A maquiladora (Spanish pronunciation: [makilaˈðoɾa]) or maquila (IPA: [maˈkila]) is the Mexican name for manufacturing operations in a free trade zone (FTZ), where factories import 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.
Currently about 1.3 million Mexicans are employed in one or more of approximately 3,000 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.
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 the US firms due to availability of cheap labor, devaluations of peso and favorable changes in the US customs laws. In 1985, maquiladoras overtook tourism as the largest source of foreign exchange, and since 1996 they been the second largest industry in Mexico behind the petroleum industry.
The North American 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 the majority of the plants were still near the border. Recent research indicates that the maquiladora industry has an impact on 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 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’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 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 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. 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. 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 account 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. To do that, Mexican labor is kept 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.
Workers are paid very low wages (often not a living wage), live in poor conditions, and have low job security.
Gender composition of workforce
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 young women. Women are preferred to men, because women 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 repetitive work of an assembly plant. The maquila industry has been accused of sexual exploitation of women.
The maquiladora operators have also been accused of discriminating against child-bearing-aged women 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.
Much of the environmental damage, particularly in the border region of Mexico, are attributed to Mexico’s economic development strategies and intense industrialization. The dense population 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.
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 been ecologically devastated 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.
The Border 2012 plan devised by the EPA has an extensive plan to help with environmental issues along the U.S./Mexico border.