ECONOMIC INTERNATIONALISATION AND

REGIONAL RESPONSE: THE CASE OF

NORTH EASTERN MEXICO
MENNO VELLINGA
Institute for Development Studies at Utrecht University (IDSUU), PO Box 80.115, 3508 TC Utrecht,
The Netherlands. E-mail: M.vellinga@geog.uu.nl

Received: September 1999; revised January 2000

ABSTRACT
Economic internationalisation and globalising processes have a dialectical appearance. The
trend towards homogenisation in an economic, social, political and cultural sense will meet with
regionally generated production, innovation and knowledge systems that, while responding to
these external influences, develop their own manifestation of the global-local nexus. The
developments in Mexico's North East, with the industrial city of Monterrey as its core centre,
present an example of the impact of these forces. Until 1988 Monterrey industries were
operating on a protected domestic market. This situation changed with the opening up of the
Mexican economy in that year and the signing of the NAFTA agreement with the USA and
Canada in 1993. This paper analyses this insertion in the world economy and the regional
response, first on an institutional level where the special brand of family capitalism ± as found in
Monterrey ± is confronting the exigencies of international competitiveness and the organisation
of business practice it requires. Second, on a sub-regional level, we observe the reaffirmation of
regional idiosyncracies in the social, political and cultural sphere. The interaction between these
two processes has been creating a most interesting case of glocalisation within the context
created by NAFTA.

Key words: Globalisation, regionalisation, embeddedness, global-local nexus, maquiladoras,

family capitalism, NAFTA

INTRODUCTION branches of manufacturing and consumer

The studies of the economic processes push-
ing towards global integration have long
conceived of globalisation as a juggernaut
that would roll along, uncontrolled and un-
controllable by individual governments and
regional/local economic, political and social
forces. In this view, the specific dynamics of
national and sub-regional economies and
economic management at these levels, will
become increasingly irrelevant in a truly
global economy. Territorial factors would play
a minor role and locations with their available
factors of production would be easily substi-
tutable (Ohmae 1995). It is true that some
developments in the organisation of certain
services, in addition of course to the workings
of the international financial sector, appear to
deterritorialise economies. However, global-
isation analyses ± mostly based on macro-
economic data ± are increasingly giving way to
the awareness that most productive activity
remains dependent on resources and support-
ing factors that are strongly tied to a territorial
context. Jointly these create an embeddedness
in a local and/or regional economic, socio-
political and socio-cultural environment that
is not substitutable (Storper 1997).
There is a growing tendency to pursue less
abstract analysis and to enter into a more
empirical study of the nature, causes, mech-
anisms and transformative power of the

