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Maquiladoras (twin plants, in-bond production operations)


Maquiladoras (twin plants, in-bond production operations)

In 1965 Mexico created the Maquiladora (or Border Industrialization) Program. The program was initially a modest attempt to shift PRODUCTION activities away from the Mexico City area in response to changes in U.S. TARIFFs that limited customs duties on U.S.-fabricated components shipped abroad for assembly and then returned to the United States. Also called twin plants or in-bond production operations, maquiladoras (from the spanish verb maquilar, meaning to collect a fee or toll for grinding grain at a mill) are factories that assemble parts and components produced around the world and then ship the finished and semifinished PRODUCTs, primarily to North American countries. Under the maquiladora program, foreign CORPORATIONs initially could import equipment and raw materials into Mexico without paying taxes, but they were required to export all of the output. Asian and North American companies established maquiladoras, but the program did not take off until a Mexican financial crisis in the early 1980s. Declining oil prices combined with excessive international borrowing forced the Mexican government to look for new sources in hard currency to meet debt obligations. With devaluation of the Mexican peso, maquiladora labor became cheaper than in developing Asian countries. Maquiladoras boomed in the mid-1980s and again after the PESO CRISIS in 1994. In the late 1980s Mexico relaxed the requirement that all maquiladora production be shipped out of the country, providing access to Mexican markets through those operations. In the 1990s, with new trade agreements with Chile, Mercursor countries (Argentina, Brazil, Uruguay, Paraguay) and most recently the EUROPEAN UNION, Mexico became an export platform for U.S.-based MULTINATIONAL CORPORATIONs. Exports from Mexican plants can enter countries like Chile without tariffs, while exports to Chile from U.S. factories do face tariffs. In the year 2000 there were over 1.2 million workers in 3,562 maquiladora operations. Employment in maquiladoras doubled in the period from 1995 to 2000. Tijuana, Mexico, is the global center of television production. Maquiladoras are now found way beyond border areas as manufacturers seek new locations with sufficient labor supplies. In November 2000, as part of the NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA), only parts and materials originating in the three North American countries could enter Mexico tariff-free. In anticipation of this change, multinational corporations, particularly Asian companies, have expanded production activities in Mexico, diverting production from other areas of the world. The success of the maquiladora program significantly influenced Mexican domestic and trade policy. Until the 1970s, Mexico was one of the most closed markets in the world and particularly fearful of U.S. domination. The maquiladora program now exceeds oil as the most import source of export revenue in Mexico. While INFRASTRUCTURE still lags, working conditions have sometimes been highly criticized, and environmental conditions are less than healthy, maquiladoras have provided a new source of opportunity for Mexican workers.
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