fbpx

MAQUILADORA INDUSTRY IN SHOCK

In recent days, a labor dispute broke out in the maquiladora industry of Matamoros, Tamaulipas. The conflict originated after the publication of the “Tax Stimulus Decree for the Northern Border Region” issued by the Government of the Republic, whereby the minimum wage in 43 border municipalities would double. Based on this decree, the employees of the maquiladoras demanded a direct salary increase to the 20% tabulator and an annual bonus of 32 thousand pesos.

Of the 42 maquiladoras that went into unemployment last Friday, January 25, 19 of them, to date , have already agreed to increase the salary for workers and grant the deferred bonus in four payments throughout the year. However, there are already three companies that chose to move their operations to other cities because they considered wage demands to be excessive. As a result of the work stoppage and the closure of companies, losses in the city have been reported for more than 100 million dollars since the beginning of the strike.

What are the risks that this labor conflict presents?

First, we must take into account that it is not about union demands, but that the workers were advised by the lawyer Susana Prieto who, it is worth remembering, has already participated in other movements of workers in the northern border of our country . It is she who has become the unofficial spokesperson of the movement and has managed to coordinate workers from various companies, leaving their union representations on the sidelines.

By virtue of the above, there is a high risk of contagion, driven mainly by the activism of the aforementioned lawyer and by social networks. Although some companies have already reached an agreement with their workers, in others negotiations are still taking place. The longer the conflict spreads, the more likely it is that in other municipalities where the decree of fiscal stimulus is applicable, they join the movement. It is worth mentioning that this decree was not aimed at improving the benefits of the workers of the maquiladoras, but to improve the minimum wage; the workers of the maquilas have salaries above the minimum, so they were not part of the target population of this stimulus program.

The communication between workers has managed to overcome the “traditional” mechanisms of negotiation. As mentioned, unions are not playing a leading role in this conflict, which is why some companies have issued communiqués requesting workers to abide by formal negotiation mechanisms. Because several workers refused to follow the formal process of placing the work stoppage, several companies tried to dissuade the movement with the threat of layoffs. However, thanks to social networks and the lawyer Prieto, workers from different maquiladoras managed to stay organized and spread their activities.

In addition to facilitating communication, social networks have served workers to legitimize their demands. Workers from around the world have posted messages of support for the movement in Matamoros.

Second, there is a risk of interruption of disruption in supply chains. Most of the companies in Matamoros are maquiladoras. The maquila is an alternative for manufacturing companies -particularly the United States in the automotive sector- to subcontract operations for the production of intermediate goods. Work stoppages stop the production of these goods, causing delays in delivery times of final products globally. For example, Carlos Rubio, general director of one of the companies that chose to leave Matamoros, declared in an interview the impossibility of guaranteeing delivery of their products to customers.

In many cases, diluting costs implies concentrating risks. To reduce costs, the supply chain tends to expand into locations with greater political risk. In these localities, economic conditions present an opportunity for savings. However, the political conditions present high costs and, if they are not managed, they outweigh the potential savings.

The recommendation is to design a system that helps mitigate the risks that tend to concentrate at only one point in the chain. For example, if a company needs to settle in places of high political risk to keep its costs competitive, it can devote effort to create channels of communication with key political actors in order to mitigate potential hostilities ( as Royal Caribbean did when it decided to settle in Haiti ).

Third, there is a risk of negatively impacting Mexico’s reputation as an investment center. Since its commercial opening with the North American Free Trade Agreement, Mexico has positioned itself as one of the main manufacturing centers worldwide thanks to our geographical location facilitates the integration of global supply chains. Not however the above, the growth prospects of major financial institutions at global and national level have revised down the growth estimate for our country for the coming years. Also, the annual CEO’s survey of PWC, announced in the last edition of the Economic Forum in Davos, Switzerland, indicates that investors have lost interest in doing business in Mexico.

Thus, in the midst of this adverse environment for the Mexican economy, social conflicts and labor only add to the bad image of Mexico before the world. For example, although Tamaulipas concentrates one third of the trade between Mexico and the US. UU., Is the state that lower confidence inspires investors. This distrust is related to the climate of insecurity that the entity has lived for decades. This labor conflict generates greater pressures to the business climate and hinders – even more – the attraction of investments in the state. Given that the maquila industry represents approximately 70% of the Matamoros economy, it is unfortunately – a difficult time for workers and for industry in general.

What is happening in Matamoros is a sample of the political risks that a new administration, at any level of government, generates to the productive activity. It also helps us to be aware that programs that theoretically should support investment could end up having opposite results when not all the consequences of its implementation are studied or the pulse or social feeling of the target population of the programs is measured.

On the other hand, we see how the lack of actors who take responsibility for the labor conflict has allowed it to grow. Thus, one of the states that could have the greatest opportunities to trade with the United States is, in turn, the state that possibly redefines labor policy in Mexico or, at least, in the border area.

 

Political Risks can help your company is prepared to face conflicts such as the one described here, write to info@riesgospoliticos.com.mx to provide personalized advice.

 

Photo by Christopher Burns on Unsplash

Follow by Email
Twitter
Visit Us
Follow Me
LinkedIn
Share

Leave a Reply