Production Halts and Industrial Action
in Mexico Amid COVID-19 Pandemic
- The onset of the COVID-19 pandemic has severely impacted manufacturing operations in Mexico, particularly in northern states which border the United States. Hundreds of manufacturing plants have been forced to close. Those which remain open are facing industry-wide protests as workers demand factory closures over fears of infection.
- Industry-wide strikes have taken place at plants in Mexicali, Ciudad Juárez, Matamoros, Nogales, Gómez Palacio (Durango), Tijuana, and Reynosa. Workers have demanded that the Ministry of Labor investigate their plants to determine if they should be considered “essential activity”, to pressure companies to adopt stricter sanitation and safety measures, or to close their plants all together.
- Federal and state governments are assessing maquiladoras to determine which fall under the “essential activities” category outlined in the federally mandated Administrative Ruling and Technical Guidelines. The language of the Ruling does not address maquiladora operations, thus leaving manufacturers unsure how to respond to various levels of government-mandated restrictions.
- Each state has implemented different measures to curb the spread of the virus with some states, such as Chihuahua and Baja California, forcing all maquiladoras within their territory to close. Both Chihuahua and Baja California state officials said that their decision to close all maquiladoras in their state was made due to non-essential factories refusing to close despite federal orders to stop production.
- Several Mexican states aim to reopen in May, but that may be unlikely as the federal government extended the state of emergency through Saturday, May 30 after the country entered Phase 3 of the health crisis.
The ongoing COVID-19 pandemic has severely impacted manufacturing operations throughout Mexico, primarily in northern states that border the United States. Federal and state governments are undergoing tedious nationwide inspections of maquiladoras (manufacturing plants) to determine which are “essential businesses” and would therefore, remain operational. The Ministry of Labor has required hundreds of plants to close throughout the country by deeming them “non-essential”. The factories that remain open are facing industry-wide protests as workers fear contracting the virus and demand all maquiladoras close for the duration of the pandemic.
A maquiladora in Mexico is a factory that operates under preferential tariff programs established and administered by the United States and Mexico. Maquiladoras make up 50 percent of all exports from the country, making manufacturing in the region an integral part of the global economy, especially for US companies. These plants provide manufacturing services primarily for the aerospace, automotive, alternative energy, electronics, medical devices, metal mechanics, and general consumer products industries. All of these industries have been impacted by the ongoing labor strikes and plant closures during the COVID-19 pandemic.
Manufacturing supply chains were further challenged after US and Mexican officials announced on April 20 that their shared border will be closed to non-essential travel for 30 days in efforts to control the spread of the coronavirus. The closure applies to recreational travel, while cargo, trade, and healthcare workers will still be allowed to cross the border. Mexican President Andrés Manuel López Obrador’s administration estimates that the peak of infections will occur on May 10 and has taken steps to expand sanitation and safety measures in essential maquiladoras across the country.
Government response and plant closures during COVID-19 outbreak
On March 30, the Mexican General Health Council declared a national state of sanitary emergency in response to the spread of the COVID-19 pandemic throughout the country. The General Health Council initially announced that the state of emergency would last until April 30 but has since extended the declaration through Saturday, May 30 after the country entered Phase 3 of the health crisis. Phase 3 indicates that the number of infections exceeds 1,000 cases and there is a high number of hospitalizations across the nation.
On March 31, the Ministry of Health published an Administrative Ruling which suspends “nonessential activities” in all 32 Mexican states and urges people to stay at home until the Ruling expires. The Ruling deems steel, cement, and glass production companies, as well as certain IT service companies, as essential businesses and calls for other businesses to self-determine whether they qualify as an “essential business”. However, the directive has proven to be difficult to implement as the language of the document is vague and does not include guidelines for maquiladoras (manufacturing plants) and factories.
Both the federal government and state governments began a nationwide initiative to examine every maquiladora in border states to determine which are essential and which should be closed. By April 21, the majority of non-essential maquiladoras in Tijuana were ordered to close following the investigation. As a result, 200 maquiladora suppliers were also closed. It remains unclear how long the suspension will continue. Notable exceptions to the mandatory closures are food distribution warehouses and companies.
In addition to federal orders and investigations, individual states have implemented their own measures to prevent the spread of COVID-19. On April 9, the Baja California state government suspended operations at all of the nearly 1,000 maquiladora plants throughout the state to determine which perform essential functions. The Secretary General of Baja California said that they reached this decision after several companies that are considered non-essential refused to close their plants and whose workers issued complaints over a lack of sanitation and safety measures at the factories. The secretary assured companies that if they abide by the measure, they will be permitted to resume activities as soon as restrictions end. Companies that do not follow the order may be required to undergo longer processes and face delays in restarting operations. Additionally, the maquiladoras that have been determined to be essential by the Ministry have been required to implement stricter health and safety measures and to reduce the number of personnel in some cases.
