Look Who's Stepping on Mexican Shoemakers' Toes

A decade ago, José Luis Mares followed in the path of his grandfather and father into the footwear business. He set up shop in León, the "shoe capital" of Mexico, in the central state of Guanajuato. In no time at all, he was managing two factories and churning out more than 800,000 pairs a year.

It wasn't long, however, before Mares' operation ran into some serious competition. In the early 1990s, Mexico was suddenly flooded with cheap shoes from China, many of them contraband. To stay afloat, Mares last year inaugurated a $1 million German-made plastics-injection sole-molding machine, so that he could diversify into new products, such as casual loafers. It hasn't helped much. "I can't for the life of me explain how we could manage to make shoes as cheaply as they do," says a discouraged Mares, 40. "We've done everything humanly possible to compete, but I don't know how we're going to survive."

HIGH CURB. Mares is just one of thousands of Mexican businessmen fighting a flood of cheap Chinese goods. In fact, Mexico has been hit so hard---and so unfairly, the business community believes--that it was the last country to approve China's entrance to the World Trade Organization. Mexico slapped a 1,040% tariff on Chinese shoes in 1993 in retaliation for alleged dumping. In finally approving China's entry into the WTO in September, Mexico agreed to remove the tariff---but only over six years. Punitive tariffs on 1,300 other Chinese products, including toys, textiles, and chemicals, will also be reduced slowly.

Mexican manufacturers worry that the gradual loss of protections will mean a slow death. Shoe shipments abroad, which peaked at 35 million pairs in 1998, plunged to just 16.5 million pairs in 2000 and are headed lower. "It's sink or swim for us. If we don't become internationally competitive quickly, China is going to displace us," says Mario Abedrop, head of the China trade committee at the Mexican Council on Foreign Trade.

Competing with China, however, is more easily said than done. Last year, Mares bid on a contract to deliver 20,000 pairs of shoes a month to Payless ShoeSource, a retailer based in Topeka, Kan., at a price of $6 a pair. But he lost out to an unknown bidder that agreed to make the shoes for $3. He's certain the supplier is Chinese. "Even with that big a volume, we can't match that price," says Mares. He pays his workers $1.80 an hour; their Chinese counterparts make $1.50 a day. "I think that 50% of our industry will disappear over the next year," Mares says. He only hopes his company is not included.

By Geri Smith in Mexico City

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