Tijdschrift voor Economische en Sociale Geografie ± 2000, Vol. 91, No. 3, pp. 293±307.
# 2000 by the Royal Dutch Geographical Society KNAG
Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden MA 02148, USA
294
processes `globalisation' is meant to concep-
tualise. This has led to a focus on the regional
dimension of these processes and on the
differences in internationalising behaviour
between branches of production. The analyses
of globalisation as anonymous processes dic-
tating conditions to the actors is increasingly
being replaced by the study of the decision-
making processes the actors (supranational
organisations, national states, multinational
and transnational corporations, financial in-
stitutions, but also regional elites and other
power groups) are involved in (Vellinga
1999). The real impact of globalisation and
the movements and counter-movements that
form part of the globalisation process can only
be understood well through an analysis of
the interactions between global trends and
sub-regionally embedded production ± and
service systems ± that are often rather idio-
syncratic in an economic, social, political and
cultural sense. Globalisation has a dialectical
appearance, especially on these regional and
local levels (Sjolander 1996; Amin & Thrift
1997). The trend towards homogenisation
flowing from globalisation and economic inter-
nationalisation through investment, trade,
technology, modern communications and
transport will meet with regionally generated
production ± innovation ± and knowledge
systems (Storper 1997). In addition to a whole
body of regional experiences in production,
trade and doing business in general, these
systems often define their own way of digest-
ing the external influences, developing an
often rather peculiar manifestation of the
global-local nexus (Giddens 1990).
The developments in the industrial city of
Monterrey in the North Eastern Mexican state
of Nuevo LeoÂn present a typical case of the
impact of these forces. Until 1988, Monterrey
industries were operating on a protected
domestic market. In that year, the conditions
under which they have to produce and
compete changed radically, requiring decisive
action of the actors involved. World economic
influences ± intensified after the Mexican
entry into the GATT in 1986, the opening
up of the economy in 1988 and the signing
of the NAFTA agreement in 1993 ± are inter-
acting with territorially articulated political,
social and cultural settings, resulting in the
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MENNO VELLINGA
organisation of an idiosyncratic regional pro-
duction system dominated by a limited number
of giant companies ± the so-called grupos ± led
by old entrepreneurial families. Monterrey
traditionally has presented a `milieu' that,
through the years, has been very favourable
towards industrial development. Location,
resources, entrepreneurial talent, a trained
labour force, political-institutional support,
and educational facilities are among the most
visible factors responsible for its spectacular
industrial take-off in the last century. Initially
industrial growth received its most important
stimuli from demand on the North American
market (Vellinga 1995). From the second half
of the 1930s to the 1980s, the import-sub-
stituting industrialisation strategy, pursued by
the Mexican Government, provided the frame-
work for industrial expansion. In recent years,
the insertion in the international economy has
created new opportunities for further in-
dustrial growth. Monterrey has become one
of the most dynamic growth centres within
the context of the market created by NAFTA.
In recent publications, even the metaphor of
Latin-American `tiger' is being used in refer-
ence to its dynamism.1 In this paper we
analyse the regional response to these radical
changes in the context within which the
Monterrey economy has to function. This
response has been, first, on an institutional
level, where the peculiar brand of family
capitalism is confronting the new exigencies
of international competitiveness and the
organisation of business practice it requires.
Second, on the sub-regional level, the inter-
action with the other actors involved ± labour
and the regional political system ± have been
affected, although in a way that has re-
affirmed the regional idiosyncrasies. Mon-
terrey has become a most interesting example
of the dialectics of globalisation or the way
in which regionalisms gain in strength while
responding to the homogenising trends that
form part of globalising processes.
HISTORICAL ANTECEDENTS OF
INDUSTRIALISATION IN MONTERREY
Within Latin America, Monterrey is a case of
early industrialisation. In the first half of the
nineteenth century trade served to accumu-
ECONOMIC INTERNATIONALISATION AND REGIONAL RESPONSE
late the capital, that were later invested in
industrial endeavours. Industrialisation began
in the 1880s and at its initial stage, and
contrary to other Third World industrialis-
ation experiences, emphasised the growth of
the heavy industry in the metal and metallurgy
sectors. In the second half of the century, the
process diversified towards other branches,
such as food and drinks, tobacco, shoes and
leather, and furniture. At a later phase, came
the production of chemicals, glass and ceramics,
metal products, construction materials, paper
and carton, branches that required more
sophisticated technologies.
The strategic location of Monterrey in the
Mexican North East, close to the border with
the USA, proved to be of great importance.
The ease with which local entrepreneurs were
able to enter into alliances with North American
capital in the organisation and management
of their companies, contributed in no small
way to their success. While maintaining regional
control over the process, they skilfully man-
aged to profit from the domestic economic
expansion at the end of the nineteenth and in
the beginning of the twentieth centuries, as
well as from the demand generated in the
USA by the industrial and technological
revolution in that country (Cerutti 1989).
Once this regional development had gained
momentum, multiplier effects began to stimu-
late growth in other economic sectors. Within
Mexico, Nuevo LeoÂn established itself as one of
the leading economic regions in the country
with Monterrey as its hegemonic centre. The
accumulation, distribution and allocation of
capital was dominated by a small group of
entrepreneurial families, establishing a very
special brand of family capitalism. Capital
moved between industry, mining and the
agro-sector with ease as industrialists, mine-
owners and hacendados often belonged to the
same families. The existence of an extensive
web of family relations among the entrepre-
neurial elite added to the early introduction of
the Sociedad AnoÂnima, and has permitted the
sharing of risks in an atmosphere of trust.
Several of those families had a history of
involvement in regional trade going back to
the 1850s. We mention the families Zambrano,
Madero, Garza, CalderoÂn, Belden, Milmo,
HernaÂndez and Rivero. In subsequent decades
295
the Sada, ArmendaõÂz, Muguerza, Ferrara, Maiz
and, in the 1920s and 1930s, the Santos,
Benavides, Maldonado, Clariond, and in the
1940s, the Lobo and RamõÂrez emerged as
entrepreneurial families. The families inter-
married, established close interpersonal rela-
tions and, above all, combined and co-
ordinated investment. Business very much
became a family affair. Their names are still
dominant, present on the boards of the large
Monterrey-based corporations (Table 2).
The entrepreneurial families have enjoyed
direct access to regional political power from
the beginning. Traditionally, their attitude
towards the federal Government in Mexico
City has been ambivalent. They were catering
for federal support of their endeavours, while
at the same time manifesting a regional
consciousness that entailed a strong mistrust
of this same federal centre. At an early point
in time, the contours became apparent of a
regional economic and political bastion that
would develop into a competitor for power
with the central Government. These socio-
political dimensions have played a decisive role
in the development process in the Monterrey
region and their understanding are crucial
to any analysis of the course this process has
taken. Politico-institutional support at the
national and regional levels was extremely
important for industrialisation to take off, first
during the end of the nineteenth and the
beginning of the twentieth centuries, second
during the 1920s when the region was recuper-
ating from the effects of the Revolution and its
aftermath, and third during the period of
active federal government support for import
substitution in the 1930s. With industrial
growth gaining momentum, the sector in-
creased its economic and `political weight' on
a national level. Among the entrepreneurs the
dependence of these political factors changed
to an ability to influence and sometimes even
dictate them. The Grupo Monterrey appeared as
an economic and political power factor on the
national scene (Saragoza 1988).
THE ERA OF IMPORT SUBSTITUTING
INDUSTRIALISATION
In the 1930s and 1940s, the structure of
production in many Latin American countries
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296
underwent drastic changes. As a result of the
1929 crisis the export-import model collapsed,
creating a necessity to substitute imports. This
process was followed with greater intensity in
Mexico than in the other countries, with the
possible exception of Chile. National econ-
omic policies were deliberately designed to
stimulate the manufacturing industry through
subsidies, tax incentives, infrastructural pro-
vision and public credit. In Monterrey, the
presence of an important metal and metal-
lurgy sector facilitated the expansion and
deepening of the substitution process. The
volume of exports by this sector to the USA
had dropped dramatically after 1929 and the
shift towards the national market had not
been a matter of choice but one of survival.
Regional industrial production increased
rapidly. Between 1937 and 1940 the number
of industries more than doubled, from 438 to
1061. Industrial investment increased by 130%
in the same period (Montemayor 1971).
One of the main characteristics of this
industrial expansion had been the growing
tendency towards: vertical integration through
the establishment of subsidiary companies
with independent legal status; oligopolistic
strategies while operating on the domestic
market; and expansion towards other parts of
the national territory. This process continued
unabated through the 1940s. The metal and
metallurgy sectors worked at top capacity,
producing inputs for the American war
industry. The branches of industry directed
towards import substitution continued to
expand as a result of the isolation from world
market competition. After the war the import
substitution process in most Latin American
economies temporarily lost some strength.
Mexico as a whole conformed to this trend,
but Monterrey formed an exception. Between
1945 and 1950 the volume of total industrial
investment quadrupled. The number of in-
dustrial establishments rose to 1,215 in 1950.
The number of workers had doubled in com-
parison with 1940 to 43,868 and doubled
again in 1960 to 83,764, employed by 2,533
industries (Censo Industrial 1951, 1961).
Many of the companies that are still playing
a prominent role in the Monterrey industrial
sector were founded in the 1940s and 1950s,
among them HYLSA (1943, steel plant),
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MENNO VELLINGA
Trailers Monterrey (1946, transport material),
and Protexa (1947, steel products).
Industrial growth continued to be led by big
companies. In 1940 the five most important
branches of industry had produced 62.1% of
the gross production value, in 1950 it had
increased to 68.4% and in 1960 to 66.0%. The
branches of metallurgy, non-metallic minerals
and tobacco products were important growth
sectors that also produced a large percentage
of the gross product of these branches on
a national level: 28.2%, 30.6% and 51.3%
respectively (Garza Villareal 1995). However,
industrial dynamics mostly resulted from the
expansion of one or a few big companies. This
way, growth was stimulated in an absolute as
well as in a relative sense, without contribut-
ing very much to the diversification of the
regional industrial structure as a whole. In
1960, Monterrey industry was centred on the
production of intermediate products and
consumption goods for the domestic market.
It produced 10% of the gross national in-
dustrial product. In subsequent years capital
goods production began. Leading US com-
panies founded subsidiaries in the area,
including technologically advanced industries
± notably in the chemical sector.
Table 1 presents the structure of industrial-
isation in Monterrey during this period of
rapid growth, using as indicators employment
and value added. The five most important
branches are listed for the years 1950±94. In
the course of this period the more `tra-
ditional' sectors (food and drink, tobacco,
textiles and clothing, leather and footwear,
furniture, paper and printing) have been
losing terrain to `modern' industries employ-
ing assembly line, process and engineering
technologies (chemicals and petrochemicals,
plastics, non-metallic minerals, metallurgy,
metal products, machinery, electronics, trans-
port materials).
The metallurgy sector had been a leader of
Monterrey industrialisation till the 1980s. The
sector was dominated by two giant companies:
Fundidora de Fierro y Acero de Monterrey
and HYLSA. The concentration of produc-
tion in the other branches has been equally
impressive. In fact, it has been a distinctive
characteristic of industrialisation in Monterrey
from the early years on, when the Fundidora
ECONOMIC INTERNATIONALISATION AND REGIONAL RESPONSE 297

