Why Mexico's Autoworkers Aren't Prospering

Wages are stagnant despite new plant openings, and unions are mainly to blame

“Protection contracts are at the heart of the pressure on factory wages”

 

- David Welch And Nacha Cattan, With Elisabeth Behrmann

At a ceremony at Mexico’s Los Pinos presidential residence in July 2014, BMW Chief Executive Officer Harald Krüger pledged to spend $1 billion to build a factory in the northern state of San Luis Potosí that will employ 1,500 workers. To mark the occasion, he presented President Enrique Peña Nieto with a model of a silver BMW race car.

The German automaker had unwrapped its own gift two days earlier, a labor contract signed by a representative from the state chapter of the Confederación de Trabajadores de México (CTM), the country’s largest union confederation, and notarized by a Labor Ministry official. The document, which Bloomberg reviewed, sets a starting wage of about $1.10 per hour and a top wage of $2.53 for assembly-line workers. The starting rate is only a bit more than half the $2.04 an hour that is the average at Mexican auto plants, says Alex Covarrubias, a lecturer at the University of Sonora in Hermosillo.

The paperwork was filed two years before BMW broke ground on the new plant, which will turn out $45,000 3 Series sedans. When workers begin to stream into the factory sometime next year, there’s a good chance most won’t know they belong to a union.