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What is a Maquiladora?

The Mexican government permits a maquiladora to import materials without paying export tax on the goods produced.
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  • Written By: Garry Crystal
  • Edited By: Niki Foster
  • Last Modified Date: 17 November 2014
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A maquiladora is a Mexican corporation that operates under a maquila program. This program is approved by the Mexican Secretariat of Commerce and Industrial Development. The maquila program entitles the company to temporarily import materials without paying export tax on the products they produce. These products are manufactured in Mexico, usually by Mexican workers. They can be produced at a highly reduced cost and then exported and sold at a much higher price.

A special customs agreement permits the company to import all equipment needed to set up premises and make their goods. This can include machinery, admin equipment, parts and materials -- basically, anything that supports the production process can be imported under the maquila program rules. The maquiladora must post a bond stating that the imported equipment will not remain permanently in Mexico. The maquiladora's products are usually exported by sale to another exporter or maquiladora.

The word maquiladora originated to describe the process of grain milling. Maquila referred to the portion that was paid to a miller for milling his grain. When maquiladoras first began appearing in the 1960's and 1970's, they were large industrial complexes and export processing plants. The low costs soon attracted the attention of international textile companies.

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Today there are over 2,500 maquiladoras. The North American Freetrade agreement facilitated rapid expansion. Maquiladoras now employ around 1.15 million Mexicans, and women make up 70% of the overall workforce. Hastily built shanty towns called Colonias were built to house these workers. Although business profits are huge, workers are generally paid around 5.75 US dollars (USD) a day and work 60 to 70 hours a week.

There a few restrictions on where a maquiladora can be located in Mexico. Mexico City, Guadalajara and the urban areas of Monterrey are the only exemptions. This is due to congestion and an already high concentration of industrial complexes within these areas. Apart from these three areas, the location of a new maquiladora is entirely the choice of the company.

Products made in a maquiladora range from fashionable clothing to electronic goods. With the exception of firearms, which need special permission, there are no limits whatsoever on what can be manufactured in a maquiladora. Anything can be processed, assembled, packaged, produced, transformed and rebuilt.

Maquiladoras continue to grow in strength. In the space of only four decades, they now account for 85% of the trade revenue generated between Mexico and the United States. With annual profits now at 200 billion USD, there are no signs of this business heading towards a recession.

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Monika
Post 2

@JaneAir - The fact that they pay their employees so little is probably partly why their profit is so high!

It's crazy to think about, but other countries don't have the same labor laws we do here in the US. I'm sure the way maquiladoras do business is perfectly legal in Mexico.

JaneAir
Post 1

I'm completely disgusted that these businesses pay their workers such a low wage. When I was reading this article, I thought it was a really cool idea at first. The maquiladora system seems like it could really help stimulate a local economy.

However, it seems deeply unfair that the people who own the business make so much money while paying the workers so little. Especially because it sounds like the working conditions aren't exactly the best. I'm sure a shanty town doesn't have all the comforts of home. Also, 60-70 hours every week is an inhuman amount of hours to work!

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