Mexican economy boosts El Paso businesses

By Timothy Roberts \ Special to the Times
Posted: 03/20/2011 12:00:00 AM MDT

The Eagle Brass metals plant on Rojas Drive is small but growing in leaps and bounds.

Two years ago, the Pennsylvania-based company opened the plant to be closer to automotive, appliance and electronic assembly plants in Mexico and their suppliers north of the border. It started with a payroll of two. A year later, it added two more and doubled its real estate to 10,000 square feet. Now the company is thinking of adding a second shift with two more people.

The success of Eagle Brass, which sells about 10,000 pounds of red metals -- copper, brass and stainless steel -- a month, comes in direct proportion to the rise in the Mexican economy. The economy of the El Paso region is highly dependent on Mexico. Right now, Mexico is doing all right.

"The Mexican economy is improving, and that's a big reason we are improving," plant manager Jerry Shapiro said. "We are seeing a lot more (requests for) quotes, and the bulk of that is generated by assembly plans in Juárez. Everything we do goes into plants that are in Juárez assembling finished goods that go all over the world."

Mexico's gross national product grew at a very healthy 5.5 percent last year, and investors are taking notice.

Walter Molano, head of research at BCP Securities in Greenwich, Conn., told Bloomberg News recently that Mexico will be "the emerging market of 2011."

It should be no surprise, Bloomberg News said, that the investments of Mexican Carlos Slim, the wealthiest person in the world according to Forbes magazine, beat Bill Gates and Warren Buffett on the stock market last year.
The Economist Intelligence Unit said the Mexican economy will continue to be strong this year, although it may grow at a slower rate of about 3.9 percent. Factors include the continued move of U.S. manufacturing to Mexico, the country's large domestic market and stable monetary polices, the Economist says.

"Emerging markets are in countries that are to some extent evolving and putting into place the foundations of an open-market economy like those in the United States, Canada, Japan or Germany," said Roberto Coronado, an economist at the El Paso Branch of the Federal Reserve Bank of Dallas.

Mexico was hard hit by the recession as investors searching for the safest investments looked to the U.S. Now that a recovery is under way, the capital that had come to the United States is quickly moving to emerging markets, where the risk -- and the return -- is a little higher.

"In the fall of 2008, the flight to quality came to the United States," Coronado said. "Over the last year and a half, capital has been flying out of the United States. Investment is coming back strong to Mexico."

Banks in Mexico have more capital, there is more economic activity and more jobs. All good news for Mexico -- and for border cities like El Paso.

"Mexico is one of the main drivers behind the El Paso economy," Coronado said. "If Mexico is doing great, that is good news for us here."

No one knows this better than Robert Queen, director of the U.S. Commerce Department's Export Assistance Center in El Paso. He helps U.S. companies export their products to other countries. Among his tasks is to hook up U.S. parts suppliers with assembly plants in Mexico.

This region "is excellent for shuttling materials over the border," Queen said. "Materials buyers in Juárez want local suppliers."

The suppliers in El Paso and Santa Teresa are bilingual and bicultural and understand the maquiladora industry. The assembly plants in Juárez "don't even want to talk with people up north if there is an alternative here."

Matt Keats figured this out 16 years ago. He has been traveling from Chicago, where his family started a metal-stamping plant in the 1950s, to Juárez to make sales calls on assembly plants.

"I saw there was a lot down here that we could get involved with easier if we were down here," he said. "I saw all the possibilities."

He came to El Paso with five stamping machines and opened Keats Southwest, where he makes precision metal stampings and wire forms. He also brought five employees because this region had few stamping plants and few people who knew how to run them. Now he has 50 machines and 50 employees that operate 24 hours a day Monday through Friday and two more shifts on most Saturdays.

Most of Keats' products are hidden inside appliances, cable boxes and medical devices. One that consumers may know is the visor clip on Chamberlain garage door openers, which are assembled in Nogales. He ships between 150,000 and 200,000 of them from his El Paso plant every week.

He, too, is benefiting from the Mexican economy.

"Everything I do ends up in Juárez, Nogales and Reynosa," he said. "Orders are up across the board -- automotive appliances, electronics."

Keats benefits from his proximity to the assembly plants across the border, and his suppliers benefit from proximity to him.

"I try to buy as many supplies and as much material as I can locally," Keats said. "If I have to bring material from Chicago, I have to pay freight."

One of his biggest suppliers is Eagle Brass, which is across the parking lot, next to a sweet-smelling bakery.

The Eagle Brass plant takes large reels of metal from the company's mill in Leesport, Pa., about 70 miles northwest of Philadelphia. It then cuts or slits the metal down to smaller reels that can be run through a stamping plant like Keats, which turns the metal into visor clips, electrical plugs and other products.

Shapiro and operations manager Jay Mendoza had both worked for Guardian Metal Sales, a similar operation, for 11 years. When Guardian folded two years ago, Eagle Brass hired Shapiro and Mendoza to open a new plant on the same site. The two work together like teammates. In a tour of the plant, they finish each others' sentences.

"We hit the ground running," Shapiro said.

"From the start," Mendoza said.

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