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close this bookDiversity, Globalization, and the Ways of Nature (IDRC, 1995, 234 p.)
close this folder11. Latin America and the Caribbean: A history of environmental degradation
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View the documentThe maquiladora phenomenon

The maquiladora phenomenon

Maquiladoras are offshore plants that carry out part or all of the phases of an industrial process for the parent company. Customs duties charged by the country of origin of the industry are usually calculated only on the value added outside its borders. The host country (where the maquiladoras are located) extends free-port status to industries willing to invest. In most cases, this means that the host country does not charge duties (or charges only nominal amounts) on the raw materials, partly completed products, or merchandise related to the specific industrial process when they cross the border in either direction.

Carrying out industrial operations offshore under this system reduces costs of production for the entrepreneur. In appropriate situations, costs of labour, energy, water, raw materials, environmental expenditures, and taxes can be reduced by establishing maquiladora factories. This system is being used in various forms in several countries throughout the world, but the major growing maquiladora region is probably the United States - Mexico border area.

Development in the border region

The border between Mexico and the United States (Figure 4) extends for more than 1 500 kilometres through a territory of steppes and deserts where, traditionally, the population density was low. Historically, only limited settlement occurred in this zone because its climate is unsuitable for rainfed agriculture and surface water resources are too meagre for use in irrigated farming. Before 1900, except for Ciudad Juarez and Monterrey, there were only a few small towns scattered near the border area; their economic activity was-restricted to low-productivity agriculture, marginal animal production, and cross-border trade (both legal and illegal).

During the 20th century, economic and demographic growth in the border area was mainly related to increased traffic and commerce between the two countries, and to the development of irrigated farming projects on both sides of the border. On the Mexican side, the federal government supported drilling and groundwater pumping; on the US side, new water sources were developed by constructing an aqueduct system from neighbouring rivers. Coupled with the availability of inexpensive migrant labour and cheap land, these improvements allowed the development of a powerful farming industry.


Figure 4. Maquiladora country: the border region between Mexico and the United States.

Industrial development began in the 1950s in Monterrey and, in the 1970s and 1980s, in the remaining border areas as a consequence of the maquiladora phenomenon. From the outset, these factories had profound effects on the economy and demography of the border region. The populations of existing cities increased rapidly. “Sleepy towns” became large cities in a matter of a few years. The social and environmental impact of this growth continue today.

The metropolitan area of Tijuana, which had a population of 461 thousand in 1980, grew to 748 thousand by 1990 (Secretaria de Desarrollo Social 1993, p. 301). Nearby, Mexicali’s population increased from 511 to 602 thousand in the same period; Reynosa’s from 295 to 377 thousand; Matamoros’ from 239 to 303 thousand; and

Ciudad Juarez’s from 567 to 798 thousand. During the 1980s, the number of people in the whole urban border area increased from 2.8 to 3.8 million (Secretaria de Desarrollo Social 1993, pp. 197-198).

The evolution of the maquiladora phenomenon is illustrated in Table 7. In 1994, there were more than 2 500 factories providing jobs for 1 million people or about 15% of all those employed in industry in the country. In 1975, the total annual value added by the maquiladora industries was $332.4 million; this increased to more than $2.5 billion by early 1989 and, in 1994, it was expected to exceed $5 billion.

Tijuana contains the largest number of maquiladora plants; by 1992, 530 industries of this type were located there. Other cities near the Californian border also host a large number of factories Mexicali, 154; Tecate, 86; Ensenada, 33; and San Luis Colorado, 12. Along the Arizona-Sonora boundary, the main centre is Nogales, with 73 plants. On the Texas border, the main concentrations are in Matamoros, 94; Nuevo Laredo, 83; Reynosa, 71; and Monterrey, 70.

Table 7. Growth in maquiladora’s near the US - Mexico border.

Year

No. factories

No. workers

% of total industrial employment

1975

454

67214

4.2

1976

448

74496

4.5

1977

443

78433

4.8

1978

457

90704

5.0

1979

540

111365

5.7

1980

620

119546

5.4

1981

605

130923

5.3

1982

585

127048

5.4

1983

600

150867

7.6

1984

672

199864

9.7

1985

760

211969

-

1986

891

249833

-

1987

1125

305253

-

1988

1396

369489

-

1989

1631

427244

-

Source: CIDAC (1991,p.119).

Wages in Mexico are low: in 1992, they averaged $1.22 per hour, compared with $3.67 per hour in South Korea and $4.63 per hour in Taiwan. At the same time, average hourly wages in the United States and Canada exceeded $17 (Bettson 1993). This level of wage differential promotes the “migration” of labour-intensive industries to the inexpensive side of the border.

