Margarita
Juanita
Manuel
International Business
Juan Castro
Assignment #1
Jan. 22, 2002
Executive Summary
Maquila. What is a maquila, how does it operate, what countries have them, what
products are produced and what is reverse maquila? These are questions that will be
answered in this report.
“"Maquiladora" or ”maquila" is derived from the Spanish word "maquilar"
which historically referred to the milling of wheat into flour, for which the farmer
would compensate the miller with a portion of the wheat, the miller’s
compensation being referred to as "maquila". The modern meaning of the word
evolved from its use to describe any partial activity in a manufacturing process,
such as assembly or packaging carried out by someone other than the original
manufacturer” (www.maquilaportal.com)
MJM found that the majority of maquiladoras are owned by the United States,
which greatly benefits the United States. Maquiladoras are basically sweatshops in
Mexico. Several countries own maquilas and produce a number of goods from
electronics, to automotive, to apparel and toys.
MJM 2
Situation Analysis
There are several maquilas in Mexico. Maquilas are production plants used by
other countries to produce their products at a cheaper labor cost.
“Today a maquiladoras refers to a Mexican company operating under a
special customs regime which allows the maquiladoras to temporarily import into
Mexico on a duty free basis, machinery, equipment, materials, parts and
components and other items needed for the assembly or manufacture of finished
goods for subsequent export” (www.maquilaportal.com).
Several multinational companies - such as BMW, Chrysler, Fisher-Price, Sony
and Xerox - use maquilas because the labor is cheaper and they only have to pay import
taxes on the foreign made parts of their products.
Research
Describe the concept of a maquila. Why does it exist? How does it operate?
“A maquiladora typically performs assembly, or sub-assembly, operations.
[…] For example, a wire harness is assembled in Juarez and then sent to auto
assembly operations in Hermosillo or Saltillo where it is installed in cars and
trucks. The finished cars and trucks are then exported out of Mexico
(www.twinplantnews.com).
The first maquila was established in 1966. Between then and now, the number of maquila
plants has grown from just a few to over 3,700 in August of 2001. (See Chart 1)
Chart 1
(www.maquilaportal.com)
MJM 3
“About 40% of the more than 3,000 maquilas are US owned, and another 47% are
Mexican-owned, however, most of these companies are subsidiaries of US corporations”
(www.twinplantnews.com).
Initially, maquilas were only allowed in the border states of Mexico, where they
could have a close American counterpart (Maquilas were originally called the twin plant
program because of this). “Their original purpose was to absorb excess labor in the
border areas and to encourage Mexican exports… Over time the maquiladoras concept
evolved so that maquiladoras could be established anywhere in Mexico”
(www.maquilaportal.com). In the beginning, employment in maquilas was only about
3,000 workers (www.findarticles.com), however now, there are over 1,167,183 workers.
(See Chart 2).
Chart 2
(www.maquilaportal.com)
What countries have maquilas?
Mexico is the only country that has maquilas. However, foreign countries
own these maquilas. Some of these foreign countries are: USA, Japan, Korea, Germany,
MJM 4
France, Canada, Asia, China, and Mexico also owns its own maquilas.
(www.maquilaportal.com/Top100).
What goods are mainly produced?
There are numerous goods produced in maquilas. However the main ones are
electronics/ electrical, automotive supplies, apparel, medical supplies, toys,
telecommunications, metal, and aircraft. There are several other goods produced, but
these seemed to be the major ones. (www.maquilaprotal.com/Top100).
Explain Reverse Maquila.
Reverse maquila is such a new term its definition is still fluid. “Users are applying
it to two different manufacturing situations” (Ball 83). The first situation is the exact
opposite of a normal maquila. Instead of having the production facilities on the Mexican
side, they are built on the American side of the border, but the products are used for sale
in Mexico. The second situation is slightly different, in that the products are used for sale
in the United States. (Ball 83). Production is brought to the American side for 10 simple
reasons:
1.) Better quality products
2.) Fewer problems with organized labor
3.) Electricity and waste disposal are less expensive
4.) NAFTA import duties are lower
5.) Less bureaucracy and corruption
6.) Finished products don’t have to pass through US customs
7.) Superior roads, telecommunications, and waste disposal
8.) Wage difference lessening
9.) Better educated workers, bilingual
10.) More housing, better living conditions
(Ball 83).
MJM 5
A few more tidbits
Maquilas are little more than sweatshops. Maquila workers never see the light of
day because they work 80-90 hour weeks in a 6 or 7 day work week. About 90% of
maquila workers are women between the ages of 18-25, and single mothers.
(www.idrc.ca). Maquila workers earn between $3.50 and $5 a day, “enough to do little
more than survive in the border towns, where the cost of living is 30% higher than the
rest of the country” (www.motherjones.com). (See Chart 3).
Chart 3
(www.maquilaportal.com)
Martha Ojeda, a maquiladoras worker for 20 years, tells of some of the horrors of
working in maquiladoras. Things such as workers being given ‘vitamins’ that were really
amphetamines, sexual harassment of women workers – which is not prohibited by
Mexican law – and the murder of some workers. (www.motherjones.com). Ojeda said at
the Seattle WTO summit:
“We are not expecting to make $500 a week. In Mexico, as everywhere,
we simply want fair wages, good working conditions, and the ability to live with
dignity. We want our rights to be included in the WTO’s commercial agenda”
(www.motherjones.com).
MJM 6
Strategic Alternatives/ Implementation Plan
It may seem that there could be several strategic alternatives, however, MJM
believes that there are not. Work conditions may be able to be changed slightly, but
issues such as sexual harassment are legal under the Mexican law, which another country
cannot change. It would also be counter-productive to close down the maquiladoras
because they are a major part of Mexico’s economy. A possible alternative would be for
the companies who own maquilas to lengthen deadlines, etc. and allow their workers the
opportunity to go home to their families and work a decent number of hours a week,
instead of 80-90. However, working these hours is what enables the workers to survive, if
they are being paid by the hour. (Some are paid by the hour, and others by the day).
MJM 7
Work Cited
Economics of the Maquila Industry.
http://www.idrc.ca/books/reports/1998/22-02e.html. May 1998.
Globalization and the Maquiladoras.
http://www.motherjones.com/wto/soriano1.html. Nov. 1999.
International Business: the challenge for global competition. Ball, McCulloch, Frantz,
Geringer, and Minor. 2002.
Maquila Overview.
www.maquilaportal.com/Visitors_Site/maquilaoverview/MOVEROVIEW1.htm
Maquiladoras: Entrepreneurial Experimentation to Global Competitiveness.
http://www.findarticles.com/cf_dls/m1038/2_42/54370814/p1/article.jhtml.
Mar-April 1999.
Top 100 Maquilas.
http://www.maquilaportal.com/Top100Maquilas/Top100Maquilas.htm
What is a Maquila?
http://www.twinplants.com/whatIs.htm.