Maquiladoras
What role does maquiladora play in the
development of a country? Why is this
phenomenon seen as a new phase in
capitalist development? Is this a reasonable
claim? The role that the maquila
plays in the development of a country is an
interesting topic to discuss. To
understand the role that maquiladoras play, one
must first gain an
understanding of the original purpose of the maquila. Then,
by studying the
evolution of the maquiladora to a big manufacturing base, one
may have a
better understanding of how this type of firm may lead to the
development of
the host country. In the first section, I will discuss the
origination and
development of the maquiladoras. In section two, I will provide
the opinions
of some economists and their insights as to how the maquiladora has
affected
developing countries. The third section deals with capitalism and
how
maquiladoras play a role in the development of a capitalist economy. In
section
four, I will discuss my opinions on the arguments that I have
presented. The
final section will include some concluding remarks. Now, let
us familiarize
ourselves with the maquiladora. The word "maquiladora" is
derived from the
Spanish verb "maquilar", which means to mill wheat into
flour. Farmers would
mill wheat into portions and then give a portion to the
miller; this portion was
called a maquila. As time passed, the word maquila
became associated with
manufacturing, assembly and packaging processes that
were carried out by someone
that was not the original manufacturer. In
today’s economic world, the word"maquiladora" stands for a special type of
company in Mexico (Maquila
Overview 1). The component that makes the
maquiladora different from any other
manufacturing plant is that they are
allowed to import raw materials, equipment,
and parts needed for assembly,
and export the finished good to the United States
on a duty free basis
(Maquilas 1). The first maquiladoras were built in 1966 in
Baja
California and Cuidad Juarez (United States firms established with
the
support of the Mexican government). The Border Industrialization Program
created
these companies in order to channel the abundant labor source in the
border
areas of Mexico and the United States free trade zone (Maquila
Overview 1). The
original purpose of the maquiladoras was to employ all the
unemployed people who
resided on the Mexican side of the border and also to
increase Mexican exports.
The United States saw these companies as a
chance to take advantage of the cheap
cost of labor, the lack of Mexican
labor and environmental rules and
regulations, and few duties (Maquilas 1).
The United States tariff schedules
allow for the assembly of United
States-made goods outside of the country and
then, the return of the final
product to the United States with duty only paid
on the value added to the
good. There are two sections under the tariff
schedules that allow for
industrial operations under the maquiladora program:
Item # 9802.00.60
and 9802.00.80 (were 806.3 and 807.0) that states that the
value of
components made in the United States are not subject to duty when
further
processed or assembled abroad and returned to the United States. Item
#
9802.00.60 deals with metal processing Item#9802.00.80 deals with
assembly
(Alvarez 1). Now, maquiladoras are not only located on the border of
Mexico and
the United States, but all over the country. The maquiladora can
now sell a
portion of the goods produced in the domestic market on payment of
import duties
and taxes on the imported materials (Maquila Overview 1). The
maquila industry
would not be here today without foreign investment. Many
foreign companies in
the United States, Japan, and Canada have taken
advantage of cheap Mexican labor
and the location of the Export Processing
Zones and built manufacturing
companies in Mexico. These companies are
usually fully owned by foreign
investors. These companies are probably the
most successful part of Mexico’s
economy. The growth of this industry has
been steadily increasing over the
years, generating more foreign exchange
than oil or tourism (Maquila Overview
2). Overall, the maquiladora
industry seems to be a good way to increase
productivity, employ the
unemployed and create incentive for foreign investment.
However, varying
opinions exist among economists and some see the maquila
industry as
problematic, and ultimately hindering to the overall development of
the host
country. Chapter 1, The Maquilas in Global Perspective states that
the
reformation of capitalism marks the next step in the relations of
dominant
powers with Third World Countries. Capitalism is the separation of
economy and
state. It is the social system in which the means of production
are privately
owned, and the economy is uncontrolled and unregulated, and all
land is owned
privately. Capitalism is a political/economic system that
recognizes each and
every person as an individual with individual rights
(Capitalism 1). The author
of chapter 1 argues that with the reformation of
capitalism on a global scale
with help the Third World countries achieve
substantial development that will
help their people live better lives. Since
the status of industrial countries
were not achieved in the third world, they
made goals for themselves that proved
to be inefficient. The Third World
mainly exported raw materials. The big
industrial nations saw opportunity to
invest in these countries and build
Maquilas in the export processing
zones. The primary goal was to create jobs and
generate lots of foreign
exchange. These goals were the benefits of the host
country. The United
States, being a global economic leader, saw opportunity to
invest. The main
goal of American Trade Policy is to have one world market
without any trade
barriers, discriminations or subsidies. The maquilas and
foreign investment
in the companies are the plans for the big economic leaders
to create
development in the third world. Do these investments help or hurt
global
capitalism? The maquilas role in the development of Mexico is being
seriously
considered. Many argue that the existence of these "production"
zones does
increase economic growth in that economic activity increases.
However,
this growth is not necessarily development. The author of Chapter 1
argues
that with capitalism comes opportunities to sustain development. He
lists
6 factors that can determine the success of development: 1. Links:
greater
backward links, raw materials, and greater forward links, goods to US
shows
development 2. Keeping in foreign exchange 3. Upgrading of personnel
4.
Technology transfer 5. Good labor conditions 6. Fair distribution of
costs and
benefits between foreign investors, population, and government.
However, the
author argues that the strongest capitalist effects can be seen
near the border
of Mexico and the US. Larison and Skidmore argue that the big
nations will not
contribute foreign direct investment unless they see maximum
profit. The main
objective of the Third World is to develop. Without the help
from the industrial
nations, this development would never take place. I
believe that the development
of the countries that host maqiladora factories
are helped and hindered by these
companies. Even though the industrialized
countries claim to be capitalist and
respect each individual, they are
exploiting the Mexican people. The investors
are taking advantage of the
cheap labor and the laz labor and environmental laws
in Mexico. They are
essentially going back on their word and taking advantage of
the Mexican
people. The United States also would like to see all boarders open
and free
to trade. However, since Mexico is still not fully developed and
still
maintains a strong sense of Nationalism, they may need to keep
some
projectionist policies in place. Essentially, the Unites States is using
Mexico
as a "middle-man". They are doing the hard part of the work, and we
are
enjoying their hard work and paying half the price that it would cost to
produce
these goods in the states. I think that everything has its limits and
that the
United States cannot fully call its intentions capitalistic
until it changes its
ways. The establishment of the Maquiladora industry by
United States and other
countries was initially a good idea. What the
Mexicans did not realize was that
the United States saw an opportunity to
take full advantage of their people and
laws. Even though many more Mexicans
have jobs as maquila workers, they are
making close to nothing and being
exploited. I think the system on which we run
is totally one-way, with only
our best interest in mind. The development of the
Mexican maquila
industry has definitely flourished, but then why has the economy
stayed the
same? The economy in Mexico is still stagnated and not considered a
fully
developed economy like that of the United States. The growth of the
maquilas
has stopped productivity by domestic producers. I think this industry
has not
helped the development of the country as much as it might be able to in
the
future if some policy reforms are made.
Bibliography
Alvarez, J.
(2000). The Maquiladora.
(4-23-00) Larison, Thomas D. (1997). International
Political Economy. New York:
Harcourt Brace College Publishers. Chapter
1, The Maquilas in Global
Perspective. Maquilas/Export Processing Zones.
(2000).
Maquila Overview.
(2000)