Mexico's Two-Track Recovery

A U.S.-powered rebound along the northern border has left much of the country behind

- Max de Haldevang and Maya Averbuch

Diana Rivapalacio didn’t expect to be back on the factory floor two weeks after the pandemic hit. When the Tijuana facility of Tokyo-based SMK Corp. shut down in April 2020, quality-control manager Rivapalacio and the business’s 800 machine operators, inspectors, and administrators headed home to uncertainty. But many returned to work that same month.

They had their city’s location on the U.S. border to thank. Like many manufacturers, SMK avoided a longer lockdown by convincing Mexican authorities that one of its products, a tiny location tracker, was essential since it could be used to trace shipments of vaccines or medical equipment.

Spurred by U.S. demand for Mexican-produced goods, which had been supercharged by stimulus payments, scores of companies across Tijuana found reasons to stay open—as did businesses in the rest of Baja California and other northern states. “On the border we’re doing international business,” Rivapalacio says. “They depend on us, and we depend on them.”

Other parts of Mexico haven’t been so lucky. “Every sector is having a very bad time,” says Sergio Baños, mayor of Pachuca, the capital of Hidalgo, a state near Mexico City where wholesaling, retail, and services dominate. Hidalgo’s economy contracted more than twice as much as Baja California’s last year. Formal employment in Pachuca was down 12% in the second quarter of 2021 from the beginning of 2020. In Tijuana, it rose 8%.