The news in Baja California isn’t just about television sets and computer monitors anymore. A burgeoning automotive industry is beginning to take hold as well.

            Toyota’s assembly plant between Tijuana and Tecate has been in production for almost a year, but it isn’t the only automotive assembly operation in Baja California. Kenworth has been manufacturing heavy duty trucks in Mexicali for nearly 50 years, and recently announced a major expansion of its own. Kenworth says it will spend $70 million to create 600 new jobs at its Mexicali plant, bringing the total there to nearly 2,400. The expansion project is expected to be completed by March 2006.

            Meanwhile, Toyota began production of Tacoma truck beds in Baja California in August 2004 and Tacoma trucks in December 2004. At full production, the $140 million plant will manufacture 180,000 truck beds and 30,000 Tacoma vehicles per year. The truck beds are used in production both at TMMBC and New United Motor Manufacturing, Inc. - a joint venture of Toyota and General Motors in Fremont, California.

            Various on-site suppliers and logistics partners provide an additional 175 jobs at the plant. This figure will grow to 240 when TMMBC is at full production.

Baja California manufacturing

            With a population of approximately 3.5 million, an annual population growth rate of 4.34 percent, and a GDP of $15.1 billion, Baja California is Mexico’s leading producer of television and computer monitors.

            It is divided into four municipalities: Tijuana with 46.94 percent of the population, Mexicali, the state’s capital with 32.95 percent, Ensenada with 14.91 percent, and Tecate with 2.96 percent.

            Baja California’s most important sector is the maquiladora industry with a GDP participation of 22 percent. There are more than 1,000 maquilas in the state, making this sector the leading employer with nearly 235,000 employees. The majority of these plants are located in Tijuana, Mexicali, Ensenada, Tecate, and Rosarito. The majority of these plants are manufacturers of electronic products and components, and import a considerable amount of parts (68 percent) from the United States.

            Baja California’s economy is supported by the maquiladora industry and foreign investment has played an important role in the region’s development. Of the total annual investment received, 80 percent is foreign and destined to manufacturing.

            Most of the state’s production is exported to the United States and Europe and has demonstrated sustained growth since the mid 1990s. More than 90 percent of the growth is attributable to the electronic maquiladora industry. There are important plants located throughout the state, including Samsung, Sanyo, Sony, Panasonic, Sharp, Daewoo, Hitachi, Canon, Hyundai, Mitsubishi Electronic, Acer, Honeywell, JVC, Maxell, Casio, Delta, Mag, Goldstar, among others.

            The large production of television sets and computer monitors has generated a separate need for the printing and graphic services for the production of manuals and bar codes. More than 96 percent of the printed material used is imported from the United States and Asia. Printing companies in the state are rather small and do not have the capacity to supply the large demands of those industries.

            Maquiladora-related imports are electrical machinery, sound and television equipment, plastics, machinery, iron and steel products, paper and paperboard, wood, aluminum, rubber and glass.

            The distance that separates Baja California from the interior of Mexico makes the state look more to the United States for the supply of products. The implementation of NAFTA in 1994 helped the transition of the state’s economy from the primary sectors to the maquiladora industry, particularly electronics, plastics, and wood production. These industries are rapidly becoming Baja California’s main sources of jobs and revenues, and now represent one third of Mexico’s maquila plants, thanks to its closeness to the U.S. market and low labor cost.

            Baja California’s government has led the way in the promotion of foreign investment. It was the first state in Mexico to have a Secretariat for Economic Development (SEDECO) and city economic development councils to help foreign investors establish their plants in the State. These were good incentives that resulted in the establishment of manufacturing giants such as Thomson, Sanyo, Panasonic and Sharp.

            The state’s government has supported local production of electronic products. One such step was to organize delegations to the U.S., Europe and Asia to persuade electronic companies to relocate to Baja California. Main promotional factors are low labor costs, closeness to the U.S. market, the benefits of the free trade agreements that Mexico has signed with numerous countries and the European Union, and the benefits of NAFTA.

            The state’s efforts to promote foreign investment in the electronic sector have paid off, and it has led to a corresponding growth in the demand of imported components.

