Invest in ‘the world’s most violent city’

Jose Armendariz Bailon represents factory owners and he says business is doing quite well [Chris Arsenault/Al Jazeera]

JUAREZ – Despite frequent beheadings, public shoot-outs between rival drug gangs and widespread police corruption, Jose Armendariz Bailon thinks Juarez is a great place to invest.

As chairman of the Maquiladoras Association (AMAC) in Juarez, Mexico, Bailon is responsible for drawing manufacturing investment to the border city which has been rocked by violence between warring drug cartels battling for trafficking routes to the US.  

“There is a certain fear from investors,” Bailon says during an interview in a board room at the offices of the maquiladora association. “But they [investors] see the other strengths we have, so investment hasn’t been reduced.”

Recorded homicides in the city of about 1.5 million surpassed 3,000 in 2010, a level roughly equivalent to that in a war zone. Escalating violence means 2011 is likely to be even worse.

Investment rises with violence

Remarkably, investment has actually increased slightly in Juarez in the last year, even as the body count rises.

There are some 330 factories, or maquiladoras, in Juarez directly employing about 187,000 workers, Bailon says. While the industry was hit hard by the global recession of 2008 and forced to lay off workers, growth rebounded to around five per cent in 2010, despite violence.

Some 24,000 jobs were created in Juarez between June 2009 and July 2010, according to statistcs from the Mexican Social Security Institute. Factories in Juarez produce cars, electronics, chemicals and other labour intensive manufactured goods for the US market. Workers in the factories usually earn less than $100 per week in a city where prices for basic goods are not much lower than the US.

“Right now, we are actually improving in the industrial field , it is easy to export to the US and we have qualified manufacturers,” says Adolfo Hernandez Ruiz, president of the National Chamber of Transformation Industries, a business lobby group. “Foreign investors are concerned about violence, it is a topic that always comes up. It is a big problem, I don’t hide this fact.”

While factory investment increases, small business owners are leaving the city due to violence and demands for extortion payments [Chris Arsenault/Al Jazeera]

A 2009 study from the Mexican non-profit Citizen Council for Public Security and Justice found that Juarez was the most dangerous city in the world, although other studies, including one from Foreign Policy magazine, have come to different conclusions. Critics of the Mexican study say cities including Mogadishu, the Somali capital, and parts of rural Afghanistan and Sudan are more violent, but lack an effective central government to keep statistics on the dead.  

“Juarez deserves the title of most dangerous city in the world not only for its homicide rate” but also because it is “suffering very high numbers of other violent crimes,” the Citizen Council stated in a January 2009 report.

While investment increases in low wage assembly plants, drug violence is hurting small business. Burned out husks of night-clubs and restaurants, where owners refused to pay “protection money” to gangs, can be seen across Juarez. Other small entrepreneurs simply fled.

”Race to the bottom”

Much of the city’s success as a manufacturing hub is linked to its proximity to the US, the world’s largest market, and low wages paid in the city.

“Most companies who invest here are attracted by NAFTA [the North American Free Trade Agreement],” which allows most goods manufactured in Mexico to enter the US without tariffs, says Ruiz, the business lobbyist. About 80 per cent of Mexico’s exports are destined for the US.

Critics say NAFTA created a “race to the bottom”, allowing companies to outsource production to Mexico from the US and Canada where wages are higher, benefiting capital at the expense of labour.  

“China has been investing here, because we are closer to the US,” Ruiz says during an interview at his spacious office. There were no papers on his big wooden desk and the office did not have a computer.

Today, average monthly wages in Mexico are lower than China, which is considered the “world”s factory”. Juarez-El Paso Now, a glossy trade magazine showcasing the benefits of investing in the city, says the average monthly salary in Mexico was $372 in 2009, compared with $379 in China, $961 in Turkey and $2,955 in the US.

Factories are hiring in Juarez, but critics say the wages are too low [Chris Arsenault/Al Jazeera]

While wages are low, a decent hotel in Juarez actually cost me more than in El Paso, on the US side of the border. Gasoline is also more expensive in Juarez than in the US, although food is somewhat cheaper on the Mexican side. Still, low wages in Juarez are not balanced with lower prices.

Gustavo Calderon Rodriguez, a professor of economics at the Autonomous University of Chihuahua in Juarez, thinks there is a link between low wages and violence in the city. “There cannot be social stability without financial stability,” he says during an interview in a university classroom.

“People making low wages look to the informal economy and illicit activity like drug distribution,” he says. “Free trade has led to a major concentration of wealth in the hands of a small group. I wouldn”t question the neoliberal model if it created high salary jobs, but in real terms, these are jobs with very low salaries.” 

But Bailon, from the factory owners association, defends the low wages paid to workers. “Once workers start in the industry, they start their growth. They can achieve training, education and an increase in salary.”   

There is no doubt that NAFTA increased trade flows and employment in border cities like Juarez. But between 1940 and 1982, when the state intervened forcefully in the market, Mexico’s economy grew about 6.5 per cent per year, says Rodriguez, the economist.

Critics say this period was defined by protectionism and waste, as local industrialists could manufacture second rate products without outside competition.  

Workers’ rights?

The vast majority of manufacturing plants in Juarez are not unionised. Plants are often subcontractors for other manufacturers, so if workers were to organise, production contracts would simply be changed to a non-union firm.  

“Right now labour rights are not a priority,” says Elizabeth Avalos of the Centro de Estudios y Taller Laboral (CETLAC), a workers rights centre in Juarez. “Workers fear that if they complain about anything they will lose their jobs or be thrown to the assassins.”

A climate of impunity in the city, where few trust the police or army, allows the rich to abuse the poor, workers rights activists say. More than 800 women, many of whom worked in the factories, have disappeared or been murdered since 1993.

Despite widespread violence and critiques of the economic policies practiced in the city, Ernesto Cordero, Mexico’s finance minister, expects the economy to expand up to five per cent in 2011, following five and a half per cent growth last year.

Bailon and Ruiz, the business leaders, both support the Mexican president’s decision to declare all-out war on drug gangs in December 2006.

“I hope the problem will be at least halfway solved in the next five years, if not 100 per cent,” Ruiz says, adding that he believes Mexico has been paying for someone else’s crisis. “We are the least guilty of this problem,” he says of drug dealing. “We don’t produce drugs, we are just a transit route. We are paying a high price for other countries that have more [drug] consumers.”

As our interview at the Maquilladora Association concludes, Jose Armendariz Bailon poses for a photo and invites me out for tequila. “It isn”t really that bad here; I go out without protection,” he says with a jovial grin.

“Really,” I respond. “In the last three days, I have witnessed three shootings, including the aftermath of a battle with automatic weapons at a shopping mall, where a police officer was killed. At another point, a man was left dead on the sidewalk, with brains pouring from his skull. Another man was beheaded, and his body parts strewn about a suburban field.”  

“Oh,” he says, grimacing, when my experiences are relayed. “That is terrible.”

Follow Chris Arsenault On Twitter: @AJEchris