Maquila Doldrums, Mexican Nightmares

In Chihuahua dependency is measured in 90% figures. When the U.S. economy is booming, that’s good news for this northern border state whose exports and imports are intricately tied to the fortunes of the United States, the world’s largest national economy.

But when bear markets turn bullish, and when insatiable U.S. consumers run out of cash and credit, Chihuahua suffers.

Chihuahua is a maquila state. According to the Center for Economic and Social Information (CIES), a government-affiliated research center, 97% of Chihuahua’s exports and 94% of its imports are related to the maquila industry.

In Mexico, maquilas mean the export of assembled imports, and the sector is officially categorized as the Maquila Export Industry (IME). In other words, maquilas aren’t integrated with the local production but are highly integrated with foreign economies, particularly the United States – which is the source of most of its imports and the destination of most of its exports.

Here are the hard numbers of declining exports and imports in Chihuahua: In the first quarter of 2008, Chihuahua exported $2.9 million in goods, down from $5.1 million in the same period last year. Imports dropped from $4.4 million in 2007 to $2.6 million in the first four months of 2008. These are frightening numbers. Especially for a state with various other 90% plus dependencies. Virtually all of Chihuahua’s emigrants head for the United States, and this has resulted in a flood of remittances. But when times are bad in the United States, immigrants stop sending money back home.

Remittances have experienced double-digit growth since the late 1990s, but in 2008 remittances are dropping precipitously. Newly released government figures show that remittances in May dropped 3.4% from May 2007.

Illegal business is a particularly dangerous dependency. More than 90% of the cocaine, heroin, marijuana, and methamphetamines that enter the United States come from or pass through Mexico.

What’s more, the U.S. and Mexican government concur that more than 90% of the illegal weapons entering Mexico and arming the drug cartels come from the United States.

There are no hard numbers, though, about the economic benefits of the illegal drug trade. But it’s clear from a casual look at the new luxury housing and restaurant/nightclub construction in border cities like Juárez and Palomas that drug money is being laundered. Overall, it is estimated that the illegal drug economy in Mexico is immense, dwarfing other economic sectors -- $24-$40 billion.

In Chihuahua, illegal drugs have injected billions into the state economy. But the drug violence that is terrorizing the state is shuttering the tourist trade and turning once-thriving business districts into ghost districts.

Dependency on the U.S. market, whether for legal or illegal consumer goods, is a mixed blessing for the Mexican borderlands.

Photo: Maquila factor/Siglo 21