South Texas Maquiladora Suppliers Project. INSTITUTION American Association of State Colleges and Universities, Washingtun, D.C.; Texas Univ.-Nn American, Edinburg

DOCUMENT RESUME

ED 316 135 HE 023 248

AUTHOR Patrick, J. Michael TITLE South Texas Maquiladora Suppliers Project. INSTITUTION American Association of State Colleges and Universities, Washingtun, D.C.; Texas Univ.-Nn American, Edinburg. SPONS AGENCY Economic Development Administration (DOC), Washington, D.C.; Small Business Administration, Washington, D.C. PUB DATE 89 NOTE 63p.; This report is one of a group gathered by the AASCU/ERIC Model Programs Inventory Project, funded by the Fund for the Improvement of Postsecondary Education to the American Association of State Colleges and Universities in collaboration with the ERIC Clearinghouse on Higher Education. For related documents, see HE 023 199-261. PUB TYPE Reports - Descriptive (141)

EDRS PRICE MF01/PC03 Plus Postage. DESCRIPTORS *Economic Development; Employment Opportunities; Higher Education; *industrial Training; Industry; International Trade; *Labor Force Development; Modols; Program Descriptions; *School Business Relationship; State Universities; Vocational Edar:e.tion IDENTIFIERS *AASCU ERIC Model Programs Inventory Project; *Pan American University TX; South Texas Maquiladora Suppliers Project

ABSTRACT This project was undertaken to assist South Texas industries in improving export to nearby Mexican maquiladoras (factories). The maquiladora program is based on co-production by two plants under a single management, one on each side of the border. Activities addressed four objectives: (1) to determine the dollar value, quantity, and source of the different component parts, materials, supplies, technical design services, equipment and repair service3, transportation service, brokerage, and other services purchased by plants operating in the Mexican border area (2) to determine the potential that South Texas manufacturers, wholesalers, and service companies from Brownsville to Laredo have for supplying maquiladoras with parts, materials, and services and the problems to be overcome in becoming suppliers;(3) to develop a computerized database for matching South Texas manufacturers with maquiladoras; and (4) to determine the general feasibility of establishing one or more business incubators to assist development of a South Texas maquiladora supply industry. Based on results of the study, it was recommended that a task force of representatives from the South Texas manufacturing community and the maquiladora industry, community leaders, public officials, educational leaders, and state and federal agency officials be established to develop and support six specific initiatives for information gathering and dissemination, coordination, and direct technical assistance. (MSE) V111011011111111MOMPIIIIMIEwm0.1.mtli 41

SOUTHTEXAS MAQUILADORA SUPPLIERSPROJECT

Center for Entrepreneurshipand Economic School of Development BusinessAdministration PanAmericanUniversity

J. MichaelPatrick,Ph.D. Director

Volume1

February1989

This Reportwas Prepared Underan Award fromthe U.S. Department U.S. 'APARTMENT OF of Commerce Office of Educational EDUCATION "PERMISSION Economic Research and Improvement TO REPRODUCETHIS Development MATERIALHAS BEEN Administration EDUCATIONAL RESOURCESINFORMATION GRANTED BY CENTER (ERIC) 1.1.7'4 J. Michael document hes been reproducedas received from the personor organization Patrick originating it [I Minor changes have beenmade to Improve BEST COPY AVAILABLE reproduction quality. Fonts of view or opinions slatedIn this dott TO THE ment do not necessarilyrepresent official EDUCATIONAL OERI position or policy. INFORMATION RESOURCES CENTEP (ERIC)." 2 AASCU/ERIC Model Programs Inventory Project

The AASCU/ERIC Model Programs Inventory is a two-year project seeking to establish and test a model system for collecting and disseminating information on model programs at AASCU-member institutions- -375 of the public four-year colleges and universities in the United States.

The four objectives of the project are:

o To increase the information on model programs available to all institutions through the ERIC system

o To encourage the use of the ERIC system by .AASCU institutions

o To improve AASCU's ability to know about, and share information on, activities at member institutions, and

o To test a model for collaboration with ERIC that other national organizations might adopt.

The AASCU/ERIC Model Programs Inventory Project is funded with a grant from the Fund for the Improvement of Postsecondary Education to the American Association of State Colleges and Universities, in collaboration with the ERIC Clearinghouse on Higher Educationat The George Washington University.

BEST COPY AVAILABLE

3 EXECUTIVE SUMMARY

Maquiladora plants operating betweenMatamoros and Laredo in theMexican State of Nuevo border purchased Tamaulipas alongthe SouthTexas $1.3 billion incomponent partsand materials from suppliers in1987. Less than two were made with companies percent of thepurchases in SouthTexas. The maquiladorashave expressed South Texas based an interest in buyingfrom suppliers. Estimates indicatethat if local manufacturers couldcapture 25 percentof the current parts and materialsmarket over component in the manufacturing 10,000 new jobswould be created and servicesectors. This is good a region thathistorically has news for unemployment rates. suffered the nation'shighest To realize this opportunity howeverwill require Texas manufacturersovercome several that South include inadequate impediments. Problem areas facilitiesandequipment, a skilled workers,poor management shortage of capital to finance practices, andthe need for new business start-upsand expansions. Several joint private and publicsector initiatives undertaken toovercome these problems, could be including effortsto: 1. Continuously update and disseminateinformationon maquiladora supplymarket opportunities, expanding the including data bank initiatedby the Centerfor Entrepreneurship andEconomic Development American University; at Pan

2. Establish oneor more business incubators toassist South Texasmanufacturers establish maquiladora suppliers; themselves as viable

3. Strengthen, coordinate and target theefforts of public and private jobtraining programs, includingTexas Statc Technical Institutes(TSTI), private vocational tech industry councils schools, communitycolleges, and universities tomeet the specific trainedmanpower needs of the maquiladorasuppliers;

4. Improve the generalbusiness South Texas management practicesof manufacturers throughthe expansion business development of at Pan AmericanUniversity and similarprograms in the region; 5. Establish a development fundto meet thespecial financial needsof South Texas establish themselves manufacturers seekingto as maquiladorasuppliers; and 6. Establish a SouthTexas manufacturers bring together association to maquiladoramanagers andarea manufacturers toshare informationon business opportunities. SOUTE: TEXASMAQUILADORA SUPPLIERS PROJECT

STATEMENT OF PROBLEM

The populationof the South Texas bordercounties of Cameron, Hidalgo,Starr, Webb, Willacy and Zapatadcnbled between 1950 and 1980, andis expected to double againby theyear 2000, when the region'spopulation is forecast to exceedone million two hundredthousand. While farming, ranching andcomiercial fishing havehistorically been the economicmainstays ofthe region the decadeof the 1970's saw considerablegrowth in other important income and job producing sectors, including manufacturing,construction,trade, and services. Not withstanding these gains theregion haslong suffered from conditionsof poverty and unemployment. Over the pasttwo decades 30 to40% of South Texas border familieshave lived in poverty,compared to 11to 15 percent for the state. (U.S. Census, 1980)

Unemployment ratesfor the South Texas borderregion have historicallybeen two to three timeshigher thanthe state average withsome counties (Starr) exceeding 40percent. Today, approximately60,00Q South Texas borderresidentsare without work andanother 30,000to 50,000 are underemployed. In March 1988, 62,550workers or 19.4 percent of theregion's laborforce was unemployed according to the TexasEmployment Commission

C (TEC). Thiscompares to an unemployment rateof 8.3 percentfor Texas ani 5.9percent for the U.S. for thesame month.(TEC, 1988).

The SouthTexas borderarea remains underdevelopedcompared to therestofthe State. Poor health, low educational achievementand limited job opportunities characterize the region. In 1980,per capita income was $4,416, 40percent below the stateaverage of $7,205. (U.S. Census,1980) I Today, the region's economy while experiencingsome growth in manufacturingcontinuedto be dominatedbyagriculture, tourism, tradeand services. Jobs are lowpaying andrequire minimum skilllevels. The public sector (local governmentand school districts)employsover 20 percent of the region'slabor force.(TEC, 1988)

Histoically,South Texas border communitieshave enjoyed close economicties withtheir Mexican sister citiesalong the northern borderof the State of Tamaulipas. Mexican workers remain animportantsource of inexpensive labor forTexas border agriculturaland service industries. Mexicanconsumers are important patrons of borderretail establishments, andMexican investors haveplayed a keyrole in real estate andconstruction activities ofthe region. U.S. border residents andtourists are frequent shoppersin Mexican bordercities. South Texasfarmers continue to invest in vegetableproduction and packing operationsalong the Mexican border. U.S. investment, direct andindirect, in Mexico's border manufacturingactivities has grown significaatlyover the past decade.

After a yearof intensive work the TexasBorder Economic Development TaskForce concludedthat:

"The State ofTexas can letting the no longer affordthe luxuryof border stagnateand decline. The cost in misery, in lostopportunities, and human too great. in dollarsand cents issimply

Sharing an internationalboundary has problems. At the same time, intensified the Mexico givesthe border unique, binationalculture, but also not only its development potential. itsuniqueeconomic Lured by lowwages and abundant increasing numbersof manufacturers, energy, showing interest U.S. and foreign, are in the Texas-Mexicoborder as they global competition. The factories seek to meet produce jobs for (maquiladoras) theyestablish Texans and Mexicansalike, and ripples throughoutthe state and generate income nation." (TBEDTask Force,1986)

THE MAQUILADORAPROGRAM

During WorldWar II, Mexican citizenswere admitted intothe United Statesunder the ( agricultural worker)Bracero program to meet seasonal agriculture laborneeds ata time of wartime shortages. One result ofthe program was the attractionof workers and theirfamilies to Mexico's northern border. When the program was terminatedin 1964, approximately;185,000 Mexicans were employedon farmsand ranches inthe United States. Unemployment levels,already high in Mexico's bordercities, became much higherwith the.end of theprogram and thereturn of the Mexicanworkers.

Faced with risingunemployment and a shortage of housingand municipal servicesin its border cities, Mexicoinitiated the Border /ndustrializationProgram (BIP) in 1965 to alleviatethe 3

8 problems. Noting the success that Asiancountries hadin the 1960s in creatingjobs for their growing populationby securing the assembly andprocess work of U.S. firms servingAmerican markets, Mexicanofficials sought to capture similarbenefits by designing theDIP to take advantage of provisionsof the U.S. Tariff Code.

