Read this article in:
30 July, 2000In Mexico, the metal industry is the most important one in terms of both GDP and workforce, employing 38% of all industry workers. While the importance of metal manufacturing has grown, it has also proved very sensitive to cyclic fluctuations.
By RIITTA PIETILÄ
The following text is a summary of a study on the Mexican metal industry, commissioned by the International Metalworkers' Federation and carried out by a research team at the University of Puebla. The joint project, headed by Everardo Fimbres, with Professor Huberto Juárez as the academic liaison, began in June 1999 and ended six months later. Its primary objective was to develop an industrial profile of the main features of the Metal and Machine Industry in Mexico, the country's most important in terms of both GDP and workforce (1,617,023 employees in 1999). THE STUDY: AN OVERALL LOOK The importance of metal manufacturing in particular has grown in recent years, having surpassed the food industry as the most important industry (1996). On the other hand, the sector has also proved to be very sensitive to cyclic fluctuations in the Mexican economy, which is characterised by a lack of long periods of stability and growth. Recessions, such as the financial crisis of 1995, are very deep and the years of recovery accordingly faster and higher, also highlighting the fragility of the supply-side economic model. In the study, the metal field is divided into four sectors: mining, construction, industry and electricity. The 'industry'sector is further divided into two parts: basic metals (DIVISION VII) and metal manufacturing (DIVISION VIII). The latter consists of 11 branches which the study groups into three categories: 1) automobile and transport 2) metal products and 3) machinery, electrical and electronics. Metal mining is omitted because of its insignificance, whereas the automobile industry (assembly and car parts), by far the most important one along with the electronics and electrical industries, is discussed in detail. The study is limited to 19 states (out of 31), which together represent over 97% of the metal industry, or about 1.6 million people, 38% of all industry workers in Mexico. In the following, the results of the study will also be commented on by Everardo Fimbres, head of the IMF Mexican Project Office. THE SECOND COLONISATION The Mexican economy is the second largest in Latin America, after that of Brazil. Its development during the 20th century has been affected by a long colonial heritage and, thus, by dependency on the world centres of economic and political power. For Everardo Fimbres, the country's strategic location adjacent to the United States furthermore accentuates the persistence of colonialist thinking, relevant again in Mexico today with the rise of multinational companies. "It's a fallacy to believe that a developing country such as Mexico could compete with the USA and Canada, as has been the case in recent years. Now, people begin to accept the fact that economically, our profile has much more in common with other Latin American countries instead." "Foreign investment, notably in the automobile industry, has created jobs, but when it comes to labour costs, the multinationals' interest is not the worker, but money. Big foreign companies with their cost-cutting programmes are again exploiting Mexican people -- and the trade unions are fighting back," says Everardo Fimbres. According to him, a Mexican metalworker is paid only a fraction of what his American colleague earns; where the latter earns seven dollars an hour, the former gets some 50 cents. Still, in the metal industry the wages are better than elsewhere, the average wage per hour being two times more than in the health care sector, for example. FROM STATIST TO SUPPLY-SIDE MODEL Having progressed typically for a developing country -- from agrarian reform to encouragement of private enterprise -- the Mexican manufacturing structure entered a period of severe recession in the early 1980s. 'Poor enterprises, rich entrepreneurs' aptly sums up the failure of this 'statist' model of growth, which accordingly was replaced by the supply-side model, starting in 1983. Now, the performance of the Mexican economy was measured by its export capacity, the amount of capital entering the country, the formation of new areas of industrialisation and labour productivity. However, over the last 18 years, the Mexican cycle has not been able to generate prolonged periods of stability, and the breaks in national manufacturing chains bear clear evidence of the fragility of the supply-side model. MAQUILADORAS WINNING GROUND In new industrialised areas, also comprising such flourishing activities as the maquiladora (a plant where materials are imported and finished products exported straight away) and auto industries, the increasing presence of direct foreign investment must be emphasised. The unquestionable success