Yucatan World Class Labor At $3.00 USD Per Day
Yucatan, Mexico -- My mission...to explore the Yucatan to discover business opportunities for trade, manufacturing, and joint ventures. I was to be the liaison between the Harrison County Economic Development Commission (Mississippi) and the equivalent entity of the state of Yucatan, Dirrecion de Promocion Industrial. The plan was to develop a data base of Mexican companies and their products, as well as, investment opportunities in the three states that make up the Yucatan peninsula -- Quintana Roo, Campeche, and Yucatan. The mission was successful in that I discovered about 250 companies in the 3 states that are interested in pursuing international commerce or actively seeking joint venture partners.
While I had visited the region before and was well aware of the warmth of the people, I was less informed concerning the quality of the products and the labor force. More than once, I have used the analogy of the stereotypical view of Japanese products in the 1960's to describe the situation in the Yucatan. Unfortunately, I think most Americans believe that Mexican-made products are not up to speed. The truth is, many Mexican-made products can be very competitive from a quality standpoint. Certainly, if Mexican quality is able to sneak up on American industry as the Japanese did, now is the time to locate in the Yucatan -- many American, Asian, and European companies already have.
Locating in the Yucatan can be a very pleasant experience. The industrial center of the peninsula is Merida, capital city of the state of Yucatan. In the mid-1800's, John L. Stephens in Incidents of Travel in Central America, Chiapas and Yucatan wrote about Merida and its inhabitants: "No place had yet made so agreeable a first impression...we felt as if by accident we had fallen upon a European city...we saw many persons who in appearance and manner would do credit to any society..." In my opinion, he much understated the qualities of the city and the people.
Merida became an industrial center because of the production of henequen, used in making rope, which was exported from the Port of Progreso, about 20 miles from Merida. Many fortunes were made in the henequen industry and incredibly beautiful haciendas in the country and elegant homes in the city are testimony to this wealth. However, the introduction of nylon proved to be disastrous to the henequen industry. While henequen is still grown and has commercial use for carpets and cloth sacks, the heyday is over.
Yucatecans are an industrious group and the decline of the henequen industry only pushed them in another direction. As a result, Merida has become a growing industrial center. With the passage of NAFTA and its strategic location, more growth is inevitable.
BUSINESS AND SOCIAL CULTUREThe social fabric of the Yucatan is an intriguing mix of Mayan and European cultures that translate into a strong work ethic. Coupling the work ethic with intelligence and a high literacy rate against a backdrop of a pervasive warmth of personality makes for a unique environment that enables pleasantness and productivity to co-exist as it did in this country in the 1950's.
Examples of the 1950's style pleasantness: It is not unusual to find neighbors gathered in their front yards talking and joking at night. One evening I was seeking bandaids in a neighborhood pharmacy and could not remember the Spanish word for bandaids. No one in the pharmacy spoke English, but everyone took the time to help me. Once I located a box of bandaids, the customers and the clerk went out of their way to explain if I only needed one or two, they could be bought separately from behind the counter, thus saving several pesos.
While in some ways a 1950's ambience exists, it does so in the midst of a sophisticated culture. Merida is the home to 3 universities with all the attendant cultural activities -- theater, musical events, museums, etc. Also, there are several 4-star hotels with international name recognition such as Hyatt and Fiesta Americana.
With respect to quality, there are several manufacturing facilities that have achieved ISO 9000 certification. Also, one local manufacturer that supplies GM has won an International Quality Award that was competitively earned.
All of this has not gone unnoticed. There is a growing community of American expatriates in Merida. While many of these expatriates have moved to Merida to retire, there are Americans in business in the Yucatan and have formed their own association to network and assist one another in their commercial ventures.
SPECIFIC BUSINESS ADVANTAGES TO THE YUCATANPerhaps the most striking advantage to conducting business in the Yucatan is the cost of doing business. Examples include the following: building and land costs in a modern industrial park are about $24. per square foot; monthly salaries for plant manager $3000, for production manager $1000, and the DAILY minimum wage is about $3.00.
I conducted a survey of the management of the maquiladoras in Merida for the purpose of discovering the advantages and disadvantages of doing business in the area from the perspective of those already doing business. The five highest ranking factors in terms of advantages were low crime rate, trainability of labor force, lack of labor unions, land or physical plant availability, and the low cost of labor, respectively. It's not surprising that at $3 a day the low cost of labor is considered an advantage.
However, it's not considered the number one advantage! In conversations with management, I discovered that the quality of the labor force and their commitment to the organization reflected through very low turnover rates was a common thread. Quality of the labor force is consistent with ranking "trainability" as the number two advantage. The five greatest disadvantages were considered to be lack of quality banking services, an unfavorable tax policy, lack of a well-developed transportation network, lack of availability of highly skilled labor, and a relatively unstable economy. The lack of highly skilled labor is probably offset by the trainability of the work force and the lack of a well- developed transportation network depends on the manner in which the manufacturer ships. If shipping is by boat or air, there is not a problem; if by truck or rail, there is a need to improve roads and railways.
The primary infrastructure is adequate except for the need to improve roads and railways. At the present time, there is sufficient water and electricity capacities. The port at Progreso is a shallow water port, but ample freighter service is available to U. S. ports in the Gulf of Mexico. The airport has international service and currently handles about 300 flights per week. A new privatized facility at the airport can facilitate shipping, storage, customs, etc. Also, there are four industrial parks in the city -- the newest is on the highway to Progreso.
The advantage of the geographic location is worth mentioning. Not only is Progreso surprisingly close to U. S. ports (about 700 miles to New Orleans), but it is strategically situated for commerce to the Caribbean and Central and South America. Central and South America have burgeoning markets where Mexican products have proved to be very competitive.
Obviously, this area has something going for it -- there are already over 50 maquiladoras there, and more or coming. Products currently produced are mostly those that are labor intensive such as clothing, electronic components, jewelry, carpet, and so forth. Countries from the U. S., Hong Kong, and Europe are there. If you are considering locating overseas, what do these folks know that you don't?
BUSINESS RESOURCESThere are several offices in Merida that can prove helpful to companies considering locating in the Yucatan. First, the equivalent of the states's office of economic development, Direccion de Promocion Industrial, is staffed with a competent group of professionals who speak English and know their way around the business community. The Director, Arturo Lopez, is quite knowledgeable and will accommodate any reasonable request.
CANACINTRA, is the equivalent of an industrial Chamber of Commerce and CANACOME is the equivalent of a Chamber of Commerce for smaller companies. Both offices could prove helpful, depending on specific types of requests.
SECOFI and BANCOMEXT are federal government offices that can also be of some help. The former is the equivalent of the department of commerce and the latter is the federal export bank. BANCOMEXT maintains a database of Mexican companies and their products that they wish to export, as well as Mexican companies seeking joint venture partners.
Finally, do not hesitate to contact me (Gus Gordon) at