Maquiladora Industry: New Developments Jesus Cañas Global Insight's Maquiladora Industry Outlook Conference September 29, 2006 McAllen, TX The views expressed in this presentation are strictly those of the author and do not necessarily reflect the positions of the Federal Reserve Bank of Dallas or of the Federal Reserve System. Any secondary distribution of this material is strictly prohibited. May be quoted with appropriate attribution to the author.
Outline Maquiladora Downturn: Structural Change Or Cyclical Factors? Sings of Structural Change City Competitiveness Implications for border cities
Maquiladora Downturn: Structural Change Or Cyclical Factors? Scenario 3 31.3 Scenario 2 21.3 Scenario 1 21.3 Base -14.5-25 -15-5 5 15 25 35 45 % Change in Jobs First scenario (S1) assumed no recession, and the U.S. unemployment rate held steady at 4 percent; Second scenario (S2) assumed that maquiladora wages fell 6.1 percent after 2000Q2, instead of rising 16.8 percent; Third scenario (S3) assumed that there was no recession and falling maquiladora wages.
Mexico and US Industrial Production (Index June 2000=100; Seasonally Adjusted) 120 116 112 Mexico US Excl. High Tech US High Tech (right axis) 200 180 160 108 140 104 120 100 100 96 80 Feb-00 Oct-00 Jun-01 Feb-02 Oct-02 Jun-03 Feb-04 Oct-04 Jun-05 Feb-06 Source: Banco de México and Federal Reserve.
US Manufacturing Employment, 1981 Job growth in recovery (percent) US 1981 2 Procyclical flows 1.5 Electronics Transportation Textile Structural gains Furniture 1 Chemical Machinery 0.5 Toys Food Leather 0-2 -1.5-1 -0.5 0 0.5 1 1.5 2-0.5-1 -1.5 Structural losses -2 Job growth in recession Countercyclical flows
Maquiladora Employment, 1981 Job growth in recovery (percent) Procyclical flows 1981 Recession 7.00 Structural gains Toys 5.00 Furniture Transportation Leather Textiles Other 3.00 Food Services Electronics 1.00 Machinery -4.00-3.00-2.00-1.00 0.00 1.00 2.00 3.00 4.00-1.00-3.00-5.00 Structural losses -7.00 Job growth in recession Countercyclical flows
US Manufacturing Employment, 2001 Job growth in recovery (percent) US 2001 Procyclical flows 2 Structural gains Electronics 1.5 Transportation Textile Furniture 1 Chemical Machinery 0.5 Toys Food Leather 0 Food -2-1.5-1 -0.5 0 0.5 1 1.5 2-0.5-1 -1.5 Structural losses -2 Job growth in recession Countercyclical flows
Maquiladora Employment, 2001 Job growth in recovery (percent) 2001 Recession 0.80 Procyclical flows Structural gains 0.60 Other 0.40 Toys Electronics Transportation 0.20 Machinery 0.00-3.00-2.00-1.00 0.00 1.00 2.00 3.00 Furniture -0.20 Services Food -0.40 Chemical Textile -0.60 Leather -0.80 Structural losses Job growth in recession (percent) Countercyclical flows
Unit Labor Cost 145 ULC = W L P L Laredo 135 125 Matamoros 115 Juarez 105 95 Tijuana Reynosa 85 75 Chihuahua 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Export Market Share 250 200 Reynosa 150 Tijuana 100 Juarez Chihuahua Laredo 50 Matamoros 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Population with College Education 2000 % Share Monterrey Torreón Chihuahua Guadalajara Guadalupe Mexicali Reynosa Piedras Negras Nuevo Laredo Juárez Matamoros Tijuana Nogales Tecate Agua Prieta Acuña 0.0 5.0 10.0 15.0 20.0 25.0
Population with High School Education 2000 % Share Nogales Guadalupe Mexicali Monterrey Torreón Guadalajara Tijuana Reynosa Tecate Chihuahua Matamoros Agua Prieta Piedras Negras Nuevo Laredo Juárez Acuña 0.0 5.0 10.0 15.0 20.0 25.0
Local Government Expenditures 1990 2003 Per Capita Average Nuevo Laredo Reynosa Chihuahua Monterrey Agua Prieta Nogales Torreón Guadalajara Matamoros Piedras Negras Guadalupe Mexicali Juárez Tijuana Tecate Acuña 0 100 200 300 400 500 600 700 800
Job growth in recovery (percent) Procyclical flows 1.40 El Paso Structural Employment Structural gains Job growth in recovery (percent) Procyclical flows 1.40 McAllen Structural Employment Structural gains 0.90 0.90 EHS 0.40 EHS INFO TTU GOVT LHOSPSERPRO PBS -0.10-1.50-1.00-0.50 CMNR 0.00 0.50 FIN 1.00 1.50 FIN PBS TTU SERPRO 0.40 LHOSP CMNR GOVT OTHER -0.10-1.50-1.00-0.50 0.00 0.50 1.00 1.50 OTHER -0.60-0.60 MANUF -1.10 MANUF -1.10-1.60 Structural losses Job growth in recession (percent) Countercyclical flows -1.60 Structural losses Job growth in recession (percent) Countercyclical flows Job growth in recovery (percent) Procyclical flows Laredo Structural Employment Structural gains Job growth in recovery (percent) Procyclical flows 1.40 Brownsville Structural Employment Structural gains 1.40 0.90 0.90 LHOSP EHS EHS 0.40 FIN 0.40 FIN CMNR INFO SERPRO OTHER GOVT PBS LHOSP SERPRO TTU MANUF GOVT TTU -0.10-1.50-1.00-0.50 0.00 0.50 1.00 1.50-0.10-1.50-1.00-0.50 0.00 0.50 1.00 1.50 PBS INFO CMNR -0.60 OTHER -0.60-1.10-1.10 MANUF -1.60 Structural losses Job growth in recession (percent) Countercyclical flows-1.60 Structural losses Job growth in recession (percent) Countercyclical flows
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