MAQUILADORAS AND THE NAFTA'S I


Introduction

In this paper I will discuss the history and practices of the Maquiladora industry. I will discuss its background, its problems, the benefits it offers to United States companies, and the impact the NAFTA has and will have on the industry. In addition, I will make a suggestion on a possible strategy the Maquiladoras can adopt in order to address the challenges brought on by the NAFTA, to ensure it remains a strong force in the future.





Background

Mexican agricultural workers had been granted temporary work visas allowing them to work in the United States' agricultural industries through a program called the Bracero Program until 1965 when this program was terminated. As a result of this termination, the unemployment rate had exceeded 70% in certain border cities. In May of 1965 the Border Industrialization Program was established as a replacement for the Bracero program. It was later renamed the Maquiladora Program. The program was established by the Mexican government to provide employment for Mexico's rapidly growing population along its border with the United States. This program was utilized to keep Mexicans from entering the United States. The idea was that Mexican workers would be kept on the Mexican side of the border if they were given factory jobs on the Mexican side. The Maquiladora program also wanted to attract foreign manufacturing facilities, technology, and know-how by giving a permanent tax holiday to manufacturing companies that would set up 'twin plants' on the Mexican side of the border.



In the beginning of the program, all foreign-owned operations had to be located within a 20-kilometer strip along the US-Mexican border. Since 1972 they can be located anywhere in Mexico. In 1996 there were around 2,500 Maquiladoras ' 35% of them were located in the interior states of Mexico. Last year there were over 3,000 and more and more of these operations are being located outside of the border regions. Each of Mexico's 31 states has at least one Maquiladora.



What is a Maquiladora?

Maquiladoras, also referred to as 'in bond' or 'twin' plants, are allowed to temporarily import into Mexico (free of tax) machinery, equipment, replacement parts, raw materials, and just about anything that was used in the assembly or manufacture of semi-finished or finished products. Once assembled or manufactured, the Maquila products must be exported unless special permission is obtained to sell a limited amount of output in the Mexican market. When these products are imported back to the United States, import duties are levied on the foreign value-added only. If Maquila products stay in Mexico, the are subject to applicable Mexican duties.



The Exploitation of Cheap Labor

The largest issue surrounding the Maquiladora industry is the exploitation of cheap labor. The working conditions are often unsafe, workers are not compensated adequately for their labor, attempts to unionize are discouraged; and sexual discrimination and harassment are too common.



The conditions in and outside the Maquiladoras are terrible. Workers perform tasks such as welding without protective masks, leather gloves, or goggles (in many instances) and industrial accidents and toxic exposures are common. This, along with malnutrition caused by low salaries, produce skin illnesses, cancer, irregularities in menstruation, abortions, tumors, intoxication and birth of undernourished or disabled babies.



Of the employees, many are young girls and women ranging from the ages of 14 to 20. They work 6 days a week in 10-hour shifts. The average weekly salary for a Maquiladora worker is US$35 - $45 even though the average monthly rent for a house with public services such as running water and electricity is around $200 a month.



For the most part, Maquiladoras are unorganized. In those that are organized, state-controlled unions represent the workers. Although some companies are unionized on paper, the unions, for the most part, function to reinforce management policies rather than for the benefit of workers. Then there are what are called 'phantom' unions. These unions do not fight for the worker's rights. The workers do not even know them and have never seen their union leaders. When a conflict arises in a factory, management informs the worker that their unions have accept these or those conditions. Not only are they not protected by existing unions, those that attempt to unionize and are often threatened or bribed by plant managers and the government.



In many companies, discrimination against and harassment of the female employees is very common. Female job applicants are required to produce urine samples to be used for pregnancy test, while some have company doctors and nurses examine the applicants or ask confidential information concerning their contraceptive practices. This is done because pregnant women are refused employment. Sexual harassment is often the rule rather than the exception. Rapes occur frequently and few are reported because women fear being fired or blacklisted. Shame and humiliation also keep them quiet. In Mexico, men and women are equal before the law, but the law does not recognize discrimination as a problem to be solved.



The Pollution Brought on by the Maquiladoras

The increased pollution, accompanied by the dumping of tons of hazardous wastes, poses a serious health threat to the residents of Mexico as well as the resident of the bordering US states. There are several canals that are 'black' with chemical wastes that have been measured at levels that greatly exceed permissible standards. One factory was caught dumping drums of paint, solvents, and shellac into a drain. In other areas there are abandoned lead smelters and air full of soot and dust from brick-making ovens and smoldering tire dumps.



Main Advantages for the United States' Companies

For the United States companies this was a great advantage since Maquiladoras operates at very low costs in places where the currency is weaker than the dollar'such as Mexico. The less a currency is worth, the more relative value the dollar has. Since Mexico's peso is relatively week, companies can trade their dollars for pesos with which they pay workers and expenses. The products they manufacture, however, are sold for dollars, increasing their profits by huge margins whenever the local currency falls. They could enhance competitiveness, reduce their costs, and maintain quality by placing their labor-intensive ...