Setting up a maquila in a Mexican town gives companies access to a greater and cheaper labor pool. NAFTA eliminated most barriers to moving goods among Mexico, the U.S. and Canada. 0000012950 00000 n
They also learn . The success of this program led to the generation of foreign exchange earnings. (started in 1960's with initiatives by Mexico, have more recently lost jobs to China even though NAFTA increased the number in the mid 90's) How Have Maquiladoras Impacted the Mexican Economy? Labor costs are fairly low in Mexico, which makes production cheaper. A maquiladora (Spanish:[makilaoa]), or maquila (IPA:[makila]), is a word that refers to factories that are largely duty free and tariff-free. Applicable for service providers that can assist in the export of goods and services to different manufacturers within Mexico. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. Between 1989 and 1994, the number of such plants increased by more than 200%. Agglomeration. Companies that operate under the maquiladora model are able to take advantage of numerous benefits. If you knew the answer, click the green Know box. Capital also generally refers to financial wealth, especially that used to start or maintain a business. With BIP, foreign firms were able to use factories built under PRONAF to import raw materials and export goods for a cheaper cost than in other countries. Your email address is only used to allow you to reset your password. A location where transfer is possible from one mode of transportation to another. What Are Maquiladoras: Definition, History & Benefits | NAPS The program is a part of the Twin Plant Agreement between the U.S. and Mexico. Will Kenton is an expert on the economy and investing laws and regulations. In Juarez, between 1993 and 2005, more than 370 women were murdered. This bond allows for all three countries to have free trade of products across the borders. The factories take raw materials and assemble, manufacture, or process them and export the finished product. Grouping together of many firms from the same industry in a single area for collective or cooperative use of infrastructure and sharing of labor resources. Between 1988 and 1992, 163 children in Juarez were born without brains due to the toxic chemicals from factories. Under this scheme, the raw materials would come from different corners of the U.S., but the production and processing would take place in Mexico due to low-cost labor. You are free to use this image on your website, templates, etc, Please provide us with an attribution link. Those in Mexico benefit from the creation of plants and facilities and a boost in labor and employment. See our either the copyright owner or a person authorized to act on their behalf. A short definition for Human Geography. Analytical Services; Analytical Method Development and Validation . Case Study / Maquiladoras in Mexico. Protection from fraud and external competition. Export may be direct or indirect, whether that's through the sale of products or shipping through another factory or export company. Companies can capitalize on a cheaper labor force in Mexico and also receive the benefits of doing business in the U.S. Border cities and states tend to benefit the most from maquiladoras. They flourished in the 1990s and 2000s in the aftermath of the signing of the North American Free Trade Agreement (NAFTA), which greatly reduced trading obstacles between Mexico, the United States, and Canada. Seton Hall University, Bachelors, English Literature Communications Journalism.