| Nogales Industrial Profile |
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KEY INDUSTRIES
MAIN COMPANIES
RECENT ACTIVITY
ADVANTAGES
DISADVANTAGES
The Overview Nogales is one of the least expensive places to manufacture along the U.S/Mexico border, at least from a wage and real estate perspective. It is often overlooked due to its isolated location between Tijuana and Juarez, but increasing activity in Hermosillo with the new Ford project is raising the profile of this small border town. Two major limitations on Nogales are its limited supplier base and skilled labor pool. Raw materials and components are often brought in from Phoenix or Los Angeles and visitors must fly into Tucson and drive south. Even with these limitations, Nogales is a stable manufacturing location that will continue to grow in the following years. The City POPULATION Nogales is a fast growing community of 160,000 people resting on a high mesa of the Sonora desert. The city’s population is growing at a very fast pace. According to INEGI Nogales has an annual growth rate of 4.03%, higher than the 3.13% growth rate for Hermosillo and much higher than the 1.8% national growth rate. Nogales' sister city in the U.S., Nogales, Arizona, is home to 30,500 inhabitants. (Source: INEGI 2002) LOCATION Nogales is located next to the U.S. city of Nogales, Arizona in the northern part of the state of Sonora and 60 miles south of Tucson. Sonora is located in the northwestern region of the country and shares a 365-mile border with Arizona and New Mexico. The city is situated in a hot and arid region with an altitude of 3,800 ft above sea level. Summers are extremely hot with frequent heavy rains and temperatures often reaching 100° F while winters are mild and pleasant. PROXIMITY TO KEY CITIES Once crossed over the border, trucks must travel an additional 50 miles to the nearest U.S. Interstate.
INDUSTRY SNAPSHOT Maquiladoras in Nogales grew from assembly and sewing operations in Phoenix and Tucson seeking lower labor costs south of the border. The city has profited from recent industrial growth in Hermosillo, 172 miles south of Nogales and the site of a major Ford plant. Even tough the community is still predominantly agricultural, industrial growth is accelerating and many new immigrants are being drawn to Nogales' expanding employment opportunities. As of summer September 2004 there are 79 maquila plants in Nogales which employ over 30,000 workers. The main industries in the city are agriculture, electronics, automotive and food & beverage. It is important to note that the maquiladora industry employs about half of the economically active population in Nogales. At the present time the Mariposa port of entry in Nogales is the busiest port-of-entry in Arizona. In 2003, 194,904 loaded trucks crossed northbound into the U.S. with a similar number of trucks crossing southbound into Mexico. A key component of this traffic is made up of agricultural products. About 10 % of all fresh fruit and vegetables shipped from Mexico into the U.S. each year pass through the Nogales port of entry, according to industry estimates. (Source: U.S. DOT, BTS based on data from U.S. Customs Service, Mission Support Services, Office of Field Operations, Operations Management Database). The Workforce DEMOGRAPHICS AGE DISTRIBUTION Click Here To Register LABOR AND EMPLOYMENT The economically active population in Nogales is 65,133 individuals, or 52.78% of the total population over 12 years old. The maquiladora industry in Nogales employs 30,895 people in 79 plants, a decrease from January 2000 levels when the industry employed 34,757 workers in 89 plants but still a considerable number. In fact, maquiladoras employ about half of the economically active population. A quick look at maquiladora employment in Nogales reveals that smaller and medium sized plants dominate the industry and only 12% of maquila plants have 500 or more workers. (INEGI 2004) % of Total employment by plant size
UNEMPLOYMENT AND SUB-EMPLOYMENT SKILL LEVEL Twin plants on the Arizona side typically function as administrative and distribution facilities, while plants on the Mexican side manufacture or assemble parts or components. EDUCATION AND TRAINING PROGRAMS Nogales has a 97.8% literacy rate, much higher than the 90.5% national literacy rate. Additionally, most of the city’s workforce (88%) finished junior high school, though only 8% have completed a technical or college education program. There are 14 high schools, 7 technical schools and 8 professional schools in Nogales. Several industrial parks have established training centers to support the operations of their tenants. TURNOVER RATES Competition for skilled workers is significant and turnover rates Click Here To Register The Operation WAGE RATES
Wages are the key driver of Mexico’s manufacturing industry. It is, therefore, one of the first and most important topics any company expanding in Mexico will consider. TeamNAFTA touches on the overall wage issues in our Info Center, but we have also provided some sample wages for Nogales below. While we have access to more detailed wage information, we typically present that information in a tailored report addressing a company’s specific labor needs.
