes in Baja California border region.

Primary Areas of focus: Environment, Health,
Education, Sustainable Communities, and Culture.
 Close working relationship with FINCOMUN, the
community foundation for Baja California.
The U.S.-Mexico Border

A 200-kilometer zone that extends 100 kilometers on either side
of the border stretching 3,141 kilometers or 1,952 miles from the
Pacific Ocean to the Gulf of Mexico.

Home to more than 10.5 million people, with about 6.2 million in
the United States and 4.3 million in Mexico
– Fastest growing region in North America.
– Border population expected to double to 24 million by 2020.
– US. Border area is poorest region in the country.

39 Mexican municipalities, 25 U.S. counties and 14 pairs of
sister cities along the international border.

Communities sharing natural resources (including water, air,
flora/fauna) along a common border with a wide range of transboundary socio-economic and environmental challenges.
North America’s Border Sister Cities
Rank
Metropolitan Area
2000
1990
Change
1
Detroit-Windsor
5,801,926 5,447,569
6.50%
2
San Diego-Tijuana
4,065,359 3,245,397
25.30%
3
Ciudad Juarez-El Paso
1,930,756 1,389,709
38.90%
4
Buffalo-St. Catherines-Niagara
1,547,877 1,549,992
0.10%
5
Mcallen-Reynosa-Rio Bravo
1,073,720
760,221
41.20%
6
Mexicali-Imperial County
913,787
711,241
28.50%
7
Matamoros-Brownsville
752,460
563,413
33.60%
8
Nuevo Laredo-Laredo
509,451
352,807
44.40%
9
San Luis Rio Colorado-Yuma
283,762
217,425
30.50%
10
Piedras Niegras-Eagle Pass
177,763
134,563
32.10%
Sources: National Census Bureau data for Mexico, 1990 and 2000, United
States 1990, Canada 2000, Demographia, estimates for United States 2000
and Canada 1990.
Population Growth Rate
Baja California versus rest of Mexico
5.94%
6
5
4.15%
4
3
1.85%
2
1
0
% Growth Rate 1990 to 2000
Baja Calif
Chihuahua
Nuevo Leon
Sonora
Tamaulipas
Coahuila
Mexico Avg.
Quintana Roo
Source: INEGI, 2000
Baja California has the fastest growth rate along the border and is 2nd in Mexico
only to Quintana Roo, located on the southern border with Guatemala. The
current rate of growth is unsustainable.
San Diego/Baja California
Border Regional Issues





Sustainable Communities:
– Population 2000: 4.1 million. 2020: 6.4 million
– 80,000 new residents to Tijuana per year—mostly through migration
– Infrastructure (social, physical) not keeping pace with population growth
 50% of all new housing stock is in squatter communities without
adequate sewer hook ups or potable water.
Environment:
– A variety of trans-boundary environmental issues : conservation of natural
resources; protection of endangered species; air quality; water quality
and supply; hazardous waste management, emergency response.
Health:
– HIV/AIDS; TB; Hepatitis, substance abuse, mental health issues, high
percentage of residents on both sides of border are uninsured.
Education:
– Educational attainment and skills gap issues; high drop out rate among
migrant children/youth.
Family and Children’s Issues:
– Domestic violence; drug/gang violence; teen pregnancy; few safe
recreational areas and after-school programs for children/youth
•50% of Tijuana’s growth is in squatter communities like Maclovio Rojas,
where basic infrastructure is limited and the environmental, health and
social impacts are great.
•80% of adults in Maclovio Rojas work in the maquiladora industry.
• Because of the border’s high cost of living, the majority of households
require two incomes to provide for their basic needs.
Overview
Maquiladora Industry
Effective October 2002
 Number of Plants:

3,375
Employment:
1,047,587
– % of women in workforce:
60%
 Average Direct Labor Wage/Hr.
US$ 2.38
(Fully burdened rate including benefits)
 Gross Production
$ 7.11 billion
Sources: Maquila Portal; Ceimex-WEFA
Examples of Border Area Maquiladoras
•Boeing
•Canon Business Machines
•Casio Manufacturing
•Chrysler
•Daewoo
•Eastman Kodak/Verbatim
•Ericsson
•Fisher Price
•Ford
•JVC
•GM
•Hasbro
•Hitachi Home Electronics
•Honeywell, Inc.
•Hughes Aircraft
•Hyundai Precision America
•Matsushita
•Mattel
•Maxell Corporation
•Mitsubishi Electronics Corp.
•Motorola
•Philips
•Pioneer Speakers
•Samsonite Corporation
•Samsung
•Sanyo North America
•Sony Electronics
•Toshiba
•Zenith
Maquilas by Country
January 2001
US Maquilas represent the majority of total activity
Border Area Maquiladora Industry by Sector
Source: INGEGI, 1998
Maquila Industry in Transition

