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Maquila executive talks border bottlenecks

Karla Salinas | 26.11.2014

Peering through the border fence into Mexico, where the fence cuts through Santa Teresa, you cannot miss the massive Foxconn factory complex.

Peering through the border fence into Mexico, where the fence cuts through Santa Teresa, you cannot miss the massive Foxconn factory complex.

One of the largest maquiladora’s on the U.S.-Mexico border, it looks like an industrial oasis in a sea of sand. It is located roughly 15 miles west of Downtown El Paso in San Jerónimo, Mexico, within walking distance of the border.

Yet delivering a shipment of its finished computers to the United States, navigating customs and the border, takes as many as eight steps, said Francisco Uranga, who heads the company’s business operations in Latin America.

It takes about two steps for the company to bring a container of raw materials from a free trade zone in Asia to Mexico, Uranga said, speaking to members of the Rio Grande Economics Association on Wednesday at the club’s monthly luncheon.

“What’s killing us is the process to cross the border,” he said.

Foxconn, the Taiwanese electronics giant that employs 1.3-million people worldwide, is better known by its customers, including Apple, Dell, HP, Cisco and Nintendo.

It brought in revenues of more than $130 billion in 2013, making it larger than most of its customers.

It employs 8,600 people at its factory in San Jerónimo, Mexico, manufacturing desktop and notebook computers for Dell and HP – as many as 45,000 units per day, according to Uranga.

The region is ideal for manufacturing, he said. It has all the components needed: water, energy, labor, infrastructure and logistics.

“We could literally be the most efficient border crossing, the most efficient manufacturing site, along the entire border,” said Uranga, who prefers the nickname “Pancho.”

But there are a number of bottlenecks, he said, that are holding back the maquiladora industry and U.S.-Mexico trade, and the region needs to work better together to ease those bottlenecks.

More than a year ago, the U.S. and Mexican governments entered into an agreement to establish a pilot project that would set up lanes for precleared containers heading north, so that manufacturers could avoid long lines for customs at the border.

Three border towns would participate: Otay Mesa in California, Laredo in Texas and San Jerónimo where Foxconn is located. But the program has stalled and has not moved forward in San Jerónimo.

One hurdle, Uranga said, is the program involves U.S. Customs and Border Protection officers working on the Mexico side of the border to preclear shipments at Foxconn. CBP officers carry firearms, which is a touchy subject in Mexico.

“It is so important for us today to push the model,” Uranga said.

A different pilot program started in El Paso earlier this year, he said, has been more successful. In January, the city of El Paso began reimbursing CBP for increased staffing at the city’s ports of entry as part of a $1.5-million partnership between the city and CBP. The goal is to reduce wait times.

“We have not been aggressive to extend those agreements,” Uranga said.

Instead of focusing on trade, he said, the discussion about the border in the United States has been dominated by immigration and security. In Mexico, the discussion is focused on tax and labor reforms.

“The maquiladora concept will be changing dramatically Jan. 1 of this year. Taxes are going to be complicated, and if you don’t certify your operation, almost unbearable,” Uranga said.

Beginning next year, the exemption to the value-added tax, or IVA, for maquiladora companies will be eliminated as part of President Enrique Peña Nieto’s fiscal reforms.

To be exempt from the tax, maquiladora companies must complete a certification process by the end of this year. Otherwise, they will have to start paying a 16-percent tax on the goods they import.

As of two weeks ago, 108 of the 310 maquiladoras in Juárez had received the certification, according to Claudia Troitiño, president of the Juárez Maquiladora Association.

Foxconn first set up operations in Mexico in 2004 when it acquired a Motorola facility in Chihuahua City and, today, it has seven manufacturing facilities in Mexico, including the one in San Jerónimo.

Source: http://www.elpasoinc.com/