Maquiladora

In Mexico, a maquiladora (Spanish pronunciation: [makilaˈðoɾa]) or maquila (IPA: [maˈkila]) is a manufacturing operation, where factories import certain material and equipment on a duty-free and tariff-free basis for assembly, processing, or manufacturing and then export the assembled, processed and/or manufactured products, sometimes back to the raw materials' country of origin. They are an example of special economic zones as seen in many countries.

In 1964, the Bracero Program, which allowed Mexican agricultural workers to work legally in the U.S. on a seasonal basis, came to an end. Less than a year after the end of the Bracero Program, the Mexican Government launched the Border Industrialization Program (BIP) or the Maquiladora Program, to solve the problem of rising unemployment along the border. The maquiladoras became attractive to US firms due to the availability of cheap labor, devaluations of the peso and favorable changes in US customs laws. In 1985, maquiladoras overtook tourism as the largest source of foreign exchange, and since 1996 they have been the second largest industry in Mexico behind the petroleum industry.

Following the 1994 North American Free Trade Agreement (NAFTA), the growth of maquila plants skyrocketed. During the five years before NAFTA, the maquila employment had grown at a rate of 47%; this figure increased to 86% in the next five years. The number of factories also increased dramatically. In the five years preceding NAFTA, 564 new plants opened; in the five years following, 1460 plants opened. However, the maquiladora growth is largely attributable to growth in US demand, and devaluation of the peso and not NAFTA itself. In the 1970s, most maquiladoras were located around the Mexico–United States border. By 1994, these were spread in the interior parts of the country, although the majority of the plants were still near the border. Recent research indicates that the maquiladora industry affects U.S. border city employment in service sectors.

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