Maquiladora

A maquiladora or maquila is a factory that imports materials and equipment on a duty-free and tariff-free basis for assembly or manufacturing and then re-exports the assembled product, usually back to the originating country. A maquila is also referred to as a "twin plant", or "in-bond" industry.

The term "maquiladora", in the Spanish language, refers to the practice of millers charging a "maquila", or "miller's portion" for processing other people's grain.

Legal Requirements of a Maquiladora

Environmental Compliance

In theory, Mexican environmental compliance is as strict as in the US. All hazardous waste materials that come into Mexico must leave the country. An Environmental Impact Assessment and related permitting must be issued by the Mexican government. Additionally, an impact assessment and associated permitting must be done for any water based waste disposal and air emissions.

Health and Safety Compliance

Mexico has a socialized medical system to which all Maquiladora operations must pay into. A maquiladora of over 100 employees is required to keep a doctor on staff in addition to employees having access to the public medical system.

Wages and Benefits

Mexico has three different minimum wages, depending on which part of the country a company is operating in. The minimum wage for the border region is highest at 49 pesos per day. The average starting wage for most maquiladora workers is 110 pesos per day, with workers who stay for more than 3 months realizing a significant increase. Mexico has a 48 hour work week, with employees receiving a full day of pay on Sunday. Additionally, Mexico has a socialized medical system which every employer must pay into, social security, severance pay, paid holidays, mandatory bonuses and child care. The fully loaded wage rate for a new unskilled laborer working in a maquiladora is $2.30 an hour, taking into consideration all of the cash and non cash fringe benefits. Employees can expect a 20% increase after 6 months of employment.

Taxation

• Corporate Income Tax - Companies operating under the Maquila program can choose to pay their corporate income tax in one of three ways, 6.9% of the total value of all assets that the company possesses in Mexico, 6.5% of the operating cost and expenses for that year or arrange to have a transfer pricing agreement approved by the appropriate US and Mexican tax authorities. In all cases, the tax is deductible from US corporate income tax.
• Real Estate Tax - There is a nominal real estate tax on industrial real estate.
• Employment Tax - A maquiladora has to pay an employment tax in addition to the normal employee income taxe it must take out of its employees wage.
• Value Added Tax (IVA) - Maquiladora companies are subject to paying VAT in Mexico on services or materials purchased in Mexico. Application for reimbursement of these VATs may be made to Mexican government. Maquilas once were taxed on the value add of products manufactured or assembled then shipped back across the border for resale but this taxation is no more.

Customs

All raw materials, parts and machinery are imported into Mexico on a temporary basis duty free for up to 18 months. For machinery this can be renewed indefinitely, for raw materials and parts they must leave the country as finished goods on a first in first out basis over the 18 month period. If a Maquiladora wishes to import a NAFTA good into the country on a permanent basis, it may do so with no duty but the company will have to pay the Mexican VAT rate of 10% on the value of the good.

Examples of Maquiladoras

• Electrónica del Noroeste S.A (Tecate) - The first maquiladora
• Toyota (Tijuana)
• Kenworth (Mexicali)
• Panasonic (Tijuana)
• MI Technologies, Inc. (Tijuana)
• Fender Guitars (Ensenada)
• Electrolux Home Products (Juarez)
• Osram Sylvania (Juarez)
• Saint-Gobain Performance Plastics (Saltillo)

Growth and Development

During the later half of the sixties, maquiladora industries rapidly expanded both geographically and economically and by 1985, had become Mexico’s second largest source of income from foreign exports, behind oil. Since 1973, maquiladoras have also accounted for nearly half of Mexico’s export assembly. Between 1995 and 2000, exports of assembled products in Mexico tripled, and the rate of the industry’s growth amounted to about one new factory per day. By the late twentieth century, the industry accounted for approximately 25 percent of Mexico’s gross domestic product, and 17 percent of total Mexican employment. However, profits generated from maquiladoras are typically sent back to the United States, or other investor-based countries, and therefore, maquiladoras do not promote direct economic development within Mexico.

