STEVE INSKEEP, Host:
The news we get out of Mexico is consistently distressing. Over the past four years of the drug war's rage, the northern border with the U.S. has become one of the most violent parts of the country. So it's surprising to discover that during this drug war the region has seen an economic boom. The duty-free assembly plants, known as maquiladoras, are rapidly adding jobs. As NPR's Jason Beaubien reports, exports to the United States are reaching record levels.
JASON BEAUBIEN: Just across from El Paso, Texas, Juarez is the murder capital of Mexico and one of the most violent cities in the world. More than 3,000 people were killed in drug-related violence in Juarez last year. Extortion, carjacking and kidnapping are rampant.
This might not seem like an ideal business environment, but foreign companies are investing heavily in Juarez and other violence-plagued cities along the border.
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BEAUBIEN: At a huge 180,000 square foot factory near the Juarez airport, plastic is being molded into mannequins. A worker opens the metal mold with a power wrench.
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BEAUBIEN: Alan Russell is the president of TECMA which runs this maquiladora.
ALAN RUSSELL: Mannequins are made in every color. Some are translucent. You'll see red ones, black ones, white ones.
BEAUBIEN: Some of the maquiladoras produce a specific product for a specific company. In this plant, TECMA runs seven different operations for seven different U.S. companies. One area is making customized dashboard covers. Another is producing electronic components for modems.
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BEAUBIEN: And then they also do what Russell calls reverse logistics, refurbishing used products.
RUSSELL: Let's say a credit card reading machine in Wal-Mart is two years old or it has become inoperative. It comes here, it's cleaned, it's inspected, new ribbons, new software update and then it's put back in to the market.
BEAUBIEN: El Paso-based TECMA runs 17 plants across Juarez. This border city with a population of just over a million people was hard hit by the recent recession. Between 2008 and 2009 Juarez lost nearly 85,000 jobs. But the city is rapidly bouncing back and local officials expect that by the end of this year employment levels will have returned to their 2007 peak.
Even with a smaller workforce, exports last year reached an all time high. The value of trade between Juarez and El Paso jumped a stunning 47 percent from 2009 to 2010. And similar gains are being reported in other border cities, such as Matamoros, Reynosa and Nuevo Laredo. Russell says the Mexican border has a huge logistical advantage over China or other industrial hubs in Asia.
RUSSELL: We have another operation that ships the same day that the orders are received. They're produced that day and by 3 o'clock the truck door shuts. Their product is crossed and put on either Federal Express or UPS and shipped the exact same day.
BEAUBIEN: But one issue about Juarez that Russell always has to address with potential clients, is security.
RUSSELL: We have to talk about it. It's the elephant in the room.
BEAUBIEN: Thousands of Mexican soldiers and federal police race back and forth across Juarez in convoys. The nervous troops are dressed in full battle gear and clutching assault rifles. Yet Russell and other business leaders say the violence from the drug war, for the most, part hasn't affected the maquilas.
RUSSELL: To date we've not had those kinds of problems, as you would think that could happen in an environment like this. But it just hasn't happened.
BEAUBIEN: If the foreign companies working in Juarez have been immune from the recent crime wave, local businesses have not. The local newspaper El Norte estimates that 90 percent of small businesses in Juarez are forced to pay local gangs for protection. The head of the local restaurant association pegs the extortion rate at 60 to 70 percent.
Maria Soledad Maynez, the head of economic development and promotion for Juarez, says extortion is dampening the economic recovery of the city.
MARIA SOLEDAD MAYNEZ: There's a lot of small businesses there, right now, if they want to work, they have to pay. So, yes, it's a big issue for those small business, more than the big ones.
BEAUBIEN: Maynez however says she's confident that Juarez will overcome its current crime problem soon. And she says businesses are very interested in moving into the area. For instance a new slaughterhouse is being built in a free-trade zone on the western edge of Juarez. Maynez says the plant will be able to slaughter and process animals at a significantly lower cost than in the United States.
SOLEDAD MAYNEZ: We can take advantage as a maquiladora bring temporarily the cows. Pack it. Freezing and send it back.
BEAUBIEN: MÃ¡ynez says many companies currently operating in the U.S. could operate far cheaper in Juarez. Wages in the maquilas start at about ten dollars a day. Once products are moved back into El Paso, they can be shipped quickly by truck, rail or plane throughout the U.S. and Canada.
Two separate realities are unfolding in Juarez - the city's murder rate rivals that of a war zone, yet its factories are exporting products at a record level.
Jason Beaubien, NPR News.
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