of both areas and the chronic weakness of the domestic market have been two constant ingredients in this period of increasing integration of the Mexican economy into the new system of globalisation. "Before changing the economic model, the Mexican state attempted to protect national production. Now, with economic globalisation, these maquiladoras have won ground from the traditional companies, which require lots of investment," Everardo Fimbres says. "The automobile industry is actually our most important export branch (only 20% of the production goes to the domestic market), and this type of producing has become more and more common there too. Most maquiladora workers are women, so protecting their rights is a trade union issue of great importance." AUTOMOBILE CLUSTERS SPREAD NORTH Despite the various attempts by the government to decentralise the industrial agglomerations, the metal and machine industry in Mexico (hereinafter MIM) is concentrated in the Federal District and the state of Mexico. These still account for about 50% of the total added value for this division. The third important producing state, with the biggest share in the basic metal industries, is Nuevo León with an average contribution of 10%. When it comes to the distribution of employees, establishments and assets, the MIM activities in various states form industrial districts. In DIVISION VII (basic metal industries), looking at the criterion of employment, the most important district is Monclova (Coahuila), and in DIVISION VIII (metal products, machinery and equipment) there are six important industrial manufacturing districts, out of which only one (Tlalnepantla) belongs to an area with a long industrial tradition. The rest are, revealingly, districts with assembly plants for electrical and electronic goods to supply the automotive industrial clusters, which since the mid-1980s have spread to the North. "The government gives it land and supplies electricity and water at a cheap rate -- to foreigners. This is true with all new industries in Mexico, but it is of special significance in the automobile industry. We have more automobile plants than ever, and in some cities like Puebla, the majority of inhabitants work in this same field." EMPLOYMENT: A SPECTACULAR RATE OF GROWTH Looking more closely at this 'field', we find certain interesting facts. In the study, the establishments are classified into MICRO (up to 30 employees), SMALL (between 30 and 100), MEDIUM (between 101 and 500) and LARGE (more than 500). In DIVISION VII, the structure consists mainly of micro (64.4%) and small (25.5%) establishments, the share of large ones averaging only 4.7%. Yet according to the distribution of employees, the majority of workers (66.7% in the period 1995-1999) are employed in large establishments. DIVISION VIII shows an even more complex panorama with its high percentage of micro enterprises averaging 79.8% and large ones only 3%. The distribution of employment again follows the opposite trend: about 79% of the workers are employed in large enterprises. As a whole, of the 1,528,892 employees in the MIM, 1,056,668 were employed in large enterprises, while only 111,166 worked in micro enterprises. In addition, observing the dynamics of growth of employees, we see that employment in the large enterprises has been growing at a spectacular rate: from 677,816 employees in 1995 to 1,056,668 in 1999. This indicates that over the last five years the large enterprises have been accumulating no less than 378,852 new jobs to yield a growth in the period equal to 55.8% -- an increase which lies in the increase in personnel in the country's assembly plant structure related to metal and machine activities. AUTO INDUSTRY -- MEXICO AS A PLATFORM The automobile industry in Mexico (AIM) -- automobiles and car parts -- is the most important manufacturing industry in terms of generating added value. Its modern history goes back to the 1980s, when the restructuring of plants was linked to the restructuring of the large international automotive consortia, with the result that Mexico became a platform oriented towards supplementing quotas for the major markets. That strategy has taken over virtually all of the AIM due to the domestic market's weakness (notably after the 1994 financial crisis). During the period 1994-1998, the AIM's total figure for foreign direct investment was above 10 billion dollars. At the same time, the car part segment began to exhibit levels of annual investment somewhat higher than the total for the finished unit industry. Export statistics also show the importance of the AIM, which in comparison with the monthly averages of manufacturing exports, 8.5 billion dollars, has been exporting more than 20 billion dollars. "From the early 1990s, Mexican production was based on producing complete units for export. This aspect must be evaluated in the context of the recent processes of regionalisation, where