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Stronger peso hurting maquiladora industry along the border

A quality control technician, right, watches as a woman works on an assembling an electronic component at the Suntron de Mexico plant in Tijuana, Mexico, Photographer: David Maung/Bloomberg via Getty Images

SAN DIEGO — Many who operate maquiladoras along the border between San Diego and Tijuana are reporting losses in revenue due to the current strength of the Mexican peso, said Roberto Vega Solís, president of the Mexican Employers Association in Tijuana.

Maquiladoras are manufacturing plants in Mexico that are operated by corporations in the United States and other countries.

Once assembled in Mexico, the finished products such as fireplaces, televisions and trucks are then sent north of the border.

According to Mexico’s Chamber of Commerce, maquiladoras provide one out of every two formal jobs in border cities from Tijuana to Juarez and one out of 10 jobs in Mexico.

“When most export and sell, they get paid in dollars, but since budgets for production including labor are set in pesos, your dollars aren’t going as far,” said Vega Solís. “Your profits diminish since you set your budget expecting 20 pesos per dollar.”

As of this week, one dollar gets you less than 17 pesos, according to Bloomberg.

“It’s urgent that the dollar recover and regain its value versus the peso, so businesses can regain some of their earnings because they are definitely making less right now,” said Vega Solís.

Vega Solís also stated there are other industries already feeling an impact including tourism, saying fewer people are taking vacations to Mexico, and when they do, they are spending less money.

Ismael Plascencia López, president of the Baja California College of Economists, says historically, the peso-versus-dollar swings are felt stronger along the border.

“Without a doubt us along the border who are used to buying in dollars are seeing a benefit because our pesos are generating more dollars, but if we’re exporters to the United States, there is no benefit,” said Plascencia López. “There is an excess of dollars right now circulating around the world, decreasing the value of the currency.”

The economist said he expects the stronger peso to remain in place through the end of the year, but eventually it will start losing its value as inflation in the U.S. will continue to go down.

Border Report

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