BUSINESS SECTION

Mexican Maquiladora Industry fears CAFTA will hurt – textiles the most

August 18, 2005

Mexico's assembly-for-export industry, which has struggled to compete with China, will likely be hurt further by the proposed Central American Free Trade Agreement, officials said Wednesday.

Enrique Castro, president of Mexico's maquiladora association, said the new trade agreement still awaiting final approval would likely affect Mexico's textile industry the most.

Some companies may prefer to move their factories to Central America, which generally has cheaper labor than Mexico and a growing clothing industry, he said at a news conference.

"These are emerging nations that have a great need to develop," Castro said.

The trade pact which includes the United States, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic would eliminate trade barriers and open the region wider to U.S. goods and services. It would also lower obstacles to investment and strengthen protections for intellectual property.

While the agreement was recently passed by the U.S. Congress and signed by U.S. President George W. Bush, it is still awaiting approval by congresses in Costa Rica, Nicaragua and the Dominican Republic.

The North American Free Trade Agreement which includes the United States, Mexico and Canada, and began in 1994 boosted industry and wages in Mexico, especially along the U.S.-Mexico border. But Mexico has struggled to compete with developing powerhouses like China in recent years.

Castro said Mexico has already lost some investment to Central America, which offers "more simple models and mechanisms and better incentives" to investors.

Tomás Mena, vice president of the maquiladora association, said Mexico will have to become more competitive and explore new areas of industry, like manufacturing plane parts.

Still, Mexico's export industry was doing well, officials said. Mena said that halfway through 2005, Mexico has exported US45.45 billion worth of goods, an increase of 9.18 percent over the same period last year.

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