U.S. Markets closed

McAllen, Texas Helps Bring 'Maquiladoras' Across The Border To Reynosa

FreightWaves

The McAllen Economic Development Corporation (EDC) recently worked with officials in the Mexican city of Reynosa to build two new maquiladoras (also known as maquilas), in addition to a major expansion of an existing one.

The three maquiladoras — Indo-MIM Pvt from India, Delphi Technologies Plc (NYSE: DLPH) from Ireland and Nidec Motor Corp. from Japan — represent around $80 million in investments and potentially 1,000 new jobs in Reynosa, which is connected to McAllen by several international bridges.

Maquiladoras are foreign-owned factories — many of which are in Mexican border towns, that import parts from abroad, and build products made strictly for export. In recent years, many foreign companies opened maquiladoras in Mexico, drawn by cheap wages and lower living costs, and in some cases incentives from local governments.

"We announced that there are three new companies that we have brought into Reynosa," said Keith Patridge, president and CEO of the McAllen Economic Development Corporation during a May 13 radio interview with radio station KURV 710. "Because of the changes in the United States-Mexico-Canada Agreement [USMCA], it creates a very competitive situation for the border locations for manufacturing, just simply because of the flexibility a company has to produce either on the U.S. side or one the Mexican side."

McAllen is a city of 143,000 people located 238 miles south of San Antonio. McAllen, only 11 miles from the border, is a gateway to Mexico with three international crossings in its vicinity— the Pharr-Reynosa International Bridge, the Hidalgo- Reynosa International Bridge and the Anzalduas International Bridge.

Both McAllen and Reynosa have been working together for more than 20 years and their economies are closely intertwined. Both cities are connected by the Pharr-Reynosa International Bridge, the busiest commercial crossing in the Rio Grande Valley.

Southbound truck crossings totaled 50,883 trucks for the month of April, while northbound trucks at the Pharr International Bridge totaled 49,762 trucks. The bridge made $13.56 million in revenue last year.

According to the McAllen EDC, Japan-based Nidec Motor Corp. will expand its current Reynosa maquiladora to 126,000-square feet and 400 new jobs. The company already has 1,000 workers employed in Reynosa. Nidec manufactures motors for cars and electric appliances.

Delphi TechnologiesPlc is investing more than $22 million in its new maquiladora in Reynosa, which will create more than 400 new manufacturing jobs. Dublin, Ireland-based Delphi Technologiesis an auto parts manufacturer that primarily serves the North American market.

Delphi Technologiesalready owns one maquiladora in Reynosa, where more than 100 people work. Delphi Technologiesalso operates six maquiladoras in Ciudad Juarez, Mexico, near the city of El Paso, employing 11,400 workers.

Founded in 1997, Indo-MIM has a global workforce of more than 2,000 employees, with the majority based in India. The company produces precision component parts using metal injection molding (MIM) technology. Indo-MIM's new $25 million maquiladora in Reynosa will create 200 new jobs.

Maki Ortiz Dominguez, the Mayor of Reynosa, said her city of 612,000 people is attractive to investors because of its highly skilled labor force and its geographic location. Reynosa is located 9 miles from the United States-Mexico border, and 22 miles from McAllen.

"New maquilas are coming, we will have a maquila that will be dedicated to the construction of advanced internal combustion systems and will be an investment worth more than $27 million for the city," Dominguez said in a release. "We will continue to work very hard so that more and more companies will come and we will generate more and more jobs in the manufacturing industry."

Patridge said even though the USMCA has not been ratified yet, it is already playing a part in affecting cross-border markets. President Donald Trump and leaders from Mexico and Canada signed the agreement on November 30, 2018. It is supposed to replace the North American Free Trade Agreement, which was established in 1994.

Some of the major provisions in the new USMCA, particularly in the automotive sector, require 40 percent of the value of the vehicle to be produced in a plant that pays at least $16 an hour plus benefits, Patridge said.

"USMCA is also changing the regional value content, which means that in order for a vehicle to be considered North American, 75 percent of the content must be made in North America," Patridge said. "There are a lot of opportunities and we feel like that if USMCA finally gets ratified by the three legislatures, that it is going to just blow things up down here; things are going to take off again."

The USMCA still must be ratified by the federal legislatures of Canada, Mexico and the United States. As a result, it would not go into effect until 2020 at the earliest.

Image sourced from Pixabay

See more from Benzinga

© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.