The Migration of the Maquiladoras

By Simon Chandler

Jobs used to be so plentiful in Juarez that if a worker didn't like where she was working, she could simply find a new job the next day. And if she didn't like that new job, she could go and find something else the following day. Factories often had turnover rates of up to 80% per year as the city found itself awash with jobs. There was such a shortage of workers that children as young as 13 could work in the maquiladoras, using falsified birth certificates as a way to get hired. Companies would scour the whole of Mexico looking for employees. During the 1990s around six buses a day were arriving in Juarez full of already contracted workers from the southern state of Veracruz.

The maquiladoras in Juarez were such an employment magnet that in less than 40 years the population of the city had ballooned from around 200,000 people in 1965 to close to 2 million today. All that began to change towards the end of 2000. As Mexico entered the new millennium, Juarez had an historical high of 312 maquiladoras employing more than 265,000 workers. By the middle of 2003,142 of these factories, or 45%, had closed or moved away, shedding between 60 and 80,000 workers in the process.

The Mexican economy, and the maquiladora sector in particular, has always been very susceptible to the ebbs and flows of the US economy. So it was not a surprise when the downturn in the US economy towards the end of 2000 had an effect on its Mexican counterpart. Some analysts saw the downturn in the maquiladora sector as just a temporary blip, part of the cyclical nature of a free market economy. Others saw the situation differently. They saw the failure of an economic model where capital moves across national boundaries at will without taking into account the social and political implications.

The maquiladora program, or Border Industrialization Program (BIP) was established in 1965 during the administration of President Gustavo Diaz Ordaz. The objectives of the program were various. One was to stimulate the economies of the Border states in northern Mexico which for most of Mexico's history had been isolated, both politically, and economically, from the rest of Mexico. It was hoped that this stimulation would lead to a rise in the standard of living for those in the North and at the same time provide a market for domestic industry in the interior of Mexico.

A second objective of the maquiladora program was to provide employment for the thousands of unemployed Mexican workers who were returning from the US after the Bracero program was canceled in 1964. The Bracero program was established during World War II by the US government. It was a program to supply short term Mexican agricultural workers as contract laborers to meet labor shortages in the US during the war years, although it was subsequently extended after 1945. Although many of the Bracero workers were from the interior states of Mexico, when they returned to their homeland, they chose to remain in the Border area.

Since the late 1930s, Mexico had employed a Import-Substitution Industrialization (ISI) model as a way of building up the Mexican economy and lowering the dependence on imported products, both consumer and capital. This policy relied on state intervention in the form of higher tariffs on imported products, and subsidies to domestic producers. The maquiladora program was a radical departure from the ISI model. It was an economic program which allowed foreign-owned firms to operate along the US-Mexico border on a duty free basis. At the time of its establishment in 1965 however, the maquiladora initiative was not seen as an alternative model of industrialization, but as more of a migration or employment policy.

The way is worked was the following: US and other foreign owned companies were allowed to export material and components to Mexico, where they would be assembled by Mexican workers and re-exported, mostly to the US. The only tax would be on the 'value added', i.e. the labor. The incentive for the companies was the relatively low cost of Mexican labor, and the close proximity of the US consumer market, and various tax breaks given by the Mexican government. The first factories to relocate to Mexico were often labor intensive sectors such as the garment and textile industry. Over the years the production had diversified to include electronic, automotive, and other manufacturing.

By 1980 there were 620 maquiladoras operating along the US-Mexico border, employing approximately 120,000 people. The industry was beginning to generate significant foreign currency for the Mexican economy. In 1986 Mexico acceded to the General Agreement on Tariffs and Trade (GATT) which would later evolve into the World Trade Organization. One of the conditions of joining GATT was that Mexico would dismantle its ISI model and other forms of protectionism. These changes allowed maquiladoras to be established in other parts of the country and led to a further increase in maquiladora activity. By 1990 there were around 1,500 maquiladoras employing more than 400,000 people.

By this time the maquiladora industry had ceased to be merely a migration and employment program for Northern Mexico. It was beginning to transform and dominate the Mexican manufacturing sector. During ISI, approximately 40% of industrial production was concentrated in Mexico City. But by 1990 25% of industrial production was in the maquiladora industry which was almost exclusively located on the Northern border.

The greatest impulse to the maquiladora program however was the signing of the North American Free Trade Agreement (NAFTA) in 1994. This lead to maquiladoras being located in non-Border areas such as Jalisco, Yucatan, and Puebla. It also lead to the number of factories to rise to over 3,500 by 1999 and employment to reach approximately 1.2 million workers.

