Mexico remains trapped as a link in the transnational production process which adds little value and which transfers little advanced technology.
David Ibarra, 2008108
In recent decades, Mexican manufacturing plants known as maquiladoras have become an integral part of the economy. Maquila originally meant the share of flour the mill owner retained for milling a farmer’s grain. Unlike, say, the oil or auto industries, maquiladoras produce a wide variety of products including auto parts, computers, electronics, and apparel.
The maquiladora, as originally envisioned, was a plant that would assemble or process elements from another country, typically the United States, and then export them for final finishing and sale. The legal basis of the maquiladora was a 1964 Mexican law that allowed foreign owners to import components and machinery duty-free and to own 100 percent of the production facility. Mexican law also allowed an unlimited number of visas for maquiladora management and technical personal.
Even though the maquiladora was created by Mexican law, its growth depended on a provision of the U. S. tariff code that provided that only the value added in Mexico was subject to duty when assembled components were shipped back to the United States. Typically, this value added consisted of labor costs and overheads. The majority of the value, the original components, was duty-free if the components originated in the United States.
In addition to the provisions of U. S. and Mexican law, the growth of the maquiladora was based on: 1) low wages in Mexico, 2) high-quality labor, 3) Mexican government subsidies to border areas, 4) low transport costs to the United States, 5) U. S. managers being able to live on the U. S. side of the border and work in Mexico, 6) proximity to the home office, 7) low political risk, and 8) lax enforcement of labor and environmental regulations.109
Even though the maquiladora was initially rationalized as a source of alternative employment for bracero farm labor, it never met this goal since early maquiladora employees were overwhelmingly women. In 1965, there were only twelve maquiladoras with 3,000 employees. The industry expanded slowly through 1982. This slow growth was largely due to the relatively high wages Mexican workers received. In 1982, they received $1.69 an hour, more than workers in Hong Kong or Taiwan earned.110
The key to transforming the maquiladora from relative obscurity to being a major factor in U. S.—Mexican economic relations was the 1982 devaluation of the peso. That drastically reduced the cost of maquiladora labor, as measured in U. S. dollars. Wages sunk as low as $0.43 an hour in 1987. Manufacturers rushed in, and maquiladora employment increased from 127,048 to
457,000 between 1982 and 1990. The 262.5 percent growth in maquiladora employment between 1980 and 1989 is especially striking when compared to the 10.9 percent decrease in other Mexican manufacturing jobs during this period.111
In the early 1990s, maquiladora growth declined as the U. S. economy became sluggish and maquiladora wages rose. However, after the 1994 peso devaluation, maquiladora employment once again soared as the dollar value of wages plummeted and a robust U. S. economy demanded ever more goods. Between 1994 and 2000, maquiladora employment rose from 465,261 to a record 1,338,970. Between 1980 and 2000, exports from maquiladoras increased from 15 percent of all exports to 50 percent.112
As managers learned that Mexican workers could perform not only simple assembly but also sophisticated operations, they brought in more capital-intensive production of electronics, computers, and auto parts. During the 1990s, a new generation of maquiladora plants involved transforming components, rather than just assembling them, and required higher skill levels of their workers.113
During the early Fox administration, maquiladora employment fell to 1.07 million as China began to flood the U. S. market with exports, the U. S. economy lost dynamism, and more than 600 maquiladora plants relocated to China. From a 2002 low, maquiladora employment rebounded in the latter part of the Fox administration. By 2006, as the U. S. economy expanded, maquiladora plants earned Mexico $16 billion in foreign currency, created 17 percent of industrial jobs, and accounted for more than 65 percent of industrial exports.114
Although the maquiladora has provided jobs to hundreds of thousands, it has also created serious problems. These problems largely flow from the combination of low wages, corporations successfully demanding that they remain virtually tax-free, and the mushrooming population on the Mexican side of the border. Historian Richard Sinkin commented on the result: “In some border locations— like Tijuana and Ciudad Juarez—the growth of the maquilas has overwhelmed the ability to provide adequate water, sewage disposal, electricity, roads, adequate housing for workers, and in some cases even workers themselves.”115
Lax enforcement, or non-enforcement, of environmental regulations has led to a variety of environmental problems. There have been many documented cases of chemical discharges into waterways. Dumping toxics into the sewage system has been deemed Tijuana’s primary environmental problem since sewage treatment plants are not equipped to remove such substances. In many cases, toxics have been illegally deposited in the desert outside cities where maquiladoras are located. Finally, massive amounts of toxic materials are sometimes left at abandoned maquiladora sites. Greenpeace Mexico reported that at the abandoned Metales y Derivados site on the Otay Mesa outside Tijuana there were 6,000 to 10,000 tons of lead, cyanide, nickel, cadmium, and zinc. Environmental problems in the border area, where most maquiladoras are located, continued to deteriorate after NAFTA went into effect in 1994.116
The financial liberty of maquiladora operators contrasts sharply with tight restrictions on workers’ freedom to form unions and choose leaders. Management has the support of the Mexican government in preventing the formation of independent unions. The usual union-busting tools are available to maquiladora managers, including government repression, strikebreakers, and the threat or the reality of relocation. When maquiladoras are established in new areas in central Mexico, they typically hire young women who have never held jobs before and thus are viewed as unlikely to press demands for effective union representation.117
While maquiladoras have provided jobs, they have failed to become integrated with the rest of the Mexican economy. Only 3.6 percent of the materials used in production are of Mexican origin. One reason for the small percentage of Mexican inputs, especially compared to Asian inputs in similar Asian operations, is that much long-established Mexican industry is located near the Valley of Mexico and thus cannot easily ship to maquiladoras. Those in charge of purchasing for maquiladoras often work in the United States and so are unaware of what is available in Mexico. Finally, many Mexican producers are unable to meet delivery times and international price and quality standards.118
World History
