Transcript Maquiladoras

1.Overview
2.Nicaragua
3.Mexico
MAQUILADORAS
By Mahghadi Daniel, Deanna Delello, Brenda Miranda
1.
Overview
Maquiladora plants are
generally foreignowned 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 work
authorization for Mexican farm workers in the
United 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)
“Piece work, repression,
& low salaries are as old
as the industrial
revolution that changed
the world forever.”
(Revista
Envio)www.envio.org.ni
Familiar stories
 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)
1980-2010
10
Percent
5
0
1
-5
-10
-15
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
GDP growth rate
GOVERNANCE INDICATORS
source: 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
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
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
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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 (19421962)
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.
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
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ed.
http://www.referenceforbusiness.com/encyclopedia/EntFac/Externalities.html.
Matamoros Government Municipal Webpage.
http://www.matamoros.gob.mx/municipio/industria/maquiladoras_m
atamoros.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. AprJun 2005.