The BIP providesfor the duty free import ofmachinery, equipment andcomponents for processing and/orassembly within designated areas along theU.S.- Mexicoborder and interior sites, providedthat all the imported productsare re- exported. The U.S.Tariff Code(Items 806.3 and 807)permits there- importation ofthe processed and/or assembledproducts intothe U.S. and taxes onlythe value added portion of thegoods, which usually consistsonly of the labor used to producethe product. The basic concept of the DIP,also knownas the maquiladora or "twin-plant"program, is one ofco-production. U.S. firms establish twoplants under a single management,one on each side of the border. The U.S. plant provides thecapital intensive processes of componentmaking and the factory on theMexico side, the labor-intensiveprocessesof assembly. The U.s.plant supplies its Mexicanplant with the component partsand materials and the Mexicanplant returns assembled productsto the U.S.for possible furtherprocessing and shipment to thevarious markets. The maquiladoraprogram is animportant force in the development ofthe border region. In additionto the thousands of jobs theprogram has created for Mexicanworkers, theprogram

9 has become Mexico's secondlargest foreign exchangeearner, behind oil and gas revenues andahead of tourism. The programis also anemployment generator on the Texas sideof the border, where hundredsof jobs havebeen created in suchindustriesas transportation, communications,construction,custom brokerage, and warehousing. In addition, according tomany U.S. firms operating maquilaplantsin Mexico, the programhassaved thousands ofU.S. jobs that would haveotherwise beenlost to foreign competition. The maquila program permitsU.S. firms to reduce theircosts and remain competitive bymoving certain portions of theirproduction activities off-shore. (USITC,1988) The maquiladoraindustry has grown from 12 plantsemploying 3,000 workers in1966 to 1,350 plants employing385,000 in 1988. By the year 2000 theindustry is projected tohave closeto 2,000 plantsemploying three quarters ofa million.(750,000) workers. Over the pastfive years (1983-88) themaquiladora industry growthrate has been phenomenal, thenumber of firmshas increased by115% and employees by 123%.(SCOFI, 1988) Maquiladorasprocessand/or assemble a broad rangeof products rangingfrom automotive equipment toelectricmotors, integrated circuitboards, T.V. components, radioreceivers, tape decks, hospital supplies,garments and food items. Electrical, textile, andtransportation related productsaccount forover 75% of the items handled by theaaquiladoras. The majority (over 80%) of the maquiladoraplants are located alongthe 2,300 mile U.S.-Mexico border from Brownsville, Texas to San Diego,

5 Y;.

10 California. The balance (20%)can be found at different sitesin the interior ofMexico. (SCOFI,1988) In 1987, 54% ofthe maquiladora plants were either100% or majority ownedby foreign companies, while46% were either100% or majority owned byMexican companies. (SCOFI, 1988) The U.S. is the principalforeign country operating maquiladoraplants in Mexico. In recentyears interest has been shown byJapanese, European, Koreanand Taiwanese companies inestablishingco- production operatingalong the U.S.border.

PREVIOUS STUDIES

While little studied, it is believedthat maquiladora operations havemade a significant contribution todevelopment of the borderby linking together the economiesof U.S. and Mexican bordercommunities. Although there is substantialanecdotal evidenceto suggest maquiladorascontribute to economicinterdependencyalong the border, veryfew empirical studies areavailable to validatethe nature and extentof the relationships.(Martinez,1978) Case studies providingfor the general estimation ofthe employment, income andexpenditure impact of the maquiladoraactivityon Texas-Mexico bordercommunities indicate mutualbenefitsare realized bybot'l sides (Mitchell, 1986,Patrick, 1987). Other researchershave used various methods to estimatethe effects of themaquiladoras on border communities. An econometric model using linear regression was employed to

11 estimate themaquiladora industry employment linkages between the cities ofCiudad Juarezand El Paso (Sprinkle,1986). An economic basestudy was utilized to estimatemaquiladorarelated employment, incomeand expenditure multipliers forAqua Prista, Sonora, Mexico.(Ladman, 1972) An input-outputmodel was used to determinethe population, employment andexpenditure impacts of the maquiladoraprogram on Nogales, Sonora (Ayer,1974). An econometricevaluation of employment and retailsales effectson four Texasborder SMSAs has been conducted.(Holden, 1984) Stoddard (1987) found that Mexicanand U.S. border communities benefitedfrom the maquiladoraprogram. The Program provides employmentfor Mexican border residents,generates local revenues from assessedfees to fund public services,encourages localinvestmentin industrial parks andinfrastructure,and spurs growth insuch support industriesas transportationand business services. U.S. border merchants alsobenefit fromthe maquiladoraprogram since a large portion ofmaquiladora worker wages are spent inthe U.S. for clothing, foodand recreation. The programalso stimulates the developmentof localcomponent parts supplyoperations.

The benefitsof the maquiladora program for Mexicohave not gone unquestionedhowever (Grunwald, 1985). Negative effectson Mexico'seconomy and society have beenattributed tothe assembly operations. Three areasof concern have centered on: theabsence of significant linkages ofthe assembly activities tothe Mexican economy, the effects on the labor force in areas- where

1r)ti waquiladorasareconcentrated, and thevulnerability of saquiladoras to swingsin the U.S.and world economies. Arguments have been made that by theirvery nature assembly operations constitutean enclave in the Mexicaneconomy. First, it has been notedthat onlya small percentage of materialsused in the assemblyoperationsIs of Mexicanorigin. Second, althoughmany of the maquiladoraplantsusesophisticated equipment and technologies, there is littletransfer of technology + the rest of the Mexicaneconomy. Third,the employment generatedby the maquiladoras tends not toabsorb the traditionally unemployedand underemployed males but ratheryoung women who have notpreviously been in the labor force. Fourth, it is said thatmaquiladora wages are destined toremain low,not only because ofthe low skill requirements ofassembly operations but also becauseof the effort to keep suchactivities attractive to foreignmanufacturers. Finally, onlya part of thewages paid to maquiladoraworkers are spent on Mexican goods andservices because of the workers and theirfamilies shopacross the border. Thus,it is argued,that income generated by themaquiladora operations of foreign corporations provideonly limited stimulus to the Mexicaneconomy.

Counter argumentsnote that the institutionalframework for maquiladora operationsreinforce their economic isolationfrom the Mexicaneconomy. Overall, while the assertionof lowwages is accurate, itmust be recognized that minimumwage scalesare set and regulatedby the Mexican government not themaquiladora

13 operators. In general, maquiladorasare not permittedto sell in the Mexicanmarketplace but must export their entireproduction. Both U.S. and Mexicanmaquiladora managers report thatattempts to increase theiruse of Mexican components and materialsin their assemblyoperations are fraught withproblems. Mexican suppliers cannotmeet the maquiladora's vigorous qualitycontrol specifications anddelivery schedules, their productioncapacity is insufficientand their prices are too high. Finally, thelow participation of Mexicancapital and entrepreneurship in maquiladora activities limits thetransfer oftechnology from maquiladora operationsto the Mexican economy. Nevertheless, local publicofficials on both sides ofthe borderacknowledge that the maquiladora plants arean important stimulusto their economies.

Maquiladora plant operators and publicofficials however express concern and frustrationover the inadequacyof local infrastructure--streets, international bridges, industrial parks, and utilities that limit thegrowth of themaquiladora industry. In addition, there is growingconcern among Mexican officialsover the lack of adequate housing,health care and transportation services toaccommodate the needsof the rapidly growing maquiladoralabor force.

14 MAQUILADORAS ON THESOUTH TEXAS BORDER

The generalconsensus along the South Texas-Mexicoborder is that the maquiladoraindustry is mutually beneficialto U.S. and Mexican border communities. There is agreementthat efforts should be madeto promote its future growth. Of particular interest to Mexicanand U.S. officials is findingways to bring greater integrationbetween border maquiladoraactivities andthe Mexican and U. S. economies. The recentfocus ofmany U.S. border communitieshas been on the developmentof their local manufacturing baseso as to capture a share of themaquiladora supply market for component parts andmaterials. Maquiladora activity has grown in importancealong the South Texas-Mexico borderover the past decade. Thenumberof maquiladora plantsbetween Brownsville, Tx./Matamoros, Mex.and Laredo, Tx/NuevoLaredo, Mex., increased by over 56percent front 73 in 1978 to114 in 1987. Employment in themaquiladora plants increased byover 100 percent during the same periodfrom 24,000 to 60,000. Preliminary researchresults basedupon interviews with industry representatives andanalysis ofsecondary data indicate thatthe maquiladora plants are responsiblefor over 10,000 U.S.border economy jobs fromBrownsville toLaredo. (Patrick, 1987)

The payroll forthe 60,000 Mexican maquiladora workersin 1987 was estimatedto be $130 million, while the payrollfor U.S. border residentsworking in maquiladora-tied jobswas estimated to be $90million. Mexican maquiladoraworkersspentan

15 estimated $40 million In U.S. border communitiesin 1987, while the combined expenditures of Mexican andU.S. maquiladora-ticd workers generated an estimated $10 insales tax for theState of Texas and $1 million in local sales taxfor South Texasborder communities. (Patrick,1987)

In recent years, faced with increasing international competition,the maquiladoras rave turned theirattention to cutting costs and improving productivity. The focus has beenon reducing inventoryand transportation costs by emphasizingthe replacement of long distance supplierswith localsuppliers. Recent estimates (Patrick, 1987) indicatethat the 114 maquiladora plants operating betweenMatamoros, Mex. andNuevo Laredo, Mex. purchase $1-$3 billion incomponent partsand materials annuallyfrom suppliers located in the midwestand eastern states ofthe U.S. The Vehicle SafetyDivision of TRW, in McAllen, Texas, for example, purchases and maintainsan inventory of 40,000 individual itemson a monthly basis,at a cost of $5 million. Over 95 percent ofthe itemsare purchased from suppliers outside the South Texas region. TRW has set for itself, the goalof eventually purchasing 90percent ormore of its componentparts and materials from local suppliers.(Rankin, 1987) The company is actively pursuing thisgoal by seekingout and working withthe local manufacturerstodevelop their capabilities tomeet strict TRW quality control standards..Many other maquiladora plants in the regionhave expresseda strong interest in buyingfrom local suppliers but indicate theydo not