Table 1. The five leading branches in Monterrey industry 1940±94 (as percentages): (a) Employment; (b) Value added.

1940 1950 1960 1970 1980 1988 1994

Food products 18.9 ± 14.7 11.2 11.6 16.2 10.2

Clothing 13.9 12.9 17.7 6.6 ± ± ±
Metallurgy 10.7 29.0 11.6 10.9 17.1 6.9 ±
Non-metallic minerals 9.1 9.0 10.3 18.5 17.2 17.6 10.1
Leather & shoes 8.7 ± ± ± ± ± ±
Machinery (non-elec) ± 6.8 ± ± ± ± ±
Metal products ± 8.6 7.0 9.9 9.1 7.3 29.0
Chemicals ± ± ± ± 7.5 7.8 6.0
Electrical products ± ± ± ± ± ± 9.7
Total % 61.3 66.3 61.3 57.1 62.5 55.8 65.0

(a) Employment.

1940 1950 1960 1970 1980 1988 1994

Food products 11.4 9.1 6.6 10.9 6.8 17.9 7.4

Clothing 6.3 ± ± ± ± ± ±
Metallurgy 12.7 26.0 18.9 15.7 22.4 12.0 ±
Non-metallic minerals 10.8 10.0 16.0 13.9 14.1 11.5 12.9
Metal products ± 8.7 ± 8.0 8.8 6.4 24.8
Chemicals ± ± ± ± ± 10.1 ±
Electrical products ± ± ± ± ± ± 8.3
Tobacco products 26.1 ± 21.0 12.5 9.5 ± 9.9
Drinks ± 11.3 6.3 ± ± ± ±
Total % 67.3 65.1 68.8 61.0 61.6 57.9 53.3

(b) Value added.

Source: III Censo Industrial 1941; V Censo Industrial 1951; VII Censo Industrial 1961; IX Censo Industrial
1971; XI Censo Industrial 1981; XII Censo Industrial 1989; XIV Censo Industrial 1995. The data for
1940, 1950, 1960, 1970, 1980 and 1988 was adapted in Garza Villareal 1995, pp. 124±146.

(metal/metallurgy) and Cuauthemoc (beer, companies. They employed 57.1% of the

glass, carton) conglomerates set the pace of
industrial development in the region (Vellinga
1989). In 1984, 2.6% of the total number of
industrial enterprises employing over 250
workers accounted for 88.6% of total invested
capital and employed 63% of the total in-
dustrial labour force. The leading industrial
branches were all dominated by giant indus-
trial companies. In metallurgy, for example,
1.6% of the big companies accounted for 90%
of the total investment and 60% of employ-
ment in the branch, indicating the capital-
intensive nature of these industries. But also
in the other sectors the trend towards con-
centration was pronounced. In 1998 this
situation had not changed: 3.3% of the total
number of enterprises concerned these big
industrial labour force and accounted for
88% of total invested capital (LoÂpez Garza &
Valero Gil 1985; GutieÂrrez Garza 1995). The
micro and small companies employing less than
100 workers numbered 92.8%, accounted for
5% of industrial capital and employed 25.1%
of the industrial labour force. The micro-
enterprises account for more than 7,000 small
shops using simple technologies and are
mostly active in the sectors of foodstuffs
production, and metal work and repair
(GutieÂrrez Garza 1995).
The considerable concentration and cen-
tralisation of capital ± much superior to what
could be observed in other parts of the
republic ± has formed a salient characteristic
of the Monterrey industrialisation process

