Maquiladoras, to put it simply, are low-wage factories that import materials tax free and export them back out again as a processed product. The word maquiladoras originated from the Spanish word maquilar, which means the payment a miller receives for grinding the corn of others (Sable, 1989). Hence, the business is aptly named; foreigners take their goods to be processed elsewhere, particularly in Mexico. It is not just in Mexico that this type of business is practiced in other poor countries are targeted by corporations because of lower wages.
Lower wages means the company saves a lot of money and is the primary reason why maquiladoras make sense, at least in a businessman’s perspective. Having low costs and high productivity rates is the dream of every businessman. It is a surefire way for a business to profit and grow. Using this perspective, we can say that the maquiladora system makes sense. Whoever came up with the maquiladora system is a genius; the system works because poor countries such as Mexico (the country where the system originated) have low wages.
Companies probably save millions of dollars each year by having their factories built in countries where wages are low. According to Made in Mexico Inc. (2008), “companies are expected to save on average, as much as 75% on labor costs” (n. p. ). The low wages would compensate for the construction of the factories. Duty free importation of materials also helps in compensating for the cost of construction. Due to the success of the maquiladoras in Mexico, other countries have also embraced this system, and are even threatening the top maquiladora producing country.
China appears to be the favorite in overtaking Mexico, among other eastern countries. Despite the success of the maquiladora system in Asian countries, they do not have the advantage of having close proximity between the host country and the producing country such as that of US and Mexico. Transportation costs are much lower within countries that are close to each other. Based on this “distance advantage” that the maquiladoras in Mexico have, implementing the system especially in Mexico makes lot of sense (again, from a businessman’s point of view). The maquiladora system makes a lot of sense.
It would be ludicrous to think that it does not. However, making sense is not just based on how much a company would save and how much it would profit. Yes, the maquiladora system is economically sensible, but over the years, its image has changed. The maquiladora system was first viewed as something that would help a poor country because it would generate more jobs, but since its noble beginnings, maquiladora factories have been regarded as slave factories because of the low wages, poor working conditions, and over-worked employees, among other factors.
A University of Mexico study shows that on average, maquiladora workers earn from $3. 50 to $5. 00 a day, barely enough to go through a day. In some factories, workers are exposed to hazardous chemicals and are forced to work overtime (Soriano, 1999). To generate jobs is half of the two major reasons why the marquiladora system is allowed. It is one of its selling points that made it very appealing to countries that accepted its conditions. The other reason is of course, company profitability.
Both these reasons make the system sensible because it appears to be a win-win situation; people get jobs, companies earn more. Despite the seemingly perfect set-up that the marquiladora system appears to be, things soon turned ugly and the latter reason turned out to be the only concern of most companies. It is still a sensible way of doing business, for anything that encourages more profit is sensible, but if making sense means exploiting other people, we are better off being non-sense people.
References
Sable, M. H. (1989). Las Maquiladoras: Assembly and Manufacturing plants in the United States-Mexico border: an International Guide. New York: Haworth Press. Made in Mexico, Inc. (2008). Maquiladoras: General Industry FAQ. Retrieved February 11, 2009 from http://www. madeinmexicoinc. com/FAQs. htm. Soriano, J. (1999, November 24). Globalization and the Maquiladoras. Mother Jones. Retrieved February 11, 2009 from: http://www. motherjones. com/news/special_reports/wto/soriano1. html.