Since globalization has contributed to the competition and advent of low-cost offshore assembly in places like Taiwan, China, and countries in Central America, maquiladoras in Mexico have been on the decline since 2000: According to federal sources, approximately 529 maquiladoras shut down and investment in assembly plants decreased by 8.2 percent in 2002. Despite the decline, there still exist over 3,000 maquiladoras along the 2,000 mile-long United States–Mexico border, providing employment for approximately one million workers, and importing more than $51 billion in supplies into Mexico. As of 2006, maquiladoras still account for 45 percent of Mexico’s exports. Maquiladoras, in general, are best represented among operations that are particularly assembly intensive.

Controversies and Concerns

Gender

Mexico possesses a strong system of labor laws, yet enforcement of these laws within the maquiladora industry is often lax. While most people who were employed under the original Bracero Program were men, the majority of maquiladora employees are women. Women are considered to be preferred to men because women will typically work for cheaper wages, and are easier for male employers to direct and impose poor working conditions on. Some maquiladora operators have admitted a preference for women also because women often display a greater level of patience and higher dexterity than men in performing the standardized and repetitive work of an assembly plant. Therefore, the maquila industry has, based on these conditions, been accused of the sexual exploitation of women. On the other hand, opponents of this allegation argue that women are paid higher wages working in a maquiladora than they commonly would in other forms of employment in northern Mexico. In addition, some have argued that maquiladora employment enables women to make their own money and thus become more independent, while teaching them new skills and giving them more opportunities that they may not otherwise acquire.

The maquiladora operators have also been accused of discrimination of child-bearing-aged women in order to keep costs down because Mexico’s labor laws contain extensive maternity requirements. They often demand pregnancy tests as a prerequisite to employment or insist that female workers use birth control. If a woman is found to be pregnant, it may likely hinder her chances of getting hired, and if an existing worker becomes pregnant, she may be terminated.

In recent years, however, there has been a shift toward hiring more male workers due to labor shortages and the emergence of heavier industries operating within maquiladoras.

Low Wages, Long Hours

One of the main goals of the Border Industrialization Program was to attract foreign investment. In order to do that, Mexican labor must remain cheap and competitive with other major export countries to keep the United States firms operating within the Mexican assembly plants. So to keep production high and costs low, maquiladoras have been accused of harsh working environments, which include low wages, forced overtime, and illegal working conditions for minors. Mexican women work for approximately one-sixth of the U.S. hourly rate. It has also been reported that the income one receives from work in a maquiladora is rarely enough to support a family. Low wages are a main reason for foreign investment. However, some management personnel condone low wages in maquiladoras by arguing that the cost of living is lower in Mexico than in other countries. Employee turnover is also relatively high, reaching up to 80 percent in some maquiladoras, due in part to stress and health threats common to this type of labor.

Environmental concerns

Many of the environmental concerns, particularly in the border region of Mexico, are attributed to Mexico’s economic development strategies and intense industrialization. The dense number of maquiladoras and the inability of Mexico’s environmental regulatory program to keep up with the rapid growth of the industry over the past quarter of a century have contributed to major environmental problems. Both the United States and Mexican governments claim to be committed to environmental protection, yet environmental policies have not always been enforced. Although the La Paz Agreement signed by Mexico and the United States in 1983 requires hazardous waste created by United States’ corporations to be transported back to the U.S. for disposal, some companies avoid paying disposal costs by dumping toxins and other waste into Mexico’s rivers or deserts. The United States Environmental Protection Agency reports that only 91 of the 600 maquiladoras located along the Texas-Mexico border have returned waste to the United States since 1987.

Although NAFTA recognizes the need to prevent hazardous waste, Mexico’s waste imports have nearly doubled in recent years, and most of this waste comes from the United States. In Mexico, some maquiladoras lack proper waste management facilities and the ability to clean up disposal sites, which is why some of the hazardous waste is illegally disposed of. Environmental hazards associated with some maquiladoras include polluted rivers and contaminated drinking water. According to the Southwest Consortium for Environmental Research and Policy (SCERP), all streams and rivers in the border region have suffered some amount of devastation as a consequence of the maquila industry. Furthermore, the United States Geological Survey, the state of California, and the Imperial County Health Department have all asserted the New River, which flows from Mexicali near the border to the Salton Sea in California to be "the dirtiest river in America". Ongoing exposure to toxic wastes can contribute to health problems such as cancer, skin disease, hepatitis, and birth defects. Furthermore, Mexico does not have any laws requiring industries to publicize basic environmental data on their operations, and so Mexico does not keep a very accurate inventory of hazardous waste.

