1.Overview2.Nicaragua3.Mexico

By Mahghadi Daniel, Deanna Delello, Brenda Miranda

1. Overview

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

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

Maquiladoras

Since the mid-1960’s the maquiladora has been understood as: A simple

assembly activity Cheap labor, with

low added value Limited linkage

with local suppliers

What attracted Maquiladoras? Cheap labor Weak enforcement

of environmental and labor laws

Maquiladoras

The maquiladora industry has evolved since the early 1980s

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

What are best practices?

Increases or improvements in:

Complex activities Capabilities Just-in-time Continuous improvement Job safety

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.

History

Why were they created? Response to unemployment in Mexico’s

northern border region The demise of the Bracero program in

1964 Bracero– a program that had provided

workauthorization for Mexican farm workers in

theUnited States.

History

1960’s and 1970’s Maquiladora operations were

dedicated principally to the simple assembly of parts and components

The use of unskilled, low wage labor provoked strong criticisms

In 1970’s U.S. economic crisis led to closing of several maquiladoras companies.

History

By 1977 inter-ministerial commission was created to promote maquiladora industry

Government regulations were modified to simplify administrative requirements and expand existing features

History

The program, initially started as an emergency measure to reduce unemployment, transformed into a necessary program

In 1980’s maquiladora become the

foundation for the region’s industrial development particularly along the border and dynamically grew

2. …in Nicaragua

From World Bank.org

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.

Fortex Maquila

Allegations:

1.Exploitation in the

workplace

2. Frequent verbal

abuse,

3. Forced overtime

4.Low wages (as low as $.95/day)

5.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

Chentex Maquila, Taiwanese-owned

Chih Hsing factory Allegations:

1.Sweat shop conditions

2.Filthy & cramped

living quarters

3.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.)

Mil Colores, US-owned maquila factory

Allegations:

1.Forced overtime

2.Starvation wages

3.Extreme heat

4.Filthy bathrooms

5.Excessively high

production goals

6. Mass firings and

union busting

7. Cheating on Social

Security health

care

Sewing clothes for *No Fear * Sonoma (Kohl’s)* 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)

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.

Externalities: Improvement of government

buildings and infrastructure Reduced unemployment, 5.4%, with

48% underemployment (CIA)

GOVERNANCE INDICATORSsource: WorldBank.org

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)

3. …in Mexico

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

Negative Externalities- ("external costs" or "external diseconomies")

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)

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 becamethe main source of new jobs in Mexico and one of the leadinggenerators 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.

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

…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, Mexico’s waste imports have nearly doubled in recent years, and most of this waste comes from the United State.

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.

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

References Externalities. Reference for Business Encyclopedia of

Business, 2nd ed. http://www.referenceforbusiness.com/encyclopedia/Ent-

Fac/Externalities.html. Matamoros Government Municipal Webpage.

http://www.matamoros.gob.mx/municipio/industria/maquiladoras_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.