Maquiladora employment has declined due to a number of key
factors
–
–
–
–
–
–


Rising labor rates
NAFTA Article 303 results in tariff benefit elimination
Post 9/11 tightening of border.
US recession and decreasing consumer demand.
Strong Mexican peso
Growing foreign competition (e.g. China-.$043/hour, El Salvador$1.59/hr; Dominican Republic-$1.53 ; Vietnam-$.05; versus
$2.38/hour in Mexico)
Foreign investment in the maquiladora sector has strunk 23%
within the last year.
Between June 2001 and March 2002, some 240,000
maquiladora jobs, 18 % of the total we lost--350 plants shut
down
– Baja California lost 63,000 jobs during this time frame.

Still, those industries with need to be close to US market remain
(e.g. Heavy industry; automobile; some electronics)
A Sample of Recent Tijuana
Maquilas Defections

Saft, French battery producer

Aldila, a golf club maker

Kisho Electronics, a Korean TV and computer circuit-board maker

Cannon, Inc, a Japanese ink-jet-printer factory (shifted production
to Vietnam)

Casio, a Japanese electronics manufacturer.
A March 2002 poll by the Japanese Maquiladora Assn found that
40% of the 71 companies surveyed said they were considering
eliminating assembly operations or moving entire factories elsewhere
Source: Business Week, April 29, 2002
Maquiladora Employment
Percentage Change
Workforce employment has been down since 2001, a
product of the US recession, foreign competition and
] other factors
9/11 among
Source: Latin Focus, 2002
Making the Case for Business Leadership
Along the U.S.-Mexico Border



Since the passage of the North American Free Trade
Agreement (NAFTA), the population and industry has
grown along the U.S.-Mexico border but investment in
social services and infrastructure has not kept pace.
While maquiladora employment has declined,
unemployment and poverty have increased so the need for
greater corporate leadership is now very critical.
At the same time, corporate philanthropy on the border has
been marginal at best:
– Absence of strong corporate HQs along border has kept region
largely out of the loop on corporate foundation support.
– Maquilas are cost centers and generally not disposed to
philanthropy with a few exceptions (GM, Levi Strauss, Sony,.
Mattel).
– Other key non-maquila companies are beginning to show
leadership (ATT, Citibank, Sempra)…but more needs to be done.
Case Study:
Sempra Energy




A Fortune 500 company based in San Diego with over 12,000
employees
– 350 employees in Baja California
Has been active in Baja California for over 15 years and
currently has several projects throughout the state.
– Natural Gas pipeline from US to Mexico (BajaNorte)
– Gas-fired power plant under construction (Mexicali)
– Planned LNG facility in Ensenada
– Natural gas offered to consumers via its Eco-Gas subsidary
in Mexicali (50,000+ residents to date)
Also operates in the border states of Chihuahua and Coahuila.
A committed corporate philanthropist, working through ICF to
support a wide range of causes in the border area including the
environment, education, health and social services.
A few Sempra’s Corporate Philanthropic
Initiatives through ICF in Baja California
Construction of Visitors Center
Exhibit area, San Pedro Martir
National Park, Baja California in
conjunction with re-introduction
of the California condor.
Museo Sol del Niño
Mexicali
Sports facilities and women’s center in
Maclovio Rojas, Tijuana, B.C.
Conclusion



The U.S.-Mexico border faces severe socioeconomic, health and environmental issues that
warrant serious attention by companies and
corporate foundations with a presence on the border.
While the lagging US economy hurting maquila
production short-term, the sustainability of the border
region is of strategic importance to a wide range of
US and foreign companies.
Border area grantmakers (foundations, government,
corporations) need to work together, leveraging
resources and lessons learned to make a difference
in this important underserved region of North
America.