Maquiladora


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maquiladora Maquiladoras

What role does maquiladora play in the development of a country?  Why is this
phenomenon seen as a new phase in capitalist development?  Is this a reasonable claim?  The
role that the maquila plays in the development of a country is an interesting topic to discuss.  To
understand the role that maquiladoras play, one must first gain an understanding of the original
purpose of the maquila.  Then, by studying the evolution of the maquiladora to a big
manufacturing base, one may have a better understanding of how this type of firm may lead to
the development of the host country.  In the first section, I will discuss the origination and
development of the maquiladoras.  In section two, I will provide the opinions of some
economists and their insights as to how the maquiladora has affected developing countries.  The
third section deals with capitalism and how maquiladoras play a role in the development of a
capitalist economy.  In section four,  I will discuss my opinions on the arguments that I have
presented.  The final section will include some concluding remarks.  Now, let us familiarize
The word maquiladora is derived from the Spanish verb maquilar, which means to
mill wheat into flour.  Farmers would mill wheat into portions and then give a portion to the
miller; this portion was called a maquila.  As time passed, the word maquila became associated
with manufacturing, assembly and packaging processes that were carried out by someone that
was not the original manufacturer.  In todays economic world, the word  maquiladora stands
for a special type of company in Mexico (Maquila Overview 1).  The component that makes the
maquiladora different from any other manufacturing plant is that they are allowed to import raw
materials, equipment, and parts needed for assembly, and export the finished good to the United
States on a duty free basis (Maquilas 1).  
The first maquiladoras were built in 1966 in Baja California and Cuidad Juarez (United
States firms established with the support of the Mexican government).  The Border
Industrialization Program created these companies in order to channel the abundant labor source
in the border areas of Mexico and the United States free trade zone (Maquila Overview 1).  The
original purpose of the maquiladoras was to employ all the unemployed people who resided on
the Mexican side of the border and also to increase Mexican exports.  The United States saw
these companies as a chance to take advantage of the cheap cost of labor, the lack of Mexican
labor and environmental rules and regulations, and few duties (Maquilas 1).  The United States
tariff schedules allow for the assembly of United States-made goods outside of the country and
then, the return of the final product to the United States with duty only paid on the value added to
the good.  There are two sections under the tariff schedules that allow for industrial operations
Item # 9802.00.60 and 9802.00.80 (were 806.3 and 807.0) that states that the value of
components made in the United States are not subject to duty when further processed or
assembled abroad and returned to the United States.
Item # 9802.00.60 deals with metal processing
Item#9802.00.80 deals with assembly (Alvarez 1).
Now, maquiladoras are not only located on the border of Mexico and the United States,
but all over the country.  The maquiladora can now sell a portion of the goods produced in the
domestic market on payment of import duties and taxes on the imported materials (Maquila
The maquila industry would not be here today without foreign investment.  Many foreign
companies in the United States, Japan, and Canada have taken advantage of cheap Mexican labor
and the location of the Export Processing Zones and built manufacturing companies in Mexico.
These companies are usually fully owned by foreign investors.  These companies are probably
the most successful part of Mexicos economy.  The growth of this industry has been steadily
increasing over the years, generating more foreign exchange than oil or tourism (Maquila
Overview 2).  Overall, the maquiladora industry seems to be a good way to increase productivity,
employ the unemployed and create incentive for foreign investment.  However, varying opinions
exist among economists and some see the maquila industry as problematic, and ultimately
hindering to the overall development of the host country.
Chapter 1, The Maquilas in Global Perspective  states that the reformation of capitalism
marks the next step in the relations of dominant powers with Third World Countries.  Capitalism
is the separation of economy and state.  It is the social system in which ... more

