Mexican Investment Flows Into Region Where Trump Resonates

By Robbie Whelan 

HAZLETON, Pa. -- Here in this former center of steelmaking and textiles, Donald Trump's campaign promises of stricter immigration laws and tighter borders resonate with voters.

But over the past few years, hundreds of jobs in Hazleton and the surrounding region of northeastern Pennsylvania have been preserved or expanded due to investment from an unlikely source: Mexico.

The result is that Hazleton has become a showcase of the contradictions of globalization in an election where both Mr. Trump and Democratic rival Hillary Clinton have questioned the benefits free trade.

Mr. Trump had an 11% lead in Luzerne County, which includes Hazleton, in a late-October poll conducted for Axiom Strategies, a firm that has done work for Republican candidates.

In early 2009, Mexican baking conglomerate Grupo Bimbo SAB bought Weston Foods Inc., a U.S. unit of George Weston Ltd. of Canada , for $2.38 billion. With it came two Weston plants in Hazleton and a stable of American brands, including Arnold's bread, Boboli pizza crust and Thomas' English Muffins.

Despite buying Weston at the height of the financial crisis, Bimbo has reduced head count only slightly and built new plants in the region. Bimbo says that since 2012 it has invested $1 billion in the U.S.

Weston had about 2,500 workers in Pennsylvania, while today, Bimbo employs roughly 2,300, including those at its U.S. headquarters in Horsham and workers at nine industrial-scale bakeries.

In a region that lost thousands of factory jobs over the past few decades, the deep-pocketed new owners were welcomed. "Bimbo could have taken the company and moved it out of the area, but we're very fortunate that they decided to keep them here," said Kevin O'Donnell, president of CAN DO Inc., Hazleton's nonprofit economic development group.

Other Mexico-based food manufacturers have invested in the area as well. In 2005, Mission Foods, a tortilla maker and U.S. arm of Mexico's Gruma SA, opened a plant in nearby Mountain Top that employs roughly 400 people.

And in 2012, Arca Continental SAB acquired Wise Foods Inc., a century-old, family-owned maker of Cheez Doodles and other snack foods based in Berwick, a small town across the Susquehanna River from Hazleton.

The Hazleton area isn't alone in seeing Mexican investment. Annual direct Mexican investment in the U.S. more than tripled from 2006 to 2015, from $5.3 billion to $16.6 billion, according to Bureau of Economic Analysis data analyzed by the Wilson Center, a nonpartisan think tank in Washington. The Mexican government estimates that 123,000 U.S. jobs are supported by Mexican investment.

"There's been this shift from Mexicans coming across the border looking for jobs, to having this huge boom in capital coming across the border and creating jobs in the U.S.," said Andrew Selee, the Wilson Center's executive vice president and senior adviser to its Mexico Institute. "The infusion of Mexican capital has saved some classic American brands and preserved the jobs that go with them."

Another big Mexican investor north of the border is Mexichem SAB, a global petrochemical giant with $5.7 billion in annual sales that has invested more than $2 billion in the last five years in 13 U.S. states.

Mexichem exports fluorspar and other raw materials from Mexico to its U.S. plant in Louisiana, which produces products such as refrigerants used by the car industry. The company, in turn, ships ethylene gas from the U.S. to feed its Mexico plants.

Mexichem's chairman, Juan Pablo del Valle, has been one of the few major Mexican businessmen to publicly criticize Mr. Trump's protectionist and anti-immigration plans and his speech against Mexicans and other groups.

At a recent rally in Florida, Mr. Trump referred to "rural towns in Pennsylvania, Ohio, North Carolina and all across our country," saying that establishment politicians had "stripped away these towns bare" and sent jobs and factories to Mexico, China and other countries.

His message is popular in Hazleton, reflecting uncertainty about the economy but also tensions over illegal immigration.

In April, 77% of voters in Luzerne County's Republican primary voted for Mr. Trump, who won six times as many votes as his nearest competitor, Sen. Ted Cruz.

Until World War II, Hazleton had thousands of anthracite coal miners, but the industry declined as cleaner, more efficient fuels gained popularity. Some workers migrated to jobs related to the steel industry, which had a center in the nearby Bethlehem Steel works, while others worked in textiles.

But all three industries largely left the area by the end of the 20th century. As of September, the metro area that includes Hazleton, Scranton and Wilkes-Barre had an unemployment rate of 5.9%, 1.1 points higher than the U.S. average.

At the same time, Hazleton, a city of about 25,000 people, saw a large influx of Hispanic immigrants, drawn by the relatively inexpensive cost of living and ample jobs in the distribution and food industries.

In 2006, in response to a rising crime rate that some politicians attributed to undocumented immigrant drug dealers, Hazleton's then-mayor, Lou Barletta, enacted harsh ordinances targeting landlords who housed illegal immigrants and employers who hired them. The policies were later ruled unconstitutional by a federal judge.

Mr. Barletta, now a Republican congressman seeking his fourth term representing the Hazleton area, said people here see Mr. Trump as a candidate who understands the region's economic struggles. "Free trade with open borders is a direct assault on towns like Hazleton," Mr. Barletta said.

Mike Schlossberg, a Democratic state representative from the nearby Lehigh Valley, said Trump's message is resonating in Hazleton because of the "monstrous tensions" surrounding immigration there. "There's an incredible irony because immigrants create tremendous oppoturunity, because they create far, far more jobs than they take away," he said.

Jolie Weber, chief executive of Wise Foods Inc., said Arca's purchase of the company helped it avert stagnation.

"If Arca had not bought Wise, Wise would have fallen into another private-equity firm's hands and that would have jeopardized the brand and the company's manufacturing facilities," Ms. Weber said. "There certainly was a risk that those jobs over time would not be replaced."

Over the last year, Arca has built a new wing on the Berwick factory to help handle logistics and bought two new 600-gallon boilers to expand its production of kettle-fried potato chips. Head count at the factory has remained steady at about 600 workers.

Two years ago, in Breinigsville, Pa., about 45 miles southeast of Hazleton, Grupo Bimbo opened what company officials describe as its most technologically-advanced plant in the country, a 230,000-square-foot bakery that flies the flags of the state of Pennsylvania, the U.S. and Mexico.

Inside, 275 workers -- new hires as well as employees from other Bimbo plants -- bake 2.8 million hot dog buns, loaves of bread and buns used for Burger King chicken sandwiches every week.

The average starting salary at the Breinigsville plant is $42,000 a year, said Jonathan Berger, a vice president at Bimbo Bakeries U.S.A. Inc.

"I don't think it's exactly the steelworkers of yesterday who are working in this plant," he said. "But the next generation of workers who want to be involved in manufacturing, they have a place here, in a good work environment that has great technology in it."

Write to Robbie Whelan at [e-mail]

(END) Dow Jones Newswires

November 04, 2016 08:14 ET (12:14 GMT)

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