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Role of Maquiladora in the Country Development

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What role does maquiladora play in the development of a country? Why is thisphenomenon seen as a new phase in capitalist development? Is this a reasonableclaim? The role that the maquila plays in the development of a country is aninteresting topic to discuss. To understand the role that maquiladoras play, onemust first gain an understanding of the original purpose of the maquila. Then,by studying the evolution of the maquiladora to a big manufacturing base, onemay have a better understanding of how this type of firm may lead to thedevelopment of the host country.

In the first section, I will discuss theorigination and development of the maquiladoras. In section two, I will providethe opinions of some economists and their insights as to how the maquiladora hasaffected developing countries. The third section deals with capitalism and howmaquiladoras play a role in the development of a capitalist economy. In sectionfour, I will discuss my opinions on the arguments that I have presented. Thefinal section will include some concluding remarks.

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Now, let us familiarizeourselves with the maquiladora. The word maquiladora is derived from theSpanish verb maquilar, which means to mill wheat into flour. Farmers wouldmill wheat into portions and then give a portion to the miller; this portion wascalled a maquila. As time passed, the word maquila became associated withmanufacturing, assembly and packaging processes that were carried out by someonethat was not the original manufacturer. In todays economic world, the wordmaquiladora stands for a special type of company in Mexico (MaquilaOverview 1). The component that makes the maquiladora different from any othermanufacturing plant is that they are allowed to import raw materials, equipment,and parts needed for assembly, and export the finished good to the United Stateson a duty free basis (Maquilas 1). The first maquiladoras were built in 1966 inBaja California and Cuidad Juarez (United States firms established with thesupport of the Mexican government). The Border Industrialization Program createdthese companies in order to channel the abundant labor source in the borderareas of Mexico and the United States free trade zone (Maquila Overview 1). Theoriginal purpose of the maquiladoras was to employ all the unemployed people whoresided 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 cheapcost of labor, the lack of Mexican labor and environmental rules andregulations, and few duties (Maquilas 1). The United States tariff schedulesallow for the assembly of United States-made goods outside of the country andthen, the return of the final product to the United States with duty only paidon the value added to the good. There are two sections under the tariffschedules 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 thevalue of components made in the United States are not subject to duty whenfurther 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 andthe United States, but all over the country. The maquiladora can now sell aportion of the goods produced in the domestic market on payment of import dutiesand taxes on the imported materials (Maquila Overview 1). The maquila industrywould not be here today without foreign investment. Many foreign companies inthe United States, Japan, and Canada have taken advantage of cheap Mexican laborand the location of the Export Processing Zones and built manufacturingcompanies in Mexico. These companies are usually fully owned by foreigninvestors. These companies are probably the most successful part of Mexicoseconomy. The growth of this industry has been steadily increasing over theyears, generating more foreign exchange than oil or tourism (Maquila Overview2). Overall, the maquiladora industry seems to be a good way to increaseproductivity, employ the unemployed and create incentive for foreign investment.

However, varying opinions exist among economists and some see the maquilaindustry as problematic, and ultimately hindering to the overall development ofthe host country. Chapter 1, The Maquilas in Global Perspective states that thereformation of capitalism marks the next step in the relations of dominantpowers with Third World Countries. Capitalism is the separation of economy andstate. It is the social system in which the means of production are privatelyowned, and the economy is uncontrolled and unregulated, and all land is ownedprivately. Capitalism is a political/economic system that recognizes each andevery person as an individual with individual rights (Capitalism 1). The authorof chapter 1 argues that with the reformation of capitalism on a global scalewith help the Third World countries achieve substantial development that willhelp their people live better lives. Since the status of industrial countrieswere not achieved in the third world, they made goals for themselves that provedto be inefficient. The Third World mainly exported raw materials. The bigindustrial nations saw opportunity to invest in these countries and buildMaquilas in the export processing zones. The primary goal was to create jobs andgenerate lots of foreign exchange. These goals were the benefits of the hostcountry. The United States, being a global economic leader, saw opportunity toinvest. The main goal of American Trade Policy is to have one world marketwithout any trade barriers, discriminations or subsidies. The maquilas andforeign investment in the companies are the plans for the big economic leadersto create development in the third world. Do these investments help or hurtglobal capitalism? The maquilas role in the development of Mexico is beingseriously considered. Many argue that the existence of these productionzones does increase economic growth in that economic activity increases.

However, this growth is not necessarily development. The author of Chapter 1argues that with capitalism comes opportunities to sustain development. He lists6 factors that can determine the success of development: 1. Links: greaterbackward links, raw materials, and greater forward links, goods to US showsdevelopment 2. Keeping in foreign exchange 3. Upgrading of personnel 4.

Technology transfer 5. Good labor conditions 6. Fair distribution of costs andbenefits between foreign investors, population, and government. However, theauthor argues that the strongest capitalist effects can be seen near the borderof Mexico and the US. Larison and Skidmore argue that the big nations will notcontribute foreign direct investment unless they see maximum profit. The mainobjective of the Third World is to develop. Without the help from the industrialnations, this development would never take place. I believe that the developmentof the countries that host maqiladora factories are helped and hindered by thesecompanies. Even though the industrialized countries claim to be capitalist andrespect each individual, they are exploiting the Mexican people. The investorsare taking advantage of the cheap labor and the laz labor and environmental lawsin Mexico. They are essentially going back on their word and taking advantage ofthe Mexican people. The United States also would like to see all boarders openand free to trade. However, since Mexico is still not fully developed and stillmaintains a strong sense of Nationalism, they may need to keep someprojectionist policies in place. Essentially, the Unites States is using Mexicoas a middle-man. They are doing the hard part of the work, and we areenjoying their hard work and paying half the price that it would cost to producethese goods in the states. I think that everything has its limits and that theUnited States cannot fully call its intentions capitalistic until it changes itsways. The establishment of the Maquiladora industry by United States and othercountries was initially a good idea. What the Mexicans did not realize was thatthe United States saw an opportunity to take full advantage of their people andlaws. Even though many more Mexicans have jobs as maquila workers, they aremaking close to nothing and being exploited. I think the system on which we runis totally one-way, with only our best interest in mind. The development of theMexican maquila industry has definitely flourished, but then why has the economystayed the same? The economy in Mexico is still stagnated and not considered afully developed economy like that of the United States. The growth of themaquilas has stopped productivity by domestic producers. I think this industryhas not helped the development of the country as much as it might be able to inthe future if some policy reforms are made.

BibliographyAlvarez, 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 GlobalPerspective. Maquilas/Export Processing Zones. (2000). Maquila Overview. (2000) Economics

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Role of Maquiladora in the Country Development. (2018, Dec 03). Retrieved from https://graduateway.com/role-of-maquiladora-in-the-country-development/

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