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298
from the beginning on. In the course of the
1970s, however, the process assumed unparal-
leled proportions and strongly affected the
organisation and the policies of the big
concerns. The emphasis shifted from branch-
specific production towards product differen-
tiation and the creation of divisions ± two
processes that preferably were initiated in
combination. Product differentiation implied
expansion towards various product-market
combinations. Conglomerates or multi-market
companies were formed, which followed
either of the following strategies:
1. A number of different activities were
assembled in one concern without the
existence of a logical relationship between
them. Basically this strategy was an oppor-
tunistic one. The only objective was the
continuity of the accumulation process as a
whole, and the individual companies were
subordinated to this goal.
2. Logically related activities in the produc-
tion and services sectors were integrated
into a more or less consistent whole in
order to build resistance against fluctu-
ations in the economic cycle.
Both corporate strategies were present when
the large grupos industriales were founded in
Monterrey. An example of the first mentioned
strategy was presented by the conglomerate
ALFA. An example of a conglomerate based
on an integration of more logically related
Table 2. The grupos industriales and entrepreneurial families in Monterrey.
Grupo industrial Year organised
CEMEX 1969
CYDSA 1970
ALFA 1974
COPAMEX 1976
IMSA 1976
VISA 1976
VITRO 1979
PROTEXA 1980
GAMESA 1980
AXA 1981
PROEZA 1981
GRUMA 1981
RAMIREZ 1981
Source: Registro PuÂblico de la Propiedad y el Comercio de Nuevo LeoÂn. In Palacios 1999.
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MENNO VELLINGA
activities was glass producer VITRO. The
strategy on the level of the concerns was
basically a capital strategy. The close associ-
ation with the banking system was essential
while pursuing this course (HeÂrnandez Laos
1984). It made the mushroom-like growth of
the grupos industriales in the 1970s possible.
Monterrey became a prime example of the
integration of industrial and financial capital,
all the time, that is, under the control of the
traditional entrepreneurial families. Table 2
shows the grupos that were formed and the
families that were involved. Many of those
families ± as noted before ± have been active
participants in regional industrial and com-
mercial development for over 100 years and
have contributed to a rather idiosyncratic
brand of family capitalism.
The main body of the Monterrey-based
financial apparatus serving the economic
expansion in the region had been established
during the period of industrial take-off in the
1930s and the 1940s. In subsequent years the
trend towards concentration made itself felt
also in the financial sector. Large financial
groups were formed, all of them in close co-
ordination with industrial interests. Two among
them ± SERFIN and BANPAIS ± became the
most powerful banking institutions in the
country. They gave the Monterrey based con-
glomerates a greater independence from the
State and the banking system based in Mexico
City (Fragoso et al. 1979; CastanÄ eda 1982).
Entrepreneural families
Zambrano GutieÂrrez, Zambrano Trevin Äo
Sada Zambrano, GonzaÂlez Sada
Garza Sada ± Garza LaguÈera
Maldonado Elizondo
Clariond Reyes ± Canales Clariond
Garza Sada ± Garza LaguÈera
Sada Zambrano ± Sada GonzaÂlez
Lobo Villarreal, Lobo Morales
Santos GonzaÂlez, Santos de Hoyos
Garza Garza, Garza Herrera
Zambrano GutieÂrez, Zambrano Lozano
GonzaÂlez Moreno, GonzaÂlez Barrera
RamõÂrez GonzaÂlez, RamõÂrez Jauregui
ECONOMIC INTERNATIONALISATION AND REGIONAL RESPONSE
The process of conglomerate formation,
also presented itself through the development
of large-scale activities in the commercial and
services sectors next to the ones in industry. In
some cases these were part of the integration
along vertical and horizontal lines of a specific
branch of activity, but more often, the logic
behind assembling a variety of economic
activities under one corporate umbrella was
dictated by overall financial strategies. Activ-
ities in branches like real estate, tourism,
supermarkets, communications and transport
were taken on and in some cases became very
important. They were often developed in
other regions of the country, which gave the
process of capital formation a truly national
scope.
This model of accumulation, distribution
and allocation of capital functioned unharmed
until the beginning of the 1980s, and it served
Monterrey entrepreneurs to build an economic-
financial imperium. The oil boom in the years
between 1977 and 1981 created the conditions
for a spectacular growth of most grupos. Start-
ing in 1981, however, when the impact of the
international economic crisis became felt, this
structure started to crumble. One grupo after
another appeared unable to meet the obli-
gations resulting from the foreign loans that
had been contracted in the years before. The
nationalisation of the Mexican banking system
in September 1982 gravely complicated this
already serious situation (Vellinga 1988).
THE CHALLENGE OF AN `OPEN
ECONOMY'
The crisis of the 1980s was the most severe that
Monterrey has experienced. The big conglom-
erates had over-expanded and in the course of
this process had become heavily indebted to
foreign banks. Their activities had to be re-
structured. Several corporations had to return
to their original industrial base activities of the
1960s. Their corporate product-market strat-
egies had to be changed, allowing for more
decentralised decision-making, permitting a
more rapid adaptation to changing economic
conditions. This process of restructuring and
re-orientation of growth strategies was the
more traumatic for Monterrey entrepreneurs
because through the 1982 nationalisation of
299
the banking system they had lost temporary
control over the financial sector that until
then had operated in close co-ordination with
their activities in other sectors.
Industrial production in the 1980s dropped
dramatically. Between 1980 and 1988 the
regional annual growth rate was negative
(71.1%, as compared to the slightly positive
national rate of 0.8%). The Local Specialis-
ation Index (LSI) for industry fell from 1.7 to
1.56 in the same period, indicating a decreas-
ing importance of industry within the regional
economy in those years (Garza Villareal 1993).
The data in Table 1 shows a decreasing con-
tribution of value added by the five most
important branches, between 1980 and 1994.
Monterrey industry proved to be vulnerable
in these years of crisis. In 1980, the region
counted 4,550 industries. The regional indus-
trial structure appeared to be diversified, with
a good distribution between the production of
consumer durables, intermediate products
and capital goods. However, industrial growth
had remained dependent upon the dynamics
of the traditional branches that were rapidly
meeting their limits of expansion. Metallurgy
and non-metallic minerals had remained the
`workhorses' of Monterrey industry, produc-
ing 38.1% of GPV in 1980. In 1986, however,
the metallurgy sector received a heavy blow,
the industrial giant Fundidora de Fierro y
Acero de Monterrey was closed and the contri-
bution by the sector to GPV fell from 27.8%
in 1980 to 12.8% in 1988. Its contribution in
terms of value added decreased from 22.4% in
1980 to 12.0% in 1988 and 5.1% in 1994.
Among the 18 branches present in the
Monterrey industrial apparatus, nine joined
the downward trend in this period; the other
nine showed some growth. The `losers' were,
next to metallurgy, tobacco, leather and shoes,
wood products, paper and carton, non-metallic
minerals, metal products, transport equipment
and `other industries'. It is interesting to note
that most of these branches concern indus-
tries using natural and mineral inputs that
have to be imported into the region. The
`winners' were foodstuff, textiles, apparel,
furniture, printing, chemicals, rubber and
plastics, non-electrical machinery and elec-
trical products. However, the net loss to in-
dustrial GPV was considerable (780 billion
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300 MENNO VELLINGA