An additional factor promoting the installation of factories in Mexico is the absence of a powerful trade-union movement there. In effect, the main workers’ union, the Confederacion de Trabajadores de Mexico, is largely under the control of the governing party (Partido Revolucionario Institucional), making it difficult for industrial workers to organize strikes or press for better working conditions or pay.

In addition, rnaquiladoras tend to hire more women than men. In Mexico, women, who are at a social disadvantage, see the prospect of working in factories as “liberation” from a male-chauvinist society. Entrepreneurs take advantage of this situation. After some time, however, women become tired of the repetitive, nonthinking jobs and long hours. Trade-union movements have begun several times as workers struggle for higher wages, better working conditions, and shorter hours. In response, some companies have simply vacated their premises during a weekend and left the country. This “reduced responsibility” of employers in Mexico is an “advantage” that some industries are using to their benefit.

Environmental problems

According to the environmental report of Secretaria de Desarrollo Social (1993, p. 197), of the 1 929 maquiladora plants, only 206 (11%) had treatment systems. In addition, 1 094 plants (57%) emitted pollutants into the atmosphere; 1 254 (65%) of them did not have a system for reducing the contaminant content of their emissions. About 55% of the industrial plants (821) produce hazardous solid wastes. Of the 821 maquiladoras operating near the US-Mexico border that generate hazardous wastes, only 71% had reported these wastes by mid-1992.

Maquiladoras are a source of environmental problems for several reasons. First, environmental laws and controls in Mexico are much less strict than in the rest of North America, promoting the relocation of many industries that are looking to reduce costs (not only labour, but also environmental costs). Second, industries experiencing problems with occupational health and safety can expect related costs to decrease when then move south of the border. Finally, the excessive concentration and fast growth of the maquiladora cities make it difficult for the Mexican authorities to build or provide the required infrastructure and services (see box 8).

8. The ease of Ciudad Juarez

By late 1992, Ciudad Juarez, in the central border region, contained 330 maquilodoros, the second largest concentration in the country (after Tijuana). Because of these industries, the city grew from a medium-sized town of 400 thousand people in the 1970s to twice that number in the early 1990s. Many new suburban neighbourhoods developed, making it difficult for municipal and state authorities to provide essential services. The city is across the Rio Grande from El Paso, Texas, which is also a fast-growing city (with a population of more than 400 thousand).

Before the maquiladora revolution, Ciudad Juarez was known for fast divorces and inexpensive dental work. Today, many major US-based, Japanese, and other transnational companies - General Electric, Northern Telecom, Phillips, Toshiba, TDK, Honeywell, and RCA - have factories there.

According to Bettson (1993), the metropolitan area of El Paso is the seventh most polluted metropolitan area in the United States. Atmospheric data show high levels of ozone, sulphur dioxide, carbon monoxide, nitrous oxide, and lead.

The people who are most affected by environmental problems in the Juarez - El Paso region are those living in the new suburbs near the factories. Tuberculosis, hepatitis, skin diseases, gastrointestinal problems, miscarriages, and cancer are all unusually high in these areas compared with the rest of Mexico. Cases of anencephaly (babies born without a brain), normally a rare condition, have become frequent (163 cases in 4 years) and are attributed to exposure to toxic substances used in the maquiladoras (Bettson 1993).

The redistribution of economic roles

The maquiladora phenomenon is only one aspect of the effect on Mexico of the world redistribution of economic roles. Some Mexican industrial exports to the United States increased significantly between 1986 and 1989 (Table 8).

Most (over 60%) of the investment behind this industrial expansion, which to a large degree complemented the maquiladora phenomenon, originated in the United States. Other countries with interests in Mexico include the United Kingdom (contributing 6.7% of foreign investment in 1989), Germany (6.3%), Japan (5.3%), and Switzerland (4.4%) (CIDAC 1991, p. 165).

According to El Universal in Mexico City (Cortes 1993, p. 3), by mid-1993, the maquiladora sector had overtaken the petroleum sector as the main generator of foreign currency. The rate of increase in added value as a result of the maquiladoras had been 13% for the last 5 months (April to August 1993). During the same period, employment in the factories increased by 9%. By May 1993, the sector provided employment to almost 546 thousand workers. In Baja California alone, where there were 809 plants, inputs to the maquiladoras and exporting industries reached $2.7 billion in 1992. For the whole country, the value of inputs was $14 billion, representing a significant contribution to the Mexican economy.

Table 8. Rate of increase (%) in Mexico’s exports, 1986 to 1989.