the big auto corporations in Mexico produce cars for American and Canadian markets," Everardo Fimbres notes. INTEGRATION AND COST-SAVING PROGRAMMES It is in this context of integration that the signing of the North American Free Trade Agreement (NAFTA) must be evaluated, since it had a direct effect on that integration. For a start, the agreement defined the general framework of regionalisation of production and market access, the community of interest in the countries involved in legal and labour terms and, in particular, the Rules of Origin, which stipulate degrees of regional and national integration to be reached. In 1994, the domestic automobile production was 522,350 units; next year, the output had dramatically fallen to 152,500 units, whereas the export production continued its steady growth. "Most metal companies are disappointed with NAFTA, and the workers have lost a lot. Mexico is a poor country, and yet companies with their cost-saving programmes tend to interfere in the workers' organisational structures to encourage the atomisation of unions." "On the other hand, in the automobile field there are some very strong unions who try to save existing jobs, ameliorate working conditions... Now we have an even bigger need for them, since the import of used cars was liberated two months ago -- in five years there will be no restrictions anymore." TWIN PLANTS ON THE CLUSTER PRINCIPLE All indications are that the automotive structure of North America is increasingly moving towards complementary twin productions, i.e. twin plants. This trend, together with the fact that Mexican assembly plants in the period 1994-1999 have been increasingly surrounded by car parts plants, gives the impression that they (the Mexican assembly plants) will constitute the support to supplement production quotas of Canadian and American plants. At the same time, they are developing a mechanism for the transition in North America to automobiles without internal combustion engines. Emphasising that Mexico's economic policy encourages economies of agglomeration, the present study then proposes a ranking of enterprise agglomerations in various districts of the country. Two types of groupings in car parts plants can be distinguished: those formed around assembly factories (Volkswagen -- Puebla; Chrysler - State of Mexico; General Motors - Coahuila etc.) and those which exist in regions far away from them (enterprises in places such as Reynosa, Ensenada, Ciudad Juárez, etc.). The first type of agglomeration is clearly constituted on the Cluster principle, while the second corresponds to the export/maquiladora model. Finally, three models of integration are proposed for identifying the operating principles of the automobile plants in Mexico surrounding the business projects of the Platform and the Modular Factory. The detailed examples given are the VW and Ford assembly plants in Mexico and the GM plant in Silao, and the conclusion to be drawn is that the modular factory project has not advanced substantially since 1997-98 (due to resistance on the part of the unions), whereas the Cluster principle is moving ahead. MINING AND IRON/STEEL PRODUCTION To fill in the details of the Metal and Machine Industry in Mexico, the study closes with a summary of the general situation of mining and the iron and steel producing branch. These 'traditional' activities have had a limited development in the growth of Mexican capitalism, the mining's share of industrial GDP having remained at 5% over the last 20 years. The states with the biggest mines are Coahuila, Colima and Michoacán, and the most important metallurgic minerals include iron, coke and coal. Mexico's steel production was 14,241 tonnes in 1998, qualifying it for second place in Latin America after Brazil, and 16th place in the international context. The contribution of basic metal industries to manufacturing GDP has not varied substantially over the last 20 years either; it has maintained an average of 5%, and the number of employees in the division has not exceeded 60,000. In examining the restructuring of the Mexican iron and steel complex in the 1990s, two major elements can be identified: first, the adjustment in employment and the modernisation of equipment related to the incorporation of new processes; and second, the expansion of business to other countries together with an increase in exports. As an epilogue, we may consider the productivity indicators provided by management, who generally affirm that "there was an increase from 259 tonnes per worker in 1991 to 594 tonnes per worker in 1996 and 643 in 1997." Since the corollary implies that there were only somewhat 22,000 workers directly employed in the Mexican iron and steel industry, the reduction in personnel must be explained within the process of restructuring and privatisation. The project is to be continued with a study of the trade unions and workers' organisation in them, taking into account various districts of Mexico, different fields of production and different companies. Riitta Pietilä is a free-lance journalist.
