Maquiladora Industry in United States

In this paper I forget discuss the history and gives of the Maquiladora labor. I provide discuss its background, its problems, the benefits it offers to coupled States companies, and the relate the NAFTA has and lead start on the in patterry. In addition, I bequeath make a suggestion on a practicable st saygy the Maquiladoras force out adopt in bon ton to cost the challenges brought on by the NAFTA, to ensure it remains a tender force in the future.Mexi put forward inelegant perishers had been granted temporary spring up visas allowing them to work in the joined States agricultural industries through and through and through a course of study called the Bracero Program until 1965 when this program was terminated. As a result of this termination, the unemployment graze had elapseed 70% in true elude cities. In May of 1965 the B hallow industrialisation Program was open as a heir for the Bracero program. It was later renamed the Maquiladora Program.The program was open by the Mexi git g oernment to tolerate employment for Mexicos rapidly ontogenesis population on its frame with the United States. This program was utilized to keep Mexicans from come in the United States. The idea was that Mexican workers would be kept on the Mexican case of the border if they were given factory jobs on the Mexican side. The Maquiladora program overly cute to attract unusual manufacturing facilities, technology, and fill out-how by grownup a permanent tax pass to manufacturing companies that would set up play off plants on the Mexican side of the border.In the counterbalance of the program, all foreign-owned functions had to be determined in spite of appearance a 20-kilometer strip along the US-Mexican border. Since 1972 they can be located anywhere in Mexico. In 1996 in that respect were what ever so 2,500 Maquiladoras 35% of them were located in the intragroup states of Mexico. Last year there were over 3,000 and much and much of these operations argon being located outside of the border regions. Each of Mexicos 31 states has at least one Maquiladora.Maquiladoras, a bid referred to as in bond or twin plants, be allowed to temporarily substance into Mexico (free of tax) machinery, equipment, replacement parts, raw materials, and just about anything that was employ in the assembly or perform of semi-finished or finished products. Once assembled or manufactured, the Maquila products must be exported unless special allowance is obtained to sell a limited measuring rod of output in the Mexican market. When these products argon merchandise back to the United States, import duties ar levied on the foreign value-added only. If Maquila products plosive speech sound in Mexico, the ar subject to relevant Mexican duties.The largest issue surrounding the Maquiladora industry is the exploitation of cheap labor. The workings conditions argon often unsafe, workers be non make up adequately for their la bor, adjudicates to unionize are deter and sexual discrimination and harassment are too common.The conditions in and outside the Maquiladoras are terrible. Workers perform tasks such as conjoin without protective masks, leather gloves, or goggle (in galore(postnominal) a(prenominal) instances) and industrial accidents and toxic exposures are common. This, along with malnutrition caused by low salaries, acquire skin illnesses, cancer, irregularities in menstruation, abortions, tumors, intoxication and parturition of undernourished or disabled babies.Of the employees, galore(postnominal) are young girls and women ranging from the ages of 14 to 20. They work 6 days a week in 10-hour shifts. The amount weekly wages for a Maquiladora worker is US$35 $45 redden though the average monthly rent for a signboard with public services such as running water and electricity is nigh $200 a month.For the closely part, Maquiladoras are unorganized. In those that are organized, state -controlled unions be the workers. Although some companies are unionized on paper, the unions, for the most part, function to reinforce commission policies kinda than for the benefit of workers. Then there are what are called phantom unions. These unions do not fight for the workers rights. The workers do not even know them and nurture never seen their union hold upers. When a conflict arises in a factory, oversight informs the worker that their unions pick out accept these or those conditions. Not only are they not protected by existing unions, those that attempt to unionize and are often jeopardize or bribed by plant managers and the government.In legion(predicate) companies, discrimination against and harassment of the womanly employees is very common. Female job applicants are required to produce urine samples to be used for pregnancy test, while some perk up company doctors and nurses examine the applicants or ask confidential information concerning their prophylact ic device practices. This is strikee because pregnant women are refused employment. familiar harassment is often the rule rather than the exception. Rapes occur frequently and few are reported because women fear being fire or blacklisted. Shame and humiliation excessively keep them quiet. In Mexico, men and women are equal before the law of nature, but the law does not recognize discrimination as a problem to be solved.The taint Brought on by the MaquiladorasThe increased pollution, go with by the toss of tons of uncivilised wastes, poses a serious health menace to the nonmigratorys of Mexico as hearty as the resident of the bordering US states. There are some(prenominal) canals that are black with chemical wastes that have been measured at levels that greatly exceed permissible standards. bingle factory was caught dumping drums of paint, solvents, and shellac into a drain. In early(a)wise areas there are abandoned lead smelters and air full of soot and dust from br ick-making ovens and smoldering tire dumps.Main Advantages for the United States CompaniesFor the United States companies this was a great prefer since Maquiladoras operates at very low cost in places where the capital is weaker than the bucksuch as Mexico. The less a gold is worth, the more relative value the dollar has. Since Mexicos peso is relatively week, companies can trade their dollars for pesos with which they pay workers and expenses. The products they manufacture, however, are interchange for dollars, increasing their profits by huge margins whenever the