Maquiladora
Encyclopedia
Factory
A factory or manufacturing plant is an industrial building where laborers manufacture goods or supervise machines processing one product into another. Most modern factories have large warehouses or warehouse-like facilities that contain heavy equipment used for assembly line production...
, that may import materials and equipment on a duty-free and tariff-free
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
basis for assembly or manufacturing and then "re-exports" the assembled or manufactured product, sometimes back to the originating country. A maquila is also referred to as a "twin plant", or "in-bond" industry. The principal examples of this sort of operation occur in Latin America
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
, but also occurs in other countries in the world that have adequate legislation. Currently about 1.3 million Mexicans are employed in maquiladoras.
The term maquiladora, in the Spanish language
Spanish language
Spanish , also known as Castilian , is a Romance language in the Ibero-Romance group that evolved from several languages and dialects in central-northern Iberia around the 9th century and gradually spread with the expansion of the Kingdom of Castile into central and southern Iberia during the...
, refers to the practice of millers charging a maquila, or "miller's portion" for processing other people's grain.
History
In 1964, the Bracero ProgramBracero Program
The Bracero Program was a series of laws and diplomatic agreements, initiated by an August 1942 exchange of diplomatic notes between the United States and Mexico, for the importation of temporary contract laborers from Mexico to the United States.American president Franklin D...
, 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 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 the US firms due to availability of cheap labor, devaluations of peso and favorable changes in the US customs laws.
The North American Free Trade Agreement
North American Free Trade Agreement
The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the Canada – United States Free Trade Agreement...
(1994) favorably impacted the growth of maquila plants. During the five years before NAFTA, the maquila employment had grown at the rate of 47%; this figure increased to 86% in the next five years. The number of maquila plants grew from about 2700 to about 3700 in 2001. 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 majority of the plants were still near the border.
Although the maquiladora industry suffered due to the early 2000s recession
Early 2000s recession
The early 2000s recession was a decline in economic activity which occurred mainly in developed countries. The recession affected the European Union mostly during 2000 and 2001 and the United States mostly in 2002 and 2003. The UK, Canada and Australia avoided the recession for the most part, while...
, 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 FDI 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
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
's Special Economic Areas.
Health and safety compliance
Mexico has a socialized medical system which all Maquiladora operations must pay into. A maquiladora of over 150 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.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 pricingTransfer pricingTransfer pricing refers to the setting, analysis, documentation, and adjustment of charges made between related parties for goods, services, or use of property . Transfer prices among components of an enterprise may be used to reflect allocation of resources among such components, or for other...
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 tax it must take out of its employees wage.
- Value Added TaxValue added taxA value added tax or value-added tax is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the "value added" to a product, material or service, from an accounting point of view, by this stage of its...
(VAT) - 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 has been discontinued.
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 North American Free Trade AgreementNorth American Free Trade Agreement
The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the Canada – United States Free Trade Agreement...
(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
Vat
Vat or VAT may refer to:* A type of container such as a barrel, storage tank, or tub, often constructed of welded sheet stainless steel, and used for holding, storing, and processing liquids such as milk, wine, and beer...
rate of 10% on the value of the good.
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 productGross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
, and 17 percent of total Mexican employment.
Since globalization
Globalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...
and physical restructuring
Physical restructuring
Manufacturing companies often refer to their manufacturing plant transfer, consolidation and closure activities as physical restructuring. This can be done by moving production or services overseas, a process known as offshoring. Such projects began in the United States during the 1960s and by 2009...
have contributed to the competition and advent of low-cost offshore assembly in places like China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
, and countries in Central America
Central America
Central America is the central geographic region of the Americas. It is the southernmost, isthmian portion of the North American continent, which connects with South America on the southeast. When considered part of the unified continental model, it is considered a subcontinent...
, 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
United States–Mexico border
The United States–Mexico border is the international border between the United States and Mexico. It runs from Imperial Beach, California, and Tijuana, Baja California, in the west to Matamoros, Tamaulipas, and Brownsville, Texas, in the east, and traverses a variety of terrains, ranging from major...
, 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.
Maquiladoras Outside Mexico
In the 1970s the maquiladora industry expanded outside of Mexico, and were particularly successful in Central AmericaCentral America
Central America is the central geographic region of the Americas. It is the southernmost, isthmian portion of the North American continent, which connects with South America on the southeast. When considered part of the unified continental model, it is considered a subcontinent...
, thanks to changes in local tax laws intended to promote industrialization, as a part of a long term strategy to improve living standards and diversity economies. Often maquiladora industries began in the export zones that had previously be devoted to the export of fruit in those countries. For example, in Honduras
Honduras
Honduras is a republic in Central America. It was previously known as Spanish Honduras to differentiate it from British Honduras, which became the modern-day state of Belize...
, maquiladoras moved into the zones along the north coast of the country where previously there had been banana production on a large scale. The industry was particularly successful in San Pedro Sula
San Pedro Sula
San Pedro Sula is a city in Honduras. It is located in the northwest corner of the country, in the Valle de Sula , about 60 km south of Puerto Cortés on the Caribbean. With an estimated population of 638,259 people in the main municipality, and 802,598 in its metro area , it is the second...
