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Maquiladoras

1.Overview 2.Nicaragua 3.Mexico. Maquiladoras. 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. M aquiladora.

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Maquiladoras

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  1. 1.Overview 2.Nicaragua 3.Mexico Maquiladoras By Mahghadi Daniel, Deanna Delello, Brenda Miranda

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

  3. 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

  4. 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

  5. What attracted Maquiladoras? • Cheap labor • Weak enforcement of environmental and labor laws

  6. Maquiladoras • The maquiladora industry has evolved since the early 1980s • Consequence of the adoption of best practices in the productive processes and industrial organization.

  7. What are best practices? Increases or improvements in: Complex activities Capabilities Just-in-time Continuous improvement Job safety

  8. 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.

  9. 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.

  10. 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.

  11. History • By 1977 inter-ministerial commission was created to promote maquiladora industry • Government regulations were modified to simplify administrative requirements and expand existing features

  12. 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

  13. 2. …in Nicaragua From World Bank.org

  14. 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.

  15. FortexMaquila Allegations: Exploitation in the workplace 2. Frequent verbal abuse, 3. Forced overtime Low wages (as low as $.95/day) 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

  16. ChentexMaquila, Taiwanese-ownedChihHsing factory Allegations: Sweat shop conditions Filthy & cramped living quarters 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.)

  17. Mil Colores, US-owned maquila factory Allegations: Forced overtime Starvation wages Extreme heat Filthy bathrooms 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)

  18. 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.

  19. Externalities: • Improvement of government buildings and infrastructure • Reduced unemployment, 5.4%, with 48% underemployment (CIA)

  20. GOVERNANCE INDICATORS source: WorldBank.org

  21. 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)

  22. 3. …in Mexico

  23. 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

  24. Public Sector Remedies to Negative Externalities • 1. Regulation, such as emission limits. • 2. Corrective Taxation-In some cases taxesare 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)

  25. History of Maquiladoras in Mexico • In 1965, the Mexican government implemented El Programa de IndustrializacionFronteriza (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 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.

  26. 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

  27. …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.

  28. 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.

  29. 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

  30. 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.

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