On the surface, the growing investment by plastics processors in the U.S.-Mexico border region would seem to spring mainly from the effects of the North American Free Trade Agreement and the devaluation of the peso. While both issues plainly are serving to drive growth in the expanding maquiladora industry, other, lesser-recognized factors also are at work, making investment in Mexico attractive to U.S. and other foreign companies.
One is the reduction in U.S. interest rates, which has prompted investors to seek higher returns in Latin America. The lower rates also save Mexico a considerable amount of money on its foreign debt.
NAFTA, of course, does not yet extend beyond Mexico to other countries in Latin America.
That provides Mexico, as those in real estate say, with ``location, location, location.'' It is both a trade avenue to the United States for South American nations and a country from which Asian companies can export products to both Latin America and the United States.
That in turn has prompted more financial institutions to establish offices in the region, both to monitor investments and to handle new business.
All this has helped move Mexico toward a more diversified economy, a positive development for a country that long depended largely on only a few export products, such as agricultural goods.
It is against this backdrop that the maquiladora industry has experienced a 700 percent growth rate in the border region of El Paso, Texas, and Ciudad Ju rez, Mexico, during the past five years. According to Solunet, an El Paso company that tracks maquiladoras and international trade, 259 new plants located along the 2,100-mile U.S.-Mexican border last year.
That's largely because companies drawn to the region previously purchased parts from firms in other areas of the country but now require nearby suppliers as a result of the ``just-in-time'' manufacturing concept.
The Mexican migration of industries that are heavy users of plastics, such as automotive and consumer electronic manufacturing, has greatly expanded the border molding industry. As staff reporter John Couretas reported last week, the economic development division of the Greater El Paso Chamber of Commerce says there are now nearly 1,000 injection molding machines in the El Paso/Ciudad Ju rez area. More are coming.
Existing companies, such as Foster Mold Inc. of El Paso, are expanding while other firms are moving to the region to serve customers.
That is why Epic Components Co. of New Boston, Mich., is constructing a $10 million auto parts plant in El Paso.
The company's vice president told Plastics News that Epic expects to have 50 molding machines, with clamping forces of 85-450 tons, operating on the border by the end of this year. Another 25 will be added within the next year or two, according to the executive.
Given that Mexico and other Latin American countries recently have been staggered by serious economic problems, the border boom is particularly impressive. And welcome.