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Mexico Business

For simplicity, we have broken down the country of Mexico into five major regions: Northwest (Sonora, Chihuahua, Durango, Baja California Sur), Northeast (Coahuila, Zacatecas, Nuevo Leon, San Luis Potosi, Tamaulipas), West Coast (Sinaloa, Jalisco, Nayarit, Guerrerro, Oaxaca, Colima, Michoacan), Central (Morelos, Aguascalientes, Michoacan, Guanajuata, Hidalgo, Estado de Mexico, Puebla, Queretaro, Tlaxcala, The Federal District), and South (Chiapas, Vera Cruz, Tabasco, Campeche, Quintana Roo, Yucatan).  Each region is diverse in industry; some are more heavily involved in agriculture while others are most involved in high-tech manufacturing.  Generally speaking the most important economic activities of all the regions include tourism, fishing, mining, agriculture/livestock, petroleum distilleries, and low/high-tech manufacturing (many maquiladoras exist along the California border).  Central Mexico is the most industrialized region and accounts for almost 60% of the countrys GNP.  It is in this region that large multi-nationals such as Ford Motor Company, Nissan, and Texas Instruments, have chosen to establish major production plants.  The implication of a country diverse in industry and culture is that there is a need for a workforce as diverse and skilled as each regions relative industries.  This is one of the most challenging issues that confronts the Mexican HR manager today, especially in the turbulence of a new political party and international deregulation.  
As the rampant modernization continues to spread and business becomes more privatized through new political agendas, major industries such as telecommunications, energy, and manufacturing, will become a major focus of Mexican business.  Although still resembling an oligopoly ruled by major players such as Telemex and Iusacell, the market scope of the Mexican telecommunications industry is expanding rapidly with the advent of cellular, satellite, and broadband, technologies.  This emerging technology is the portal through which competition is entering.  Globalstar de Mexico (a joint venture between Prinicipia of Mexico, S. de R.L., Loral Space & Communications, and Vodafone Airtouch) has already launched an affordable global satellite telephone service that can provide fixed service to remote locations without a fiber or cable network (1).  In cellular, American Tower has entered into an agreement with Nuevo Grupo Lusacell to build 200 build-to-suit towers, and assume 400 existing towers (2).  In the related networking sector, Nortel has been awarded a contract from Telefonica Data to implement a nationwide ATM network in Mexico that will offer customers basic connectivity, internet access, and hosting services (3). The major players are responding aggressively and taking actions such as those of Carlos Slim Helu (chairman of Telmex) who announced the planned investment of $4.6 billion to implement digital service.  
Paralleling the boom in the telecommunications industry is the energy sector of Mexico.  As industrial activity grows exponentially, so too does the need for electricity (projected demand is about 8% increase per year).  Second to the fiscal policy, the energy sector has been targeted as one of the most urgent areas for reform by the Vicente Fox administration (5).   The state-held petroleum monopoly Petroleos Mexicanos (PeMex) is one of the five largest petroleum companies in the world and provides over 30 percent of the GDP of Mexico from petroleum revenues.  Like in the U.S., natural gas is the preferred alternative to petroleum as an energy source.  However, with the recent doubling of prices, natural gas has become a less attractive alternative.  Developing a solution to the nearing energy crisis of Mexico will be another major issue that faces the Fox administration.  Moreover, this will be a costly solution as an estimate based on Mexicos growth rate projects a need for $4 billion of investment into energy to support growth; this is 40 percent of the entire Mexico federal budget (5).
A third sector that has and will continue to experience strong growth is Manufacturing, especially high-tech manufacturing.  Since Kodak first began manufacturing in Guadalajara in 1969, companies have increasingly looked to establish manufacturing plants in Mexico to take advantage of the relatively low labor rates and tax breaks (6).  Companies such as Lucent Technologies, Ericsson, Compag Computer Corp., and Cisco Systems, have already established high-tech Maquiladoras (foreign owned manufacturing plants) in Mexico.  Guadalajara is now recognized as a world leader in high-tech electronics manufacturing.  The magazine Business Mexico calls Guadalajara the silicon valley of the south, and estimates that more than U.S. $9 ... more

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