pesos during 1980±88) (Garza Villareal 1995).
Most producers of intermediate products lost
market shares and had to reorganise produc-
tion. Those industries producing immediate
consumption goods (i.e. food products) tem-
porarily increased their relative importance.
The opening up of the Mexican economy
in the second half of the 1980s has gener-
ated radical changes in the conditions under
which Monterrey industry has to produce and
compete. The new conditions under NAFTA
represent the strongest challenge Monterrey
industry has been confronted with in its 120
year history. The grupos needed just a few years
to adapt. Initially, the dependency on imports
of inputs and capital goods increased. The
industry export-base coefficient collapsed from
1.13 in 1988 to 0.49 in 1992, indicating a
development from a trade surplus of 13% to
a trade deficit of 51%. The export position
of most branches deteriorated, as imports
invaded the domestic market. As a result, the
trade deficit increased to $1,750.2 million
in 1994, the first year of NAFTA. However,
in subsequent years the export position of
Monterrey industry recuperated. Its 1998
deficit has decreased to 3% with a value of
$82 million. The 1995 devaluation of the peso
as a result of the 1994 `tequila crisis' has con-
tributed in no small way to the recuperation
of export positions. The various branches of
industry, however, continue to show consider-
able fluctuations in their export performance.
Not all those with positive export positions
managed to retain them and those who did
lost strength. The differences between the
1988 and 1998 positions are often substantial
(see Table 3).2 Drinks, non-metallic minerals
and metallurgy kept export positions, but their
coefficient decreased from 25.43 to 7.00
(beverages), from 13.09 to 6.83 (non-metallic
minerals and from 2.10 to 0.95 (metallurgy)
respectively (GutieÂrrez Garza 1997). Metal
products and machinery and equipment im-
proved their positions substantially: from 1.05
to 6.27 and from 0.68 to 1.21 respectively.
These sectors include capital goods produc-
tion and their export performance indicates
considerable international competitiveness.
Tobacco and leather and footwear also de-
veloped positive export positions, but the
volumes are rather small. The five most
important branches of industry in 1994,
contributing 76.4% to industrial GPV, at the
same time appear to be those most dependent
on the import of inputs (81.4%).
After 1988, Monterrey industry had to pay
a price for having had the opportunity to
operate in a protected domestic market for
over half a century. Most industries had fallen

Table 3. Industry export base coefficient, Nuevo LeoÂn 1988±98.

1988 1989 1990 1991 1992 1994 1995 1996 1997 1998

Food 0.4 0.38 0.63 0.27 0.20 0.25 0.66 0.09 0.15 0.18
Drinks 25.43 24.51 11.91 3.34 0.65 1.69 4.05 15.00 6.00 7.00
Tobacco 0.24 0.29 37.16 3.03 2.67 ± ± 5.00 9.00 8.00
Textiles & clothing 4.34 2.46 0.6 0.26 0.22 1.14 1.58 0.92 0.81 0.74
Leather & footware 0.53 1.3 1.17 0.94 0.48 0.91 1.17 0.96 1.27 1.04
Wood products 2.26 1.55 1.16 0.56 0.37 0.50 0.80 0.13 0.26 0.33
Paper, publishing, printing 0.68 0.62 0.26 0.1 0.05 0.90 0.36 0.15 0.20 0.11
Chemicals 1.09 1.11 1.26 0.75 0.70 0.37 0.16 0.39 0.40 0.29
Rubber & plastics 0.64 0.67 0.75 0.37 0.36 0.31 0.29 0.50 0.39 0.35
Non-metallic minerals 13.09 9.32 7.71 4.31 4.88 5.11 8.17 5.73 6.21 6.83
Metallurgy 2.1 1.46 0.68 0.38 0.35 0.41 1.66 1.44 1.26 0.95
Metal products 1.05 0.98 0.43 0.62 0.63 0.90 0.91 5.26 4.64 6.27
Machinery & equipment 0.68 0.75 0.31 0.30 0.30 0.40 0.74 1.37 1.07 1.21
Other industries 0.43 0.16 0.23 0.21 0.10 0.99 1.73 0.37 0.97 0.22
Total industry coefficent 1.13 1.0 0.73 0.53 0.49 0.60 0.92 1.00 0.95 0.97

Source: Departamento de Estudios de Mercado; Secretaria del Trabajo, DelegacioÂn Nuevo LeoÂn; Secretaria
de Comercio y Fomento Industrial.

# 2000 by the Royal Dutch Geographical Society KNAG

ECONOMIC INTERNATIONALISATION AND REGIONAL RESPONSE
behind technologically, and also in the area of
management and organisation they had dis-
regarded international trends. The traditional
models of industrial organisation had de-
pended on the presence of large markets for
standardised goods produced through Fordist-
type production processes in large immobile
and bureaucratic corporations. The techno-
logical changes in the 1980s have made the
integration of design and production and the
downsizing of production runs possible. In
addition, the growing flexibilisation in pro-
duction has created a greater scope for fine
tuning to market circumstances. This has
given rise to new competitive strategies based
on product quality and demand preference
in different market segments, with a different
spread of delivery. These new developments in
technology favoured changes in management
practices. Inspiration was drawn from Japanese
models, including just-in-time delivery, time
and quality management and human resource
development. The new practices differ radi-
cally from the management that, until re-
cently, we would find in many Monterrey
industries including the large corporations.
These same corporations, however, are now
leading the process of techno-managerial
change. At the same time, they are the ones
that have the resources to do it. Within the
grupos, decision-making concerning product-
market matters and administrative affairs is
being decentralised. The corporations have
subdivided into smaller and more homo-
geneous units that are given considerable
autonomy in questions on how to run their
businesses. In the past, vertical integration
was sought in order to monopolise the market
and to control all the phases of production.
Under the new circumstances, vertical inte-
gration will serve the formalisation of links
with dependable suppliers of high-quality
inputs who function within the context of
the overall corporation. In Monterrey this
system has been used in favour of subcon-
tracting with independent suppliers that are
known in the USA and Western Europe. It has
become difficult for independent small and
medium-sized firms to create production
linkages.
Among the big corporations the size of
the mother company has been reduced and
301
redesigned to focus on specific product-
market combinations. The corporation as a
whole, however, will benefit from the access
the mother company has to national and
foreign providers of the capital needed to
finance the process of techno-managerial
change. In this area of modernisation, the
gap between the big corporations ALFA,
VITRO, CYDSA, VISA, IMSA, CEMEX, PRO-
TEXA on the one hand, and the small and
medium-sized companies on the other is ever
widening (Pozas 1993).
International competitiveness and the con-
solidation of attractive export positions on the
North American market will require further
advances on this path of techno-managerial
change and a more generalised application in
industry (Aguilar Barrajas 1995). The intro-
duction of new technologies has long lagged
behind and only in the last few years a
considerable effort can be noted to catch up
with international trends. In 1988, Monterrey
industry imported machinery and equipment
for a total value of $130.6 million, represent-
ing only 4.3% of industrial value added gener-
ated in that same year. In subsequent years
imports of technology did not increase and
accounted for 2.2% in 1990, 2.1% in 1991 and
0.87% in 1992 (GutieÂrrez Garza 1993). In her
study on industrial restructuring in Monterrey
in the early 1990s, Pozas (1993) comments on
the absence of departments of research and
development and programmes of techno-
logical modernisation in most firms outside
the large grupos. On the eve of NAFTA, many
Monterrey industries still had to be convinced
of the necessity to adapt to the new circum-
stances of international competition. Most
companies were lacking a comprehensive
understanding of what was being required
under the conditions of NAFTA. Acquiring
new technology ± whether independently
bought or acquired through associations and
co-investments with foreign companies ± and
integrating it into the production process
means having a clear marketing strategy
including well-defined ideas concerning the
role this technology will play in this pro-
duction process. Few industries had actually
mapped out such strategies. Those companies
in Monterrey that did organise their own R&D
departments were a favourable exception.
# 2000 by the Royal Dutch Geographical Society KNAG
302 MENNO VELLINGA