16 .71

have the personnelnor the time to actively seek out anddevelop local manufacturer/suppliers,as TRW is now.doingon a limited scale. It has been estimated that if SouthTexas manufacturers could capture 25percent of this multi-billion dollarmarket, 7 to 8 thousandnew jobs could be created along the SouthTexas- Mexico border. (Patrick,1987) Establishinga South Texas maquiladora supply industryhas indirect as wellas direct job creation and economicdevelopment benefits. Maquiladora suppliers are manufacturers withmaterial and service needs of their own. Consequently, theopportunity exists to develop a second tier of localfirms to supply locally based maquiladorasuppliers. The economic benefits (i.e., new jobsand expenditures)of developinga second tier of local firms to meet theraw product, materials and service needs of a locallybased maquiladorasupply industry could beconsiderable. In 1987, for example, a newly established.South Texas manufacturer (supplier) of plasticcomponents for severallarge maquiladoras spentover $5.0 millionon raw materials, equipment, Services and supplies. Less than 10% ($50,000)of the material, equipment andother services were purchased fromlocal firms. The firm estimatesthat more than 75% of its futurepurchases could be made with local South Texascompanies. The materials, equipment, andservices purchased range from cuttingtools, grinding wheels and blades, sandpaper, solvents,emery cloth and belts to metal plating, heat treatingand industrial painting.

17 The firm hasplans to increase its sales fivefold, to $20 millionover the next five years, and will likelyspend $15 to $16 millionon raw materials and production services. Based upon job to salesratios for industries producing similarmaterials and servicesacross thestate, the $15 to$16 million in purchases would generate 100 to150 direct jobs. On a larger scale, it is estimated.that if South Texas basedmaquiladora suppliers couldcapture 25 percent of the $1-3 billioncomponent parts and materialsmarket a second tier of firmsemploying 3,500 - 3,750 would be requiredto supply the locally basedmaquiladora supply industry.

The total numberof new jobs, direct andindirect, created as a result ofestablishing a South Texasmaquiladora supply industry thatcaptures 25% of the existing marketwould be in the range of 10,500 to11,750. This is significantin view ofthe fact that theSouth Texas border regionhistorically hasled the nation inunemployment andpoverty.

PROJECT GOAL ANDOBJECTIVES GOAL: To determine the potentialfor developinga South Texas basedmaquiladora supply industry. The establishmentof the industrywould provide for economicdiversificationand new jobs in theregion.

The projectgoal is consistent with thegoals of theU.S. Department ofCommerce, FDA's Austin regionaloffice andarea economicdevelopment effortsby:

13 W4

A. Creating private sector jobs inseverely distressed rural economicarea with high capita income; unemployment andlow per

B. Promoting private and non-federalpublic capital formation andinvestment, economic enhancement of local diversificationand economic developmentcapacity; C. Increasing thecompetitiveness of world economy; U.:;. companies inthe

D. Providingan opportUnity for (component and parts) agri-business equipment manufacturers toconvert over to the productionof non-agriculture and parts. but relatedcomponents

OBJECTIVES: Project activil:ies objectives: sought to achievefour

1. Determine thedollar value,quantity and different component source of the parts, materials,supplies, technical designservices, equipment repair services, and equipment transportation services,brokerage and other servicespurchased by maquiladora in the Mexican plants operating border area andcities of Bravo, Reynosa, Matamoros, Rio Camargo, and NuevoLaredo. 2. Determine the potehtialthat South Texas wholesalers, and manufacturers, service companiesfrom Brownsvilleto Laredo have forsupplying maquiladoras parts, materials with component and services. Identify the problems (i.e.,technical, managerial that South Texas and financial) manufacturers needto overcome inorder to become maquiladorasuppliers. 3. Develop a computerized data base formatching South Texasmanufacturers with supply component maquiladoras to parts, materialsand services. 4. Determine the general feasibilityof establishing more business incubators one or to assist thedevelopment ofa South Texas maquiladorasupply industry.

19 PROJECT METHODOLOGYAND RESULTS Objective 1: Determine the dollarvalue, quantity source of the different and component parts,materials, supplies, technicaldesign services, repair services, equipment and equipment transportation services,brokerage and other servicespurchased by maquiladora the Mexican border plants operatingin area and cities ofMatamoros, RioBravo, Reynosa, Camargo andNuevo Laredo.

The first step in meeting objective1 required compilinga current list of maquiladoras operatingalong the SouthTexas- Mexico border. This was done through consultationwith chambers of commerce, industrialdevelopment foundationsand economic development entities, in SouthTexas as wellas the maquiladora associations inMatamoros, Reynosa, Nuevo Laredo, andMexico's Department of Commercial and IndustrialDevelopment (Secretaria de Comercioy Foments, Industrial). The names and addresses of 114maquiladoras (for1987) were obtained in thisfashion. In addition, informationon the types of productshandled was obtained. Based upon availableproduct information the maquiladora plantswere classified bytwo and four digit SIC codes. The complete listingof the maquiladoras can be found in AppendixA.

20 A breakout ofthe 114 maquiladora plants by locationand SIC code classificationfollows.

Table 1

Maquiladoras BetweenMatamoros and Nuevo Laredo ByLocation, 1987

City Number Percent 1.Matamoros . 55 48% 2.Reynosa - 26 3. 23% Nuevo Laredo - 24 4.Cd. Camargo 21% - 5 4% 5.Cd. Rio Bravo- _i AI Total 114 100%

21 Table 2

MaquiladorasBetween Matamorosand Nuevo Laredo 'By SIC Classification,1987

SIC Classification(Code) Number Percent 1. Electronic & OtherElectrical Equipment &Components (3600) 2. 41 26.0% Fabricated MetalProducts, Except Machinery & Transportation(3400) 14 3. Industrial &Commercial Machinery 9.0% and ComputerEquipment (3500) 4. Transportation 13 8.0% Equipment (3700) 12 5. Measuring, Analyzing& Controlling 7.0% Instruments (3800) 6. Misc. Manufacturing 11 6.5% Industries (3900) 10 7. Rubber & Misc.Plastic Products 6.0% 8. (3000) 9 Leather & LeatherProducts (3100) 6.0% 9. Primary Metal 9 6.0% Products (3300) 7 10. Stone, Clay,Glass & Concrete 4.0% Products (3200) 6 11. Chemical &Allied Products 4.0% (2800) 5 3.0% 12. Apparel &Other FinishedProducts Made from Fabric(2300) 13. Food & Kindred 5 3.0% Products (2000) 5 14. Misc. RepairServices (2600) 3.0% 3 2.0% 15. Furniture& Fixtures(2500) 16. Textile Mill 2 1.0% Products (2200) 2 17. Mining &Quarrying ofNon Metals 1.0% Min., Except Fuel.(1400) 1 18. Lumber & WoodProducts, Except 0.5% Furniture (2500) 19. Paper.& Allied 1 0.5% Products (2600) 1 20. Printing,Publishing & Allied 0.5% Industries(2700) 1 21. BusinessServices (7300) 0.5% 1 0.5% TOTAL 159 100%

The next stepwas to develop a questionnaireto be sentto the maquiladorasasking for informationon the natureof their current supplier relations. That is, what component partsand 17

22 materialswere they purchasing, in what quantitiesand dollar value, and fromwhom. The maquiladoras were asked abouttheir interest in usinglocal suppliers and under whatconditions. They were alsoasked to provide information regardingtheiruse of local servicessuch as transportation, warehousing,equipment repair, businessservices and, in general, the typesof items and materials theybuy from South Texas sources. The questionnaire can be found in AppendixB. The questionnaires were mailed, withthe assistanceof the maquiladoraassociations, to either theplantmanager or purchasing agentof the 114 maquiladoras. The responseto the questionnairewas poor. Although, fortyseven (47) surveyswere returned, themajority contained incomplete information. Follow-upphonecalls produced some information from an additional 25 firms. Owsrall, it was felt that theinformation provided was not adequate to getan accuratemeasure of the size of the maquiladora market. One reason thatmany maquiladoras turned out to bean incomplete source of informationis that they are subsidiariesof large Fortune 500 companies(i.e., Ford,GM, TRW, G.E., Zenithand Sony) and their purchasingdecisionsare made at corporate headquarters locatedelsewhere in theU,$. and not at the local plant. Another reason given by severalplant managers was that such informationwas confidential. Over 50% (40) of the maquiladoras, however, didindicate interest in using local suppliers. While someof the larger maquiladorasindicated theywould like to purchase between25%-

2. 35% of theircomponent parts and materials locally,the smaller maquiladoras indicateda desire to buy up tL 85% (insome cases 100%) locally. The maquiladoras respondingtothesurvey indicated a particular interest in finding reliable local suppliers for:plastics, metal stampings, castings,electronic components,screw machine products, plating, heattreating, and general machiningcapability. After failingto acquire the desired marketopportunity informaticn directlyfrom the maquiladorasseveral indirect optionswere considered. Both the U.S.and MexicanCustoms Services maintainrecords on all merchandise crossingthe border, including maquiladorabound shipments. Preliminary contactwith each sourcerevealed that the Mexican CustomsService in Mexico City would bethe best choice in terms of timeand cost. Volume anddollar value data was obtained fromthe Mexican Customs Serviceon all component parts and materialshipments for the monthsof January,May and September of 1987 boundfor maquiladoraplants operating between Matamoros,Mex. and Nuevo Laredo, Mex.,including Rio Bravo, Reynosa,and Camargo. The data was adjusted for seasonalityand projectedfor the entire year.

