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Implemented in 1965, the Mexican maquiladora (also known as “twin plants”) program created a free trade agreement for foreign countries to bring materials into the country for manufacturing. Initiated as a means of attracting foreign investment and fostering industrialization along the US/Mexico border, maquiladora factories tend to be located within a short distance from the border and are typically owned by non-Mexican corporations from the U.S., Japan, and European countries. These companies have been using maquiladoras to import equipment and raw materials to Mexican assembly plants on a duty-free and tariff-free basis for assembly or manufacturing. The assembled goods are then usually re-exported back to the origin country or a third party country.
At the start of the maquiladora initiative, there were around 2,000 maquiladoras with 500,000 workers. The North American Free Trade Agreement (NAFTA) has favorably impacted the growth of maquila plants and within a few years, both the number of manufacturing plants and the number of workers has more than doubled. Now due to maquiladoras, the rate of unemployment is much lower along the border than anywhere else in Mexico. These factories employ over one million Mexicans who would otherwise be unemployed.
Maquiladoras mainly produce electronic equipment, clothing, plastics, furniture, appliances, and automobile parts. Since its launch in the mid 1960s, clothing has been the number one product of these factories. Although competition from China has weakened the allure of maquiladoras in recent years, corporations must consider the advantages these factories hold. With advantages such as lower shipping, energy, and labor costs as well as faster delivery times benefiting U.S. corporations, Mexico also receives advantages from maquiladoras. The plants create employment opportunities and additional income to those who live in the border region. The country’s export revenues have also increased due to the assembly factories. The industry has been rapidly expanding and currently, maquiladoras have become Mexico’s second largest source of income from exports, right behind oils.
While there are advantages of the maquiladoras for both Mexican and foreign entities, workers face serious risks such as low wages, terrible working conditions, low job security, poor and inadequate training, and high exposure to hazardous and toxic chemicals. Working conditions are gradually improving as some workers are now getting a minimum wage of $3.40 per hour and factories have moved into modern, automated and air-conditioned facilities. Safety conditions have greatly improved as Mexico continues to adopt standards popular in other countries. Safety scanners, door interlocks, and other sensors are now widely used as plant managers become familiar with the technology. In addition to overcoming risky working conditions, automation and sensors have allowed plants to run more efficiently, helping to combat problems such as industrial pollution and environmental damage
The growth of maquiladoras has been increasing at a significant rate since 1965. As maquiladoras expand, foreign countries will continue to take notice. Since the late twentieth century, the industry held 25 percent of Mexico’s gross domestic product and accounted for 17 percent of the total Mexican employment. Currently, 80 percent of all goods produced in Mexico are shipped to the United States. As the development of maquiladoras continues, technology and automation will play a critical role in protecting workers, increasing efficiency, and providing higher paying skills based employment opportunities.
- Written by Regina Yip & Frank Bertini, VDC IAS Team.