However, they are few in numbers and all of
them belong to one of the large grupos.
A major factor explaining this phenomenon
may be the reprivatisation of the Mexican
bank system, which was concluded in 1992. In
that year, Monterrey entrepreneurs accepted
the opportunity to re-establish the integration
between industrial and financial capital that
had been the traditional trademark of devel-
opment in the region and that had been lost
through the nationalisation of banks in 1982.
They invested $4,247.7 million and acquired
BANCOMER, SERFIN, CONFIA and Banco
del Oriente, thus controlling 41.8% of the
assets of the Mexican banking system.3
However, in subsequent years, the export-
oriented industries ± under pressure by
NAFTA ± have invested heavily in new tech-
nologies. In 1996, 15.3% of the imports from
the USA ± the major provider of technology ±
concerned machinery and equipment for a
total amount of $611 million. In 1998, the
percentage had increased to 21.2 for a total
amount of $1,026 million.4 These industries are
at the same time the most modern, employing
two-thirds of the industrial workforce. The
segment of micro and small enterprises had
been bearing the brunt of the effects of the
massive imports of mass-consumption goods
when the Mexican economy opened up and
initially suffered massive bankruptcies and lay-
offs. The medium-sized industries also lost
some terrain. However, in the second half of
the 1990s these sectors managed to recuperate
and reclaim the important position they had in
the past (Table 4).
The internationalisation strategies that were
being followed have varied considerably in
each individual case (Table 5). In order to in-
crease their competitiveness on international
markets, the large companies have sought to
establish partnerships and co-investments with
foreign ± mainly North American ± com-
panies, thus creating networks of technology
transfer and formalising relationships with
high quality suppliers.
For the grupos, and the more dynamic com-
panies in other sectors as well, either one of
these strategies is indicated to adapt to the
new situation created by globalising processes
and internationalisation through a regional-
isation project like NAFTA. In the techno-
managerial field, the past years under NAFTA
have been a constant struggle of adaptation.
Fordist ways of organising production and
remunerating labour are still widespread, also
in the modern industries. Within the indus-
tries, contradictions are apparent between the
old model of labour relations and the new
forms of organising production. The mechan-
isms for mobility and wage formation includ-
ing a system of benefits, promotions and work
relations, with an important role for loyalty to
the firm through generations of workers,
conflict with the changes in the skill structure
that arise in response to the new exigencies of
quality production, competitiveness, flexibility,
multi-skilling, changing work assignments and

Table 4. Number of industries and employment 1988±98.

Numbers Change Employment Change

(%) (%)

1988 1996 1997 1998* 1988±98 1988 1996 1997 1998 1988±98

Micro 5,777 6,664 6,956 7,169 24.1 17,789 29,785 31,662 32,515 82.8
Small 795 1,544 1,596 1,712 115.3 30,625 57,868 59.977 64,021 109.0
Medium 147 277 303 312 112.2 22,429 42,903 47,347 49,129 119.0
Large 114 224 244 263 130.7 107,595 163,534 177,318 193,838 80.2
Total 6,833 8,709 9,099 9,456 38.4 178,438 316,304 316.304 339,503 90.3
Maquiladora 70 99 110 162 130.0 8,500 38,999 38,999 45,682 143.3

Notes: *March±April 1998.

Micro: 15; Small: 16±100; Medium: 101±250; Large: 250+.
Source: CAINTRA, Nuevo LeoÂn.

# 2000 by the Royal Dutch Geographical Society KNAG

ECONOMIC INTERNATIONALISATION AND REGIONAL RESPONSE 303

Table 5. Strategies of internationalisation.

Internally directed Externally directed Mixed strategy Transnationalisation

strategy strategy strategy

Co-investment with Co-investment with Mexican corporation and Mexican corporation

business partners business partners foreign business partner acquires 100% of a
within Mexico abroad exchange participation foreign company
in their subsidiaries in
each country
Mexican corporation Mexican Exchanges of the Mexican corporation
has control of the corporation 49%±50% type exludes foreign
enterprise (i.e. ALFA) acquires an interest (i.e. VITRO) participaion
in the enterprise (i.e. CEMEX)
(i.e. IMSA)

Source: Pozas 1999.

the like. In addition, the archaic forms of
labour relations, including a strong element
of paternalism and control over the individual
worker, that have been in place now for over a
century are also out of tune with the exigencies
of this modernisation process (Vellinga 1989).
THE MAQUILADORA SECTOR IN
MONTERREY AND GLOBALISING
PROCESSES
For several decades, the maquiladora model has
offered a favourable option for cost reduction
in the assembly part of the production process
to foreign corporations (Sklair 1993). It has
promoted intra-firm trade and, in theory,
opens wide opportunities for subcontracting
on an international scale. Traditionally the
phenomenon has shown a less dynamic devel-
opment in Monterrey than in other parts of
Northern Mexico, but this situation is chang-
ing rapidly. The first maquiladora was estab-
lished in Nuevo LeoÂn in 1986 after the
limitations prescribing location in the border
region had been lifted in 1984. In 1998, 120
plants had been founded, employing a total of
45,682 workers, or 11.9% of total industrial
employment in the state. The total number of
maquiladoras in Mexico in that year was 3,130,
employing 1,038,783 workers.5

Table 6. Nuevo LeoÂn: Value of exports and imports: maquiladora and others 1990±94 (percentages and millions of
US dollars).