Study resultsindicate that in1987 maquiladoraplants between Matamoros,Mex. and Nuevo Laredo, Mex.purchased $1.3 billion incomponents parti and materialsfor processingand/or assembly. Litorallythousands of different typesof itemswere purchased bymaquiladoras.(See Appendix C) Grouping theitems

24 by two-digitSIC Codes permits categorizing theitems into20 groups. Five SIC groups account for85 percentof the total purchases, whileten groups account foe92 percent. The rank order by dollarvalue for the SIC groupsfollows. (Table3)

TABLE 3 Rank Order of Component Partsand Materials By Maquiladoras Purchased Between Matamorosand NuevoLaredo By SIC classification,1987

ANNUAL VALUE RANK CATEGORY (NAME,SIC) (MILLIONS DOLLARS) 1. Electronic andOther Electrical Equipment andComponents, Except 1.6 Computer Equipment(SIC - 3600) $ 816 2. Industrial andCommercial Machinery and ComputerEquipment (SIC - 3500) 112 3. Fabricated MetalProducts, Except Machinery andTransportation Equipment (SIC- 3400) 72 4. Rubber andMiscellaneous Plastics Products (SIC- 3000) 48 5. TransportationEquipment (SIC - 3700) 48 6. Chemical andAllied Products(SIC - 2800). . . 47 7. Measuring, Analyzing,and Controlling Instruments; Photographic,Medical and Optical Goods;Watches and Clocks (SIC - 3800) 42 8. Primary MetalIndustries (SIC - 3300) 36 9. Food and KindredProducts (SIC - 2000) 24 10. Misc. Manufacturing Industries (SIC- 3900). 17 11-20. (All OtherSIC Groups) . 18 TOTAL $1,300

20 Items (componentsparts, materials, etc.) purchasedby the maquiladoras in1987 are listedby 4 digit SIC Codes inAppendix C.

The maquiladorasspentnearly $1 billion in 1987 on electronic andother electrical equipment andcomponents, except computer equipment($816,000,000) and industrial andcommercial machinery andcomputer equipment ($132,000,000). These pufichases represent, closeto 75%of the total purchases madeby the maquiladoras in1987.

The expenditurefigure of $1.3 billion forcomponent parts and materialspurchased is consistent withpreviouslyreported numbers. Mexico'sDepartmentof Commercialand Indust'". -al Development (Secretariade Comercio y Foment° Industrial,SCOFI) reported purchasesof $1.2 billion by themaquiladloras inthe same region in 1986( SCOFI, 1988) For comparative purposes, SCOFIreported total maquiladora purchases ofcomponent partsand materials of $4.2 billionfor 1986 fromMatamoros, Mex. to Tijuana, Mex. Maquiladoras operating alongthe Texas-Mexico border madepurchases of $2.7 billion, or 64%of the total. Maquiladoras inCd.Juarez accounted for approximately 50%of the purchases, the balanceby the maquiladoras operating alongthe South Texas border.(SCOFI), 1988)

1 2 Summary: In 1987, the maquiladora plantsoperatingon the Texas-Mexico borderbetween Matamoros billion on component and NuevoLaredo spent $1.3 parts and materials. Plants imolved assembly and/orprocessing of electronic in the spent in excess equipment andcomponents of $800,000,000on component parts Plantsassembling and materials. industrialandcommercialmachinery $132,000,000, whileplants assembling spent spent $72,000,000. fabricated metalproducts

The level of expenditureson component partsand materials is expected toincrease significantly the number of over the next 3-5years as maquiladora plantsincrease. expressed an interest The maquiladorashave in buying fromlocal suppliers.

Objective 2: Determine the potentialfor South Texas manufacturers, wholesalers and servicecompanies, from Brownsville toLaredo, to supply component parts, maquiladoras with materials andservices. Identify the problems (i.e.,technical, managerial South Texas and financial)that manufacturers needto overcome inorder to become maquiladorasuppliers.

Although the focus of thestudy was on SouthTexas manufacturers,an effort was made to determinethe level of interest that wholesalers and servicecompanies inthe region have for doing businesswith the maquiladoras. Utilizing information fromvarious sources includingchambers ofcommerce, industrial andeconomic development foundations,manufacturing directories andthe State Comptroller of PublicAccounts business franchise list, 303 manufacturers, 211wholesalersand 228 service companieswere identified in the South Texascounties of

or. Cameron, Hidalgo,Starr, Willacyand Webb. Each business was mailed a questionnaireseeking to identify selected characteristicsof their business and determinetheir interest in doingbusiness with the maquiladoraplants in Mexico. 22

27 The surveyquestionnaire forms are contained inAppendix D. The overallresponserate to tle questionnaireswas 29%. The wholesale group had the highestresponse rate- 37%, followed by manufacturers- 30%, and service companies - 21%. (See Table 4)

Table 4

Distribition of SouthTexas Businesses By Economic Sectorand /Amber of Surveys Returned

Econmaic Sector Number of Surveys amber of Surveys Parcent Mailed Out Returned Returned Manufacturers 303 91 Irtbolesalers 211 30% 78 37% Service Companies 221 _AL ItrIAL 742 211_ 217 29%

The individual responses for 217South Texasbusinesses surveyed are containedin AppendixG. The distributionof businesses responding to thesurvey by economic sector, principal productand serviceare provided in Tables 5,6, and7.

28 Table 5

Distribution ofManufacturers ByProduct Product Number Percent Food and Kindred Prdts. 3 Textile MillPrdts. 3% Apparel & Other 1 1% Textile Prd 4 Lumber & OtherWood Prdts. 5% 4 Chemicals & AlliedPrdts. 5k 3 Rubber & Misc.Plastics Prd 3% Stone, Clay & Glass 13 14% Prdts 4 Fabricated MetalPrdts. 5% Machinery, Except 15 16% Electrical 25 Electronic & ElectronicEquip. 27% Paper & Allied Prdts. 4 5% Water Transp. Services 4 5% Transportation Equip. 1 1% 2 Motor Vehicle &Auto Equip 2% Misc. DurableGoods 2. ,2% 1 Misc. BusinessServices 1% Misc. RepairShops 2 2% TOTAL ..../... A.A. 91 100%

Table 6

Distribution ofWholesale Businesses By 2roduct* Product Number Roca* Machine Tools & Supplies 11 Hydraulic & Pnetmatic 14% Supplies 12 Power & Transmission 15% Equip. & Sup. 19 Maintenance, Weir, 23% & Oper. Supplies 24 Industrial & Mill 30% Supplies 11 Semi - finished& Finished Materials 44% Other 2 2% 34 42% * Because severalwholesalers carried nomiber of businesses, more than one productthe when addedup, exceed the actual (78) respondingto the survey. number

2 labia 7

Distribution Of ServiceOcmpanies By Activity

Activity Percent Repair and Rebuilding Services 4 Freight Fbrsarding 8% 16 Custcoi 13rokering 33% 17 Engineering 35% 2 Accounting & Financial 4% Legal 2 4% 2 Ted 'mica' Consultant 4% Other 3 6% ItatiL 41101111111.10 _AL 48 loft

The principalproduct and service categories reportedby the companies surveyedinclude: for manufacturing-machinery, except electrical, 27%;for wholesale- industrial andmill supplies, 44%; and, for service- customer brokering, 35%andfreight forwarding, 33%.

Although thesurvey results indicate that severalwholesale and servicecompanies are already doingsome business with aaquiladorae andothers would like to, the focusof the studywas limited to SouthTexas manufacturers. Time andavailable funds did not permit a more detailedlook at the wholesaler andservice companies. Nevertheless,a separate study of these firmswould be appropriate,since they too can bean importantsource of jobs to the region.

25 Surveyresults indicate that 62% of themanufacturers responding to the surveywere small, employing under 25 employees. Fourteenpercent reportedemploying over 100 employees. (Table 8)

Table 8

Distribution ofManufacturers By Number Of Employees

Number of Employees Number Percent Under 25 25 - 50 56 62% 50 - 100 13 14% 9 Greater than 100 10% TOTAL 13 .141_ 91 100%

The manufacturers reported performinga broad range of industrialprocesses. (Table 9) Product qualitycontrolis critical to securingmaquiladora contracts. Most SouthTexas manufacturers surveyed. appear to havea long way togo in this regard. Fewer than half (45%) reported usingwritten quality controlprocedures. Even fewerreported havingsegregated inspection.areas or utilizing statistical process control procedures. (Table10)

A I

31 Table 9

Distribution ofManufacturers By Processes Performed Process Number Percent Turning Drilling 36 40% Milling 45 49% Boring & Drilling 35 38% Grinding 33 36% Sawing & Cutoff 40 44% Meat Treating 46 51% Welding 10 11% Press Working 45 49% Blow Molding 23 25% Assembly 0 0% Plating 39 43% Inspection & Testing 4 4% Extruding 39 43% Injection Molding 1 1% 7 8%

Table 10

Distribution ofManufacturers By Quality. ControlMeasures

Measures . Number Percent Written QualityControl Procedures Statistical 41 45% Process Control 26 Segregated InspectionArea 29% 14 15%

Basedupon survey information, themanufacturers were classified intothree categories: thosc' doing businesswith aaquiladoras;those with an interest indoing businesswith the maquiladorastand, those with no interest in doingbusiness with the maquiladoras. Table 11 provides a breakout of the manufacturers basedupon this classification. A of the manufacturersarranged by 2and 4 digit SIC Coder, iscontained in Appendix E.

27 Table 11

Distribution ofManufacturers Based Upon PresentRelationship withthe Maquiladoras Classification Number Present Doing Business Interested in Doing 27 30% Business 31 Not interestedin DoingBusiness 34% _21_ 211 TOTAL 91 100%

Of the 58manufacturers that indicated theywere either doing businesswith one or more maquiladorasor were interested in doingbusiness, 43agreed to a plant visit bya manufacturing engineer.

The purposeof the plant visits was toevaluate the firms capability forexpandingor initiating a supplierrelationship with the maquiladoras . The plant evaluations focusedin three areas: adequacy of thefirms' existing facilities andequipment; adequacy of thetechnical knowledge, skilllevels andexperience possessed by thefirms' staff; and adequacy'ofthe firms'general managementcapability. An attempt was also madeto acquire information ina fourth area, the firms'ability toacquire funds for the expansionof facilities, the purchaseof equipment,and operating capital. Table 12 presentsinformation on the currentlevelof business activitythat the 27 South Texas manufacturers identified inthe surveyare doing with the maquiladoras. Total

33 sales for the27firms with the maquiladorasapproached $17 million in1987 and are projected to increase by30% in 1988,to slightly lessthan $22 million.

