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What is a Maquiladora?

What is a Maquiladora?
A maquiladora refers to a company that operates in Mexico for the manufacture of certain goods. What differentiates it from the usual company setup is that this type of company is subject to special rules when it comes to the import and export of goods. Under Mexico’s “maquila program”, companies may import goods and equipment from other countries without being imposed the usual tariffs or taxes. This is allowed with the understanding that these goods and equipment will stay in Mexico on a temporary basis only. This means that the common practice of companies under this program is to export back the manufactured goods in Mexico to other countries, sometimes to the same source country of the raw materials imported.

The term “maquila” has roots from the practice of miller workers in Mexico who collects their share for being involved in the processing of various grains. Their share is called the “maquila”. The concept of “maquiladoras” in Mexico started back in the 1960s and has continued up to today because of the incentives offered for companies in terms of taxes and duties. Companies under the “maquila” program have become export-processing centers in Mexico. Because of the tariff-free importing of goods and equipment, various industries have been attracted to set their manufacturing plants in Mexico.

But maquiladoras are not restricted to Mexico anymore. This same concept is adapted by other countries in Central America with their own version of tax cuts and incentives for manufacturing plants that setup in their respective countries. But the proliferation of maquiladoras in Mexico and in other countries in Central America has led some people to criticize the whole system. Though these companies are a big help to the investment figures of the several countries involved, many have criticized the very low wages and long working hours for the employees under the maquila system.

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Posted by Erwin Z on Aug 6th, 2011 and filed under Business. You can follow any responses to this entry through the RSS 2.0. You can leave a response via following comment form or trackback to this entry from your site