Industry

1986

1987

1988

1989

Automobiles

343

151

7.4

16.1a

Machinery

52

40.7

14.8

-

Steel

85.3

42.1

20.5

-

Textiles

71

70.1

10.6

-

Source: CIDAC (1991, p.146). a To October.

Farming on both sides of the border

These economic trends had an important impact on farming in northern Mexico. California has traditionally been an important farming state. Recently, however, as a result of decreased availability and increased cost of water and labour and environmental restrictions, the state is importing more farm products from Mexico and other Latin American countries, such as Chile. Mexico’s exports of fruit to the United States increased by 20.1% in 1986, 30.5% in 1987, and 0.2% in 1988; vegetable exports grew by 22.4% in 1986, 20.2% in 1987, and 12.5% in 1988 (CIDAC 1991).

California has always been a fruit producing and exporting state. The fact that it is now importing some produce from Mexico is striking. The main reason for this trend is the lower cost of labour in Mexico, despite the much higher agricultural yields in the United States. From 1986 to 1988, comparative yields (tonnes per hectare) in the United States and Mexico, respectively, were as follows: potatoes, 33 613 and 13 000; tomatoes (industrial), 56 234 and 25 182; lettuce, 33 396 and 30 360 (Gomez Cruz et al. 1992, p. 52).

Productivity is also generally much lower in Mexico. The difference is particularly evident in the case of some basic grains. To produce 1 tonne of corn, Mexican farmers work 17.84 days, whereas US farmers require only 0.14 days (slightly more than 1 hour of work). Therefore, labour input for corn production is 127 times lower in the United States than in Mexico. Similarly, to produce I tonne of beans, it is necessary to work 50.60 days in Mexico, but only 0.60 days in the United States. Rice requires 33.14 days per tonne in Mexico and 0.23 days per tonne in the United States. Wheat production is less demanding in terms of labour 3.17 days per tonne in Mexico, 0.33 days per tonne in the United States, and only 0.13 days per tonne in Canada (Calve Tellez 1992, p. 27).

Despite the much lower costs for agricultural labour in Mexico, the large differences in productivity are reduced when the actual cost of grain production is calculated; production costs remain substantially higher in Mexico. Producing corn costs $258.62 per tonne in Mexico and only $92.74 per tonne in the United States; for beans, the costs are

$641.17 and $219.53 per tonne respectively. The costs of rice production are not substantially different ($224.20 per tonne in Mexico and $189.89 per tonne in the United States). Wheat production costs are much lower in Canada ($93.11 per tonne) than in the United States ($143.71 per tonne) and Mexico ($152.51 per tonne) (Calve Tellez 1992, p. 26).

The cost of producing animal feed is also higher in Mexico. For example, 1 tonne of sorghum costs $152.79 to produce in Mexico and $89.25 in the United States; 1 tonne of barley costs $222.09 in Mexico, $153.50 in the United States, and only $69.95 in Canada; and 1 tonne of soybeans costs $324.64 in Mexico and $184.26 in the United States (Calve Tellez 1992, p. 27).

These figures show that, at least for some crops, US farmers are in a more competitive position than their Mexican counterparts. For many labour- and water-intensive crops, however, depending on rainfall and demand, Mexican produce can be marketed at a lower cost than US products. This is the case for some irrigated crops, such as broccoli and asparagus, that are normally produced south of the border and sold in the United States. California’s growing scarcity of water is favouring Mexican encroachment into the US market.

In Mexico, pumping of deep groundwater for irrigation is promoted by farmers being charged for power at rates far below actual costs. These rates were introduced by the former president of Mexico, Lazaro Cardenas, in 1936. They were eliminated in 1992 by C. Salinas, but reintroduced later as a result of the serious financial problems that its removal produced among northern farmers.

Pumping costs increase as the level of the water table drops; therefore, the deeper the water level, the greater the subsidy to farmers. This policy contributes to overuse of aquifers beyond their capacities. In northern Mexico, there is a risk that some aquifers will be depleted and some others may deteriorate as saline or other low-quality water enters them. Inexpensive electricity and federal support for hydroelectric works are the framework on which agricultural expansion in northern Mexico is based.

In brief, farming is heavily subsidized by the federal governments on both sides of the border. In the United States, the price of water does not include the cost of the water systems that were built to reach otherwise dry, semi-desert regions. In Mexico, not only are the infrastructures financed by the government, but there is also an additional subsidy extended through artificially low rates for the electricity used for pumping water.

Again, as in other areas of the world, the border region between the United States and Mexico is developing rapidly, but based on very fragile environmental and social models. New and imaginative solutions must be found if this and similar areas are to enjoy a stable and prosperous future.