Unlawful anti-union labor practices

Many maquiladora's have used unfair labor practices to prevent employees from exercising their right to organize.

Maquiladoras in popular culture

"Maquiladora" is a song by the British alternative rock band Radiohead. It appears on the B-side of the single for High and Dry released in February of 1995. The track was considered for Radiohead's second LP The Bends.

At the Drive-In song "Invalid Litter Dept." criticizes the work done at maquiladoras and the mysterious murders of some of their female employees.

Gregory Frost's SF novelette Madonna of the Maquiladora (Asimov's Science Fiction 2002) was a finalist for the James Tiptree, Jr. Award, the Nebula Award, the Theodore Sturgeon Memorial Award and the Hugo Award.

See also

• Dominican Republic-Central America Free Trade Agreement
• Economy of Mexico
• Free Trade Area of the Americas
• Free Trade
• Globalization
• Colonia (border settlement)

References

• Brown, Garrett D. "Protecting Workers’ Health and Safety in the Globalizing Economy through International Trade Treaties". International Journal of Occupational and Environmental Health. Apr-Jun 2005.
• Campbell, Monica. Maquiladoras: Rethinking NAFTA. PBS, 2002.
• Clapp, Jennifer. "Piles of Poisons: Despite NAFTA’s Green Promises, Hazardous Waste Problems are Deepening in Mexico". Alternatives Journal, Vol. 28, Iss. 2. Waterloo: Spring 2002.
• CorpWatch, "Maquiladoras at a Glance". June 30, 1999.
• Fatemi, Khosrow. The Maquiladora Industry: Economic Solution or Problem? New York: Praeger Publishers, 1990.
• Gruben, William C. and Sherry L. Kiser. The Border Economy: NAFTA and Maquiladoras: Is the Growth Connected? Federal Reserve Bank of Dallas. June 2001.
• Hampton, Elaine. "Globalization Legacy: A View of U.S. Factory Involvement in Mexican Education". Multicultural Education. Summer 2004.
• Hausman, Angela and Diana L. Haytko. "Cross-Border Supply Chain Relationships: Interpretive Research of Maquiladora Realized Strategies". The Journal of Business and Industrial Marketing, Vol 18, Iss. 6/7. Santa Barbara: 2003.
• Human Rights Watch. "No Guarantees: Sex Discrimination in Mexico’s Maquiladora Sector". The Maquiladora Reader. Philadelphia: Mexico-U.S. Border Program, 1999.
• Kamel, Rachel and Anya Hoffman. The Maquiladora Reader: Cross-Border Organizing Since NAFTA. Philadelphia: Mexico-U.S. Border Program, 1999.
• Kelly, Mary E. "Free Trade: The Politics of Toxic Waste". The Maquiladora Reader. Philadelphia: Mexico-U.S. Border Program, 1999.
• Moffatt, Allison. "Murder, Mystery and Mistreatment in Mexican Maquiladoras." Women & Environments International Magazines 66 (2006): 19.
• Reed, Cyrus. "Hazardous Waste Management on the Border". The Maquiladora Reader. Philadelphia: Mexico-U.S. Border Program, 1999.
• Shorris, Earl. The Life and Times of Mexico. New York: W.W. Norton and Company, Inc., 2004.
• Sklair, Leslie. Assembling for Development: The Maquila Industry in Mexico and the United States. USA: Center for U.S. Mexican Studies, 1993.
• Stoddard, Ellwyn R. Maquila: Assembly Plants in Northern Mexico. USA: Texas Western Press. 1987.
• The Human Race: Escaping From History. dir. Josh Freed. Green Lion Productions Inc., videocassette, 1994.
• Villalobos, J. Rene, et al., "Inbound for Mexico". Industrial Engineer. Norcross: April 2004. Vol. 36, Iss. 4.
• Wilson, Patricia A. Exports and Local Development: Mexico’s New Maquiladoras. USA: University of Texas Press, 1992.

External links

• http://www.understandmexico.com – Mexico Manufacturing Portal
• http://www.nafta-sec-alena.org – NAFTA Secretariat
• http://www.maquilasolidarity.org – Maquila Solidarity Network
• http://www.mexicosolidarity.org – Mexico Solidarity Network
• http://www.scerp.org – Southwest Consortium for Environmental Research and Policy
• Article on worker-run maquiladora in El Salvador