The following text is a summary of a study on the Mexican metal industry, commissioned by the International Metalworkers' Federation and carried out by a research team at the University of Puebla. The joint project, headed by Everardo Fimbres, with Professor Huberto Juárez as the academic liaison, began in June 1999 and ended six months later. Its primary objective was to develop an industrial profile of the main features of the Metal and Machine Industry in Mexico, the country's most important in terms of both GDP and workforce (1,617,023 employees in 1999). THE STUDY: AN OVERALL LOOK The importance of metal manufacturing in particular has grown in recent years, having surpassed the food industry as the most important industry (1996). On the other hand, the sector has also proved to be very sensitive to cyclic fluctuations in the Mexican economy, which is characterised by a lack of long periods of stability and growth. Recessions, such as the financial crisis of 1995, are very deep and the years of recovery accordingly faster and higher, also highlighting the fragility of the supply-side economic model. In the study, the metal field is divided into four sectors: mining, construction, industry and electricity. The 'industry'sector is further divided into two parts: basic metals (DIVISION VII) and metal manufacturing (DIVISION VIII). The latter consists of 11 branches which the study groups into three categories: 1) automobile and transport 2) metal products and 3) machinery, electrical and electronics. Metal mining is omitted because of its insignificance, whereas the automobile industry (assembly and car parts), by far the most important one along with the electronics and electrical industries, is discussed in detail. The study is limited to 19 states (out of 31), which together represent over 97% of the metal industry, or about 1.6 million people, 38% of all industry workers in Mexico. In the following, the results of the study will also be commented on by Everardo Fimbres, head of the IMF Mexican Project Office. THE SECOND COLONISATION The Mexican economy is the second largest in Latin America, after that of Brazil. Its development during the 20th century has been affected by a long colonial heritage and, thus, by dependency on the world centres of economic and political power. For Everardo Fimbres, the country's strategic location adjacent to the United States furthermore accentuates the persistence of colonialist thinking, relevant again in Mexico today with the rise of multinational companies. "It's a fallacy to believe that a developing country such as Mexico could compete with the USA and Canada, as has been the case in recent years. Now, people begin to accept the fact that economically, our profile has much more in common with other Latin American countries instead." "Foreign investment, notably in the automobile industry, has created jobs, but when it comes to labour costs, the multinationals' interest is not the worker, but money. Big foreign companies with their cost-cutting programmes are again exploiting Mexican people -- and the trade unions are fighting back," says Everardo Fimbres. According to him, a Mexican metalworker is paid only a fraction of what his American colleague earns; where the latter earns seven dollars an hour, the former gets some 50 cents. Still, in the metal industry the wages are better than elsewhere, the average wage per hour being two times more than in the health care sector, for example. FROM STATIST TO SUPPLY-SIDE MODEL Having progressed typically for a developing country -- from agrarian reform to encouragement of private enterprise -- the Mexican manufacturing structure entered a period of severe recession in the early 1980s. 'Poor enterprises, rich entrepreneurs' aptly sums up the failure of this 'statist' model of growth, which accordingly was replaced by the supply-side model, starting in 1983. Now, the performance of the Mexican economy was measured by its export capacity, the amount of capital entering the country, the formation of new areas of industrialisation and labour productivity. However, over the last 18 years, the Mexican cycle has not been able to generate prolonged periods of stability, and the breaks in national manufacturing chains bear clear evidence of the fragility of the supply-side model. MAQUILADORAS WINNING GROUND In new industrialised areas, also comprising such flourishing activities as the maquiladora (a plant where materials are imported and finished products exported straight away) and auto industries, the increasing presence of direct foreign investment must be emphasised. The unquestionable success of both areas and the chronic weakness of the domestic market have been two constant ingredients in this period of increasing integration of the