, which had a previous history of light industry, but also in the coastal towns that had previously been connected to the export of bananas, particularly by companies such as United Fruit
United Fruit Company
It had a deep and long-lasting impact on the economic and political development of several Latin American countries. Critics often accused it of exploitative neocolonialism and described it as the archetypal example of the influence of a multinational corporation on the internal politics of the...
where infrastructure was already in place. Often the new companies took over the existing structure of housing and residential arrangements (such as the "White Zones" or "American Zones" with special housing for the elite) of the older system.
Many of the human rights abuses and problems reported in the Mexican industry have been repeated in Central America.
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 ProgramBracero Program
The Bracero Program was a series of laws and diplomatic agreements, initiated by an August 1942 exchange of diplomatic notes between the United States and Mexico, for the importation of temporary contract laborers from Mexico to the United States.American president Franklin D...
were men, the majority of maquiladora employees are young 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. 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. The maquila industry has been accused of the sexual exploitation of women. 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 against 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 and 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. Mexican women work for approximately one-sixth of the U.S. hourly rate. 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 AgencyUnited States Environmental Protection Agency
The U.S. Environmental Protection Agency is an agency of the federal government of the United States charged with protecting human health and the environment, by writing and enforcing regulations based on laws passed by Congress...
reports that only 91 of the 600 maquiladoras located along the Texas-Mexico border have returned waste to the United States since 1987.
Mexico’s waste imports have nearly doubled in recent years, with 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
United States Geological Survey
The United States Geological Survey is a scientific agency of the United States government. The scientists of the USGS study the landscape of the United States, its natural resources, and the natural hazards that threaten it. The organization has four major science disciplines, concerning biology,...
, the state of California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
, and the Imperial County Health Department have all asserted the New River
New River (California)
The New River flows north from near Cerro Prieto, through the city of Mexicali, Baja California, Mexico, into the United States through the city of Calexico, California towards the Salton Sea...
, which flows from Mexicali
Mexicali
Mexicali is the capital of the State of Baja California, seat of the Municipality of Mexicali, and 2nd largest city in Baja California. The City of Mexicali has a population of 689,775, according to the 2010 census, while the population of the entire metropolitan area reaches 936,826.The city...
near the border to the Salton Sea
Salton Sea
The Salton Sea is a shallow, saline, endorheic rift lake located directly on the San Andreas Fault, predominantly in California's Imperial Valley. The lake occupies the lowest elevations of the Salton Sink in the Colorado Desert of Imperial and Riverside counties in Southern California. Like Death...
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.
The Border 2012 plan devised by the EPA has an extensive plan to help with environmental issues along the US Mexico Border.
Popular culture
"Maquiladora" is a song by the British alternative rock band RadioheadRadiohead
Radiohead are an English rock band from Abingdon, Oxfordshire, formed in 1985. The band consists of Thom Yorke , Jonny Greenwood , Ed O'Brien , Colin Greenwood and Phil Selway .Radiohead released their debut single "Creep" in 1992...
. It appears on the B-side of the single for High and Dry
High and Dry
"High and Dry" is a song by the English alternative rock band Radiohead, and was the first single released from their second album, The Bends . It was as a double A-side with album opener "Planet Telex"...
released in February 1995. The track was considered for Radiohead's second LP The Bends
The Bends
The Bends is the second studio album by the English alternative rock band Radiohead, released on 13 March 1995 by Parlophone. The Bends was produced by John Leckie at EMI's studios in London, and engineered by Nigel Godrich, who would go on to produce all future albums by the band...
.
Gregory Frost
Gregory Frost
Gregory Frost is an American author of science fiction and fantasy, and directs a fiction writing workshop at Swarthmore College in Swarthmore, Pennsylvania. He received his Bachelor's degree from the University of Iowa...
's SF novelette Madonna of the Maquiladora (Asimov's Science Fiction
Asimov's Science Fiction
Asimov's Science Fiction is an American science fiction magazine which publishes science fiction and fantasy and perpetuates the name of author and biochemist Isaac Asimov...
2002) was a finalist for the James Tiptree, Jr. Award
James Tiptree, Jr. Award
The James Tiptree, Jr. Award is an annual literary prize for works of science fiction or fantasy that expand or explore one's understanding of gender. It was initiated in February of 1991 by science fiction authors Pat Murphy and Karen Joy Fowler, subsequent to a discussion at WisCon.- Background...
, the Nebula Award
Nebula Award
The Nebula Award is given each year by the Science Fiction and Fantasy Writers of America , for the best science fiction/fantasy fiction published in the United States during the previous year...
, the Theodore Sturgeon Memorial Award and the Hugo Award
Hugo Award
The Hugo Awards are given annually for the best science fiction or fantasy works and achievements of the previous year. The award is named after Hugo Gernsback, the founder of the pioneering science fiction magazine Amazing Stories, and was officially named the Science Fiction Achievement Awards...
