Maquiladoras Case Study Essay

PRELIMINARY REMARKS Case Study three aims to describe and give an analytical overview of Mexico’s Maquiladoras. Eight academic articles were used to structure the case study. The body of literature includes four academic articles, one theoretical piece, one review of literature; all of which use secondary data, and two case studies use both primary and secondary data. Although I classify the zones under the term Hybrid-EPZs in my methodology, I will refer to them as they are referred in the literature, in this case as the Maquiladoras.

THE DEVELOPMENT OF THE MAQUILADORAS IN MEXICO According to scholars, the initial development of the maquiladoras emerged in the border regions of Mexico during the early sixties and has been growing and

Within one year alone, the maquiladora program expanded by 30%, opened 3,000 new factories and created approximately 1 million new jobs (Cooney, 2001, p.55). Scholars identify two significant factors that caused the growth in export-oriented industries during this period. The first, as identified by Toledo (2007), Cooney (2001) and Billes (2003), is the collapse of the Mexican peso in December of 1994 that precipitated the country’s worst economic crisis since the 1930s. The peso’s devaluation (the fall in the peso’s exchange rate) had several adverse impacts on the Mexican economy. During this period, Mexico experienced negative rates of growth, a wave of bankruptcies from its domestic manufacturing sector, staggering unemployment rates and a significant decline in real wages (Cooney, 2001, p.55). Both Cooney (2001) and Billes (2003) illustrate how the increasing rate of unemployment and the decline in real wages became significant incentives for foreign firms to relocate their production process to maquiladora plants in Mexico. The second important determining factor identified by scholars is the North American Free Trade Agreement (NAFTA). As Catanzarite and Myra (1993) explain, once NAFTA was instituted in 1994, maquiladora plants became highly attractive for U.S. companies due to the fact that there was little competition for wages and employment from Mexico’s domestic sectors (Catanzarite & Myra, 1993, p. 139). The contrast between the rapid growth in export-oriented industries with the decline of the Mexican economy is what Cooney (2001) argues that makes the development of the Maquiladoras in Mexico so unique and remarkable in comparison to other countries (Cooney, 2001,