local currency falls. They could enhance competitiveness, digest their costs, and maintain quality by placing their labour-intensive operations in the less positive Mexico, benefiting from the lower wage rates there.For many US companies, manufacturing in Mexico has become requisite to battle overseas competition. Since many manufacturers are moving to just-in-time inventory systems, the quick preservation poss ible from Mexicos border towns offers a substantial value over Asiatic alternatives.The NAFTAs Impact on the Maquiladora painsTraditionally, Maquiladoras offered foreign creasees several advantages over different forms of direct foreign enthronization. Since the signing of NAFTA, however, many of these advantages are either being phased-out or granted to all Mexican companies. The most significant advantages of operating as a Maquiladoras include century% foreign investing, operation without ownership of confirmings, tax sheltering of cost shopping centers, and light speed% duty-drawback or waivers for temporary imports. Furthermore, the NAFTA attempted to address the labor exploitation and environmental problems associated with the Maquiladora industry.One of the benefits of the Maquiladora program is 100% foreign investment of Mexican operations, which formerly was not allowed. However, Mexicos Foreign Investment Law has changed through the years (most significantly in 1989 and 1994)-full investment is now allowed in most business ventures.Operation Without Ownership of AssetsAnother advantage that Maquiladoras have is that they can receive take materials and capital goods as loans from their parent and lymph node companies. As a result, most Maquiladoras have little of no inventory of stock- quiet assets, eliminating the requisite to pay the Mexican asset tax of 2% of all assets. In January 1995, the Mexican IRS reported that Maquiladoras would now have to factor the depreciation of loaned assets in price- transit calculations, which is the first off step toward phasing-out this advantage by 2001.When Maquiladoras are structured as cost center (providing manufacturing services for a foreign parent) the foreign corporation has traditionally paid the Mexican company for operating costs plus negligible profit. By doing this they avoid Mexicos 34% corporate income tax, 10% authorisation profit sharing, and asset taxes. Now the Mexican IRS is ch anging the way Maquiladoras must aver assets. Over the next few years, Maquiladoras go away be forced to raise their stated profit percentage to a rate that is comparable to that of two unrelated companies playing the same transaction at encircles length. This is the type of transfer pricing procedure that is implemented by most trading blocks, like the EC. It will soon be effect end-to-end northbound America.100% Duty-Drawback or Waivers for impermanent ImportsMaquiladoras have always allowed Mexican companies 100% duty drawback or waivers in imported components that are exported as final goods. Since 1994, this has provided many Maquiladora programs a way to use non-NAFTA materials within products without the need to pay the corresponding duties over those materials when importing or exporting goods to other NAFTA nations. On January 1, 2001, Maquiladoras that manufacture goods for export to NAFTA collaborator countries will no longer be allowed to take the waiver. The wai ver will still be available for goods that are leaving to non-NAFTA countries.In 1995 the NAFTAs of Labor created the topic Administrative Office (NAO) as well as the North American accordance on Labor Cooperation (NAALC). Both were intend to stop labor abuses. The NOA was established to reminder labor complaints that NAFTA critics vocalization regarding unfair labor practices. The NAO can commend ministerial consultations as well as imposed heavy sanctions against Mexico. regrettably, the side agreements proved useless. The NOA cannot force Maquiladoras to allow unions-the most they can do is recommend ministerial consultations. inner harassment and discrimination continues as well.The NAFTA has also created side agreements covering the environment. One of them is the North American Development Bank (NAD Bank). Its purpose was to finance wastewater treatment projects along the border in the poorer communities. However, the most valuable criteria that needed to be met in o rder to receive funds were meeting certain market considerations. With this program NAFTA encouraged ripening without regard for the environment through its practice of placing market consideration above environmental protection. Another is the Commission for Economic Cooperation (CEC). The CEC was established to investigate governmental non-enforcement of environmental laws. Unfortunately it has no power to enforce ,they can only investigate-and they cant even do that until Mexico collects the data on the pollution for them.Possible Strategy for the Maquiladora IndustryAs long as the Mexican currency is weaker than the US dollar I dont think that the changes are sledding to dramatically effect the flow of US companies to the south. However, the Maquiladora industry cannot count on this for continue growth. By the year 2001 the Maquiladora industry as we know it now will have significantly changed when the phasing out is complete. Maquiladoras will no longer be tax break establish ments they will be just like other foreign investments.In order for them to fully compete in the cuddle future they must become more efficient and leaner. The impact of globalization is forcing manufacturers to produce more rapidly and cheaply than ever before and to continuously improve. Because there will be no differentiation in the midst of the non-Maquiladora and Maquiladora industries I feel the inefficient producers will be wiped out. Therefor, Maquiladora employees will need come apart training, education, incentives as well improved working conditions and higher wages. Operations will also have to be streamlined in order to reap the benefits of economies of scale and scope.In addition, Mexicans as well as US citizens will start to demand more accountability from the Mexican government and the Maquiladora industry. They need to be more responsible for their actions. What will the U.S. corporations do when human rights activists and environmentalists start lobbying and pro testing on their US sites? Do they want to take chances losing their shareholders to this type of negative attention?