The Decline of the Maquiladora

For 20 years, Tijuana was an ideal place for Sanyo Electric Co. (SANYY ) to make everything from TV components to vacuum cleaners and refrigerators. Labor was plentiful and cheap in this Mexican border town, as was factory space. The peso was weak. Equipment and parts could be imported duty-free so long as the finished products were exported. For Sanyo executives, there was an added bonus: Tijuana is only a five-minute drive across the U.S. border from San Diego, where every weekend, multinational execs have long congregated on the city's many fairways.

The golf is still great in San Diego, but Tijuana's attractions are fading fast. Sanyo closed two of its six Tijuana plants last year, laying off 1,884 employees--nearly 30% of Sanyo's local workforce. The video components once manufactured at those factories are now produced in China and Indonesia. "Mexico has made a lot of progress in exports in the past 10 years, but now maybe that has peaked," says Hisami Otaki, who heads Sanyo's operations in Baja California.