NCPA - National Center for Policy Analysis

Maquiladoras Have Expanded Rapidly

February 16, 2001

Maquiladoras are manufacturing operations in Mexico set up by foreign companies. Since 1968, firms have been allowed to import raw materials duty-free to these "in-bond" plants, paying taxes only on the value added to the finished products which are shipped abroad.

The program has expanded rapidly in recent years, due to peso devaluation and the North American Free Trade Agreement (NAFTA) -- which is gradually eliminating all tariffs between the U.S., Mexico and Canada. Many corporations have opened plants in the interior to avoid the border region's high turnover rate of 12 percent to 20 percent a month, says Richard Kean, who arranges maquiladora-based manufacturing for corporations.

  • Since 1995, the maquiladoras have grown from about 2,030 plants employing some 625,000 workers to more than 3,200 such planting employ 1.1 million workers.
  • Maquiladora exports were $63.8 billion in 1999 -- about 45 percent of Mexico's total exports.

Predictions for maquiladora growth in 2001 range as high as 9 percent as a new phase of NAFTA takes effect, and U.S. and Canadian companies won't even have to pay duties on the value-added export products.

Source: Jonathan J. Higuera (Arizona Daily Star), "Why Maquiladoras Endure," Hispanic Business, November 2000.

 

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