Has the maquiladora program been successful? It is difficult to evaluate the maquiladora program based on its original objectives since the initial situation has been transformed so much.In terms of stimulating industrial production in the Northern Borders, the maquiladora strategy was quite successful. By 1980 there were 500 maquiladoras employing about 175,000 workers. Another of the objectives of the maquiladoras was to employ the men returning from the Bracero program. Here, the maquiladora program failed miserably. In 1980, almost 80% of the people employed in the maquiladora industry were female.

By the 1980s however, the maquiladora program had transformed itself from a regional development strategy to a national economic model. Instead of just stimulating employment and industrial development on the Northern border, it now dominates industrial development throughout Mexico. By 1999 it's 3,500 plants were employing approximately 1.2 million workers. The maquiladora program has had enormous consequences for Mexico and especially the Border region.

In some ways its success has also been its failure. The maquiladora program lead to a mushrooming of the populations of the Border cities, most of which are located in fragile desert environments with very limited water resources. The exponential increase in the population has also put an enormous strain on the cities' infrastructure. There have not been the resources to cope with such a rapid influx of people. The poor squatter settlements that ring cities like Juarez are the consequence of the success of the maquiladoras. The neighborhoods where the workers live however are often located on the sides of mountains, in houses made of scrap wood and cardboard, and lacking in the most basic of services such as electricity, water, and drainage. Many people see the conditions that the workers live in and wonder what life must have been like in the places that they migrated from. They are surprised to learn that people have left communities where they have had their own houses with all the services, and with adequate schools, clinics, and parks. People have migrated from places such as Veracruz where they have everything but employment to places like Juarez where they have nothing but a job. There are simply not enough houses, schools, clinics, parks, roads for the burgeoning population.

Any resources that are available for infrastructure development are geared to the maquiladora industry. In Juarez the maquiladora industrial parks are connected to the international bridges by four lane highways, they have landscaped lawns, plentiful supplies of subsidized water, gas, and electricity.

As was mentioned above, the maquiladoras are exempt from many of the taxes that other businesses pay. In Juarez the maquiladoras agreed to pay a annual tax to the municipal government of $10 per worker per year. But this tax is voluntary. So there are times when the factories resist paying the taxes. The consequences of all this are that the municipal government, already facing severe challenges from an overstrained infrastructure and very low tax base, is not able to collect as much revenue as would be expected from such a dynamic sector of the economy. And any moves to increase taxes are met by threats to relocate to other regions or countries which are 'more competitive'.

As a model of industrial development, the maquiladora has been successful at creating jobs. But it has not really helped Mexico develop and strengthen its own economy. For most of their history, maquiladoras used very few raw materials or other inputs from Mexico in the production process, no more than 1.5%. It was estimated that if Mexico was able to provide 50% of the inputs into the maquiladora industry, that national exports would increase by $20 to $25 billion per year. They were also not allowed to sell any of the products that they produced. This requirement changed in 2000, but the overall effect has been to minimize any economic trickle down that may have occurred from the maquiladora industry to the rest of the Mexican economy. The fact that by 1999 the maquiladora sector accounted for 75% of the Mexican manufacturing sector reflects not only its massive growth but also a lack of foresight on the part of the Mexican government. There does not seem to have been a concerted effort to develop a complementary economic policy for national industry. It is not a sensible economic policy to over rely on an industry that is 100% dependent on another country's economic performance.

In 1980, 80% of the workers in the maquiladora industry were female. By 1999 this figure had declined to about 55%. One of the major social consequences of the maquiladora program were caused by the friction that comes about when a society where the man works and the women stays at home is completely turned on its head. Mexico, like all societies, has changed its attitudes towards women working over the years. But for the first 20 years of its existence, from 1965 to 1985, the vast majority of workers were women in a society that had traditional attitudes towards women's' roles. Male unemployment in Juarez remained relatively high, whilst females were often the main wage earner for the family.

A second related consequence comes from the question of Who is watching the children? In a society where it was uncommon for the women to be the primary wage earner, there has always been the support of the extended family to help out with childcare in situations when the women would work.The problem at the Border however, especially during the earlier years of migration, was that families tended to migrate not in their entirety, but as single adults, young couple, or young families. Because of the low wages and high living costs it is often necessary for both parents to be working. So for a young couple with children, without the support of the extended family, and with an almost total lack of child care options, who will watch the children? This becomes especially critical when amongst the shortage of infrastructure can be counted the almost total lack of day care facilities. It is not uncommon for children to find themselves locked in the house during the time that they are not in school whilst one or both parents are working. Many of the societal problems in Border cities such as Juarez, ranging from juvenile delinquency to drug addition to childhood obesity can be blamed on inadequate childcare.