In the state of Chihuahua, a district court judge ordered all maquiladoras in the state to close after the Ministry of Labor reported that 102 non-essential maquiladoras continued to operate despite federal and state orders to close. The Ministry of Labor closed factories in Juarez, Chihuahua City, Cuauhtemoc, and Parral after receiving complaints from workers who felt endangered by being made to work during the outbreak. Ciudad Juarez had the highest number of federally ordered plant shut downs followed by Chihuahua City. More than 100 of the nearly 250 maquiladoras in Juarez voluntarily suspended operations due to coronavirus concerns for their workers. As of April 27, nearly 90 percent of maquiladoras have closed in Ciudad Juarez. While dozens of plants have halted production lines and furloughed workers with partial pay, others have been slow to shut down despite the federal order angering workers who fear they are susceptible to the coronavirus while at work.
Maquiladora workers protest in northern Mexico
Since early March, thousands of maquiladora workers across northern Mexico have organized protests to demand the closure of their factories due to fears of infection during the COVID-19 pandemic. Many protesters have also requested that the Ministry of Labor examine their plant to determine if the facility is an essential business in order to reach a decision to remain open or not. Industry-wide strikes have taken place at plants in the cities of Mexicali, Ciudad Juárez, Matamoros, Nogales, Gómez Palacio (Durango), Tijuana, and Reynosa. The industries that have felt the greatest impact of the protests include the automotive, aerospace, and electronics manufacturing.
On March 30, workers from the AMP Amermex SA de CV, TE Connectivity plants, Plant 2 D&D, Plant 3 AD&M, and Corcom Gdog in the state of Sonora did not show up for work. The following day Lear Corporation, an automotive parts manufacturer, ceased production at all 10 of its plants in Juárez and sent 24,000 workers home with partial pay following several coronavirus-related worker deaths. By the end of April, major electronics, aerospace, telecommunications, and automotive manufacturers across northern Mexico, including APTIV, Ensambles Hyson, Leviton, Honeywell, Electrical Components International, Tridonex, Walbro, Skyworks, Eaton Bussman, Teleplan, Safran, Hubbell, Contec, Plantronics, NEO Tech, Irvin Jaropamex, Fujikura, Legrand, and Edumex, closed their plants or are in the midst of intensifying labor protests.
Due to the severe and persistent disruptions to Mexican manufacturing operations amid the COVID-19 pandemic, maquiladoras which make up the IMMEX (Maquiladora Industry and Export Manufacturing) program reported that in April alone there has been a decline of 40.25 percent in exports. The International Labor Organization estimates that Mexico could lose 1.7 million to 7 million jobs, while 50 million people are at risk of falling below the poverty threshold as a result of the crisis.
Reports indicate that maquiladoras in five border states announced that they will restart operations in May despite the federal government extending the health emergency through May 30. According to the industry and government leaders in the state of Sonora, the state plans on gradually restarting operations on April 27. The state’s plan is to reopen logistics and automotive companies first, then the aerospace and electrical-electronic sectors. In Baja California, Salvador Díaz González, president of the Mesa de Otay Industrial Association, claimed that essential companies will restart activities on May 4. Industry officials in the state of Tamaulipas are discussing plans to reopen on May 18, after activity in ports fell by 60 percent due to the lack of production from maquiladoras.
Outlook and Recommendations
Mexico’s guidance on “essential activity” is significantly different from its North American counterparts, the US and Canada, as it leaves out important supply chain components such as materials needed to make critical goods. Both the US and Canada have provided guidance specifying supply chain needs. The Trump administration has urged Mexican officials to sync its guidance with the US on what is considered essential during the pandemic as the two economies are closely linked. President López Obrador responded by saying that he does not intend to make changes to Mexico’s policy until the US economy begins to reopen.
The vague language in the Administrative Ruling has left manufacturers across Mexico unsure if they fall under the “essential activity” category, making it difficult to determine if they should ultimately close their plants. Additionally, the manufacturing sector is facing significant pressure from workers who believe they may be exposed to COVID-19 infections and are demanding their factories to close. The combination of the ongoing federal and state inspections of maquiladoras, industry-wide protests, and complications in the Administrative Ruling have brought Mexican manufacturers to a halt.
During this time of increased uncertainty in the Mexican manufacturing industry, organizations potentially affected are recommended to:
- Ensure suppliers and plants comply with health and safety measures: Under the Administrative Ruling and Technical Guidelines and corresponding state orders, businesses that fall under the “essential activities” category should ensure complete compliance with the health and safety measures of the Ruling, and document those policies and procedures.
- Assemble required documentation: Organizations will need to demonstrate the essential nature of their business activities under the terms of the Administrative Ruling. Organizations working with maquiladoras are advised to work directly with plant officials to ensure that all paperwork required for such permits are in order.
- Maintain communication with local union officials: This will help avoid and mitigate industrial action risks by assessing workers’ concerns early on. This requires ensuring safe working conditions and addressing pay and employment disputes should they arise.
- Monitor easing of restrictions: Each state will re-evaluate their restrictions to determine when to resume production. The federal government will likely announce a definitive restart date that aligns with state decisions.