1990 1991 1992 1993 1994 1991±1994

Annual growth rate

Exports 281.8 468.8 677.6 722.9 964.2 50

Maquiladora 590.9 921.3 713.2 1,618.7 1,703.5 41
Other industries 872.7 1,389.5 1,390.8 2,341.0 2.667.7 35
Total 32.0 34.0 34.0 31.0 36.0 ±
Share of maquiladoras
Imports
Maquiladora 234.7 390.0 499.8 581.6 819.3 38
Other industries 958.7 2,244.8 3,188.0 2,843.4 3,598.6 48
Total 1,193.4 2,634.8 3,687.8 3,425.0 4,417.9 41
Share of maquiladoras 20.0 15.0 14.0 17.0 19.0 ±

Source: ElaboracioÂn Secofi DelegacioÂn Nuevo LeoÂn

# 2000 by the Royal Dutch Geographical Society KNAG

304
Among the maquiladoras in Nuevo LeoÂn,
5.0% are nationally owned, 13% represent
joint ventures and 2.0% are foreign owned
(1998).6 The integration with the local econ-
omy is higher than in other locations. A
traditional complaint against the maquiladora
phenomenon has concerned the lack of
domestic content of its inputs. Normally, no
more than 2.7% of inputs is obtained locally
(1998). In Nuevo LeoÂn this percentage has
risen to an average of 17% (1998). The per-
centage of local inputs has been increas-
ing through the years and obviously has to
do with the presence of a well-developed
industrial sector capable of producing quality
products.
The production of inputs for the maquila-
dora sector is a road of expansion figuring
prominently in present discussions on future
industrial development in Monterrey under
NAFTA conditions. The maquiladora in a
formal sense will disappear in 2001 according
to NAFTA regulations. The phenomenon,
however, will obviously remain, with the
difference that it will be permitted to sell in
the Mexican market. In the past, the maquila-
dora itself was never envisioned as a driving
force of industrial development in Monterrey.
It was considered a potentially useful means to
resolve temporary employment problems. At
the same time, the flexibilisation of labour
in the maquiladora setting conflicts with tra-
ditional labour relations in Monterrey, while
its wage policies were viewed as going against
the need for a stable and highly qualified
workforce that an internationally competitive
industrial sector will require. Most of the
maquiladoras in Nuevo LeoÂn (84%) remain
assembly operations. The branches of food-
stuffs, clothing and footwear, wood products,
chemicals (plastics), and electrical appliances
dominate. All of them are labour intensive
enterprises employing mostly unskilled or semi-
skilled labour: 89% of the workers fits those
categories. Only 33% of the maquiladoras has
been using modern technology based on micro-
electronics; the others use very traditional
assembly technologies. The average annual
turnover of employment in some maquiladoras
in the Monterrey area has been as high as
48%, while the going rate in the other large
industries will not exceed 6% (1998).
# 2000 by the Royal Dutch Geographical Society KNAG
MENNO VELLINGA
The 25-year plan on industrial development
in Nuevo LeoÂn, adopted in 1995 by the state
economic development board, has targeted a
number of industries that should be drawn to
the Monterrey area to function as high-quality
suppliers to the maquiladora industry all over
Northern Mexico (Patten 1996). An elaborate
system of incentives and subsidies do accom-
pany the plan. The objective is to leave the
traditional low-wage simple technology assembly
maquiladora ± still 67% of industry in Monterey
± to other areas and instead to attract
medium- to high-tech industries that would
establish linkages with the maquiladora sector,
while benefiting from the region's milieu: its
education system, its modern communications
network, its long industrial tradition, its wide
base of suppliers, its skilled workforce and its
business-minded socio-political `climate'.
One of the industries to be promoted
concerns the production of supplies to the
automotive industry. This would be a logical
development. The Saltillo-RamoÂs Arizpe auto-
motive assembly complex (with an annual
production capacity of 1.5 million cars) is
located at short distance, next to the presence
of automobile manufacturers in Monterrey
itself (Mercedez-Benz, Ford, Volvo, Chrysler
and General Motors). The second branch of
industry to be promoted is electronics. Other
industries targeted are medical technology,
food processing, environmental protection
technology and computer software. Already a
number of international companies have
reacted and established plants in the Mon-
terrey region but it will take a few more years
to fully evaluate the effects of this project.
The maquiladora sector has become an
increasingly important part of industrialisa-
tion in Mexico. In 1998, the sector employed
26% of the total industrial worker population,
took care of 68% of Gross Industrial Product,
and 50% of total industrial exports (GutieÂrrez
Garza 1999). With the disappearance of most
import and export duties in 2001, an entirely
new situation will come into being for the
maquiladora industry. To avoid a development
through which the former maquiladoras would
largely remain assembly enclaves for the
Mexican and North American market, run by
US industries, the creation of linkages with
local/regional quality suppliers will be essential.
ECONOMIC INTERNATIONALISATION AND REGIONAL RESPONSE
It appears that Monterrey ± with 17% pro-
viders of inputs from regional suppliers ± has
been establishing a promising starting position
for developments in the post 2001 era.
CONCLUSION
Monterrey industry has been passing through
a most complex phase in its history, after the
elimination of tariff barriers, the abolition of
protectionism, and the need to adapt to the
changing conditions of the internal and
external markets. Compared to other industries,
the grupos are having a competitive advantage
through their close relationship with the
banking system and the alliances with foreign
capital, but they are also confronted with the
challenges of modernisation. The integration
into NAFTA and the close links to the highly
competitive North American market have been
creating urgency in meeting those challenges
on the short term. Despite these complexities,
Monterrey industry has been able to maintain
a steady increase in exports since the Mexican
economy opened up. The Monterrey indus-
trial apparatus appears to have a number of
dynamic growth centres that are internationally
competitive. To mention a few examples:
CEMEX has become the world's third largest
producer of white cement; Pulsar has devel-
oped into a producer of vegetables and seeds,
controlling 22% of the world market; IMSA
has become the main supplier of automobile
batteries to the North American market.
Between 1990 and 1998, the volume of
exports of Monterrey industry grew at an
average annual rate of 55.7% and increased
in value from $872 million to $4,759 million.
Devaluations like those of 1994 and 1998 have
