FREE ESSAY ON MAQUILADORAS

MAQUILADORAS

What role does maquiladora play in the development of a country? Why is this
phenomenon seen as a new phase in capitalist development? Is this a reasonable claim?
The
role that the maquila plays in the development of a country is an interesting topic to
discuss. To
understand the role that maquiladoras play, one must first gain an understanding of the
original
purpose of the maquila. Then, by studying the evolution of the maquiladora to a big
manufacturing base, one may have a better understanding of how this type of firm may lead
to
the development of the host country. In the first section, I will discuss the origination
and
development of the maquiladoras. In section two, I will provide the opinions of some
economists and their insights as to how the maquiladora has affected developing
countries. The
third section deals with capitalism and how maquiladoras play a role in the development
of a
capitalist economy. In section four, I will discuss my opinions on the arguments that I
have
presented. The final section will include some concluding remarks. Now, let us
familiarize
ourselves with the maquiladora.
The word "maquiladora" is derived from the Spanish verb "maquilar", which means to
mill wheat into flour. Farmers would mill wheat into portions and then give a portion to
the
miller; this portion was called a maquila. As time passed, the word maquila became
associated
with manufacturing, assembly and packaging processes that were carried out by someone
that
was not the original manufacturer. In today's economic world, the word "maquiladora"
stands
for a special type of company in Mexico (Maquila Overview 1). The component that makes
the
maquiladora different from any other manufacturing plant is that they are allowed to
import raw
materials, equipment, and parts needed for assembly, and export the finished good to the
United
States on a duty free basis (Maquilas 1). 
The first maquiladoras were built in 1966 in Baja California and Cuidad Juarez (United
States firms established with the support of the Mexican government). The Border
Industrialization Program created these companies in order to channel the abundant labor
source
in the border areas of Mexico and the United States free trade zone (Maquila Overview 1).
The
original purpose of the maquiladoras was to employ all the unemployed people who resided
on
the Mexican side of the border and also to increase Mexican exports. The United States
saw
these companies as a chance to take advantage of the cheap cost of labor, the lack of
Mexican
labor and environmental rules and regulations, and few duties (Maquilas 1). The United
States
tariff schedules allow for the assembly of United States-made goods outside of the
country and
then, the return of the final product to the United States with duty only paid on the
value added to
the good. There are two sections under the tariff schedules that allow for industrial
operations
under the maquiladora program:
Item # 9802.00.60 and 9802.00.80 (were 806.3 and 807.0) that states that the value of
components made in the United States are not subject to duty when further processed or
assembled abroad and returned to the United States. 
Item # 9802.00.60 deals with metal processing 
Item#9802.00.80 deals with assembly (Alvarez 1).
Now, maquiladoras are not only located on the border of Mexico and the United States,
but all over the country. The maquiladora can now sell a portion of the goods produced in
the
domestic market on payment of import duties and taxes on the imported materials (Maquila
Overview 1). 
The maquila industry would not be here today without foreign investment. Many foreign
companies in the United States, Japan, and Canada have taken advantage of cheap Mexican
labor
and the location of the Export Processing Zones and built manufacturing companies in
Mexico. 
These companies are usually fully owned by foreign investors. These companies are
probably
the most successful part of Mexico's economy. The growth of this industry has been
steadily
increasing over the years, generating more foreign exchange than oil or tourism (Maquila
Overview 2). Overall, the maquiladora industry seems to be a good way to increase
productivity,
employ the unemployed and create incentive for foreign investment. However, varying
opinions
exist among economists and some see the maquila industry as problematic, and ultimately
hindering to the overall development of the host country.
Chapter 1, The Maquilas in Global Perspective states that the reformation of capitalism
marks the next step in the relations of dominant powers with Third World Countries.
Capitalism
is the separation of economy and state. It is the social system in which the means of
production
are privately owned, and the economy is uncontrolled and unregulated, and all land is
owned
privately. Capitalism is a political/economic system that recognizes each and every
person as an
individual with individual rights (Capitalism 1). The author of chapter 1 argues that
with the
reformation of capitalism on a global scale with help the Third World countries achieve
substantial development that will help their people live better lives. Since the status
of industrial
countries were not achieved in the third world, they made goals for themselves that
proved to be
inefficient. The Third World mainly exported raw materials. 
The big industrial nations saw opportunity to invest in these countries and build
Maquilas
in the export processing zones. The primary goal was to create jobs and generate lots of
foreign
exchange. These goals were the benefits of the host country. The United States, being a
global
economic leader, saw opportunity to invest. The main goal of American Trade Policy is to
have
one world market without any trade barriers, discriminations or subsidies. The maquilas
and
foreign investment in the companies are the plans for the big economic leaders to create
development in the third world. Do these investments help or hurt global capitalism? 
The maquilas role in the development of Mexico is being seriously considered. Many
argue that the existence of these "production" zones does increase economic growth in
that
economic activity increases. However, this growth is not necessarily development. The
author
of Chapter 1 argues that with capitalism comes opportunities to sustain development. He
lists 6
factors that can determine the success of development:
1. Links: greater backward links, raw materials, and greater forward links, goods to US 
shows development
2. Keeping in foreign exchange
3. Upgrading of personnel
4. Technology transfer
5. Good labor conditions
6. Fair distribution of costs and benefits between foreign investors, population, and
government. 
However, the author argues that the strongest capitalist effects can be seen near the
border of
Mexico and the US. 
Larison and Skidmore argue that the big nations will not contribute foreign direct
investment unless they see maximum profit. The main objective of the Third World is to
develop. Without the help from the industrial nations, this development would never take
place. 
I believe that the development of the countries that host maqiladora factories are
helped
and hindered by these companies. Even though the industrialized countries claim to be
capitalist
and respect each individual, they are exploiting the Mexican people. The investors are
taking
advantage of the cheap labor and the laz labor and environmental laws in Mexico. They
are
essentially going back on their word and taking advantage of the Mexican people. The
United
States also would like to see all boarders open and free to trade. However, since Mexico
is still
not fully developed and still maintains a strong sense of Nationalism, they may need to
keep
some projectionist policies in place. Essentially, the Unites States is using Mexico as
a
"middle-man". They are doing the hard part of the work, and we are enjoying their hard
work
and paying half the price that it would cost to produce these goods in the states. I
think that
everything has its limits and that the United States cannot fully call its intentions
capitalistic until
it changes its ways.
The establishment of the Maquiladora industry by United States and other countries was
initially a good idea. What the Mexicans did not realize was that the United States saw
an
opportunity to take full advantage of their people and laws. Even though many more
Mexicans
have jobs as maquila workers, they are making close to nothing and being exploited. I
think the
system on which we run is totally one-way, with only our best interest in mind. The
development
of the Mexican maquila industry has definitely flourished, but then why has the economy
stayed
the same? The economy in Mexico is still stagnated and not considered a fully developed
economy like that of the United States. The growth of the maquilas has stopped
productivity by
domestic producers. I think this industry has not helped the development of the country
as much
as it might be able to in the future if some policy reforms are made. 
Bibliography
Works Cited
Alvarez, J. (2000). The Maquiladora. (4-23-00)
Larison, Thomas D. (1997). International Political Economy. New York: Harcourt
Brace College Publishers. 
Chapter 1, The Maquilas in Global Perspective. 
Maquilas/Export Processing Zones. (2000). 
Maquila Overview. (2000)