Distributban of Menzfacturems Hy 'mistrial Categoryand Sales 1987 and 1988

Inizstrial Category Number Of 1987 Sales1988 Sales Accent Change F11/15 (000) (PSI') (000) 1987-88 Machinery, Except Elec. 7 $2,075 $2,739 Paper & Allied Prdts. 5 32% 5,850 7,371 26% Miter & Misc. PlasticPrdts. 5 5,500 7,351 33% Fabricated Metal Prdts 4 80 Lumber & Wood Prdts. 57 (29)% 2 495 Chemicals & Allied 495 0% Prdts. 2 2,338 3,051 Misc. easiness Services 30% 2 WA_ _Ini. _02% !MAL 27 $16,876 $21,935 30%

As a group, the27 firms were found topossess a widerange of specializedmanufacturing expertise thatthe maquiladorasare looking for,including:

Plastic Products: injection molding,vacuum forming, hot stamping, sonicwelding.

Machinery andPrecision Machining: drilling, grinding, milling, baringand heat treating,stamping,pantograph and plasma-arc cuttingmagnafluxing plating heliarc welding and anodizing, and centerlessgrinding. Fabricated Metal Products: rollingbending, shearing, heliarc, tigand mig welding, stamping and swaging,screw machining, jogboring andcan manufacturing.

Electronic Assembly:wave soldering, and simulating. plantronic

29 Several of thefirmspossess specialized equipmentincluding CNC(Computer Numerically Controlled) DRO (Digital Readout) equipment, EDM (Electrical DischargeMachine) and CAD/CAM (Computer AidedDesign and Manufacturing)capabilities.Average production capacity utilization forthe 27 firmswas 43%, ranging from a low of21% to a highof 90%. Although itwas determined that many of the firmshave the necessary facilities,equipment, skilled workers, andexperience to supply the maquiladoras, the majorityface hurdles in converting theirexcess capacity into more maquiladorabusiness. Securing largevolume contracts will requiremajor improfements in areas ofquality controland assurance, deliverytime, and price. To achieve these improvements willrequire inmost cases modifications inexisting facilities and equipment,the adoption of qualitycontrolprograms and improvements in keymanagement areas of costaccounting, financial analyses, procurementand marketing.

Bidding onmaquiladora contracts is very competitive. Frequently onlya few pennies on a per unit jobquote seperate competing bidders. Firms that donot havea good understanding of their costs findthemselves losing contracts or oftenbeing awarded contracts that endup costing them more to meet thanthey can earn.

30 Table 13 presents asummary ofthe resultsof plant visits/evaluationsto 16 South Texas manufacturers that expressed an interestin doing business withthe maquiladoras. The manufacturersfall into five product categories:Chemicals and AlliedProducts; Rubber & MiscellaneousPlasticProducts; Fabricated MetalProducts; Machinery,Except Electrical;and Electrical & ElectronicEquipment. Overall, only31% of the firms were found to haveadequate facilitiesand equipment for producingcomponentpartsand materials forthe maquiladoras, 56%had adequatetechnical knowledge andexperience, and 38% had adequatemanagement skills and systems.(Table 14)

36 Table 13

Distribut.icn ofMisnufachtters By Product Category andSelected Characteristics

Facilities & Equip. Product °stew/ Tach. Skills G. Management hig,E. _Matta Mb. aftidathaSh itigtaift Chstaicals & Allied Prdts. Firm A 35. Rubber & Misc. Plastic Prdts. Firm 8 X Firm C X Firm D X Fabricated Metal Prdts. Firm E x Firm IP x X X X Firm G X X Firm H X X X x x Machinery, acceptElec. Firm I X X Firm J X Firm K X X X X X Firm L X X X Firm M X X X Firm N X X X Electrical & Electronic EcfliP Firm 0 X X X Firm P X X X Table 14

Distributicn ofWaufacturers ay Ant01311131108Measures

& Technical ItEcileige General Management !qui Port & Skills

Number of FirmsAdequate 5 9 6 Marker of FirmInadequate 11 7 8 Percent of FirmsAdequate 31% 56% 38%

In determiningwhether or not a firm had adequatefacilities and equipment considerationwas given to thepresence of such factors as reinforced concrete foundations, industrialpower supply wiring,dock high loading facilities, machineand tool maintenance shops,climatically controlled workenvironments, state of the artequipment and machinery, andquality controland

equipment procedures .

In thearea of technical skills, attentionwas given to the availability of qualified personnelin theareas of engineering, design, machining,tooling, finishing, heat treating,maintenance and qualitycontrol.

The firmswere also evaluated on their generalmanagement practices andcapability in key areas ofplanning, accounting, financial analysis, procurement andmarketing. As evidencedby the evaluations (Table 13), mostof the manufacturers needto make improvements in allareas: facilities

36 and equipment;technical knowledge and skills; and, general management practices.

Financing the expansionof facilities and the purchaseof equipment willalso be a problem for many firms. Not because their businessesdo not have potential, butbecause they donot have aproper business plan, including appropriatemarket information and financial statements(e.g. cashflow, balance sheet, income statement) to present toprospective funding sources.

In mostcases, where new equipment and machineryis to be purchased and expansion is needed, therewill also bea need to improve the knowledge and skills ofthe workforce. A general impediment identifiedby the study to the futuredevelopment ofa South Texasmaquiladora supply industry is theabsence ofan adequately skilledworkforce. Skill shortagesexist in theareas of engineering (mechanical, electrical andchemical),skilled tool and diemakers,and people with experience inplastic injection molding, metal stamping, plating, castings, screw machining, andgeneral machining.

Summary: In 1987, 27 South $16 million Texas manufacturershad sales of with maquiladorae. Although the among South Texas firms interest isstrong to supply maquiladoras,the majority impedimentsincluding inadequate face inadequately trained Facilities andequipment,an workforce, undercapitalization business managementpractices. and poor open the door Overcoming theseproblems will for many SouthTexas maquiladora market. firmsto the growing

34 objective 3: Develop a computerizeddata base for South Texasmanufacturers and matching maquiladoras tosupply for component parts,materials andservices.

In establishinga computerized data base thefirst step taken was toclassify the maquiladoras(114) and SouthTexas manufacturers (91)by two andfour digit SIC (product)Codes. Using SIC Codesas the common denominatora computerprogram was developed to match the maquiladorasand manufacturers. A listing ofthe maquiladoras and SouthTexas manufacturers classified by SICCodes that form the data basecan be found in Appendix F.

Matching maquiladorasand South Texas manufacturersby SIC Codes is justthe startingpoint. Whether thematches leadto actual contractscan only be determined after additionalstudy and negotiationstakes place between the twoparties. Such an endeavor is beyond the scope of thisstudy.

Although only 58 ofthe 91 SouthTexasmanufacturers surveyed indicated an interest in expandingor initiating business activitywith the maquiladoras, all 91firms are included in thedata base.

Summary: A data basethat matches and maquiladoras South Texasmanufacturers by SIC Codeswas established.' matchups have beenidentified. Several potential

40 Objective 4: Determine thegeneral feasibilityof establishingone or more business the development incubators toassist in of a SouthTexas maquiladora industry. supply

Business incubatorsare facilities that provide smallstart- up firms withaffordable and flexiblespace, shared support services andbusiness development services,such asfinancing, marketing andmanagement. There are over 275 incubatorsin the U.S. today helpingyoung businesses survive and grow duringthe start-upperiodwhenthey are mostfinanciallyvulnerable. Manufacturers,research and development firms,and retailand servicecompanies benefitfrom the sheltered and nu ,curing environment ofincubators.

According toNational Business Incubators Association,80 percent of companiesnurtured in incubators survive,as opposed to an 80percent failure rateafter fiveyearsfor small businesses ingeneral. The Association estimates thatby 1991 there will beover 1,000 incubator facilitiesacross the country. Incubatorsestablishedto assist manufacturers provide tenants withfunctional and flexiblespace includingproper power hook-ups andloading docks and stagingareas. Tenants are provided witha wide range of shared servicesthat normally include: administrative and secretarial services; receptionists/answering services; conference rooms; computer resources; word processing; photocopying; A/Vequipment; telecommunicationsequipment and services; and, warehousing, shipping andreceiving.

36 Tenants benefitfrom on-site technicalassistance with engineering, production, and qualitycontrol problemsas well as professionalservicesin the areasofbusinessmanagement, accounting, marketing finance and legal resources. Some incubatorsprovide tenantswith customized job trainingprograms. Incubators have had a significant impacton local economies across the nationthrough the spawning of viablebusiness that createjobs, promote investment, diversifytheeconomy and broaden the taxbase. Incubators have alsoplayed a key rolein technology innovation, development andtransfer. Under present circumstances, theestwIlishment ofone or morebusiness incubatorsto assiststrugglingSouthTexas manufacturers establish themselves asmaquiladora suppliershas considerable merit. C.; the 16 South Texas firms surveyedin this study thatare seeking to establish themselvesas maquiladora suppliers, less than a third were judgedto have adequate facilities andequipment to accomplish theirobjective. Slightly over half had therequired knowledge and skills, whileless than 40 percentoperated with adequate businessmanagement procedures and practices. An incubator could providesubstantial assistance to these firmsand new start-ups. While conducting a de* dled feasibilitystudy to determine the precisedesign that an incubator formaquiladora suppliers should take isbeyond the scope of this study,some general points can be.

