Mexico's Silicon Valley
Posted at 9:41 p.m. PST Saturday, December 2, 2000
Guadalajara: high-tech prosperity, but at what price?
BY JENNIFER BJORHUS
Mercury News
BUENA VISTA DE CAÑEDO, Mexico -- From the highway cutting through it, Buena Vista de Cañedo looks like little more than a bus stop and a shack or two selling Fanta.
Until about 1:30 p.m., as the white buses pull up.
The sleepy farm town comes alive when a crowd of teenagers and twentysomethings in jeans and T-shirts pour out of the cinder-block houses off the highway for the hourlong ride to Guadalajara.
In another era, Buena Vista's sons and daughters would have worked the rolling fields that surround it or chased the promise of work in the United States. In the 1990s, they have become Mexico's new high-tech workforce.
Each day, workers crowd the buses that careen toward more than 100 electronics ``maquiladoras'' in Guadalajara, joining tens of thousands of other young people from countryside towns like Magdalena, Tala and Calzada. They assemble products for some of Silicon Valley's largest corporations that American consumers buy or use every day -- Palm handheld computers, the Handspring Visor, IBM laptops, Cisco Systems' Internet routers, Sun Microsystems workstations and Motorola cell phones.
How low-key Guadalajara became ``Mexico's Silicon Valley'' is a classic tale of globalization. Trace this high-tech assembly line to its tail end in places like Buena Vista and you see a microcosm of an accelerating economic process, driven by the logic of profit, that's altering communities inch by inch around the world.
At best, the electronics maquiladoras promise Mexico the chance to develop valuable high-tech skills that could stimulate local industry. ``We're the Asia of 25 years ago,'' says 28-year-old Juan Francisco Fregoso, an ambitious Flextronics engineer with an MBA.
Nevertheless, critics charge these corporations are taking advantage of Mexico's severe income disparities. Low wages in Guadalajara are a bonus for the corporations -- and a problem for Mexico.
``It's a perverse combination of First World productivity and Third World wages,'' says University of California-Berkeley Professor Harley Shaiken, author of ``Mexico in the Global Economy.''
A young assembly worker The sun burns over Buena Vista, a collection of squat houses tucked in the corn and bushy sugar cane fields about 50 miles southwest of Guadalajara. In the heart of town, next to the central plaza, towers a colonial Spanish-style Roman Catholic church where 12 large stone apostles guard the entrance, iron halos jutting up from their shoulders on thick rods.
Across the street, Mar(acu)a de Jesús Torres Zárate, 21, jumps out of the shower and pulls on a pair of jeans to catch the buses coming down the highway bound for the factories run by Flextronics International.
Torres is slight, with large wide eyes, a shy young woman who graduated from a vocational high school with dreams of being an accountant. She tried to find an accounting job but couldn't. There is little work in Buena Vista. So she took the Flextronics job assembling Cisco routers for $1 an hour, or $2,403 a year -- above Mexico's poverty line but about half of Mexico's average per capita income.
``I was tired of doing nothing,'' she says.
Her father, a locksmith who keeps a small shop attached to their house, says he wishes his daughter would have kept studying, but so be it. The job is OK, Torres says. ``I feel more confident about myself,'' she says. She has also met a boyfriend. A nice young man from Guadalajara, says her family.
Torres keeps a little of her salary for some makeup and blouses, but most of it goes to her mother for essentials.
It's true that the extra $200 a month is a great help for Torres' family. But inflation in Mexico has increased at an average annual rate of 21 percent over the past decade. And until recently, real wages had been dropping.
The money goes to basics like groceries and shoes, says Torres' mother, a lively woman now forced to hobble around on crutches because of a bad knee. The only luxury the salary affords them is a little meat now and then, she insists. Not beef, which is too expensive. Only pork or chicken.
It's Torres' first job, and her mother fusses over her as though she were going away for weeks. She runs a comb through her daughter's long, wet hair. Before Torres rushes out the door, she stops her for a moment. Slowly, she makes the sign of the cross before her, then gives her a hug.