.
Roberto Bolano
Roberto Bolaño
Roberto Bolaño Ávalos was a Chilean novelist and poet. In 1999 he won the Rómulo Gallegos Prize for his novel Los detectives salvajes , and in 2008 he was posthumously awarded the National Book Critics Circle Award for Fiction for his novel 2666, which was described by board member Marcela Valdes...
's novel "2666" fictionalizes the homicide of maquiladora workers in Ciudad Juárez.
"Invalid Litter Dept.", a song by El Paso, Texas
El Paso, Texas
El Paso, is a city in and the county seat of El Paso County, Texas, United States, and lies in far West Texas. In the 2010 census, the city had a population of 649,121. It is the sixth largest city in Texas and the 19th largest city in the United States...
natives, At the Drive-in
At the Drive-In
At the Drive-In was an American rock band from El Paso, Texas, considered part of the post-hardcore genre and active from 1993 to 2001. They were known for their extremely energetic stage shows which hearkened back to the 1980s hardcore scene...
, pays homage to the unsolved murder and rape of over 570 women who were employed as maquiladora workers in Juárez, Mexico. The Track appears on At the Drive-in's 2000 critically acclaimed "Relationship of Command
Relationship of Command
Relationship of Command is the third and final studio album by the post-hardcore band At the Drive-In, and was released in September 2000. The band reached mainstream success through the album, if only for a short time before their indefinite break-up....
".
See also
- Dominican Republic-Central America Free Trade AgreementDominican Republic-Central America Free Trade AgreementThe Dominican Republic – Central America Free Trade Agreement, commonly called DR-CAFTA, is a free trade agreement . Originally, the agreement encompassed the United States and the Central American countries of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, and was called CAFTA...
- Economy of Mexico
- Free Trade Area of the AmericasFree Trade Area of the AmericasThe Free Trade Area of the Americas , , ) was a proposed agreement to eliminate or reduce the trade barriers among all countries in the Americas but Cuba. In the last round of negotiations, trade ministers from 34 countries met in Miami, United States, in November 2003 to discuss the proposal...
- Free TradeFree tradeUnder a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
- GlobalizationGlobalizationGlobalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...
- Colonia (border settlement)
- Maquila DecreeMaquila DecreeThe Maquila Decree, established in 1989, lays out the legal requirements for foreign operations in Mexico. As described by the Bancomext Mexican Showroom, an organization to promote foreign investment in Mexico, this program allows foreign companies to build and operate factories in virtually any...
- Maquila Solidarity NetworkMaquila Solidarity NetworkThe Maquila Solidarity Network is a Canadian labour and women's rights organization with offices in Toronto and Mexico City. MSN supports the efforts of workers in global supply chains to win improved wages and decent working conditions, and a better quality of life for themselves and their...
Books
- Fatemi, Khosrow. The Maquiladora Industry: Economic Solution or Problem? New York: Praeger Publishers, 1990.
- 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.
- 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.
- Wilson, Patricia A. Exports and Local Development: Mexico’s New Maquiladoras. USA: University of Texas Press, 1992.
Journal articles
- 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.
- 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.
- 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
- Moffatt, Allison. "Murder, Mystery and Mistreatment in Mexican Maquiladoras." Women & Environments International Magazines 66 (2006): 19.
- Villalobos, J. Rene, et al., "Inbound for Mexico". Industrial Engineer. Norcross: April 2004. Vol. 36, Iss. 4.
Government/NGO reports
- Gruben, William C. and Sherry L. Kiser. The Border Economy: NAFTA and Maquiladoras: Is the Growth Connected? Federal Reserve Bank of DallasFederal Reserve Bank of DallasThe Federal Reserve Bank of Dallas covers the Eleventh Federal Reserve District, which includes Texas, northern Louisiana and southern New Mexico....
. June 2001. - Human Rights WatchHuman Rights WatchHuman Rights Watch is an international non-governmental organization that conducts research and advocacy on human rights. Its headquarters are in New York City and it has offices in Berlin, Beirut, Brussels, Chicago, Geneva, Johannesburg, London, Los Angeles, Moscow, Paris, San Francisco, Tokyo,...
. "No Guarantees: Sex Discrimination in Mexico’s Maquiladora Sector". The Maquiladora Reader. Philadelphia: Mexico-U.S. Border Program, 1999.
News
Video
- Campbell, Monica. Maquiladoras: Rethinking NAFTA. PBS, 2002.
- The Human Race: Escaping From History. dir. Josh Freed. Green Lion Productions Inc., videocassette, 1994.
- Maquilapolis Documentary
External links
- CorpWatchCorpWatchCorpWatch is a research group based in San Francisco, California, USA. The group's mission is non-profit investigative research and journalism to expose corporate malfeasance and to advocate for multinational corporate accountability and transparency...
, "Maquiladoras at a Glance". June 30, 1999. - International Museum of Women Feature on Maquiladoras