Houston Chronicle | Jan. 31, 2009
Small Mexican towns hurt as global economy goes south
By DUDLEY ALTHAUS
The impact has been largely positive, villagers say. But now amid the worldwide economic slump, many in Los Rodriguez and communities like it across Mexico that have heavily invested in trade with the United States are starting to feel - and fear - globalization’s sting.
The crisis “is going to hit us, and it’s going to hit us hard,” Guillermo Ortiz, the president of Mexico’s central bank, warned last week, revising previous sunny assurances about Mexico’s prospects.
Few places seem more exposed to the downturn than Los Rodriguez, a tumble of small concrete houses, dirt streets and dusty sports fields clinging to the foothills of central Guanajuato state.
Its future seemed secure in 1994 after Mexico, the United States and Canada signed the North American Free Trade Agreement. GM built a sprawling assembly plant on fields where Los Rodriguez’s farmers had grazed livestock and tended corn and bean crops for decades.
With more than 2,500 employees, the plant produces Chevrolet Suburbans, GMC Yukons and Cadillac Escalades, primarily for export north. More than 70 other factories, mostly GM suppliers, emerged in the area. Altogether, the plants employ 15,000 people.
Though wages remained lower compared to U.S. factory labor - many assembly-line workers here earn about $100 a week, locals say - the factories meant steady work and guaranteed pay in an area where both were in short supply.
“We all depend upon General Motors in one way or the other,” said Ramon Aviñ a, who tends a small government-owned grocery on Los Rodriguez’s dirt-and-gravel main street. “It is the engine for the whole state.”
So local nerves started twitching last summer when GM’s SUV sales dived amid spikes in U.S. gasoline prices. The General Motors plant and its feeder factories began slowing production and laid off as many as 1,000 workers. News last fall of GM’s possible bankruptcy fueled speculation here that the plant might close for good.
“When the rumors were that it was going to close, people were terrified,” said Aviñ a, 56. “Because there is nothing else to do here.”
No place to go for work
In years past when family purses grew light, villagers would slip across the U.S. border illegally to waiting construction jobs in Texas, California and elsewhere. But the border barriers have escalated, smugglers fees have risen and waiting jobs have evaporated.
“You have to cross the desert,” said Daniel Rodriguez, 26, referring to the wasteland north of the Arizona border where hundreds have died of exposure. “But now there’s no work there, and there’s no work here.”
Rodriguez came home at Christmas after spending a year installing dry wall in Phoenix. The work paid $20 an hour when housing was booming, he said, then $12 an hour when construction slowed. Finally, the work played out.
Now Rodriguez has joined the dozens of idle young men who lounge in the shade of buildings along his town’s gritty main street, sullenly watching the goats and cattle being herded past and the buses picking up factory workers for the night shift.
“What else can we do?” asked Juan Jose Perez, 46, who said he’s been idle since losing a $75-a-week assembly-line job at a GM supplier last year. “We can look for work, but there isn’t any. And now if General Motors is finished, everything is finished.”
General Motors is hardly finished. But there’s little doubt its business model is vexed here, at least for now. The company produced more than 500,000 vehicles in Mexico last year - about one-quarter of Mexico’s total automobile production - and exported 75 percent of them.
Other car makers are equally affected. Volkswagen last week laid off 800 of its 9,000 workers in Puebla, east of Mexico City. And Toyota furloughed a Tijuana factory that assembles pickups.
With phalanxes of unsold vehicles tightly packed into the fields behind it, the GM plant shut down for several weeks in December. Another two-week shutdown is planned for this month.
“We run the same risks as do the United States and the global economy,” said Miguel Angel Gonzalez, economic development director of Silao, the city and county to which Los Rodriguez belongs. “These are tough times.”
Jobless rate soars
Mexico’s economy is tightly bound to America’s. U.S. consumers buy 80 percent of Mexico’s exports, and nearly all of this country’s foreign oil shipments go to the U.S. as well, passing through Houston and other Gulf Coast ports. The $25 billion that Mexicans sent home from the U.S. last year sustains many of Mexico’s poorer families.
But the economic downturn that has seized the United States and other countries will wipe out as many as 340,000 Mexican jobs this year, the central bank estimates, atop the more than 400,000 that disappeared last year. That will push Mexico’s official unemployment rate to around 5 percent of its labor force of 55 million. (Many critics argue the government undercounts the jobless and that the real rate runs much higher.)
Hoping to stoke optimism, President Felipe Calderon and his top economic aides have predicted that Mexico will weather the downturn relatively well. Policies credited by economists with cutting back debt and tamping inflation have created a healthy public balance sheet, meaning the government has money for public works projects and other stimulus plans. Mexico locked in a $70-a-barrel price for its oil exports this year, nearly double what the market pays now.
Hopes on Obama policy
Fear feeds failure by “inhibiting the decisions of economic actors,” Calderon said last week in Davos, Switzerland, where he joined other government and business leaders to debate the crisis. “Investment decisions get delayed, consumption decisions get delayed.”
Calderon may be right. But many in Los Rodriguez and other Mexican towns are pinning their hopes on President Barack Obama’s ability to pull the American economy back from the edge.
“If the United States is good, we are going to be good,” said Gonzalez, the local development official. “We are betting on that.”