Mexican economy into the new system of globalisation. "Before changing the economic model, the Mexican state attempted to protect national production. Now, with economic globalisation, these maquiladoras have won ground from the traditional companies, which require lots of investment," Everardo Fimbres says. "The automobile industry is actually our most important export branch (only 20% of the production goes to the domestic market), and this type of producing has become more and more common there too. Most maquiladora workers are women, so protecting their rights is a trade union issue of great importance." AUTOMOBILE CLUSTERS SPREAD NORTH Despite the various attempts by the government to decentralise the industrial agglomerations, the metal and machine industry in Mexico (hereinafter MIM) is concentrated in the Federal District and the state of Mexico. These still account for about 50% of the total added value for this division. The third important producing state, with the biggest share in the basic metal industries, is Nuevo León with an average contribution of 10%. When it comes to the distribution of employees, establishments and assets, the MIM activities in various states form industrial districts. In DIVISION VII (basic metal industries), looking at the criterion of employment, the most important district is Monclova (Coahuila), and in DIVISION VIII (metal products, machinery and equipment) there are six important industrial manufacturing districts, out of which only one (Tlalnepantla) belongs to an area with a long industrial tradition. The rest are, revealingly, districts with assembly plants for electrical and electronic goods to supply the automotive industrial clusters, which since the mid-1980s have spread to the North. "The government gives it land and supplies electricity and water at a cheap rate -- to foreigners. This is true with all new industries in Mexico, but it is of special significance in the automobile industry. We have more automobile plants than ever, and in some cities like Puebla, the majority of inhabitants work in this same field." EMPLOYMENT: A SPECTACULAR RATE OF GROWTH Looking more closely at this 'field', we find certain interesting facts. In the study, the establishments are classified into MICRO (up to 30 employees), SMALL (between 30 and 100), MEDIUM (between 101 and 500) and LARGE (more than 500). In DIVISION VII, the structure consists mainly of micro (64.4%) and small (25.5%) establishments, the share of large ones averaging only 4.7%. Yet according to the distribution of employees, the majority of workers (66.7% in the period 1995-1999) are employed in large establishments. DIVISION VIII shows an even more complex panorama with its high percentage of micro enterprises averaging 79.8% and large ones only 3%. The distribution of employment again follows the opposite trend: about 79% of the workers are employed in large enterprises. As a whole, of the 1,528,892 employees in the MIM, 1,056,668 were employed in large enterprises, while only 111,166 worked in micro enterprises. In addition, observing the dynamics of growth of employees, we see that employment in the large enterprises has been growing at a spectacular rate: from 677,816 employees in 1995 to 1,056,668 in 1999. This indicates that over the last five years the large enterprises have been accumulating no less than 378,852 new jobs to yield a growth in the period equal to 55.8% -- an increase which lies in the increase in personnel in the country's assembly plant structure related to metal and machine activities. AUTO INDUSTRY -- MEXICO AS A PLATFORM The automobile industry in Mexico (AIM) -- automobiles and car parts -- is the most important manufacturing industry in terms of generating added value. Its modern history goes back to the 1980s, when the restructuring of plants was linked to the restructuring of the large international automotive consortia, with the result that Mexico became a platform oriented towards supplementing quotas for the major markets. That strategy has taken over virtually all of the AIM due to the domestic market's weakness (notably after the 1994 financial crisis). During the period 1994-1998, the AIM's total figure for foreign direct investment was above 10 billion dollars. At the same time, the car part segment began to exhibit levels of annual investment somewhat higher than the total for the finished unit industry. Export statistics also show the importance of the AIM, which in comparison with the monthly averages of manufacturing exports, 8.5 billion dollars, has been exporting more than 20 billion dollars. "From the early 1990s, Mexican production was based on producing complete units for export. This aspect must be evaluated in the context of the recent processes of regionalisation, where the big auto corporations in Mexico produce cars for American and Canadian markets," Everardo Fimbres notes. INTEGRATION AND COST-SAVING PROGRAMMES