Ciudad Juarez: From Boom Town to Ghost Town?

With its strip malls, pristine roads and American fast-food restaurants, Ciudad Juarez looks on the surface more like the U.S. than it does Mexico. But after three years of escalating violence and disappearing jobs, this once-thriving industrial city no longer seems like an extension of El Paso, Texas, its neighbor across the border. In fact, it's feeling more like a war zone, with three people connected to the U.S. consulate gunned down here on March 13, just feet away from their destination, a bridge that crosses the Rio Grande into El Paso.

The deaths rattled the entire Western Hemisphere, not just because of the brazenness of the crimes but also because Juarez is a critical link in the global production chain. Nearly 80% of the workforce here toils in the region's 339 maquiladoras, or assembly lines that make the TVs, kitchen appliances and the parts for cars Americans know and love. A growing number of multinationals that have long done business here are starting to get cold feet, potentially jeopardizing the $1 billion a year that maquiladora production represents.

While no one has yet been tried for the consulate killings, authorities blame the deaths on the Aztecas, a gang of hired assassins who work for the Juarez drug cartel, which controls the trafficking route where as much as $1.5 million in illicit drugs move across the city's border daily. Shoot-outs in broad daylight in nice parts of town are becoming a common sight as the Juarez cartel battles to maintain control of its turf from the incursion of Jose "El Chapo" Guzman's Sinaloa cartel.

Big Fallout from the U.S. Recession

City leaders here say things got worse as this city of 1.8 million began to feel the effects of the U.S. recession. Since 2007, unemployment in Juarez, which has more factory jobs than Detroit and Atlanta combined, has climbed from virtually zero to 20%, says Jorge Pedroza Serrano, executive director of the city's Association of Maquiladoras.

The fallout has been dramatic. Once among Mexico's most prosperous cities, Juarez has lost 120,000 jobs and 6,000 businesses in two years. Seven maquiladoras have closed. The city's main commercial corridors have been gutted, restaurants, dance clubs and pool halls have been firebombed and hundreds of homes have been abandoned. American tourists, who used to make the 10-minute trip over the border in droves to party and shop, are now a rare sight.

Juarez began to feel the pinch of a worsening U.S. economy around the same time President Felipe Calderon began sending federal troops to aid the beleaguered city police, in late 2007. Economic woes and a spike in violence, triggered by the arrival of the troops, account for businesses shuttering and rising unemployment, Pedroza says. "Everything begins when our president decides to make a war against the cartels," he says. "We're still waiting for the problem to slow down."

Maquiladora Work Lures Mexico's Poor

"With more jobs, delinquency will go down," Pedroza predicts. But that may be wishful thinking. The U.S. recession -- and in particular, the troubles of the Big Three automakers -- have devastated the maquiladora business. After all, a full 70% of them are devoted to making seat belts, dashboards, car batteries and other parts that then cross the border to be retrofitted by union workers at American car companies. In 2009, production was cut in half from year-ago levels in Mexico's largest manufacturing sector.

The first maquiladoras set up shop in Juarez in 1966, replacing its expansive alfalfa and cotton fields. The North American Free Trade Agreement of 1994 pushed the manufacturing of even more goods across the border from the U.S. In Juarez, it could be done with far cheaper labor, tariff-free.

Across Mexico, the chance to work at the maquiladoras has been a big draw for the country's poor. As much as a third of the city's residents were born elsewhere, flocking to the border city seeking $15 per day maquiladora jobs. "If they come here it's because they had nothing there," Pedroza says.

Cartels Thrive on People's Desperation

But it's not economic nirvana by any stretch. Arnulfo Castro-Munive, a human resources manager at a maquiladora that makes air filters, says workers who migrate to Juarez still pretty much just scrape by. "The plant serves them a decent breakfast," Castro-Munive says, "and it's often the only decent meal they have that day."

Although the maquiladoras also provide benefits like free health care and transportation to work, salaries are low in a city where the cost of living is only 10% cheaper than in the U.S. Still, maquiladora jobs are competitive, leaving many looking for work and desperate for money.

So as the local economy sputters, more people in Juarez have become involved with the cartels out of economic necessity, experts say. A recent poll of 4,600 students in Chihuahua state revealed that 40% of them aspired to become sicarios, hired killers, said Alejandro Junca, chief executive of Grupo Reforma, Latin America's largest media company and the publisher of the Mexican newspaper Reforma. "They would rather live a week like a king than have 70 years of misery," Junco said, during a recent talk in San Antonio, Texas.

Killers Make as Little as $40 per Week

Turns out, though, a hired killer may not exactly get rich. The city has caught sicarios who were making 500 pesos, or $40 a week, says Juarez Mayor Jose Reyes Ferriz. Thanks to the increased military and police presence in Juarez, the amount of cocaine and other illicit drugs trafficked through the city has diminished, Ferriz says.

Problem is, that has inspired the cartels to make money by other means, and employ more people to do it. "The money they were getting from retail drug sales was not enough, so we started getting kidnappings, carjackings and extortion," Ferriz says.

It has gotten so bad that business leaders and even politicians are abandoning the city. Pedroza and Castro both commute to Juarez from their homes in El Paso. Ferriz is believed to live in El Paso as well, but adamantly denies it, saying that he only keeps a home there. Nevertheless, Ferriz, an international contracts lawyer, started receiving death threats when he was still campaigning for mayor.

Maquiladoras in the Line of Fire

The city's industrial parks are not immune to attack. In late March, after the consulate killings, the manager of a maquiladora was shot as he was leaving work. In fact, one of the three victims connected to the U.S. consulate killed in March, Jorge Alberto Salcido, was a manager of an assembly line for Dallas-based information technology company Affiliated Computer Services Inc.

Last year, five maquiladora managers reported incidents of extortion and one was killed during a carjacking. "We've designed secure routes with state police for moving goods and high-level executives," Pedroza says. "Police have secured these routes since 2005, but there used to be 50 units. Now's there's 12. We've been pushing and pushing that we need more security."

Even as the warring cartels act more brazenly, Castro-Munive thinks companies are too vested in Juarez to pull up the stakes. "I may be an optimistic person but I think that we have been down here so many years, and we have been investing such a huge amount of money on the know-how of the people-we know how to build products; we know how to comply with customers' needs in terms of quality and cost."

He adds that the maquiladora industry is highly efficient. It doesn't compete with the U.S. market but rather with the international market. "What has been happening to us in the last 24 months has been a nightmare," Castro-Munive says. "You wake up from a nightmare, and we'll wake up from this one."

With Ciudad Juarez playing such a big role in global commerce, the world is hoping that Castro-Munive is right.