Maquiladoras Essay Research Paper What role does

Maquiladoras Essay, Research Paper

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

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