Maquiladoras: Mexican Factory Assembly Plants for the U.S. Market

Export Assembly Plants for the United States

Definition and Background

Recent controversy over U.S. immigration policies regarding Hispanic people has caused us to overlook some very real economic realities regarding the benefits of Mexican labor to the U.S economy. Among those benefits is the use of Mexican factories--called maquiladoras--to manufacture goods that will either be sold directly in the United States or exported to other foreign nations by American corporations.

Although owned by Mexican companies, these factories often use materials and parts imported with few or no taxes and tariffs, under the agreement that the United States, or foreign countries, will control the exports of the products produced. 

Maquiladoras originated in Mexico in the 1960s along the U.S. border. In the early to mid-1990s, there were approximately 2,000 maquiladoras with 500,000 workers. The number of maquiladoras skyrocketed after the passing of the North America Free Trade Agreement (NAFTA) in 1994, and it is not yet clear how proposed changes to NAFTA, or its dissolution, might affect the use of Mexican manufacturing plants by U.S. corporations in the future. What is clear is that currently, the practice is still of great benefit to both nations--helping Mexico reduce its unemployment rate and allowing U.S. corporations to take advantage of inexpensive labor. A political movement to bring manufacturing jobs back to the U.S. may, however, change the nature of this mutually beneficial relationship.

At one time, the maquiladora program was Mexico's second largest source of export income, second only to oil, but since 2000 the availability of even cheaper labor in China and Central American nations has caused the number of Maquiladora plants to steadily dwindle. In the five years following the passing of NAFTA, more than 1400 new maquiladora plants opened in Mexico; between 2000 and 2002, more than 500 of those plants closed.

 

Maquiladoras, then and now, primarily produce electronic equipment, clothing, plastics, furniture, appliances, and auto parts, and even today ninety percent of the goods produced at maquiladoras are shipped north to the United States.

Working Conditions in Maquiladoras Today

As of this writing, more than one million Mexicans working in over 3,000 maquiladora manufacturing or export assembly plants in northern Mexico, producing parts and products for the United States and other nations. Mexican labor is inexpensive and because of NAFTA, taxes and customs fees are almost nonexistent. The benefit for the profitability of foreign-owned businesses is clear, and most of these plants are found within a short drive of the U.S.-Mexico border.

Maquiladoras are owned by U.S., Japanese, and European countries, and some could be considered "sweatshops" composed of young women working for as little as 50 cents an hour, for up to ten hours a day, six days a week. However, in recent years, NAFTA has started to drive changes in this structure. Some maquiladoras are improving the conditions for their workers, along with increasing their wages. Some skilled workers in garment maquiladoras are paid as much as $1 to $2 an hour and work in modern, air-conditioned facilities.

Unfortunately, the cost of living in border towns is often 30% higher than in southern Mexico and many of the maquiladora women (many of whom are single) are forced to live in shantytowns surrounding the factory towns, in residences that lack electricity and water. Maquiladoras are quite prevalent in Mexican cities such as Tijuana, Ciudad Juarez and Matamoros that lie directly across the border from the interstate highway-connected U.S. cities of San Diego (California), El Paso (Texas), and Brownsville (Texas), respectively.

While some of the companies that have agreements with the maquiladoras have been increasing their workers' standards, most employees work without even knowing that competitive unionization is possible (a single official government union is the only one allowed). Some laborers work up to 75 hours a week.

And some maquiladoras are responsible for significant industrial pollution and environmental damage to the northern Mexico region and southern U.S. 

The use of maquiladora manufacturing plants, then, is a decided benefit to foreign-owned corporations, but a mixed blessing to the people of Mexico. They offer job opportunities to many people in an environment where unemployment is an ongoing problem, but under working conditions that would be considered substandard and inhumane by much of the rest of the world. NAFTA, the North American Free Trade Agreement, has caused slow improvement in conditions for laborers, but changes to NAFTA may well spell a reduction in opportunities for Mexican workers in the future.