In Mexico, a maquiladora (Spanish pronunciation: [makilaˈðoɾa]) or maquila (IPA: [maˈkila]) is a manufacturing operation, where factories import certain material and equipment on a duty-free and tariff-free basis for assembly, processing, or manufacturing and then export the assembled, processed and/or manufactured products, sometimes back to the raw materials' country of origin. They are an example of special economic zones as seen in many countries.
In 1964, the Bracero Program, which allowed Mexican agricultural workers to work legally in the U.S. on a seasonal basis, came to an end. Less than a year after the end of the Bracero Program, the Mexican Government launched the Border Industrialization Program (BIP) or the Maquiladora Program, to solve the problem of rising unemployment along the border. The maquiladoras became attractive to US firms due to the availability of cheap labor, devaluations of the peso and favorable changes in US customs laws. In 1985, maquiladoras overtook tourism as the largest source of foreign exchange, and since 1996 they have been the second largest industry in Mexico behind the petroleum industry.
Following the 1994 North American Free Trade Agreement (NAFTA), the growth of maquila plants skyrocketed. During the five years before NAFTA, the maquila employment had grown at a rate of 47%; this figure increased to 86% in the next five years. The number of factories also increased dramatically. In the five years preceding NAFTA, 564 new plants opened; in the five years following, 1460 plants opened. However, the maquiladora growth is largely attributable to growth in US demand, and devaluation of the peso and not NAFTA itself. In the 1970s, most maquiladoras were located around the Mexico–United States border. By 1994, these were spread in the interior parts of the country, although the majority of the plants were still near the border. Recent research indicates that the maquiladora industry affects U.S. border city employment in service sectors.
Although the maquiladora industry suffered due to the early 2000s recession, maquiladoras constituted 54% of the US-Mexico trade in 2004, and by 2005, the maquiladora exports accounted for half of Mexico's exports. The industry had become an important source of foreign direct investment and foreign exchange for Mexico.
In the 2000s, the maquila industry faced competition due to rise of other countries with availability of cheap labor, including Malaysia, India, and Pakistan. The biggest threat came from China's Special Economic Areas.
Growth and development
During the later half of the sixties, maquiladora industries rapidly expanded geographically and economically and by 1985, had become Mexico’s second largest source of income from 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 25 percent of Mexico’s gross domestic product, and 17 percent of total Mexican employment.
Since globalization and physical restructuring have contributed to the competition and advent of low-cost offshore assembly in places such as 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 after the imposition of countervailing duties on Chinese products, not available in North America, that were part of the electronics supply chain. Despite the decline, over 3,000 maquiladoras still exist 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. Research indicates that maquiladoras' post-NAFTA growth is connected to changes in Mexican wages relative to those in Asia and in the United States, and to fluctuations in U.S. industrial production. As of 2006, maquiladoras still accounted for 45 percent of Mexico’s exports. Maquiladoras, in general, are best represented among operations that are particularly assembly intensive.
One of the main goals of the Border Industrialization Program was to attract foreign investment. Mexican blue-collar labor is kept cheap and competitive with other major export countries by devaluations in the peso, often corresponding with the end of presidential terms. Mexicans work for approximately one-sixth of the U.S. hourly rate.
Young women are often preferred over older women, as younger women are capable of working longer hours. Although Mexican labor law is much more stringent than American labor laws (e.g. the requirement that workers be paid three months severance after as much time on the job, should they be let go without cause), women are sometimes subjected to unsafe and unsanitary working conditions. Poverty is a key factor that motivates women, in particular, to work in maquiladoras. The minimum wage set by the Mexican government is barely enough to help sustain a family. The minimum wage "buys only about a quarter of the basic necessities that are essential for a typical worker’s family". Maquilas pay at much higher than the minimum wage in most markets since there is a lot of competition for the best workers, and workers will not work without transportation and other bonuses. The 2015 Minimum wage is 70.1 pesos per day in Tijuana (minimum wages vary by zone and worker classification) or about $0.55 per hour at the current exchange rate of 16 pesos per dollar, while most entry level positions in maquilas pay closer to $2 per hour including bonuses and 25% Social Security and housing and retirement.
Gender composition of workforce
Mexico possesses a strong system of labor laws, yet enforcement of these laws within the maquiladora industry is often lax.(p1) While most people who were employed under the original Bracero Program were men, the majority of maquiladora employees are young women.(p3) Women are preferred to men, because women typically work more. 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 repetitive work of an assembly plant. 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.
Both the United States and Mexican governments claim to be committed to environmental protection, yet environmental policies have not always been enforced.(p42) However, maquilas are required to be certified and to provide an environmental impact statement. In Mexico, most maquiladoras are global players that use international standards for waste treatment and disposal that exceed Mexican requirements and that require any waste generated to be re-exported. 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 United States for disposal, the United States Environmental Protection Agency (EPA) reports that only 91 of the 600 maquiladoras located along the Texas-Mexico border have returned hazardous waste to the United States since 1987. This is likely due to the fact that most maquiladoras are factories that perform sewing and assembly of consumer products and many of the materials that are considered hazardous are incorporated into those products.
Maquiladoras offer showers and sanitary facilities to workers that often lack running water,[clarification needed] thus reducing waste. The United States Geological Survey, the state of California, and the Imperial County Health Department—among others—have all asserted that the New River, which flows from Mexicali, Baja California, Mexico near the Mexico–United States border into California's Salton Sea, is "...the dirtiest river in America."
The EPA's US–Mexico Border 2012 Program has an extensive plan to help with environmental issues along that border.
- Dominican Republic-Central America Free Trade Agreement
- Economy of Mexico
- Free Trade Area of the Americas
- Free Trade
- Colonia (Mexico)
- Latin American economy
- Maquila Decree
- Maquila Solidarity Network
- Also referred to as a "twin plant", or "in-bond" industry.
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