Paving the Way.

Infrastructure pays off for southeastern Mexican state.

YUCATAN HAS ALWAYS BEEN A defiant Mexican state, not unlike Texas in the United States. So renegade is the southeastern state, in fact, that it refers to itself as a "republic." But it is more than bravado that has carried it to economic good times.

About four years ago, the government of Yucatan recognized it was in trouble. Tourist dollars pouring into Cancun and the so-called Mayan Riviera bypassed Yucatan, and underemployment was a thorny problem. The solution: infrastructure.

"The Yucatan government has invested huge sums in developing transportation infrastructure, which includes airport expansion, road development and modernization of Puerto Progreso," says local businessman Raul Chan.

That investment is paying off. Puerto Progreso recently completed a US$120 million redevelopment project and now can now accept cruise liners and container ships with a draft of 36 feet. The port also sports a new 100-acre container facility capable of handling 2,500 containers--an important addition considering that container traffic has surged from 14,000 twenty-foot equivalent units (TEUs) in 1996 to 62,000 in 2000. It is expected to jump to 166,000 TEUs by 2004.

Some 36 kilometers up a modern highway to Merida, the spiffed-up port joins a new airport. All three have contributed to the burgeoning of the state's maquilas, or in-bond assembly plants. Today, Yucatan state boasts more than 33,000 maquiladora jobs, compared with 6,200 six years ago.

"Last year Osh Kosh B' Gosh, Stein Seal and SML Labels set up base in Merida with investments totaling $170 million," says Roberto Ponce, vice president of Yucatan Industrial Parks, a full service support organization for industrial startups. Precision Castparts Corporation, which manufactures airplane engines and turbines, recently launched an $80 million investment that will employ 1,800 people. He says an assembly operation can be up and running within four months after the contracts are signed.

These new recruits join a host of well-known textile manufacturers, including Maidenform, Sara Lee, Wrangler, Levi Strauss, Polo Ralph Lauren, Coach, Eddie Bauer, Liz Claiborne and Gap, which also owns Banana Republic.

State promo material also touts worker skills it attributes to the region's Mayan heritage. "The native Yucatecan excels in traditional crafts. Manual dexterity. An eye for detail. Patience to concentrate on parts of the whole," according to a pamphlet titled Yucatan--The New Frontier for Business.

"The major attraction to us was the work force. The women come with excellent manual skills that we need in clothing manufacture, learned in their homes from sewing beautiful huipiles," says Fabia Atti, of Italian apparel-maker La Perla Industries, referring to hand-crafted Mexican blouses. Stein Seal and Falco Electronics say they were also attracted by the tech skills among available graduates from Merida's universities and colleges.

La Perla's Atti says the worker turnover--or lack of it--is also a plus in Yucatan. "Ours is less than 2%, which has meant great savings on recruitment and training," Atti explains.

Bottom line. Overall, Yucatan's production costs are approximately 20% below those in Central America. Industrial property costs--both leasing and purchasing--also are significantly lower than other areas, Ponce says. In Merida, for example, lease rates run $4 to $4.24 per square foot. That compares to border-area rates of $4.40 to $5.80 per square foot. Real estate for purchase runs about 20% below that in other assembly plant areas. Osh Kosh B'Gosh moved its manufacturing plant from Honduras to Merida for those reasons.

Labor costs also stay low because the assembly plants have kept union organizers out. Government promotional material says that 90% of maquiladoras are not unionized.

Managers at locals maquilas also say quality of life for Yucatan workers and managers is better than that of their counterparts at the U.S.-Mexican border. David Alpfzar Carrillo, looking up from a scanning electron microscope, smilingly states, "Life's just great, perfect!"

Alpizar, production manager for a U.S. dental component manufacturer Ormex, says he heads to a wide sand beach with his children when he's finished work.

"I'm not stranded in a polluted border town surrounded by desert," he says. "Plus work's a breeze here: good facilities, good labor pool, no unions. The whole maquiladora infrastructure is in place."

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