EL PASO, Texas (Border Report) – Mexican cities bordering the U.S. are becoming increasingly dependent on foreign-run factories.

Maquiladora employment now accounts for one out of every two formal jobs in cities from Tijuana to Juarez to Nuevo Laredo, and one out of 10 jobs in Mexico, said Thor Salayandia, the new vice president of the Mexican Chamber of Industry. That’s one million jobs in border cities and 2.7 million jobs overall.

“Fifty percent of the jobs in 12 cities – more than 1 million jobs – are maquiladora jobs,” Salayandia said. “Juarez and the other cities depend on maquiladoras, for good or bad. What’s the good? They help develop human talent, they bring in technology and they afford us the opportunity to sell them the supplies they need.”

The challenges include looming labor shortages, industrial parks nearing capacity and the failure of more local suppliers to step forward, he said.

But American and Canadian firms want to re-shore production from Asia to avoid supply-chain disruptions such as those brought about by the COVID-19 pandemic. And Detroit automakers with a presence in Mexico are pondering investments in electric vehicle production. That presents even more opportunities for job growth, trade experts said.

Maquiladora employment in Mexico (Dallas Federal Reserve Bank chart)

The economic impact of maquiladoras is felt on the U.S. side as well, according to Jerry Pacheco, president of the Santa Teresa, New Mexico-based Border Industrial Association.

“It’s a symbiotic relationship,” he said. “We have companies here that are receiving maquiladora products, shipping them to Europe, shipping them to Asia and to Latin America. And for the USA, you will see trucks going to the coast with finished products, you’ll see trucks going to Chicago, you’ll see trucks going to the Gulf Coast.”

Trade experts have long said that for every four jobs created by maquiladoras in Mexico, one job is generated in the U.S.

Pacheco said that figure is now closer to three-to-one.

“Firms have a footprint in the U.S. and a footprint in Mexico. They will run their headquarters here, hire workers there. You hire your managers either in Mexico or have managers from the U.S. that cross the border every day. Thousands of Americans cross that border to work on maquilas as plant managers, quality control (specialists) or engineers. There’s almost a seamless situation and we reap the benefits from there.”

Industrial parks in Santa Teresa and in El Paso are teeming with warehouse, trucking, packaging, and logistics operations catering to maquiladoras in Northern Mexico. Other businesses such as plastic molding, metal stamping and cable manufacturers, and steel suppliers also provide services to south-of-the-border operations.

Trucks waiting to ship out at the Santa Teresa, New Mexico, industrial park. (Border Report photo)

“All of that is being shipped to the maquilas in Mexico. The final product comes back and is warehoused and staged out of Santa Teresa or El Paso distribution centers,” Pacheco said. “I told my staff this morning we would not be here if not for the maquiladora industry.”

Maquiladoras have been around since the late 1960s, when the U.S. and Mexican governments established a program to promote jobs in Mexico and produce less-expensive goods for U.S. consumers. The U.S.-Mexico-Canada Agreement (USMCA) further refined the program, allowing for raw materials to be sent to Mexico, assembled there and only tax the value-added to the product, not the product itself.