News Column

Ontario, Calif.-area Firms Explore Operating in Mexico

August 20, 2004

Stephen Wall

ONTARIO, Calif. -- Robert Carreon has sold video surveillance equipment to law-enforcement agencies around the country.

Now, the Rancho Cucamonga manufacturer wants to expand his horizons beyond U.S. borders.

Insight Video Net has a $3 million contract with IBM to install digital video cameras in 100 banks in Mexico.

But Carreon isUunfamiliar with the ins andUouts of doing business south of the border.

"My biggest fear is getting the product into the country," said Carreon, who expects to net $6 million to $8 million in sales this year.

To get answers, Carreon joined about 60 business owners at a seminar Wednesday at the Marriott Ontario Airport.

The event is part of an export initiative organized by the Inland Empire Minority Business Development Center.

Lawyers, accountants and customs brokers explained how to set up shelter companies and manufacturing plants in Tijuana, the Mexican border city of two million people about 120 miles from San Bernardino.

Mexico is the second-largest U.S. trading partner after Canada. U.S.-Mexico trade reached $235.5 billion last year. California exports about $14 billion worth of goods to Mexico a year.

Understanding Mexican culture is key to a successful operation, said Fernando Cervantes, a Tijuana lawyer.

Under Mexican labor law, employers can't fire workers whenever they want, Cervantes said. Because the legal and tax systems are different, it is helpful to hire Spanish-speaking human resources directors who can communicate effectively with Mexican workers and U.S. managers, he said.

"You're in a different country," Cervantes said. "You cannot deal with your employees in Mexico the same way you deal with your employees in the United States."

Incorporating a business in Mexico can take from two weeks to two months, he said.

Companies are required to provide socialAsecurity, housing allowances and other employee benefits.

In Tijuana, about 140,000 employees work in 572 foreign manufacturing plants known as maquiladoras, said Alejandro Rivera, director of the Tijuana Economic Development Corp.

Maquiladoras are foreign-owned companies in Mexico that import goods duty-free for assembly and export the finished products to the United States and other countries.

Mattel, which opened a 1.2 million-square-foot distribution center at San Bernardino International Airport in April, employs 3,000 people at its toy manufacturing plant in Tijuana.

Mexico is an attractive investment because of its low wages and proximity to the United States, said Roberto Gallegos, a U.S. customs broker.

"The advantage of Mexico over China is logistics," Gallegos said.

Goods will be moved across the border in minutes through an express trucking lane that opens next month, he said.

The minimum wage in Tijuana is about $4 per day, with the average factory worker earning $10 or $11 per day, Rivera said.

John Riley, who helps U.S. companies set up shelter operations in Mexico, said prospective employers should do a cost-benefit analysis before making their decision.

"There is a tendency to emphasize the risk and you miss the benefit," said Riley, owner of ABC Manufacturing in Tijuana. "You can do virtually anything there."

Ray Nieves, a Highland businessman, wants to set up a distribution center at the border and sell discontinued household items in Mexico.

"It's a good way to assist our neighbors in Mexico to get a discount rate for our products," said Nieves.

Source: (c) 2004, San Bernardino County Sun, Calif. Distributed by Knight Ridder/Tribune Business News.

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