A common criticism of the maquiladoras has been their standards, or lack of, for labor rights, including wages, and their environmental record. On paper, labor law and labor standards in Mexico are extremely high, and have been since the end of the Mexican revolution at the beginning of the 20th century. The problem has always been that the labor laws have not been enforced. There have been frequent and justified complaints about the maquiladoras lack of respect for labor law. Complaints include lack of safety in the factories, not receiving promised bonuses, workers getting fired for trying to organize unions, and illegal compulsory pregnancy tests for women. The Border area has historically had low levels of unionization, and of the unions that do exist, they are of the 'charro' type, often ineffective and corrupt because of their links to the former ruling party, the PRI. Attempts to form independent and effective unions have been hampered by harassment of the workers involved and the fear that any union activity will lead to firings. The current layoffs have increased the fears of any type of union organizing. Because of the fact that Mexican labor law was not being enforced, and due to the pressure of certain union sectors in the US and Mexico, NAFTA also included a labor side agreement called the North American Agreement on Labor Cooperation (NAALC).The NAALC can 'obligate' national governments to enforce their labor laws in situations when they are not doing so.

The low wages paid in the maquiladoras have also been a constant source of criticism towards the maquiladoras. The lower cost of labor is the only reason why maquiladoras locate in Mexico and it is estimated that when a factory relocates from the US it is saving on average $25,000 per worker per year.

Mexico has three minimum wage zones. The Northern border, Mexico City and Baja California, and the rest of the country. In 2003, the minimum wages on the Northern border was about 42 pesos per day, a little less than $4. According to the INEGI, 29% of workers earn between one and two minimum wages, 47.43% earn between 2 and 5 minimum wages, and 16.45% of workers earn more than 5 minimum wages. Workers usually start at minimum wage and then receive increases as they stay longer or rise up the ladder. The maquiladora industry often quotes the average wage as being between $3 and $4 per hour but this figure includes all bonuses such as punctuality bonuses, productivity bonuses, transportation bonuses, cafeteria bonuses. None of these bonuses are guaranteed, and some of them, such as the transportation and cafeteria bonuses are not transferable for cash. In the current economic crisis, many of these bonuses that workers had come to rely on were scaled back. One of the justifications for paying low wages in the maquiladoras is that the cost of living in Mexico is so much less than in the US. But a price comparison between food costs in El Paso and food costs in Juarez show that prices are pretty much comparable between the two cities and in some cases higher in Juarez. Despite criticism of the low wages in the maquiladoras, the companies argue that the wages that they pay are minimum wage or above and comparable with other sectors in Mexico. Whenever there is a move to form independent unions or to press for higher wages, the maquiladoras response is that any moves in that direction may cause them to relocate to other regions or countries where wages and costs are even lower. This, despite the fact that wages in Mexico has not increased in dollar terms since the 1980s due to the frequent devaluations of the Mexican peso. Despite all the arguments, it is hard for anybody who has spend even a small amount of time in some of the colonias that workers live, to argue that they do not deserve to get paid more money.

Another major criticism of the maquiladora is their lax environmental record. Until 2000, all US maquiladoras operating in Mexico were required to return any hazardous waste that they produced back to the US. Also, all maquiladoras are required to file compliance manifests on the proper disposal of hazardous waste. Like the labor laws, the problem was not with the laws themselves but with the enforcement. Toxic waste was often deposited directly into the drains,placed illegal dump sites, or passed on to third party recyclers. Since 2000, maquiladoras are able to leave hazardous waste in Mexico. Apart from the unscrupulous companies, maquiladoras that want to be responsible with the dumping of hazardous waste are often faced with the lack of treatment, storage, and disposal facilities. A factor again of massive industrial growth which infrastructure has not yet caught up with. As with labor laws, environmental standards in the maquiladora industry have not been excellent, but are similar to those found through out Mexico. Perhaps a more relevant point to bring up is the responsibility of an economic system that causes such phenomenal growth in an environment that is just not capable of supporting such a large population. And an economical model that does not provide for money to be generated to pay for necessary infrastructure improvements for water, paved roads, and sewerage.

Evaluating the success and failures of the maquiladora industry over the past 40 years gives us a unique insight into the long-term consequences of what has since become known as globalization. In 1965, most 'underdeveloped' countries pursued a policy of import substitution as a way of building up a strong national economy. This was a model that most industrialized countries had at used at some time with success, from England in the 1840s to Japan in the 1950s.

When the maquiladora program started in 1965, it was a regional development model. But since then, now known under many guises such as 'free trade','neo-liberalismo', or simply capitalism,the export-based model of economic development now dominates the underdeveloped world. It is an economic model that relies on exports to fuel economic growth. So Mexico focuses on manufactured products, Colombia on fresh cut flowers, Chile on fruits and vegetables, China on consumer goods. The World Bank and IMF strictly impose this regimen on any countries that hope to get a loan or any other economic aid. Basically, economic growth and development is dependent on the demands for goods, especially consumer goods, in the industrialized countries such as the US, Europe and Japan. An economy that is based on export is always at the mercy of the richer countries that buy those products. But it is one way to try to develop the economy. The maquiladora model, at least in the way that it was implemented in Mexico for most of its history, had so few local inputs that it has had a limited impact in developing the Mexican economy, since the only local input was labor. Also, the fact that the maquiladoras were unable to sell what they produced within Mexico often has effected negatively the choices and value available to Mexican consumers.