the tendency to stimulate exports. However, in
order to increase the possibility of taking
advantage of these conjunctural develop-
ments, it will be necessary to reduce the
general dependence of Monterrey industry
on imported inputs and foreign technology.
The imports of machinery and equipment,
and industrial inputs in general, increased at
an almost equal pace with exports and totalled
$4,841 million in 1998.7
Within Mexico, Monterrey is the most
dynamic and internationalised industrial
region. The differences in levels of develop-
305
ment with the other regions ± in particular
those in the central and southern part of the
country ± are ever increasing. How these
pressures towards modernisation and maximi-
sation of the region's competitive advantage
within NAFTA, will change the regional
production system, including those factors
that in the course of industrialisation in
Monterrey have contributed to a regional
embeddedness that has been rather idiosyn-
cratic, remains to be seen. This idiosyncrasy
includes an interesting mix, on the one hand,
between modern and dynamic ways of doing
business along the lines that the entrepre-
neurs are being taught at the American
business schools they attend. On the other
hand, traditional elements are included,
such as:
. An important role for family capitalism.
. A structure of their enterprises (the grupos)
that has remained in force since the era of
conglomerate formation in the 1960s and
1970s.
. A paternalism in labour relations with an
important role for employer-controlled
labour unions.8
. A political role that includes a firm grip on
regional politics and includes a capacity to
intervene successfully on a national level in
politics pertaining to their interests.
. A strong regional identity which has always
had mobilising functions during the for-
mation of the regional production system.
The factors involved in this process ± the
economic, the social, the political and the
cultural± reinforce each other and have cast
this system in a particular mould that will be
hard to change.
The Monterrey case does show that the
institutional structures that form part of the
context for regional development differ con-
siderably in their capacity to promote, em-
power and guide innovative entrepreneurial
acting, private as well as public. The solutions
to the challenge of trying to sustain regional
economic viability in the face of market
developments and technological change will
differ in each individual case. Comparative
analysis will produce knowledge on those
variables that in the various production
milieus build an innovating environment with
# 2000 by the Royal Dutch Geographical Society KNAG
306
the ability to mediate successfully the impact
of world economic processes.
The globalising as well as the localising
processes are not anonymous processes that
dictate conditions to the actors. On the con-
trary, these phenomena are the outcome of a
myriad of decision-making processes. Some of
these will be directed towards the optimisation
of positions as defined by neo-classical theory,
and others may be pursuing the optimisation
of satisfaction in other terms. The logic of
capital will have different meanings in differ-
ent situations and would certainly not always
be defined on the basis of `pure' capitalist
criteria, as we observe again in the case of
Monterrey with its important role for family
capitalism.
These processes of `global localisation', or
glocalisation, incorporate the dimensions of
convergence and divergence, of homogen-
isation and fragmentation that form part of
the dialectical nature of a globalising world.
`Think globally, act locally' is the often-heard
slogan, expressing the essence of the strategy
needed to deal with globalising processes.
Localised or regionalised production com-
plexes, as in the case in Monterrey, are firmly
embedded in a regional production milieu.
At the same time they are becoming inter-
nationalised and globalised both organisation-
ally and in terms of trade and other networks.
It has become a matter of survival to become
simultaneously intensely local and intensely
global.
Developing Monterrey into NAFTA's North
Mexican `tiger' will require substantial adapta-
tion to world economic pressures. The inter-
action between these influences and the
idiosyncracies of Monterrey's production sys-
tem may produce one of the more interesting
examples of the workings of the global-local
nexus brought about by a project of regional-
isation linking the world's most powerful
industrial economy with a newly industrialis-
ing country.
Notes
1. `It's happening in Monterrey', The Economist,
27 June 1992, p. 53. When referring to Monterey
as an industrial centre, we should realise that its
impact and regional significance transcends the
# 2000 by the Royal Dutch Geographical Society KNAG
MENNO VELLINGA
politico-administrative boundaries of the state
of Nuevo LeoÂn. In the case of Monterrey, the
concept of `region' refers more to a processional
space that could include the states of Chihua-
hua, Durango, Coahuila, San Luis PotosõÂ,
Tamaulipas and even the state of Texas in the
USA (Cerutti et al. 1999). In these states, Mon-
terrey entrepreneurs hold important invest-
ments. Recently, the journal Fortune, on the
basis of research in 30 Latin American cities and
extensive interviewing among American entre-
preneurs involved in businesses in Latin America,
found Monterrey the Latin American city with
the most favourable business climate. The study
mentioned the qualified work force, excellent
communications and the presence of facilities
like the Technological University in Monterrey
founded by regional entrepreneurs in 1943
(El Norte, 30 November 1994).
2. Data is derived from an import-export matrix of
the state of Nuevo LeoÂn and should be inter-
preted with some caution. The larger firms will
have subsidiaries in the neighbouring states.
3. Data is from CAINTRA Nuevo LeoÂn; El Norte,
6 June 1992.
4. Data is from Secretaria de Comercio y Fomento
Industrial, sede Monterrey.
5. Data is from December 1998, see Industria
Maquiladora de ExportacioÂn (1999), Aguasca-
lientes: Instituto Nacional de EstadõÂstica, Geo-
grafia e Informatica, February, pp. 2±8.
6. The 1998 data on maquiladoras in Monterrey
results from survey research by GutieÂrrez Garza
(1999).
7. Data is from Secretaria de Comercio y Fomento
Industrial, sede Monterrey.
8. The model of labour relations that predom-
inates in Monterrey industry has a highly
paternalist nature and includes an extensive
system of worker care and control, including
food subsidies, medical care, subsidised loans,
discount stores for clothing and shoes, edu-
cation, sport clubs, etc. Workers also have to
enrol in employer-controlled labour unions, the
so-called sindicatos blancos.
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