Torres, her cousin and the others head down the road. They jump into the back of a red pickup full of Flextronics workers bound for the bus stop a mile away.
Buena Vista de Cañedo For generations before globalization, towns like Buena Vista have followed the rhythms of corn, the crop first cultivated by the native Mexicans. About one-quarter of all Mexicans still live in rural areas, many of them subsistence farmers eking out a living on small, rain-fed plots.
The forces of globalization are changing all that. In the mid-1980s, Mexico shifted economic gears. Instead of focusing inward on developing its own domestic industries to sell to its own citizens, the Mexican government turned outward to foreign investors to develop goods for export. It jumped on the free-trade machine.
Attempting to modernize the countryside, officials have steadily cut supports to farmers. Under the North American Free Trade Agreement, Mexico has thrown the doors open to crops from the United States and Canada. Subsistence farmers find they can't compete with the big, mechanized U.S. and Canadian farmers who have flooded Mexico with cheap corn. A world corn glut has further driven down prices. This economic trade liberalization is driving thousands of farmers off the land, into cities and across the border.
In Buena Vista, the farmers are all switching to sugar cane, which Mexico exports to the United States. About half the town's men now work in the United States illegally, according to a group of women gathered one day at Torres' house. One woman said her husband paid a ``coyote'' $1,600 to cross over. He earns more in half a day washing dishes in Alabama than in a week of farm work in Buena Vista.
Now, in globalization's latest twist, the new electronics maquiladoras in Guadalajara are luring away Buena Vista's young.
``Now the young guys don't want to work in the fields,'' says Salvador Sedano, 55, a deeply tanned farmer sitting on a bench in Buena Vista's plaza. ``They're starting to bring people from other villages to cut the sugar cane.''
Factory worker, farm worker José ``Luis'' Ram(acu)rez Vásquez, an outgoing 22-year-old, runs as the buses pull up in Buena Vista. He twists his ankle and comes limping to the bus stop with a grin.
Ram(acu)rez and his 18-year-old sister, Fátima -- the youngest of nine children -- live with their mother, Rebeca, on the edge of town. The family grows its own corn for tortillas and milks its own cow.
The chores never end. A day off from the factories finds family members working a clattering machine in the yard, cotton stuffed in their ears, shredding sugar cane for animal feed.
Ram(acu)rez has worked in the fields since he was 5 years old, so when a van came through town last year with fliers and speakers blaring about factory work, he barely paused.
Although the money is about the same, he says, the new job beats the fields. Field work is hot, hard and sporadic, and doesn't offer health insurance. Ram(acu)rez works six days a week at Flextronics, assembling Internet routers for about $9 a day, with health insurance and other benefits. His sister works four 12-hour shifts a week at Solectron making cell phones for about $6.40 a day.
``I imagined the luxury of a factory,'' Ram(acu)rez says softly.
Plucked from Santa Clara County Like an old Spanish lady wearing a lace of faded grandeur, 500-year-old Guadalajara remains a place of colonial churches, elaborate fountains and lush green gardens. A new Guadalajara rises along the chaotic highway that rings the city's outer edge. There sit large blockish buildings that look as though they were plucked from Santa Clara County and dropped into the fields.
Guadalajara has had a core of American tech companies since IBM first moved there in 1975. Hewlett-Packard came in 1982. Others followed.
Now, a new crowd of some 18 contract manufacturers and more than 50 suppliers dot the highway circling Guadalajara's perimeter. The contractors assemble printed circuit boards and brand-name electronics products. They employ more than 40,000 people. To the south, Solectron. To the north, Flextronics and Jabil Circuit. To the west, Universal Scientific Industries.
