An article that appeared in yesterday’s Wall Street Journal caught my attention because it show cased how people fleeing Ciudad Juarez in Mexico, due to the violence, have taken up new residence, opened new nightclubs and restaurants among other new businesses in El Paso Texas. We had discussed the fact that metal fabrication shops had started moving north of the border back in April of this year.
These stories underscore why El Paso has become home to folks from Juarez seeking a safer life. We have learned of several horror stories in Juarez involving metal-based supply chains. About a month ago, a colleague went to see a potential supplier for some metal fab parts. He and his colleagues noticed something was not right from the outset because when they talked with the owner of the shop on the phone, he was reluctant to have them go and visit him. Instead, the metal fab shop owner wanted to come and see our colleagues. But this made no sense since our colleagues wanted to examine what kind of equipment the metal fab shop used. The two parties agreed to a date and time to meet at the shop. When our colleagues arrived, the place seemed like a fort, with electronically controlled door bars and CCTV. As our colleagues approached the door, he made them take off their shirts to show the machine shop that they were not carrying any weapons. Once declared “clean”, the owner decided to let our colleagues in though he still acted very cautious as if he was expecting our colleagues to pull out a weapon or harm him in some way.
The plant tour lasted only about a couple of minutes. When the discussion turned to specific parts needed for quotation, he abruptly interrupted the meeting and said that he needed to go. Our colleagues left the premises. Needless to say, no business resulted from the meeting, despite the fact that our colleagues felt the shop could meet their requirements. Just yesterday, our colleague wanted to set up a meeting with a local machining supplier to discuss a new project. The supplier would not permit a visit without conducting a pre-qualifying meeting in another locale. My colleague had to prove he carried legitimate professional credentials and even had to disclose the names of other suppliers known to him to gain his trust.
Another issue involves approving new suppliers. In this case, one has to prove the size and financial health of the customer to the supplier to match the right project with the right supplier. But with kidnappings skyrocketing amongst local suppliers, nobody wants to disclose the financial health or size of their customers. This information has become far more sensitive. Obviously, this new “safety strategy as my colleague calls it hurts a suppliers ability to attract new business and it makes the supplier approval process drag out longer than necessary.
All of these trends benefit the community of El Paso and to the detriment of the Juarez economy since both economies compete for customers. Our colleague knows at least 3 local metal shops that have left Juarez for El Paso albeit as a smaller operation. But those that make the move prefer smaller and safer to the alternative in Juarez. Nobody goes to restaurants in Juarez these days. Doing so makes one a target for violence. We know of others who have moved their families out of town to minimize any potential assaults against their children and wife. One of these associates now commutes every week back and forth in order to visit his family.
We know of another metal fab supplier, a U.S. company with operations both in Northern U.S. and in Chihuahua. He usually visits his Mexican metal fab operations every month. Another colleague recently met with this supplier who said he used to fly into El Paso and drive to Chihuahua by highway to minimize travel expenses. But since last year, he has opted to take an international flight into Chihuahua city to avoid the need to transit to Juarez by car. And he has moved business from Juarez to El Paso.