Manufacturing Trends 

The El Paso/Santa Teresa region is one of the few areas in the United States that has seen a sustained increase in manufacturing operations. Most of this increase is due to manufacturing and assembly in Mexico that began with the Maquiladora Program and is continuing with NAFTA.

Over $40 billion in merchandise trade crosses the US/Mexico border in this region, annually. There are four international border crossings in this region, three in El Paso and one in Santa Teresa. The Santa Teresa border crossing is the only regional border crossing that is a land crossing instead of a bridge crossing. This advantage allows for easier expansion of the Santa Teresa crossing as commercial traffic grows.

The Maquiladora Program:
The Mexican government began the maquiladora program in the mid¬1960s to increase employment along Mexico’s northern border. The maquiladora program allows companies to incorporate on the Mexican side of the border, import components for assembly or manufacturing, and export them to the US. Duties are paid only on the value added to those goods in Mexico. Tax regulations on maquiladoras are undergoing constant change as they shift in status from special projects to regular Mexican companies.  

The North American Free Trade Agreement (NAFTA):
NAFTA reduces tariffs on goods that originate in Canada, Mexico and the US, when the goods are traded among those countries. NAFTA, enacted January 1, 1994, will be implemented over a fifteen-year period, with more goods becoming duty-free each year.

Peso Devaluation:
While severely hurting retail sales in the border region, the peso devaluation has been very good for manufacturing in Mexico. In December 1994, the peso fell from 3.5 pesos to the dollar to seven. It is currently near 9.5 pesos to the dollar. Correspondingly, Mexican manufacturers have seen their labor bills cut drastically. Although Mexican labor is still more expensive than labor in some Asian countries, Mexico’s higher productivity rates and proximity to the US market bode well for a continued increase in manufacturing.