Components from U.S. and Asian suppliers are trucked and flown to Guadalajara every day. In fact, driven by the movement of electronics, industrial and computer gear, Mexico has now surpassed Japan as the No. 1 destination for California exports. No one knows exactly how much California ships directly to Guadalajara, but one state trade analyst believes it received a sizable portion of the $5 billion worth of electronics and computer gear California shipped to Mexico last year.
Completing the circle, nearly $9 billion worth of gadgets slid off Guadalajara's assembly lines last year and were packed into the trucks and planes for export, most back to the United States.
Mexican officials have aggressively pursued this industry since Mexico was plunged into the 1994-95 peso crisis.
The juggernaut of globalization actually started with trade liberalization in the 1980s, which had steadily been destroying jobs as Mexican businesses failed. By 1994 -- the year NAFTA took effect -- the stresses burst open. Spooked by the Chiapas uprising and a series of political assassinations, foreign investors stampeded out of Mexico. Desperate for foreign cash, Mexican officials devalued the peso again. Inflation and interest rates soared. Wages fell. Businesses were closing.
Guadalajara needed help fast, says Sergio Garc(acu)a de Alba, the state's director of economic development, who took office in 1995. Its traditional economy -- tequila, furniture, food processing, textiles, farming and women's shoes (Guadalajara has entire malls devoted to nothing but black shoes) -- couldn't generate enough jobs.
``We saw only one window,'' de Alba recalls. Get U.S. companies to come and build plants.
It wasn't a tough sell. Not only does Guadalajara boast six major universities, a decent airport and good roads, it had cheap land, cheap electricity and cheap workers. It was right next to North America markets. And under NAFTA, the longstanding benefits of the maquiladora program were expanded to erase the remaining export taxes.
With the peso's value plummeting, Guadalajara was one big bargain basement for American companies. In the United States, the average hourly wage for contract manufacturers is $11. In Guadalajara: $1.80. Flextronics says its average is $3 per hour if you include the transportation and subsidized meals it provides.
Alejandro Gómez Montoy, Solectron's goateed vice president for Latin America, said he specifically chose Solectron's current home on Guadalajara's southern edge because it was close to the supply of excellent workers in the countryside. ``Efficient, very disciplined,'' he said.
For Solectron, the biggest bang for the buck is Mexico's talented engineers, who earn from $20,000 to $25,000 a year.
In just a few years, Solectron has developed a 64-acre campus of cavernous pink plants. There, a workforce of 10,000 churns out, among other things, 33,000 cell phones a day.
``We can produce 80,000 a day, explains Oscar Huerta y Herrer(acu)as, Solectron's director of operations, standing on a shop floor the size of a football field. ``Who's going to use them, I don't know.''
Arriving in Guadalajara The convoy of white buses from Buena Vista reaches Flextronics shortly before 3 p.m.
Outside: the tasseled corn of old Mexico, a big chicken farm, a cemetery, flower stalls, oily auto-repair shops and a tumble of roadside cantinas sending out the smells of fried pork and tortillas.
Inside: workers in white lab coats ambling down sidewalks carved from groomed lawns, low stone-and-glass buildings, a trimmed soccer field and a gleaming white cafeteria where, for about 50 cents, workers can load plates with all manner of meat, fruit and salad. Even sushi.
Torres heads into Building No. 6 and Ram(acu)rez stops at the company's medical office to get his twisted ankle checked. Then, wearing his white lab coat, he limps back to his workstation in Building No. 6. This plant, big as an airplane hangar, is dedicated to Cisco Systems. Most of the group from Buena Vista work here.
Ram(acu)rez settles into a tall chair and digs into a stack of flat green circuit boards. He boxes the ones that pass.
Another shift begins.
As repetitive as the jobs may be, the chance to meet so many new people from outside Buena Vista offers some excitement. The atmosphere in Building No. 6 is relaxed, and it's clear not all the eyes are glued to the green printed circuit boards.
Fátima Ram(acu)rez, who prefers Buena Vista's solitude to Solectron, is ambivalent.
``Watching so many people makes me dizzy,'' she says. ``The first few days I had headaches.''