42 It would beappropriate to start on a small scalefocusing in thoseareas wheresuccess is likely to occur basedupon current marketdemand conditions and the capabilitypossessed the South Texasmanufacturing community torespond. In terms of demand, areas of plastic injection molding,metal stamping, platingand screw machine operations are the strongest. Presently, in the South Texas manufacturingcommunity there existsconsiderable experience in metalstampingandscrew machining. Although experience in plasticinjection moldingand plating existsto a much lesser degree, qualifiedindividuals from other partsof the country are finding theirway to South Texas seeking to establish themselvesin these fields. In general, theSouth Texas manufacturing communitypossess the basicexperience needed in these fields toget started. What is lackingare the resources necessary to developand establish such an industry. Constraints includethe largeinvestments in facilities andequipment necessary to getstarted. Even small operations willrequire $3-$5 million dollarinvestments during the first fewyears. An adequately trained workforcepresents another problem. Althoughthere are somehighly skilled individualsavailable, eventually hundredswill needtobe trained ifthe businesses are to operateon a viable scale. Finally, being technically competentis notaguarantee to success in businesi. Becoming a maquiladorasupplier isvery

38 competitive. Only those manufacturers thatare on top of all aspectsoftheir businesswill prosper. Cost accounting, inventory controland pricing are criticalareas. Personnel management is important. And perhapsmost importantof all is knowing the conditionand needs of the business andbeing able to communicate this to local banksor out of town venture capitalists. Without adequate financing the businessis sure to fail no matter what the qualityof their product.

Summary:Establishingone or more incubators South Texasmanufacturers has to nurture considerable merit. The idea is particularly attractivein light ofthe successes had around thecountry. incubators have

Conclusions The purpose ofthe study has been to determinethe potential for establishinga South Texas industry to supplymaquiladora along the Texas-Mexicoborder withcomponent parts and materials. Study results confirm that many 'SouthTexas firmsare currently supplyingmaquiladoras and that the opportunityexists to expand the level of businessactivity significantly. In 1987, maquiladoras operating in Mexicancommunities from Matamoros to NuevoLaredo spent an estimated $1.3billion on component parts,materials and other items thatwere supplied almost exclusivelyby sources outside of SouthTexas. Studies estimate thatif South Texas manufacturerscould capture25 percent of this market, over10,000 new jobs,many of a higher skill and highwage nature, would be created inthe South Texas economy. Clearly thatwould be good news to a region that 39

44 historically has sufferedthe nation's highestunemployment rates.

Presently onlya fraction (less than 2percent) of the aequiladoracomponent parts and materialsmarket is being supplied by SouthTexas firms. While the studyconfirmed that there is considerable interest on thepart of the SouthTexas business communityto take advantage of the marketopportunity that the aaquiladorasoffer, it is clear that severalimpediments will have tobe overcome before thiscan happen. Problems include inadequate facilitiesandequipment, ashortage of skilled workers,poor business management practices, and theneed for capital tofinance new business 4 start-ups andexpansions. These problems are manageable givenproper attention.

Recommendations ManySouthTexas entrepreneurs, public officialsand community leaders are keenly aware ofthe opportunitythat the aaquiladoras holdfor the economic growth of theregion. They also recognizethat significant impediments mustbe overcome if this opportunityis to be turnedinto reality. As such, and based upon theresults of thestudy, it is recommended thata task force comprised of representativesfrom theSouthTexas .manufacturing community, themaquiladora industry, community leaders, public officials, educational leaders, state and federal agencyofficials beestablished to develop and support several initiativesincluding effortsto:

45 1. Continuously update and disseminateinformation maquiladora supply on market opportunities,including expanding the databank initiatedby the Center for Entrepreneurshipand Economic American University; Development atPan

2. Establishone or more business South Texas incubators to assist manufacturers establishthemselves maquiladora suppliers; as viable

3. Strengthen, coordinate and target theefforts of public and private jobtrainingprograms, including State Technical Texas Institutes (TSTI),private industry councils, vocationaltech. schools, and universities community colleges, to meet thespecific trainedmanpower needs of themaquiladora suppliers;

4. Improve the generalbusiness South Texas management practicesof manufacturers throughthe expansion business development of at Pan AmericanUniversity and similarprograms in the region; 5. Establish a development fund tomeet the special financial needsof South Texas establish themselves manufacturers seekingto as a maquiladorasupplier; and, 6. Establish a South Texas manufacturersassociation to bring togethermaquiladoramanagers and area manufacturers to shareinformationon business opportunities.

46 BIBLIOGRAPHY

47 Bibliography

Ayer, Harry W. andRoss M. Layton and the Impacts "The BorderIndustry Program of Expendituresby Mexican a U.S. Border Community: Industry Employeeson An EmpiricalStudy of Nogales", of RegionalScience, Vol. 8 No Annals 2, June, 1974,pgs. 105-117 Bureau of theCensus, 1980 Census of Commerce of Population,U.S. Department

Grunwald, Joseph,"Production Sharing: Perspective", Twin An International Plant News, Vol.3, No. 10, May1988 Holden RichardJ. Maqufladoras Along theTexas/Mexico Border: Econometric Evaluationof Employment An and Retail SalesEffects on Four Texas BorderSMSAs, Regional Texas Department Economic DevelopmentDivision, of CommunityAffairs, February,1984 Ladman, Jerry R.and Mark O. Mexican Border Poulsen, EconomicImpact of 'the Industrialization Program:Agua Prieta, Tempe: Center forLatin American Sonora. University, May 1972 Studies, ArizonaState

Martinez, Oscar,Border Boom Town, Austin: Ciudad JuarezSince 1848, The Universityof Texas Press,1978 Mitchell, WilliamL., EconomicImpact of Maguila Juarez on El Paso,Texas and other Industry in for 1982 Ciudad Sections of theUnited States Juarez, ChihuahuaMexico, 1982 Patrick, J. Michael,and Roland S. of Maguiladoras Arriola, "The EconomicImpact on Border Development: A Rio Grande Study- Some Preliminary Findings", Valley Case Social Science Paper presented atWestern Association meeting,El Paso, Texas,April 1987 Rankin, Michael D., FinanceManager, Vehicle Corporation,McAllen, Texas, Safety Division,TRW Communication. February 1987,Personal

Secretaria deComercio y Fomento Industrie Naquiladora, Industrial (SOCFI)in Mexico Banco Nacionalde Mexico,S.N.C., 1988 Sprinkle, Richard,Project Link: Employment Linkages An Investigationof the between Cd,Juarez and El El Paso, Texas,December 1986 Paso, Universityof

Stoddard,EllwynR., Patterns Border, El Paso: of Poverty Alongthe U.S.- Mexico Organization ofU.S. Border Citieseand Counties, Universityof Texas atEl Paso, Center American Studies,1978 for Inter- Texas Border. EconomicDevelopment.Task Recommendations, Force, Final Report'and Austin, Texas,December 1986

48 Texas EmploymentCommission, Labor Force Estimates,1988 U.S. International Trade Commission,The Use of TSIUS Items806.30 and 807, and.EconomicImpact USITC Pub. 2053,January 1988 .;-:;1

APPENDIX A MAQUILADORASBETWEEN NkTAMOROSAND NUEVO CLASSIFIED BY LAREDO, MEXICO PRODUCT (SIC)CATEGORY

SIC 1400: Mining & Quarryingof Nonmetallic Min., ExceptFuel 1479 Normetales, S.A. de C.V., CiudadReynosa

SIC 2000: Food & KindredProducts 2033 Empacadora Calmo,S.A., Ciudad 2087 Conacit de Reynosa 2092 Reynosa S.A. deC.V., Ciudad Mariscos deMatamoros, S.A., Reynosa 2092 Procesadora de Matamoros 2099 Mariscos,Bagdad, B.A., Tex-Tex, S.A.,Matamoros Matamoros

SIC 2200: Textile MillProducts 2221 MaquiladotaGeneral de 2253 Maquilas MatAmoros,Matamoros /ndustriales dela Frontera, S.A., RioBravo SIC 2300: Apparel andOther Finished Products MadeFrom Fabric 2331 Rio Contratosde Costura, 2342 S.A. de C.V., Rey-Mex Bra,S.A. de C.V., Cd. Camargo 2385 Reynosa Fisher Pricede Mexico, 2392 Neco de Mexico, S.A. de C.V.,Matamoros 2392 S.A., Matamoros Fisher Pricede Mexico, 2394 Frieba de S.A. de C.V.,Matamoros Mexico,S.A., NuevoLaredo

SIC 2400: Lumber& Wood Products, ExceptFurniture 2434 Jesus Flores Mc:los, Nuevo'Laredo

SIC 2500: Furniture iFixtures 2511 Rosa Alvarado 2531 Nabor, NuevoLaredo Asientos ParaTrans. de Mexico, S.A., NuevoLaredo SIC 2600: Paper & AlliedProducts 2656 Tex-Tex, S.A. 2679 Matamoros Tex-Tex, S.A.Matamoros

SIC 2700: Printing, Publishing, andAlliedIndustries 2741 Producciones Impacto deMexico, Nuevo Laredo

51 4

2789 Producciones Impact° de Mexico, Nuevo Laredo

SIC 2800: Chemicals &Allied Products 2819 Productos de 2834 Preservacion,S.A., Matamoros Agroquimicosy Equipos S.A., 2865 Productos de Matamoros 2891 Preservacion,S.A., Matamoros Alfa Celulosade Mexico, 2899 S.A., RioBravo Tex-Tex, S.A.,Matamoros

SIC 3000:Rubber & MiscellaneousPlasticsProducts 4021 Mex-Moc De Mexico,S.A., Nuevo 3021 Calzado Deportivo Laredo de Reynosa,S.A., Ciudad 3052 Mangueras.Porosas de Reynosa 3052 Mexico, S.A.de C.V., Leece Nevillede Mexico Matamoros 3069 S.A. de C.V.,Matamoros BrownsvilleRubber Co.S.A., de C.V., 3069 Genesco de Mexico, Matamoros 3069 S.A. de C.V.,Ciudad Fisher Pricede Mexico, Reynosa 3089 S.A. de C.V., Glasmex, S.A.,Matamoros Matamoros' 3089 Electro Semblies de Mexico,S.A., Matamoros

SIC 3100: Leather &Leather Products 131 Genesco de Me!":co,S.A. de C.V., 3142 Barry de Mexico, Ciudad deReynosa 3171 S.A.,Nuevo.Laredo Bolsas deLaredo, S.A., 3172 Nuevo Laredo Cobar, S.A.de C.V.,Nuevo Laredo 3172 Altos Cosmeticos, 3199 S.A., de C.V.,Nuevo Laredo Maquila deAutopartes,S.A., de 3199 Hamill Mexico, C.V., NuevoLaredo 3199 S.A. de C.V.,CiudadReynosa Datacom de Mexico,S.A. de C.V., 3199 Condura, S.A. ciudadReynosa de C.V.,Matamoros

