Maquiladoras Analysis Paper

Amir Ebadi-Angorani
Professor David Cohen
WOOD 461
1 February 2014 An Analysis of the Export Processing Zone of Northern Mexico: Maquiladoras Although the Mexican maquiladora system is an important component of Mexico-US trade, the connection between the acceleration in maquiladora growth and the North American Free Trade Agreement (NAFTA) needs clarifications. Manufacturing in Mexico obligates American firms to comply with Mexico 's detailed labor regulations; however, increasing foreign investment requires that the Mexican Government attempt to make these regulations flexible enough not to scare off foreign investors. Consequently, as much as NAFTA may have increased economic benefits to the Mexican economy, the maquiladora development
could be held accountable for the evident poor labour conditions in Mexico as they have increased Mexican industrial productivity to foreign countries without increasing wages (Villarreal 2010). The Maquiladora is an area of Mexico that extends along the United States and Mexican border for a vital purpose.
The role that the maquiladoras play in the development of a country can be discussed through evaluation of a thriving international capitalism occurring in Mexico 's northern boundary. The word, maquiladora, is used to describe the foreign-owned assembly plants clustered along the border of Mexico and United States. The maquiladora program was first initiated in 1965, a year after the eligibility of Mexican agricultural workers to legally work in the United States through the Bracero program was terminated (Hanson 2003). After this, Mexican border towns such as Tijuana and Juarez became overcrowded with citizens in temporary settlement to find opportunities of returning to the United States. Subsequently, shortages of food, water, shelter and transportation caused the Mexican government to create the National Border Development Program (PRONAF) in 1965 (Gruben 2011). PRONAF was the first step to establishing the maquiladora sector of Northern Mexico. It was implied as a win-win situation that would improve Mexican economy from foreign investment as well as create jobs for those living in the overcrowded border towns. Regions like the maquiladora are referred to as Export Processing Zones (EPZ), which are big industrial estates set up with multinationals in mind (Salzinger 2003). In this case, government bureaucrats from foreign countries would go to major world
cities to offer significantly cheaper costs for labor towards production and manufacturing of goods for export.
There 's an extensive amount of foreign-owned assembly plants in the maquiladoras. National Auto Parts and Delphi Auto parts are amongst the major automobile industry companies controlled by the major automotive manufacturers like General Motors and Chevrolet. The electronics sector of the maquiladoras is also shared by major manufactures such as Sony, Samsung and Dell (Pais 2011). Currently, Mexico is the second largest supplier of electronic products to the U.S. market. In 2010, Mexico 's exported amount of consumer electronics and devices to the United States reached $71.4 US dollars (Pais 2011). A study on maquiladora employment shows that the biggest industry sector is electronics, followed by auto parts in second and apparel at third (Sargent et 2008)(1070). This production line inside Mexico could only occur because of the division of labor in other countries, particularly the United States that had sophisticated factories that would create these cheap assembling activities inside Mexico. The Mexican government 's thriving economy was allegedly reported to experience a halt due to the oil crises of early 1980s (Stracke 2003). In an effort to regenerate its economy, restrictions on the maquiladoras were gradually dropped until the 1989 Maquiladora Decree, the reasonable cause of a dreadful Mexico. The maquiladora Decree 's major effects were minimizing income and property taxes that multinationals owed Mexico for their foreign industry as well as making licenses of such multinationals valid for an indefinite period rather than the original two year limit (Salzinger 2003). The maquiladora 's most drastic change came in to effect after the 1994 signing of NAFTA. NAFTA created a "free trade zone" between Canada, United States and Mexico for the purposes of increasing trade by reducing or eliminating restrictions on tariffs and import quotas. By lowering trade barriers, the agreement has expanded trade, increased employment, and increased prosperity for all three countries; consequently, the number of maquiladoras increased rapidly (Huato 2010). Mendoza (2003) provides considerable evidence for this with statistics from the 1993 to 2006 time frame; the total exports coming from the maquiladora region rose from 21.9 billion US dollars in 1993 to 111.9 billion in 2006 (57). The increase in labor has had a significant effect on wages shown in the Mendoza (2003) journal. Maquiladora and US manufacturing average hourly wages were reported in the 1993 to 2006 time frame and they show a decrease in Mexican maquiladora wages from $1.9 per hour in 1993 to $0.5 per hour in 2006 (60). On the contrary, NAFTA has made the Mexican industry and the economy extremely vulnerable to the world economic oscillation and in particular US recessions. US recessions have caused job loss and wage decreases in the maquiladora. As for the claim that maquiladoras increase unpredictability in the local economy, Hanson(2003) points out that "maquiladoras tend to be very sensitive to business cycles in other countries" and "are footloose establishments that can easily relocate to another country if local costs rise"(26). Multinationals searched for more potential plant sites in low-wage countries as understandings with offshore assembly managing grew. China, being a communist country after the Cold war, went through drastic changes in the 1970 's. The Mexican maquiladoras began to compete with the new types of EPZ called the Special Economic Zones (SEZs) of China. Special Economic Zones were made for multinationals to come in and invest in cheap land and cheap labor in return for export to the world for strengthening Chinese currency. Many multinationals took advantage of these cheap wages because of how much costs were reduced in assembling products. There were comparative differences in the growth of exports between Mexico and China as Mexico had an 11.5% increase while China had a 18.5% increase in exports from 1990 to 2006 (Jorge 2003).
