After the Peso Crisis, the Mexican Recovery with Maquilas

Essay by docperio44University, Bachelor'sA+, April 2005

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Maquilas - The Way to a Mexico Recovery

Mexican Maquiladoras

Maquiladoras are mainly considered processing facilities; they process and assemble products such as consumer and industrial electronic goods, automotive components, wood, leather and clothing, toys, and medical supplies. The maquiladora program is also known as the "twin plant" "production sharing" or "in bond" program. The terms "twin plant" and "production sharing" stem from earlier anticipation that paired plants would be established in physical proximity, one on either side of the U.S.-Mexico border. The labor-intensive production processes would occur in Mexico and the rest of the processes in the U.S. (production sharing). This would allow companies to capitalize on the cheaper labor costs without actually relocating to Mexico.

However, today the maquiladora industry has expanded to mean much more. The "industry" is actually an agglomeration of manufacturers from various industrial sectors with the automotive and electronic sectors accounting for more than two-thirds of maquila production.

Manufacturers use a variety of investment forms to capture the benefits associated with maquilas, including wholly owned subsidiaries, joint ventures, and shelter agreements (subcontracting agreements). There are numerous industrial parks dedicated to maquila manufacturing, and plant sizes range from over 2500 employees in some automotive and electronic assembly units to 60-to-8 person job shops, these being more common in woodworking and garment operations.

U.S. firms account for over 90 percent of the value of maquila investment and control the largest number of maquilas; multinationals (MNEs) such as Ford, General Motors, Eastman Kodak, Caterpillar, Hewlett Packard, and Westinghouse command the largest share of business. In addition, there is an increasing presence of "third country" maquilas. Perhaps most notably, Japan is rapidly increasing its maquila presence. Japanese MNEs such as Sony, Sanyo, Fujitsu, Matsushita, and Hitachi use maquilas, and some of these have encouraged their Japanese suppliers (for...