The maquiladora industry grew steadily since its establishment in 1965. But the really strong growth occurred in the years following the signing of the NAFTA agreement in 1994. NAFTA was an agreement which set out to create a free trade zone between Canada, the US, and Mexico. It allowed the free movement of good, services, and capital. But not labor. The European Union (EU), formerly known as the European Community, and before that the European Economic Community, has also established a free trade area. But with the major difference that labor is as free to move as goods, services, and capital. So, as it stands today, a person in Greece or Portugal can freely move to Germany or France to work, or study, or just live. Or vice-versa. Whilst there, the person can use all the health and social services that that country offers to its own citizens. Originally, the European Union was composed or 5 or 6 Western European countries. When nations such as Spain, Portugal, Ireland, and Greece applied to join the EU in the early 1970s there was quite an income disparity between the member countries and the applicants. So as part of the economic integration process, the richer countries provided grants to the poorer countries to allow them to develop infrastructure, invest in industry and education, and do other things that would help develop their economies. There were fears that with the free movement of labor that the population of Portugal and Greece would simply relocate to France or Germany where both wages and benefits we

re substantially higher than in their own countries. But that has not happened. The industrial development strategy has been quite successful and allowed the poorer countries to build stronger economies. Countries like Ireland and Spain have been experiencing economic growth like never before.

This is an important lesson. There is an underlying perception that if the US opened its southern border, the whole of Latin America would enter and swamp the country. But our experience here at Annunciation House, working with migrant sand refugees has taught us something. It has taught us that the decision to migrate to another country is not an easy one to make. To uproot one's life, leaving behind family, friends, and one's culture is a wrenching decision that most people would prefer not to have to make. Migration is caused by poverty, desperation, and oppression. A country that provides a standard of living where people have enough food to eat, are able to get healthcare and an education for themselves and their children, and where people do not fear their government, does not generally experience mass emigration. But it is this poverty, desperation, and oppression that causes thousands of people to cross the southern border of the US and has led to over 2,700 deaths over the past 10 years as migrants have

tried to enter the US. Mexico has an economy comparable in size to the state of Ohio. How hard would it have been to have included in NAFTA a component to allow Mexico to develop its economy and bring about some kind of economic stability to the country? How hard would it have been to provide supports to a Mexican agricultural system that is at the point of collapse and could see millions of people leaving the land in the next few years?

People look at Juarez and complain about the state of the roads, the schools, or the parks. But what can you expect when the minimum wage starts at 0.45c an hour? When any time the municipal government mention new taxes the maquiladoras threaten to take off? Where are the taxes going to come from?

There is the hopeful sense that the American public is beginning to make a connection with US foreign and economic policy, and the subsequent reactions to or effects of those policies. For example, anti-US feeling in the Middle East is increasingly recognized as a reaction to the US's need to secure and control oil supplies. Likewise, the constant waves of migration towards the US from Mexico and Central America are now seen as the direct consequences of US foreign and economic policy. Whether it be the 1 million Salvadorans who came to the US as a result of the US governments support for an oppressive government during the 1980s, or the millions of Mexicans who are losing their jobs in the agriculture sector as a result of free trade policies. These decisions have had and will continue to have very real repercussions for US society.

There is an increased realization that for there to be peace there needs to be justice, and that a move to fair trade rather than free trade would establish an environment where the basic fundamental human rights of access to jobs, education, and healthcare are respected. We also need to take into account the environmental impact of the current economic model. The Juarez/El Paso metropolis has a combined population of close to 3 million people and it situated in a fragile desert environment. The population continues to grow despite warnings that the aquifers that currently supply the cities may be exhausted within a generation. The planet simply cannot and will not support an economic model that is based on economic growth. At current rates the US economy is doubling twice every 20 years or so. That is twice the consumption, twice the pollution, twice the waste. Already the planet is faced with serious challenges due to climatic change. With countries such as China and India now rapidly expanding their economies, it does not take a genius to see that we have to build an economic system that is not only just but sustainable.

David C. Korten, in his book When Corporations Ruled the World, makes the point that the current economic system is not a natural phenomenon as some free market economists and politicians would have us to believe. It is a system that was shaped by laws and agreements to specifically benefit corporations, especially the giant multi-national corporations that currently dominate all aspects of our society. If, as citizens of our individual countries, as well as citizens of the world, do not agree with the current system, then we have a right and a responsibility to change it.