The Maquiladora (also referred to as Maquilas) industry continues to be the driving economic force along the U.S.-Mexico border. Maquiladoras are Mexican companies that operate under Maquiladora programs approved by the Mexican Secretariat of Commerce and Industrial Development. Begun in 1965, Maquiladora programs allow up to 100 percent foreign participation in terms of capital investment in and management of the companies, as well as duty-free imports of machinery, equipment, raw materials, parts, safety items, and administrative materials (provided the goods do not remain in Mexico permanently).
A Maquiladora uses competitively priced Mexican labor to assemble, process or perform manufacturing operations. A Maquiladora temporarily import component parts from the U.S. or other countries and then exports the product, either directly, or indirectly, by selling them to another Maquiladora or exporter.
In addition, Mexican law allows operations to bring in most capital equipment and machinery from abroad. The Border Industrialization Program (BIP) created the Maquiladoras in 1965. This program allowed U.S. companies to assemble their products in Mexico . Later, companies from other countries began to establish Maquiladora plants along the northern border of Mexico .
With the implementation of the North American Free Trade Agreement (NAFTA) in 1994, Maquiladora plants have taken on increased importance.
The Maquiladoras have since increased their exports, total production value, and the size of their work force. There are currently about 4,760 Maquiladoras producing a wide array of products. Most Maquiladoras are located around the Mexican border, however, it is possible for them to locate anywhere in Mexico .
Tijuana is the Maquiladora center of Mexico , with over 700 factories employing 115,000 workers. Mexicali is home to 125 maquilas with approximately 51,700 employees. Currently, manufacturing employs more than 28 percent of the workforce in the Mexico border region.
Mexico 's projections are more optimistic for the Maquiladora industry. Experts are predicting Mexico to add more than 60,000 jobs in 2005 and increase the number of companies in the Maquiladora sector.
MAQUILADORA PROGRAM BENEFITS
- U.S. firms become more competitive in world markets by combining American advanced technology with lo wer cost Mexican labor.
- American employment opportunities increase for skilled workers in warehousing, product finishing, administration, and several other areas.
- A portion of the wages earned in Mexico return to the United States through purchases of US products.
- 100% ownership by non-Mexican firms is permitted under the law.
- Location of the plant near the border allows key personnel to live in the U.S. Up to 10% of the technical and administrative personnel in the plant may be foreign (non-Mexican)
- An import permit is granted for raw materials, assembly parts, and other inputs. An exemption or subsidy of up to 100% of the General Import Tax for raw materials, and machinery and equipment is granted.
- This fiscal regime allows Maquiladoras to sell their products within Mexico under a yearly scheduled quota system that permits up to 70% of the output for 1997 and increments of 5% yearly until year 2000. Beyond the year, 2000 there will be no restriction on the amount of sales in the Mexican market.
- Improved access to Mexican and Latin American markets.