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Essay on Mexico's Maquiladora Industry
Over the last two decades, Mexico has dramatically opened its economy to foreign trade and investment. Mexico began this process of liberalization in the 1980’s by unilaterally lowering barriers to imports and removing restrictions on multinational firms. It consolidated these reforms in the 1990.s by signing the North American Free Trade Agreement (NAFTA) with Canada and the United States. The country has converted itself from an inward-oriented economy to one in which export production is the main source of economic growth. By 2000, the share of international trade in Mexico’s GDP was 32%, up from 11% in 1980. Foreign direct investment (FDI) has helped fuel Mexico’s export growth, quadrupling from less than 1% of GDP in the early 1980’s to over 3% of GDP in the late 1990’s.
One of the first methods of foreign outsourcing was the maquiladora in Mexican border towns. Maquiladoras originated in Mexico in the 1960s, with many of the plants located in the border towns of northern Mexico. They grew dramatically after Mexico substantially revised its economic regulations concerning foreign investment in the early 1980s. “The maquila industry has transformed the border area of Baja California - which includes the cities of Tijuana, Ciudad Juarez and Mexicali - from tourist and agricultural areas into thriving industrial centers. As of May 2002, there are over 3600 maquiladora plants employing over 1.1 million people in Mexico” (Web, 1).
The maquiladoras became a means of providing employment and significant foreign-exchange earnings for Mexico's developing economy. Maquiladoras characteristically mostly manufacture finished goods for export to the United States and are generally owned by non-Mexican corporations. They take advantage of plentiful low-cost Mexican labor, advantageous tariff regulations lessened somewhat as a result of the North American Free Trade Agreement, and close proximity to U.S. markets to produce such items as home appliances and automobiles......
