Monday, June 15, 2009

What is a Maquila or a Maquiladora? Mexican Border Factories Employ Thousands and Account for a Great Share of Mexican Exports but At What Cost?

A quote in the previous LawPundit posting uses the term maquila (short for maquiladora).


Map of the maquiladora plants in Mexico from The Cutting Edge

The Wikipedia under maquiladora tell us that:
"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. Nearly half a million Mexicans are employed in maquiladoras.

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....

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 and physical restructuring have 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.
"
We also found some legal analysis online of maquiladoras as well as related economic articles and materials, including several posters who regard maquiladoras as sweatshops:
  • Truett, Lila J. and Truett, Dale B., NAFTA and the Maquiladoras: Boon or Bane?. Contemporary Economic Policy, Vol. 25, No. 3, pp. 374-386, July 2007. Available at SSRN: http://ssrn.com/abstract=993979 or DOI: 10.1111/j.1465-7287.2006.00043.x

  • Covington M. Wall, Mexico Economic Crisis, Fiat Peso Currency Skating on Thin Ice Mexico Jun 02, 2009 - 03:28 AM
    "GDP fell 8.2% in the first quarter of this year alone directly impacting the unemployment rate officially around 5.1% in the first quarter up from 3.7% a year ago. The hardest hit segments of the economy have been the auto and maquiladora industries. Domestic auto sales have contracted close to 25% and auto exports have fallen nearly 41%. Exports as a whole have fallen sharply, by some estimates around 45%, due to the severity of the economic crisis in the US which because of NAFTA is México’s largest trading partner. The US is also the destination of nearly 80% of goods traded internationally. In addition to oil exports the US has also been the primary destination for migrant labor receiving nearly 500,000 annually but off sharply this year along with remittances sent by migrants. Remittances alone, which amount to roughly 30% of GDP, make up a large part of direct foreign investment. Direct foreign investment in the 1Q of this year totaled 2.6 billion USD and is 36% lower by some estimates compared to 2008 figures which totaled 21 billion for the entire year. [emphasis added]

    Continued deterioration of macroeconomic conditions is causing officials to frantically try to find ways to bolster the economy in order to hedge off an economic melt down thus avoiding a repeat of the last great crisis in 1995. "

  • Patrick J. Kelly, Mexico Maquiladoras and NAFTA (March 2001)

  • Editorial, Lucinda Vargas, Senior Economist, Maquilaportal.com, NAFTA, the U.S. Economy and Maquiladoras

  • Mexican Taxation of Maquiladoras, UnderstandMexico.com

  • Discover the Cost-Saving Benefits of Mexico Manufacturing with Maquiladoras, MadeInMexico.com

  • Gil Villagrán, MSW, Maquiladoras-NAFTA's Sweatshops, (gvillagran [at] casa.sjsu.edu)
    Saturday May 2nd, 2009 12:41 PM

  • Mike Westfall, Maquiladoras--American Industry Creates Modern-Day Mexican Slaves, The Cutting Edge, The Edge of Labor, June 8th, 2009, who writes:
    "NAFTA has been a disaster for the working people and the communities in which they live in all three nations. Today we clearly see that the results of NAFTA have led to a much weaker America with devastated and shuttered manufacturing communities. Mexican wages have dropped, and almost 20 million more Mexicans now live in poverty. American business leaders have been quick to seize upon the opportunity to take advantage of these desperate workers.

    It is common knowledge that many U.S. politicians get hefty campaign contributions from industry. The only NAFTA winners have been the companies and politicians."

  • Vic Kolenc, Hundreds hungry for NAFTA business, El Paso Times, 06/12/2009 12:00:00 AM MDT

  • Niñas de la maquila: malos tratos y abuso, Vanguardia.com.mx, por El Universal , 14-Junio-2009 (10:03 a.m.)

  • Maquila Solidarity Updates, Maquila Solidarity Network

  • Maquilaportal.com

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