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Maquiladoras are Mexican corporations that temporarily import materials without paying export taxes on the products they produce. They can import all necessary equipment and employ Mexican workers to produce goods at a reduced cost, which are then exported and sold at a higher price. There are over 2,500 maquiladoras, employing an estimated 1.15 million Mexicans, with women making up 70% of the workforce. The products range from fashion clothing to electronics, and maquiladoras generate 85% of the trade revenue between Mexico and the United States.
A maquiladora is a Mexican corporation that operates under a maquila program. This program is approved by the Mexican Secretariat of Commerce and Industrial Development. The maquila program authorizes the company to temporarily import materials without paying export taxes on the products they produce. These products are made in Mexico, usually by Mexican workers. They can be produced at a highly reduced cost and then exported and sold at a much higher price.
A special customs arrangement allows the company to import all the equipment it needs to set up facilities and manufacture its goods. This can include machinery, administrative equipment, parts and materials – basically anything that supports the production process can be imported as per the make-up program rules. The maquiladora must deposit a bond stating that the imported equipment will not remain permanently in Mexico. The maquiladora’s products are generally exported by sale to another exporter or maquiladora.
The word maquiladora emerged to describe the process of grinding grain. Maquila refers to the portion that was paid to a miller for grinding his grain. When maquiladoras began to appear in the 1960s and 1970s, they were large industrial complexes and export processing plants. Low costs soon attracted the attention of international textile companies.
Today there are over 2,500 maquiladoras. The North American Freetrade Agreement facilitated rapid expansion. Currently, maquiladoras employ an estimated 1.15 million Mexicans, and women make up 70% of the overall workforce.
The hastily built slums called Colonias were built to house these workers. While the profits of the companies are huge, workers are generally paid around 5.75 US Dollars (USD) a day and work 60 to 70 hours a week.
There are some restrictions on where a maquiladora can be located in Mexico. Mexico City, Guadalajara and the urban areas of Monterrey are the only exemptions. This is due to congestion and a high concentration of industrial complexes in these areas. Beyond these three areas, the location of a new maquiladora is entirely up to the company.
Products manufactured in a maquiladora range from fashion clothing to electronics. With the exception of firearms, which need special permission, there are no limits to what can be manufactured in a maquiladora. Everything can be processed, assembled, packaged, produced, transformed and rebuilt.
The maquiladoras continue to grow in strength. In the space of just four decades, they now represent 85% of the trade revenue generated between Mexico and the United States. With annual profits now at $200 billion, there are no signs of this business heading into a recession.
Asset Smart.
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