It is in this context of integration that the signing of the North American Free Trade Agreement (NAFTA) must be evaluated, since it had a direct effect on that integration. For a start, the agreement defined the general framework of regionalisation of production and market access, the community of interest in the countries involved in legal and labour terms and, in particular, the Rules of Origin, which stipulate degrees of regional and national integration to be reached. In 1994, the domestic automobile production was 522,350 units; next year, the output had dramatically fallen to 152,500 units, whereas the export production continued its steady growth. "Most metal companies are disappointed with NAFTA, and the workers have lost a lot. Mexico is a poor country, and yet companies with their cost-saving programmes tend to interfere in the workers' organisational structures to encourage the atomisation of unions." "On the other hand, in the automobile field there are some very strong unions who try to save existing jobs, ameliorate working conditions... Now we have an even bigger need for them, since the import of used cars was liberated two months ago -- in five years there will be no restrictions anymore." TWIN PLANTS ON THE CLUSTER PRINCIPLE All indications are that the automotive structure of North America is increasingly moving towards complementary twin productions, i.e. twin plants. This trend, together with the fact that Mexican assembly plants in the period 1994-1999 have been increasingly surrounded by car parts plants, gives the impression that they (the Mexican assembly plants) will constitute the support to supplement production quotas of Canadian and American plants. At the same time, they are developing a mechanism for the transition in North America to automobiles without internal combustion engines. Emphasising that Mexico's economic policy encourages economies of agglomeration, the present study then proposes a ranking of enterprise agglomerations in various districts of the country. Two types of groupings in car parts plants can be distinguished: those formed around assembly factories (Volkswagen -- Puebla; Chrysler - State of Mexico; General Motors - Coahuila etc.) and those which exist in regions far away from them (enterprises in places such as Reynosa, Ensenada, Ciudad Juárez, etc.). The first type of agglomeration is clearly constituted on the Cluster principle, while the second corresponds to the export/maquiladora model. Finally, three models of integration are proposed for identifying the operating principles of the automobile plants in Mexico surrounding the business projects of the Platform and the Modular Factory. The detailed examples given are the VW and Ford assembly plants in Mexico and the GM plant in Silao, and the conclusion to be drawn is that the modular factory project has not advanced substantially since 1997-98 (due to resistance on the part of the unions), whereas the Cluster principle is moving ahead. MINING AND IRON/STEEL PRODUCTION To fill in the details of the Metal and Machine Industry in Mexico, the study closes with a summary of the general situation of mining and the iron and steel producing branch. These 'traditional' activities have had a limited development in the growth of Mexican capitalism, the mining's share of industrial GDP having remained at 5% over the last 20 years. The states with the biggest mines are Coahuila, Colima and Michoacán, and the most important metallurgic minerals include iron, coke and coal. Mexico's steel production was 14,241 tonnes in 1998, qualifying it for second place in Latin America after Brazil, and 16th place in the international context. The contribution of basic metal industries to manufacturing GDP has not varied substantially over the last 20 years either; it has maintained an average of 5%, and the number of employees in the division has not exceeded 60,000. In examining the restructuring of the Mexican iron and steel complex in the 1990s, two major elements can be identified: first, the adjustment in employment and the modernisation of equipment related to the incorporation of new processes; and second, the expansion of business to other countries together with an increase in exports. As an epilogue, we may consider the productivity indicators provided by management, who generally affirm that "there was an increase from 259 tonnes per worker in 1991 to 594 tonnes per worker in 1996 and 643 in 1997." Since the corollary implies that there were only somewhat 22,000 workers directly employed in the Mexican iron and steel industry, the reduction in personnel must be explained within the process of restructuring and privatisation. The project is to be continued with a study of the trade unions and workers' organisation in them, taking into account various districts of Mexico, different fields of production and different companies. Riitta Pietilä is a free-lance journalist.