Source: Area industry wage studies and interviews with local managers, $11.00 pesos/USD INDUSTRIAL COSTS dollar @ 11 pesos/USD
*CFE.-June 2004, ** Pemex.-June 2004, *** Comision Nacional del Agua.-June 2004 INDUSTRIAL REAL ESTATE AVAILABLE SPACE Four major industrial parks serve Nogales. These parks offer all services necessary for manufacturing including water, electricity, natural gas and fiber optic telephone services. A current survey of industrial parks in Nogales, with a variety of site options, reveals the following average USD prices:
TRANSPORTATION Highways The Nogales Port of Entry provides separate points of entry for commercial and non-commercial traffic, which reduces border-crossing times. The DeConcini Port of Entry serves pedestrians, passenger vehicles and rail containers while the Morley Port of Entry is restricted to pedestrians. The Mariposa entry opened for freight in 1976 and expanded to handle passenger vehicles in 1983. The recent addition of two lanes at the Mariposa Bridge helps to handle the increasing trade volumes trade between Arizona and Sonora. At the present time the Mariposa port of entry at Nogales is the busiest port-of-entry in Arizona with close to 200,000 loaded trucks crossing northbound into Nogales, AZ annually. The major American markets near Nogales are: Tucson (1 hour via Interstate I-19), Phoenix (31/2 hours via Interstate I-10), El Paso (5 hours via Interstate I-19 and I-10), and Southern California (10 hours). Overseas markets are accessible through the Pacific Ocean ports at Long Beach, California (10 hours trucking time) and Guaymas, Sonora, Mexico (5-6 hours trucking time). Nogales has access to two NAFTA corridors:
Roads through the city of Nogales are narrow and access to the four industrial areas can be tricky. A new four-lane interstate highway, Corredor Fiscal, which connects the Mariposa border crossing with Mexico’s Highway 15 to Hermosillo, eases congestion and enhances safety. Railroads Rail service is available from Ferrocarriles Nacionales de Mexico offering connections and loading service to the rest of Mexico and the U.S. Sea Transportation The nearest deep sea port to Nogales is the port of Guaymas, located 257 miles south and considered one of the most important in the Country. CUSTOMS The Nogales and Mariposa ports have customs personnel that have been trained to provide rapid customs inspections. Some of the services offered at these customs offices include:
INCENTIVES The government offers incentives in relation to payroll taxes, training programs, and assistance in the procedures for meeting requirements at three levels of government (federal, state, and municipal). Additional incentives can be negotiated, depending on the location of the new project, type of manufacturing activity, and the creation of jobs. The incentives subject to negotiation include: infrastructure works, fees with the State Public Registry, and construction permits. STATE OF SONORA INCENTIVES According to compliance with certain requirements, a percentage of reduction in the payment of taxes on remunerations received by personnel is applied, according to specific categories. This reduction will be 100%, 75%, or 50% depending on a case by case basis. In addition, assistance is provided in the following areas:
Sectors offering special opportunities: Automotive, Auto Parts, Aerospace, Mechanical Metallurgy, Electronics, and Software The Support SUPPORT SERVICE COMPANIES The service and support capacity of Nogales is limited, but improvements have been made in recent years due to the rapid growth of the manufacturing industry. Twin plants on the Arizona side typically function as administrative and distribution facilities and provide quality support. Large-scale operations, particularly those producing high-tech products, may require very specialized support beyond what is offered in Nogales, AZ. Some of them have developed their service channels and suppliers from Phoenix or Tucson. The Politics UNIONS Unions have a limited presence in Nogales. Only 20% of the workforce is unionized. Some of the unions that have presence in the city include the Revolutionary Confederation of Mexican Workers (CROM), the Revolutionary Confederation of Workers and Farmers (CROC), and the formerly state-run union, the Mexican Workers Confederation (CTM). Local labor relations are excellent and stable throughout Sonora and Southern Arizona. Union leaders are cognizant of oversees competition and thus maintain a harmonious working environment with management. POLITICAL INFLUENCES The state of Sonora has been progressive and aggressive in marketing their capabilities to support new manufacturing. Much of this emphasis has been towards developing new sites in the state’s interior, reflective of the fact that Nogales' isolation severely limits its capacity to accept larger manufacturing operations. Nevertheless, the state of Arizona, hoping to better capitalize on the expanding maquiladora industry in the fashion of California and Texas, inevitably pulls people towards Nogales. Sonora has established a marketing agency in Tucson to assist new maquiladoras relocating into the state. Arizona, likewise, has a very pro-business attitude and offers numerous assistance programs and tax abatements to new businesses. OTHER COMPANIES IN NOGALES
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