            The main products manufactured and exported by the electronic maquiladora industry are: television sets, computer monitors, storage batteries, power suppliers, sound generating equipment, unrecorded media films, insulated wire and cables, microphones, printed circuits, and automated data processors.

Other sectors

            A large portion of the maquiladora plants manufacture electronic products. It is estimated that 27 million television sets and computer monitors a year are manufactured in Tijuana and Mexicali, and these products have an average 40 percent of plastic content.

            In the last five years, manufacturers of these products have been inviting to the state smaller plants that supply them with the parts needed in their production processes, including plastic injection plants.

            The electronic industry’s need for manuals, bar codes, instruction pamphlets, etc. has developed the printing and graphic industry.

            Approximately 96 percent of all printed material used by the manufacturing industry is imported. Local printing factories are small and run as family businesses, oriented to serve the needs outside the manufacturing industry. They do not have the capacity or the quality required by major plants.

            Baja California’s woodworking industry is oriented to the export market. With more than 200 plants, it gives employment to 20,000 people, and it is diversified in the production of furniture, wood frames and moldings, reconstructed lumber products, wood boxes and platforms. Close to 90 percent of these plants are located in Tijuana and Tecate.

            Approximately 50 percent of the plants are established under the maquiladora program, and the rest are mostly joint ventures of U.S. and Mexican capital, and their products are mostly exported because of greater profits. They supply 50 percent of the U.S. market for picture frames and moldings.

            Manufacturers in this sector constantly seek new technologies and equipment to increase their production volumes. The industry lacks modern equipment and that restricts production development. Over sixty percent of equipment for furniture production is more than 10 years old.

            The most promising products for this sector are the machinery used in the production processes, such as cutters, wood polishers, painters, iron fittings, different types of screws, paint, lacquer, and abrasives. The main products manufactured and exported by the wood-processing maquiladora industry are: wooden frames, furniture, packing wood and pallets.

    Major factors that will shape the demand for products and services over the next few years include:

    •Recovery of U.S. economy.  Over 80 percent of all maquila production is destined for the U.S. market and an increase in demand of products would result in:

            •Foreign–European and Asian- manufacturers opting to relocate their production to Mexico’s Border Region, to take advantage of NAFTA content rules;

            •Expansion of existing plants and consequently, an increase in the demand for raw material, parts and services.

            •Recovery of the Mexican economy.  This will open a market for plants to sell part of their production into the domestic market. 

            •Development of Infrastructure.  The government’s current program of developing and modernizing the infrastructure in the region will also have a positive effect on the maquiladora industry.  The government has launched approximately 20 projects along the border region to improve and/or expand port facilities, roads, railroads, water treatment plants, wastewater facilities, and airports.

            There are four major cities in Baja California, ranging from Mexicali in the desert to Ensenada on the Pacific Ocean.

Mexicali

            Mexicali is the state’s capital and is fast becoming one of Mexico’s most industrialized cities. It has a population of approximately one million that grows 2.9 percent annually, due to migration from the interior of Mexico. It has the second largest concentration of maquilas in Baja California, with 135 plants, aside from the traditional local industry that had developed for decades. This industry employs approximately 55,000 people.

            Since NAFTA, Mexicali’s maquila industry has grown nearly 40 percent. It has 10 modern industrial parks, and it is fast turning into the top choice of manufacturers looking for destinations for large maquiladoras, including Acer, Daewoo, NEG, Mag Technologies, Sony, Kenworth, Allied Signal, LG Electronics, Nestle, Rockwell, and Black and Decker, among others.

            Mexicali’s maquila growth has mirrored and fed off the electronics industry in the San Diego/Tijuana region, driven in large part by Asian companies. Several Asian manufacturers have their plants in the city. Mexicali accounts for approximately 32 percent of Baja California’s business activity and 23 percent of its foreign investment (6 percent of Mexico’s foreign investment). Sixty-five percent of Mexicali’s maquilas are owned by U.S. investors. The remaining 35 percent are: Japanese, Korean, Taiwanese, Chinese, French, and Mexican. The initial plants were manufacturers of medical equipment, textiles and automotive, and now the major plants manufacture electronics components and parts, and computer monitors.