SIC 3200: Stone Clay, Glass, ConcreteProducts 3229 Neco de Mexico, 3231 S.A. de C.V.,Matamoros Plews, S.A.de C.V., 3264 Matamoros Delredo, S.A.de C.V., 3264 Auto Industrial Nuevo Laredo 3264 de Partes,S.A. de MaquiladoraMexa,,S. de C.V., Matamoros 3291 R.L. deC.V., Matamoros Especialidadesde Reynosa, S.A.de C.V.,CiudadReynosa SIC 3300: Primary MetalProducts 3312 Dura de Mexico,S.A.de C.V., 3312 Fabricacion Matamoros 3314 Metalica deMatamoros, Cortes delBravo, S.A. S.A., Matamoros 3317 de C.V., RioBravo Industries deConectores de Matamoros,S.A. Matamoros I,

3339 Normetales, S.A.de C.V.,Ciudad 3356 Metales Federados, Reynosa 3365 S.A., Matamoros Maquilas Medicas4S.A. de C.V., CiudadReynosa

SIC 3400: Fabricated Metal Products, ExceptMachinery& Tran 3423 Especialidades deReynosa, S.A.da 3423 Plows, S.A.de C.V., CiudadReynosa 3429 C.V., Matamoros Auto Industrialde Partes, 3429 Industries S.A., Matamoros 3429 W.R.E.N, S.A.de C.V., CandadosUniversal.. de Matamoros 3433 Tideland de Mexico, S.A.deC.V., MatamorA 3442 Mexico, S.A.deC.V., Ciudad Puertas y Vidriosde Matamoros, Reynosa 3462 Datacom do Mexico, S.A.de C.V.,Matamoros 3469 S.A.de C.V.,Ciudad Partes deTelevision de Reynosa 3471 Arts Tubular, Reynosa, S.A.,CiudadReynosa 3491 S.A., CiudadReynosa Condura, S.A.,de C.V., 3494 Matamoros Nibco deReynosa, S.A.de 3499 Frieba de Mexico, C.V., CiudadReynosa 3499 S.A., NuevoLaredo Candados Universalesde Mexico, S.A.de C.V.,Matamoros

SIC 3500: Industrial & CommercialMachinery & ComputerEquipment 3524 Asientos Para 3531 Transportacionde Mexico, Manimex, S.A.,Ciudad Reynosa Nuevo Laredo 3532 V.M.C. de Matamoros, S.A.deC.V., Matamoros 3544 Fundidora deAcero Rio 3545 V.M.C. de Grande, S.A.,CiudadCamargo 3545 Matamoros, S.A.deC.V., Matamoros ManufactureraFronteriza, 3545 S.A. de C.V.,Ca. Camargo Cedro de Mexico,S.A.de C.V., 3552 Coil Company Matamoros de Mexico,S.A. de C.V., 3552 Aerotech de Matamoros 3552 Matamoros, S.A.,Matamoros Lepco, S.A.,Matamoros 3559 Ideal Equipment 3567 de Mexico,S.A., Matamoros Coil Companyde Mexico, 3571 S.A. de C.V.,Matamoros ManufacturesIndustrialesSigma, S.A., CiudadReynosa SIC 3600: Electronic &Other Electrical Equipment &components 3612 Productos Electronicos, 3612 S.A.de C.V., Ma. D. Lourdesdel Valle Reynosa 3612 Border Electronicas Canseco, NuevoLaredo 3612 Mexicana,Matamoros Lambda Electronicsde Mexico, 3613 Electro Semblies S.A., CiudadReynosa 3613 de Mexico,S.A., Matamoros Ideal Equipmentde Mexico, 3613 Delnosa, S.A. S.A., Matamoros 3613 de C.V.,CiudadReynosa EnsambladoraInd.. Mecanico 3613 Auto. SA deCV Nuevo Neco de Mexico,S.A. de C.V., Laredo 3613 Sistemas de Matamoros 3621 Energia deMatamoros, Cedro deMexico, S.A. S.A., Matamoros 3621 de C.V.,Matamoros Sociedad deMotors. Domesticos, S.A., Cd.Reynosa

53 3621 Ensambladora de 3621 Matamoros, S.A.,Matamoros Recicladora deMetales de 3621 Matamoros,Matamoros Singer PrecisionsGenerales de 3621 Areotech de Mex.S.A.C.V.,Matamoros 3625 Matamoros, S.A.,Matamoros Electronic ControlCorporation de 3625 Areotech de Mexico SA,Matamoros 3625 Matamoros, S.A.,Matamoros Border ElectronicasMexicana, 3625 Duro de Mexico, Matamoros 3625 S.A. de C.V.,Matamoros Lambda Electronicsde Mexico, 3625 Duro de Matamoros, S.A., CiudadReynosa 3629 S.A. de C.V.,Matamoros Kemet de Mexico,S.A.de C.V., 3634 Ensambladora Ind. Matamoros 3634 Mecanico Auto.SA de CV Neco de Mexico,S.A. de C.V., Nuevo Laredo 3641 Componentes de Matamoros 3641 Iluminacion deMexico, Sa, Electro Partesde'Matamoros, Nuevo Laredo 3643 Porta Sistemas, S.A.de C.V.,Matamoros 3644 S.A. deC.V., Matamoros Springfield Wirede Mexico, 3647 Industrias S.A.de C.V.,Nuevo Laredo Thompson deMexico, S.A. 3647 PEA Industrail, 1/41' CV, Cd.Camargo 3647 S.A. deC.V., RioBravo Auto Industrialde Partes, 3651 Deltronicos de S.A.de C,V.,Matamoros 3651 Matamoros, S.A.de C.V., CTS de Mexico,S.A. de C.V., Matamoros 3661 Porta Sistemas, Matamoros 3663 S.A. de C.V.,Matamoros Winegard deMexico, S.A.de C.V., 3663 Areotech de Matamoros 3672 Matamoros, S.A.,Matamoros Deltronicos deMatamoros, 3674 Electronic S.A. de C.V.,Matamoros ControlCorporation de 3674 Lambda Mexico SA,Matamoros 3674 Semiconductor,S.A., CiudadReynosa TRW electronicaEnsambles, 3674 Partes de S.A., CiudadReynosa Television deReynosa, 3676 LGeCe Neville S.A.deC.V.Cd.Reynosa de Mexico,S.A.de C.V., 3677 Ma. Lourdesdel Valle Matamoros 3677 Canseco, NuevoLaredo MexiensamblesElectronicos, 3677 Condura, S.A. S.A., C.V.,Matamoros de C.V.,Matamoros 3677 Cedro de.Mexico, 3677 S.A. de C.V.,Matamoros Lepco, S.A.,Matamoros 3679 CTS de Mexico, 3679 S.A. deC.V., Matamoros Ensambladora Ind.Mecanico 3679 Kimco, S.A., Auto. SA deCV NuevoLaredo 3679 CiudadReynosa MaquiladoraMexa, S. deR.L. de R.L. 3679 Condura, S.A. de CV,Matamoros 3679 de C.V.,Matamoros ProductosElectronicos, 3694 K.L.H. de Mexico, S.A.de C.V.,Reynosa 3694 S.A. deC.V., Matamoros IndustriasThompson de 3694 Sistemas E Mexico, S.A.de CV, Cd.Csmargo 3694 Instrumentaciones,S.A. de CV, Deltronicos deMatamoros, Nuevo Laredo 3695 S.A. de C.V.,Matamoros Magneticos deMexico,S.A. de C.V., NuevoLaredo SIC 3700: TransportationEquipment 3711 Eagle Allen ExecutiveAutomobile, 3714 La Mosa,S.A., Nuevo Nuevo Laredo 3714 Laredo InduatriosFronterizosCm. S.A. de C.v., NuevoLaredo 3714 Leece Nevillede Mexico 3714 S.A. deC.V., Matamoros Delredo, S.A. deC.V., Nuevo 3714 Auto Industrial Laredo 3714 de Partes,S.A. de C.V., Componentes Mecanicosde Matamoros Nuevo Laredo 3714 Rimir, S.A.de C.V., SA de CV,Matamoros 3714 Trico Matamoros Componentes, S.A.de C.V., 3714 Electronic Matamoros Control Corporationde Mexico 3714 Ensambladora Ind. SA, Matamoros 3714 Mecanico Auto.SA de CV Auto Trim deMexico, S.A. Nuevo Laredo de C.V.,Matamoros

SIC 3800: Measuring,Analyzing, & ControllingInstruments 3822 Condura, S.A.de C.V., 3822 Matamoros ControlesReynosa, S.A.de C.V., 3822 Neco de Mexico, CiudadReynosa ". 3822 S.A. de C.V.,Matamoros Ranco de Mexico,S.A. de C.V., 3822 Ranco de Mexico, Matamoros 3823 S.A. de C.V.,Matamoros Ideal Equipmentde Mexico, 3823 Deltronicos de S.A., Matamoros 3825 Matamoros, S.A.de C.V., Condura, S.A.de C.V., Matamoros 3825 CTS de Mexico, Matamoros 3825 S.A. de C.V.,Matamoros Cedro de Mexico,S.A. de 3829 Neco de Mexico, C.V., Matamoros S.A. de C.V.,Matamoros 3842 Plows, S.A.de C.V., 3843 Matamoros ManufactureraFronteriza, 3873 Ranco de Mexico, S.A., Cd.Camargo S.A. deC.V., Matamoros

SIC 3900: Miscellaneous ManufacturingIndustries 3915 Maquiladora 3931 Aurea, S.A.,Cd. Camargo Datacom de Mexico,S.A. de 3942 Fisher Price C.V., CiudadReynosa de Mexico,S.A. de C.V., 3944 Modelos Magnificos, Matamoros 3991 S.A. deC.V., Matamoros Aerotech deMatamoros, 3991 Cepillos de S.A., Matamoros Matamoros, S.A.de C.V., 3999 Manufactures Matamoros 3999 IlimitadasS.A. de C.V., Sistemas deEnergia de Matamoros 3999 Matamoros,S.A., Matamoros Ranco de Mexico,S.A. de C.V. 399 9 Plows, S.A. de C.V.,Matamoros

