Mexico Jeans Production Pre-NAFTA
Updated: Dec 20, 2018
Mexico is a country with rich history, generous people and growing economy, but in the late 1980’s, it was a country in turmoil. Mexico was in the midst of humanitarian and civic crises that started with ongoing government and electoral corruption, a large earthquake in 1985 that had over 10,000 casualties, and devastation from a hurricane in 1988. NAFTA was not signed until 1992 and went into effect in 1994. All of these factors affected their economy, making Mexico a limited trading partner.
In 1990, Mexico was still recovering from the turbulence of the 1980’s and there were still very few freeways, phones in residences. Environmental issues such as air and water quality were low priority and cell phones were extremely rare.
And yet, that was the place and time that my gut told me was ideal for building a jeans production business.
I asked my wife, Roxanne, to move with our 10-year old son, Stephan, into the great unknown that was Mexico in 1990. She gave me two conditions: the first was “anywhere, but Mexico City” due to the poor air quality; and her second condition was that we would stay no more than 3 years.
Mexican society rules were all lifted from the Napoleon Code, for me it was an exact copy of the French system with which, I was very familiar. I didn't feel I was in a foreign country. I am fluent in Spanish and after a couple months, having integrated the "Mexican" way of expression, I would easily pass for a local whenever I wanted, which helped me out of some sticky situations, more than once.
I agreed and we decided to move to the town of Puebla, in the state of Puebla, which is the historic textile capital of Mexico. After a brief search, we bought a spacious apartment. However, I didn’t quite understand why the seller kept emphasizing that the unit had not 1, but 2 phone lines. It was only later that I learned most residences didn’t have a phone line and that waiting for installation could take several years.
At the time, most jean companies would send pre-cut products to be assembled in Mexico under a duty-free program called “807.” There were very few full-package jeans being made, but a tremendous amount of sewing was taking place.
Tehuacan, is the second largest town in the state of Puebla. It was and still is the denim center in Mexico, so I started going there every day from Puebla where I had settled with Roxanne and Stephan.
In those days, the only route was a narrow and perilous two lane road. One night, while driving back to Puebla, my driver moved into the oncoming lane to pass a slower moving car. That’s when I saw a large truck charging at us in an unplanned game of chicken. He swerved back over to our side in time to feel the car shake from the passing truck. Once I caught my breath my first thought was “what a shitty way to go.”
To get started, my brother Gerard helped by sending a lot of production. We put a team together from our Hong Kong production who became affectionately known as "los Chinos."
We diligently started training the factories to work in a way acceptable to US retailers, which we felt would open a lot of doors. We believed the industry could grow from essentially a giant sewing factory to a very sophisticated and competitive provider for the top US brands.
Breaking into a new territory, even with several years of success in the industry, can take persistence and patience. It also requires an understanding of the lay of the land. Two groups dominated the town and the jeans industry: Vaqueros Navarra, owned by Spaniards; and the Haddad family. There were smaller players like the Jalife brothers, who were the pioneers of the industry in Tehuacan. But it was a typical provincial village like anywhere else in the world. It had a strong social structure where everyone knew their place in the pecking order. There were a lot of gossips, but the people were very honorable and true to their word.
Sewing under 807 programs was considered the lowest post on the totem pole. Many US companies mistreated their Mexican suppliers by paying them late, charging them back, and generally taking advantage of them.
I have always believed that your business is as strong as your relationships and good relationships are built on mutual trust, respect, and communication. To ensure we got first priority, and hence as much production as we wanted, I came up with a very simple French system, called “payer au cul du camion,” loosely translated to “paying cash on the barrel.”
To implement my philosophy, every Friday I would visit each of the four factories I was using and watched them seal my container. They would hand me the invoice and I would immediately cut them a check. Within a month, we were shipping 4 containers per week and got first priority at our factories.
Ultimately, starting a jeans production business in Mexico proved to be a great move. I built a new factory campus that included a mess hall and dorms for our employees and we ultimately ended up making 100,00 pairs a day for many US brands for several years.