Maquiladoras

1
Maquiladoras

• 1.Overview
• 2.Nicaragua
• 3.Mexico

By Mahghadi Daniel, Deanna Delello, Brenda
Miranda
2
1. Overview

• Maquiladora plants are generally foreign-owned
  firms, many of which are subsidiaries of
  U.S.-headquartered multinational enterprises.

3
Maquiladora

• Under the laws of Maquiladora and NAFTA
• The company imports raw materials
• Assembles the final product
• Exports the final product to the U. S.
• Pays import duties if the final product is sold
  within that country

4
Maquiladoras

• Since the mid-1960s the maquiladora has been
  understood as
• A simple assembly activity
• Cheap labor, with low added value
• Limited linkage with local suppliers

5
What attracted Maquiladoras?

• Cheap labor

• Weak enforcement of environmental and labor laws

6
Maquiladoras

• The maquiladora industry has evolved since the
  early 1980s

• Consequence of the adoption of best practices in
  the productive processes and industrial
  organization.

7
What are best practices?

• Increases or improvements in
• Complex activities
• Capabilities
• Just-in-time
• Continuous
• improvement
• Job safety

8
History

• 1967 the first Maquiladora opened in Nogales,
  Sonora.
• The maquiladora program allowed foreign companies
  to enter Mexico with 100 of their own capital.
• However, only 49 foreign capital was allowed in
  the manufacturing industry.

9
History

• Why were they created?
• Response to unemployment in Mexicos northern
  border region
• The demise of the Bracero program in 1964
• Bracero a program that had provided work
• authorization for Mexican farm workers in the
• United States.

10
History

• 1960s and 1970s
• Maquiladora operations were dedicated principally
  to the simple assembly of parts and components
• The use of unskilled, low wage labor provoked
  strong criticisms
• In 1970s U.S. economic crisis led to closing of
  several maquiladoras companies.

11
History

• By 1977 inter-ministerial commission was created
  to promote maquiladora industry
• Government regulations were modified to simplify
  administrative requirements and expand existing
  features

12
History

• The program, initially started as an emergency
  measure to reduce unemployment, transformed into
  a necessary program
• In 1980s maquiladora become the foundation for
  the regions industrial development particularly
  along the border and dynamically grew

13
2. in Nicaragua
From World Bank.org
14
Las Mercedes Industrial Free Trade Zone

• About 20 factories in 2000, mostly employ women.
  
• located on the outskirts of Managua, Nicaragua
• Mostly simple tasks which require no additional
  skills (garment assembling, as opposed to
  electronics)
• Financed by US, Taiwanese, and South Korean
  capital
• These firms have also refurbished government
  buildings , including the presidential palace
• Government tries to attract capital to the
  country, in spite of the lack of a deep water
  port on the Atlantic Coast of Nicaragua.

15
Fortex Maquila

• Allegations
• Exploitation in the
• workplace
• 2. Frequent verbal
• abuse,
• 3. Forced overtime
• Low wages (as low as .95/day)
• Organized union and members were fired.
• (Revista Envio.org)

• Workers had an 18-hour sit-down strike to demand
  improvements in the workplace, including
  salaries.
• Fortex refused to recognize the union

16
Chentex Maquila, Taiwanese-owned Chih Hsing
factory

• Allegations
• Sweat shop conditions
• Filthy cramped
• living quarters
• Young workers (as young as 15) work
• 13 hour s/7days
• 4. In Nov, 1999, 45 workers were hospitalized
  due to chemical exposure at the plant

• Largest of the maquilas
• Making clothes for
• Wal-Mart
• K-Mart
• JC Penney 
• (Kathie Lee Gifford clothing line in Wal-Mart is
  disclosed to have been sewn in Honduras.)

17
Mil Colores, US-owned maquila factory

• Allegations
• Forced overtime
• Starvation wages
• Extreme heat
• Filthy bathrooms
• Excessively high
• production goals
• 6. Mass firings and
• union busting
• 7. Cheating on Social
• Security health
• care

• Sewing clothes for
• No Fear
• Sonoma (Kohls)
• High Sierra (Target)
• Arizona Jeans (JCPenney)
• Known as the factory with
• the worst working conditions
• in Las Mercedes FTZ
• (according to the Natl. Labor Committee)

18
Familiar stories

• Piece work, repression, low salaries are as
  old as the industrial revolution that changed the
  world forever. (Revista Envio)www.envio.org.ni

• 1. High Absenteeism
• 2. Only trained for simple tasks. More
  complicated tasks require more advanced training.
• 3. These workers, with their low levels of
  production and low opportunity costs have been
  seen throughout history, shop girls in the mills
  in Lowell, MA, until now in China.