Boom's positive effects The positive impacts of Guadalajara's electronics boom are easy to tick off. The growth has stimulated services such as transportation, hotels, food service. The engineering departments of Guadalajara's universities are enjoying a surge in demand for their students. The companies generate substantial tax revenues.
Solectron's Gómez, who is also president of the local maquiladora association, cites studies showing that every job created by the electronics industry supports five people down the economic chain as employees spend money.
The companies are expanding so fast they're reaching farther and farther into the countryside to find employees. Maids have disappeared. ``Help wanted'' signs dot store fronts.
The shiny new Jettas and Volkswagen Beetles zipping down Guadalajara's thoroughfares speak to the good times here. Stores crammed with furniture line the streets of the city's fashionable west side, where hotels cater to wealthy Mexicans and foreigners and restaurants serve haute Mexican cuisine and 80 types of tequila.
Mexico may finally be witnessing some benefits from its wrenching free-trade experiment, economists say. Boosted by higher oil prices and a strong U.S. economy, Mexico's gross national product surged 7.5 percent in the first nine months of this year. That's phenomenal for an economy that suffered a harrowing 6.2 percent contraction during the peso crisis.
Mexico's unemployment rate is an extremely low 2.1 percent, although Mexican economists criticize official counts for seriously understating the picture because it considers people who are barely working to be employed.
``For the first time that I can even remember, you're talking about a lack of skilled labor and semi-skilled labor,'' Mexican economist Jonathan Heath says with some amazement.
Dreams of another lifestyle Across the highway from Solectron, a big sign greets you at a security gate: ``El Palomar.'' The pigeon.
Ricardo Palacio, 35, an affable, heavyset Solectron engineer who speaks flawless English, motors his red sedan up the wide, smooth street winding through the new gated community. He and his wife, Angelica -- two small children in the back -- are checking the house.
Half built, it sits high up near the end of Paseo de Agua. He passes stuccoed, Spanish-style homes with pools and elaborate gates, then pulls up to his lot and parks.
There sits the concrete-block skeleton of a very large home.
``I always had the dream of living in a neighborhood like this,'' Palacio says, gesturing to El Palomar's stylish, tile-roofed mansions.
It's a trophy house, even by U.S. standards. Palacio imagines each room out loud as he walks through. Over here is a four-car garage with room for his dune buggy. In the entryway there's a space for a fountain. To the right is Palacio's study, with the perfect spot for his statue of Don Quixote. The living room has cathedral ceilings, the outline of a fireplace.
Each of the children's rooms has a bath. An inside deck off the master bedroom overlooks a rec room.
The house and land will cost him about $200,000, a stretch on his $55,000 annual salary. Palacio is financing the project week by week. Every Saturday, he drives to the site to pay his architect, who pays the construction crew.
``Thank you, Solectron,'' says the architect, Martha Iñiquez.
The price of free trade Not everyone is giving thanks. Guadalajara is paying a price for its free-trade progress. Guadalajara's electronics boom is forcing up real estate prices and overloading Guadalajara's roads, electricity and water supplies. In August, an industrial accident at a Taiwanese super-contractor that makes motherboards for IBM renewed concerns about the electronics industry's environmental and health impact. About 45 workers were hospitalized after being sickened by toxic fumes inside the plant.
Economists worry that the electronics companies are too isolated from the local economy. While the companies provide business for many local low-tech firms, such as local transportation and food-service companies, they use very few Mexican suppliers for their most advanced technological goods. Most of the manufacturing materials are shipped in from foreign companies, many of whom have moved to Guadalajara to service them. The lack of links with local suppliers hampers the development of locally owned Mexican tech companies.
Likewise, the products Ram(acu)rez, his sister and Torres turn out are primarily bound for the United States, not local markets.
The growth of foreign competition has hurt locally owned PC makers, according to a recent joint study by UC-Irvine and the University of Guadalajara. Most have either lost business, been bought or gone out of business.