SIC 7300: BusinessSerives 7389 A.C. Nielsen Co. de Mexico,S.A. de C.V., NuevoLaredo SIC 7600: MiscellaneousRepair Services 7623 IndustriesNuevo Laredo, 7641 Arts Tubular, S.A. de C.V.,Cd. Reynosa 7699 S.A., CiudadReynosa AereoReparaciones, S.A. de C.V.,Nuevo Laredo

55 It to

APPENDIX C COMPONENT,PARTS, MATERIALS MIDOTHER PURCHASED BYMAQUILADORAS ITEMS, AND NUEVO BETWEENMATAMOROS IAREDO,MEXICO,1987

SIC CODE PRODUCTCATEOGORY PURCHASESPER 3600 MONTH(DOLLARS) Electronicand Other Equipment and Electrical $ Components,Except 67,512,542 ComputerEquipment 3500 Industrialand Commercial Machinery and ComputerEquip. 11,441,878 3400 FabricatedMetal Products,Except Machineryand 6,466,030 TransportationEquip. 3000 Rubber andMiscellaneous Products Plastics 4,191035 3700 TransportationEquipment 2800 4,032,672 Chemicals and AlliedProducts 3800 3,791,389 Measuring,Analyzing,and Controlling Instruments;Photo- 3,491,058 graphic,Medical and OpticalGoods; Watches andClocks 3300 Primary MetalIndustries 3,137,876 2000 Food and KindredProducts 3900 1,686,199 'MiscellaneousManufacturing Industries 1,393,483 2200 Textile MillProducts 2600 1,171,374 Paper and AlliedProducts 2300 917,673 Apparel andOther Finished Made FromFabrics Products 852,626 Materials and Similar 3200 Stone, Clay, Glass, andConcrete Products 819,303 1000 Metal Mining 5000 317,888 Wholesale Trade-DurableGoods 3100 279,567 Leather and LeatherProducts 145,657

57 2700 Printing, Publishing,and Allied Industries 125,731 0000 Miscellaneous 2500 93,635 Furniture andFixtures 92,065 2400 Lumber and Wood Products,Except Furniture 77,482 2900 Petroleum Refining andRelated Industries 64,458 5100 Wholesale Trade-NondurableGoods 55,537 1400 Mining and Quarrying ofNonmetallic Minerals,Except Fuels 8,174 1700 Construction-Special TradeContractors 5700 48197 Home Furniture, Furnishing,and EquipmentStores 3,092 0100 AgriculturalProduction-Crops 1,702 0800 Forestry 293 TOTAL $112,174,916 APPENDIX E SOUTH TEXASMANUFACTURERS CLASSIFIED BY PRODUCT (SIC)CATEGORY

Key: (Y) - Doingbusiness with (N) - Not doing maquiladoras business withmaquiladoras (I) - Interestedin doing business withmaquiladoras SIC 2000: Food & KindredProducts 2076 Open Sesame 2093 Commodities,Inc., Brownsville Open SesameCommodities, (N) 2097 McAllen Ice Inc., Brownsville(N) Company, McAllen(I) 2097 Southeastern Public Service Co.,Harlingen (I) SIC 2200: Textile MillProducts 2299 Lottie LeeCo., Laredo(Y)

SIC 2300: Apparel is OtherTextileProducts 2328 Valley Uniforms, 2337 Inc., McAllen(I) St. Mary'sIndustries, 2342 Form -0 -Uth, Edcouch (I) 2349 Inc., McAllen(N) Hilco Inc.,Harlingen (I)

SIC 2400: Lumber & WoodProducts 2439 Los FresnosTruss Company, 2448 Woodstock Mfg. Los Fresnos(N) 2448 Co., Inc.,McAllen (Y) Georgia PacificCorporation, 2449 Age Industries, Harlingen (I) inc., San Benito(I)

SIC 2600: Paper & AlliedProducts 2653 WeyerhaeuserPaper Company, 2653 Kenneth Fox McAllen (Y) Supply Co.,McAllen (Y) 2653 Valley Packaging, 2653 McAllen (Y) InternationalPaper, Edinburg 2653 Age Industries, (Y) Inc., San Benito(I)

SIC 2800: Chemicals& AlliedProducts 2851 PolibridCoatings, 2851 Inc., Brownsville Potter Pai :+co. of Texas, (N) 2869 J & B Indus Inc., Brownsville(Y) ies, San Benito(I)

60 iffi'k," SIC 3000: Rubber & Misc.PlasticProducts 3069 Kolder, Inc., 3079 Edinburg (N) Mad-Way-Ler, Inc.,McAllen (I) 3079 Unit Source, Inc., La Feria(Y) 3079 Criterion Plastics, 3079 Inc., Kingsville(1) VideocraftManufacturing 3079 Company, Laredo(Y) Port IsabelPlastics,Inc., Port 3079 Kinney Bonded Isabel (Y) 3079 Warehouse,Inc., Donna(I) Valley PlasticSupply, Inc., 3079 King's Prosperity Weslaco (N) 3079 Industries,McAllen (Y) Chem-Prof DoorCo., Inc., 3079 Brownsville Brownsville (N) Molding,Brownsville (Y) 3079 Rio GrandePlastic, 3079 Products, Pharr(Y) Regency Plastics,McAllen (Y)

SIC 3200: Stone, Clay,& GlassProducts 3231 The Glass Shop, Brownsville(N) 3291 Norton Company, 3295 Brownsville (N) Oglebay NortonCompany, Brownsville 3299 Barium Supply (I) Company, Brownsville(N)

SIC 3400: Fabricated MetalProducts

3411 South TexasCan Company, 3441 Inc., Weslaco(I) Palmer SteelSupplies, 3441 Inc., McAllen(I) MarathonLetourneau (Gulf 3442 Tex-Steel Marine) (N) Corporation,Harlingen (N) 3443 Stuart Manufacturing 3443 Inc., Edinburg(I) Semco Mfg.Company., Pharr 3443 Guenzel Metal (I) 3443 Products, Inc.,Harlingen (N) Tigra International,Inc., McAllen 3443 Brees-Brac. Company, (I) 3444 Port Isabel(I) Brownsville SheetMetal, Brownsville 3444 Alfredo's Sheet (N) Metal Shop,Weslaco (N) 3444 Thirlwall's Sheet 3451 Metal co.,Brownsville (N) Young DentalManufacturing 3469 Brees-Brac Corp., Brownsville(Y) Company, PortIsabel (I) 3482 National Medical 3498 Care, McAllen(N) McAllen Pipe& Supply, 3499 Marathon Inc., McAllen(I) Letourneau (GulfMarine) (N) SIC 3500: HachinerytExcept Electrical 3523 Frontier Industries,Inc., Raymondville 3523 Emroth Company (N) 3541 DBA Emir,Harlingen (N) Scalise Co. Inc.,McAllen (Y) 3542 Scalise &Co. Inc., 3542 McAllen (Y) Clear-Tex, Inc.,Laredo (Y) 3544 Clear -Tax, 3544 Inc., Laredo(Y) Ten-Tex Tool& SupplyCo., Laredo 3544 Astex Tool & (Y) ManufacturingInc., McAllen 3544 PrecisionProducts (Y) 3544 Company,Brownsville(Y) Texas PrescisionCompany, Brownsville 3544 Modern Machine (Y) aop, Laredo(I) 3544 Valley Tool& Die, 3544 Inc., Alamo(I) Sauceda'sPrescision 3544 Colbert Grinding,Inc., SanBenito ManufacturingCo., Inc., (1) 3544 International Laredo (Y) 3544 Mfg. Services,Harlingen (I) Rio GrandeTool Company, 3551 Brownsville(Y) Sort-RiteInternational, 3551 Inc., Harlingen(N) Thompson Mfg.Company, Harlingen 3559 Roforsa, (N) 3569 Incorporated,Laredo (Y) Velcon Filters,Inc., Harlingen 3592 Instrumentation (I) 3599 Products,Inc., Harlingen BrownsvilleMachine Shop (I) 3599 Morales Machine Inc., Brownsville(I) 3599 Shop, Laredo(I) Border MachineShop, Inc., 399 Crow Iron & Laredo (N) SupplyCompany, Edinburg 3599 Joe Summers& Co., Weslaco (I) 3599 Delta Machine (I) 3599 Company,Brownsville (N) Balch MachineCo., Inc., 3599 Texas Tool. Mission (I) Company, McAllen(N)

SIC 3600:Electric & ElectronicEquipment 3661 Intellicall 3664 Mfg.e Inc.,Pharr (I) CalidadElectronics, 3674 Calidad Inc., Edinburg(I) 3674 Electronics,Inc. Edinburg (I) TracorAerospace, Inc., 3679 Tracor Laredo (I) Aerospace,Inc., Laredo 3679 Carlingswitch, (I) Inc., Brownsville(N)

SIC 3700: TransportationEquipment 3729 StinarCorporationof Texas, 3731 Marine Railway, Harlingen (I) 3732 Inc., Brownsville(I) Low TideInternational, 3732 B & B Boat Inc., McAllen(I) Building,Inc., Brownsville 3742 Anabel Corporation, (I) Brownsville(I) rups r 4

SIC 4400: Water Transportation 4469 Ferromar, Inc.,Brownsville (I)

SIC 5000: WholesaleTrade-DurableGoods 5093 Anglo Iron& Metal Company* Brownsville(I)

SIC 7300: Business Services 7397 Pan American 7399 Laboratories,Inc., Brownsville Funco Inc.,Edinburg (I) (I)

SIC 7500: Automotive Repairand Services. 7538 Tek Turbine,Brownsville (N)

SIC 7600: MiscellaneousRepair Services 7692 Roth-GutierrezTexano, Inc.,Pharr (N) 7692 All StarIron Works, 7692 Mercedes (I) Acosta WeldingService, Edinburg 7692 Joe Summers (I) & Co. Inc.,Mission (I) 7699 Delta Machine Company, Brownsville(N)