Tijuana

            Tijuana has more maquiladora plants than any other city in the country, with 580, and more than 150,000 workers. Electronics account for 30 percent (directly or indirectly) of the maquilas in the city. A large percentage of the maquilas are firms from Southeast Asia and the United States; among them Sony, Samsung, Sanyo, ADI, Tatung, Mattel and Sharp.

            Tijuana provides an environment for manufacturing and maquila operations. Its experienced, mature industrial work force, low labor cost and easy access to the United States, together with services and facilities available in San Diego have made this city an attractive location for the manufacturing industry.

            The city has a young and growing population, utility and support services, an extensive network of suppliers and more than 30 industrial parks strategically situated to accommodate the manufacturers needs and requirements. Neighboring San Diego complements the formula with an unmatched quality of life, excellent public education, health services, high tech industry and R&D and high quality communications. Together it makes for one of the most competitive regions in the world for strategic investment.

            Tijuana is considered a manufacturing capital with growth potential, competing with highly efficient countries in the field, such as Korea, Taiwan, Malaysia and Singapore.

            Important manufacturing consortiums such as Sony, Samsung, Sanyo, Hyundai, Hitachi, Honeywell, and Matsushita have established operations in Tijuana under the maquiladora concept.

     Tijuana is home to manufacturers from fields as diverse as textiles and garments, toys and sporting goods to auto parts and electronics. Nevertheless, the biggest maquila sectors in Tijuana include electronics, plastic and wood production.

Tecate

            Tecate is one of Baja California’s boom towns, located at the U.S. border, 30 miles east of Tijuana. This center, with a census population of 77,000 but an unofficial count of 132,000 is growing at a 4 percent annual rate. The economy is fueled by 115 maquilas, many of them from the United States, with several more slated to come. In addition to the 10,000 working for the maquilas, there is extensive employment with small industry, craft shops and beer production.

     Considering the great need for infrastructure, the city is considering the possibility of privatizing selected public sectors and major public projects. Among those being planned:

            •Expansion of fire department equipment and facilities.

            •Sewage processing plant and landfill for 130 tons per day.

            •Canalization of eight miles of the Rio Tecate.

            Major improvements have been made to the international port of entry at Tecate. A new, larger and more modern Tecate port of entry was recently dedicated. The new facility has five times as much space as before. The improvements are part of a three-year, $18.8 million construction project to modernize an aging facility built in 1933.

            The two-phase project will provide for safer, more thorough and more efficient processing of the over 1 million vehicles and 2.7 million people who annually cross the border at Tecate.

            The first phase has created a new port facility that will be used to process truck, passenger vehicle and pedestrian traffic. The subsequent phase calls for renovation and upgrading of the old structure by the summer of 2005 to house additional offices, training and conference areas and detention space, officials said. The new facilities, when complete, will total 20,000 square feet, an increase of over 16,000 square feet over the old facility.

Ensenada

            With a population of 369,000 and over 60 percent of the state’s territory, Ensenada is an important economic region in northwest Mexico. Its industry is oriented mostly to commercial fishing, mining and agriculture industries. It has a manufacturing sector of more than 80 firms, most of them oriented to textiles-apparels and food packaging.

            The county has approximately 20,000 miles of coastline, and fisheries is the industry that generates most of the jobs and a considerable amount of revenues. It is based on high market value species such as tuna, lobster, shrimp, sardine, and other fish. The county has three ports: Ensenada (major), El Sauzal, and Isla de Cedros, and they all together account for approximately 7,000 meters of port infrastructure.

            The state’s infrastructure for the processing of fishing products is located in Ensenada, one of the most important in the country, with 11 canning factories for tuna, sardine, and squid and 4 flour reducing plants of fish and seaweed. This industry has a storage capacity of 16,000 tons.

            In addition, Ensenada has abundant reserves of metallic and non-metallic minerals, including precious metals, metals for industrial use, and quarry products. Close to 1,500 kilograms of gold and 10,000 kilograms of silver are mined a year, and 870,000 tons of cement are produced annually.