Low wages pose a serious problem for Mexico's long-term development. For one thing, they hamper the development of a middle class in a country where at least 32 percent of the people still live on less than $2 a day.
For every well-educated Mexican engineer with a new salary, there are thousands of Mexicans on the shop floor who aren't earning decent living wages, argue the maquiladora critics. In Guadalajara, such wages typically mean every member of a family must work. At her current rate, it would take Fátima Ram(acu)rez nearly a whole day's pay to buy a four-pound chicken for dinner.
``These are not the solutions for the workers,'' says Román Munguia, an urban-planning professor at the University of Guadalajara and a head of the University's union. ``In particular, not the young up-and-coming workers.''
The electronics factories are enormously profitable, he reasons. Flextronics' Guadalajara operation alone posted annual revenues of $1.2 billion. Worldwide, the company's profits hit $120.92 million. Solectron posted global profits of $497.2 million. The company can afford to pay workers more and it doesn't, Munguia argues.
The companies counter that the assembly jobs pay significantly more than comparable jobs in the local textile and shoe factories. The health and other benefits alone are ``way above and beyond the local or national industry,'' says Solectron's Gómez.
The average electronics maquila wages of $1.80 an hour -- and Torres, Ram(acu)rez and his sister earn less -- are nearly four times Mexico's federal minimum wage of $3.96 a day. That, of course, isn't saying much. Even conservative Mexicans consider the minimum wage a de facto policy to maintain cheap labor.
Simple purchases, hard decisions In the ragged outskirts of town sits the little farmhouse where Ram(acu)rez and his sister live with their mother.
The house and yard are a calamity of flowers, mounds of dirt, guava trees, corn and farm equipment. Chickens dart about, accompanied by a stumbling litter of puppies. Inside in the kitchen, Rebeca Ram(acu)rez, a no-nonsense woman with big glasses, heats corn tortillas and frijoles.
Buena Vista remains poor. Sections of town have no plumbing or electricity. Simple purchases here can mean hard decisions. Ram(acu)rez, for example, had wanted to hold a small party for his 22nd birthday in October. He canceled because he needed to buy a pair of glasses instead and estimated they'd cost him more than a week's salary.
``Physically, it's not that hard,'' he says of his job. ``But my eyes are getting tired.''
The factory money isn't much more than what they previously earned doing sporadic farm work. But it's easier and the benefits are better. The jobs supplement the $642 a year they earn off the land they own, a plot smaller than most golf-course putting greens. Do they splurge on anything at all?
``Nada,'' their mother says emphatically from the kitchen.
Taking a break from grinding sugar cane for animal feed, Ram(acu)rez sits at the kitchen table in the cramped farmhouse and contemplates his upcoming birthday. His wish is for a better life, he says. A cloud of frustration passes his face.
``He means to get out of here,'' a translator says bluntly.
Their dream is relatively simple. If Fátima Ram(acu)rez can get to the United States to work for just a few years, maybe they can make it come true.
A horse ranch. That's what they want. A place for their two horses, Catrina and Surdo, to run. And a life with no long bus rides or circuit boards or white lab coats.
Heading home
It's 10:50 p.m. Quitting time.
Another convoy of buses rumbles through the Flextronics gates. Ram(acu)rez, Torres and her cousin and the others from Buena Vista troop to bus No. 7. Torres, off saying goodbye to the new boyfriend, finally takes her seat. They've had only two dates, she says.
The lights go out and bus No. 7 rolls back out into old Mexico. Past the bullfighting rings, the shacks selling straw hats and Fanta, the curving green hills of sugar cane and corn and the white crosses and angels in the hillside cemeteries.
Jolting through the dark, the bus is quiet. Some drift to sleep. A trumpet on a radio station warbles from the speakers. Sometime after midnight, they stumble out under the starlight, each about $8 richer.
Until tomorrow, they say. Goodbye. Hasta luego.
The white bus pulls away, and the group from Buena Vista walks home.
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