Direct Foreign Investment (DFI) in maquiladoras slowed in the early 2000s as it accelerated in the Chinese manufacturing sector (Sargent et al 2008). The failure of Mexico to continue introducing market adjustments for attracting multinationals has allowed China to gain more manufacturer support. Although there has been a decrease in investment for Mexican labour, maquiladoras are not necessarily being dropped for the more favourable Chinese SEZ. Reasons for this include Mexico 's cheap transportation costs, especially with heavy products because of the close proximity the United States. Also, multinationals would rather rely upon an already experienced labor force such as that in Mexico than invest towards more training in a different population (Sargent et al 2008). Reasonably, the chance to work in a factory is "attractive employment for the economically disadvantaged in Northern Mexico” (Sargent et al 1999). The major downsides are long hour days with harsh conditions while no labor unions were present to enforce equality of treatment of laborers. In the maquiladora program today, human rights of workers are frequently not obeyed (UNDP, 2003). Such simple things like going to the bathroom and drinking water are not permitted for workers in order to speed productions and increase efficiency. Several sources suggest that the health and safety of the workers are of high risk. Unsafe working conditions often result in labor accidents and common accounts of exposure to toxic chemicals cause major health threats. Environmental laws are also not respected as factories continue to pollute the air and land. The wages are not enough to meet the basic needs of families. Living in shanty homes in slum communities are the reality of many children of whom most will never get an education because of a lack of funding, space and resources. Women 's rights are also not respected as sexual harassment and sanctions for being pregnant are normal in many factories. (Cifuentes et al., 1995; Hanson, 2002; Salzinger, 2003). While the Mexican labor laws suggest a protective environment for the promotion of workers ' rights, there are human rights reports associated with the maquiladoras sector that imply that this is not the reality of the situation. Enormous employment competition and government inefficiency create a corruption of rights. For example, maquiladora workers often are not properly trained nor educated to take safety precautions for the tasks they perform (Kagan 2005). In a study of Tijuana 's maquiladora workforce, 53 percent had not received safety data sheets from employers as required by Mexican law and 40 percent of all workers surveyed had not received any training from employers regarding on-site hazards or protective practises (Kagan 2005). Although the Mexican department of labour constitution has established a minimum work age of 14, a government report found that 54,000 children between the ages of 12 and 15 worked in textile manufacturing in 1988 (USDL 1994). Obstacles are present when workers stand up for their rights because multinational corporations will most likely have more power and control over the government 's labor department. As a result, the labour department usually sides with the employer 's favourable criterion.
Discussion
A projection for this plan was a better Mexico, but poverty still exists in Mexican border towns where workers work for American corporations under the same conditions. From a humane point of view, I believe this makes the Mexican EPZ agreements a major violation of human rights. American corporations benefit the most from this situation and become wealthier with record profits while people in Mexico continue to suffer for all the hardships they endure. Under the misconception that NAFTA provided opportunities and jobs to Mexico, people will likely forget about the effects that come along with such a booming industry development in a poor country. Mexican government was in favor of this system because of concern to create jobs and reduce social problems. This evident disparity in the world is something many people are aware of; however, little consideration is being made about the relationships of power that exists within money. In my opinion, this US government would agree to this keep these operations running at full capacity because they could reduce the migrating Mexicans that would travel to USA, thus saving the many expenses of labor in the US. People migrated to these zones in the hopes of finding stable work and income.
Today, there is less work because of expanding globalization and more favorable labor supply in countries elsewhere such as China. The workforce will continue to endure the same environmental and health issues left behind from the maquiladoras. I believe there 's a serious dilemma for policy makers looking for solutions to the problem. An obvious public policy solution would be to increase Mexico 's stock of human capital through increasing funding for education, but data from the past indicates migrations of educated Mexicans who choose to seek jobs elsewhere like in the United States (Munishi 2003). Also, better educated citizens may not necessarily mean a better educated and more productive work force due to a country 's poor infrastructure, labour market firmness and institutional and regulatory deficiencies that won 't be able to provide high standards to education to bigger numbers of people (Munishi
2003). It is apparent that affordable prices on many consumer goods can be made possible mainly due to the people at the bottom of the economic class system that make products cheaply in their so called "privileged positions” (Aguilera et al 1994). With this mindset, I also think that if this were the case, there are ways to make working conditions a lot better. I would think that while these companies continue to make huge profits, they could supply their workers with better conditions and some benefits for themselves and their families. With the situation in the maquiladoras, what world organizations such as the UN can do is place trade sanctions on such zones until a criterion of equality capitalism is met. Although that would be the start, to suggest a clear cut solution to solving the deeper issue would be ambiguous because researching in to EPZ 's and poverty labour conditions has demonstrated to me that government agencies are weak and inadequate when faced with the dominance of industry unions in their own countries.

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