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Mexico, Development, and Maquilodoras
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Natural Resources
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MAQUILADORAS Tijuana
Nogales Ciudad Juarez
Matamoros
Reynosa
Monterrey
Chihuahua
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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
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GDP PER CAPITA ALONG THE US-MEXICAN BORDER
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• 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
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• 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
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• Maquiladora products
MAQUILADORAS
Electronic equipment Electric appliances Auto parts Clothing Furniture
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• 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
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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
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NAFTA
How has Mexico benefited from NAFTA?
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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?
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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.
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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.