19
Externalities

• Improvement of government buildings and
  infrastructure
• Reduced unemployment, 5.4, with 48
  underemployment (CIA)

20
GOVERNANCE INDICATORS source WorldBank.org
21
Recent Updates

• Recent GDP fell by 3 in 2009 due to decreased
  demand for its exports (CIA)
• 19,000 jobs have been lost as of 2008 (according
  to elnuevodiario.com.ni)
• Many maquilas which had previously closed will be
  opening with Mexican and Central American
  investment, including a new call center.
  (centralamericandata.com)
• CAFTA formed, 2006, to help find markets for
  exports. However, minimum wage has increased,
  and this will probably interfere with comparative
  advantage for textiles (CIA)

22
3. in Mexico
23
Negative Externalities- ("external costs" or
"external diseconomies")

• Are something that costs the producer nothing,
  but is costly to society in general.
• Are more common than positive externalities
• Adds a social cost
• Many negative externalities are related to the
  environmental consequences of production and use.
• Examples
• Pollution (air, water, environmental etc.)
• traffic

24
Public Sector Remedies to Negative Externalities

• 1. Regulation, such as emission limits.
• 2. Corrective Taxation-In some cases taxes are
  used to reduce negative externalities or to
  recover some of the cost for society.
• government taxes firms
• subsidies (applies to positive externalities)
• 3. Social pressure and education can remedy
  some problems, but this seems to be limited to
  low-cost externalities.  
• Example The Environmental Protection Agency
  (EPA)

25
History of Maquiladoras in Mexico

• In 1965, the Mexican government implemented El
  Programa de Industrializacion Fronteriza
  (Industrialization Program or BIP), which mainly
  promoted the establishment of maquiladoras in the
  region.
• Grew indirectly out of the termination of the
  Bracero Program (1942-1962)
• During the 1980s, the maquiladora industry grew
  rapidly and became
• the main source of new jobs in Mexico and one of
  the leading
• generators of foreign exchange.
• Consequently, by 2000, approximately 1.3 million
  workers were
• employed in the maquiladora industry,
• The assembly-manufacturing sector had become one
  of the main
• drivers, if not the main driver, of the
  Mexican border economy.

26
Maquiladora Facts

• 80 of total maquiladora employments are in
  border towns.
• In Baja California there are currently 1,155
  maquiladoras.
• Tijuana, Mexicali, Ensenada, Tecate and Rosarito.
• Mexican women work for approximately one-sixth of
  the U.S. hourly rate
• Young females compose majority of the maquila
  labor force
• Some management personnel condone low wages in
  maquiladoras by arguing that the cost of living
  is lower in Mexico than in other countries.
• Employee turnover is also relatively high,
  reaching up to 80 percent in some maquiladoras,
  due in part to stress and health threats common
  to this type of labor

27
Facts

• In Mexico, some maquiladoras lack proper waste
  management facilities and the ability to clean up
  disposal sites, which is why some of the
  hazardous waste is illegally disposed of.
• Environmental hazards associated with some
  maquiladoras include polluted rivers and
  contaminated drinking water.
• Maquiladora waste disposal service carriers dump
  toxins into landfills, rivers, populated canyons,
  and storm drains.
• Millions of gallons of toxic waste are dumped
  daily into the Rio Grande in Texas.
• Scientists believe that the Rio Grande is
  becoming a toxic disaster zone.
• In 1993, 1000 gallons a second of poisoned water
  was thrown into the Pacific coast of Tijuana and
  San Diego.
• Although NAFTA recognizes the need to prevent
  hazardous waste, Mexicos waste imports have
  nearly doubled in recent years, and most of this
  waste comes from the United State.

28
Case Studies

• Tijuana, Baja California, Mexico
• In 2009, 661 Maquiladoras existed.
• High influx of influx of workers, the city has
  become bigger,
• More poverty
• No improvement on a refined sewer system,
  plumbing, and electricity.
• Constant exposure to hazardous waste.
• Matamoros, Mexico
• In 2008, there was 122 Maquiladoras, which
  accounted for 35 of Maquilas in the entire
  state.
• In 2004, the salary of a person working in a
  maquila averaged 8,093 pesos compared to the
  national average of 584 pesos.
• (Website was not clear as to explain if these
  numbers pertain to monthly or yearly wages I
  believe this is monthly wage)
• Rate of Anencephaly, babies born without brains,
  is 4 times the national average
• Attributed to exposure to Xylene chemical
• Brownville, Texas also has high degree of babies
  being born with this deformity.

29
La Paz Agreement

• Signed by Mexico and the United States in 1983
• Requires hazardous waste created by United
  States corporations to be transported back to
  the U.S. for disposal.
• The United States Environmental Protection Agency
  reports that only 91 of the 600 maquiladoras
  located along the Texas-Mexico border have
  returned waste to the United States since 1987

30
References

• Externalities. Reference for Business
  Encyclopedia of Business, 2nd ed.
• http//www.referenceforbusiness.com/encyclopedia/E
  nt-Fac/Externalities.html.
• Matamoros Government Municipal Webpage.
  http//www.matamoros.gob.mx/municipio/industria/ma
  quiladoras_matamoros.asp
• The Environmental Protection Agency (EPA).
  http//www.epa.gov/region09/
• Reed, Cyrus. "Hazardous Waste Management on the
  Border". The Maquiladora Reader. Philadelphia
  Mexico-U.S. Border Program, 1999.
• Brown, Garrett D. "Protecting Workers Health and
  Safety in the Globalizing Economy through
  International Trade Treaties". International
  Journal of Occupational and Environmental Health.
  Apr-Jun 2005.