Mexico, Development, and Maquilodoras

Natural Resources

MAQUILADORAS Tijuana

Nogales Ciudad Juarez

Matamoros

Reynosa

Monterrey

Chihuahua

MAQUILADORAS • The term given to modern industrial plants in

Mexico’s U.S. Border zone. • These foreign owned factories assemble imported

components and or raw materials and then export finished manufactures mainly to the United States.

• Import duties are disappearing under NAFTA, bringing jobs to Mexico and the advantages of low wage rates to the foreign entrepreneurs

GDP PER CAPITA ALONG THE US-MEXICAN BORDER

• Initiated in the 1960s as coupon houses

• Assembly plants that pioneered the migration of industries in the 1970s

• Today

– >4,000 maquiladoras

– >1.2 million employees

MAQUILADORAS

• Modern industrial plants • Assemble imported, duty-free components/raw

materials • Export the finished products • Mostly foreign-owned (U.S., Japan) • 80% of goods reexported to U.S. • Tariffs limited to value added during assembly

MAQUILADORAS

• Maquiladora products

MAQUILADORAS

Electronic equipment Electric appliances Auto parts Clothing Furniture

• ADVANTAGES – Mexico gains jobs. – Foreign owners benefit from cheaper labor

costs.

• EFFECTS – Regional development – Development of an international growth

corridor between Monterrey and Dallas - Fort Worth

MAQUILADORAS

NAFTA

• Effective 1 January 1994 • Established a trade agreement between

Mexico, Canada and the US, which: –Reduced and regulated trade

tariffs, barriers, and quotas between members

–Standardized finance & service exchanges

NAFTA

How has Mexico benefited from NAFTA?

MEXICO AND NAFTA

• Foremost, it promises a higher standard of living.

• NAFTA creates more jobs for Mexicans as US companies begin to invest more heavily in the Mexican market.

• Mexican exporters increase their sales to the US and Canada.

• Is that the entire story?

U.S. TRADE WITH CANADA & MEXICO

• Canada remains as the United States’ largest export market.

• Since 1977, Mexico has moved into 2nd and then 3rd place (displacing Japan).

• 85% of all Mexican exports now go to the United States.

• 75% of Mexico’s imports originate in the United States.

Even the era of globalization, geography, and distance matter a lot. Americans have a level of entwinement with Canada and Mexico that’s way out of proportion to those countries’ weight in the world economy as a whole.