What does "Maquiladora" mean?

From a legal / technical standpoint, a modern day maquiladora is a (primarily foreign-owned, as is the case with CaliBaja) manufacturing operation located within the country of Mexico (usually along the US-Mexico border) setup in a way that allows it to leverage the following legal framework:

 

  • Mexico's "special economic zone" legislation (i.e. the "maquiladora program") that provides a maquiladora with the ability to temporarily import (with the understanding that they will eventually be exported) items into Mexico without the payment of the taxes, tariffs, and duties that would otherwise be imposed.

  • Open trade partnerships between Mexico and the United States (such as the North American Free Trade Agreement (NAFTA)) that allow the goods produced in Mexico to be imported into the United States without the payment of the duties / tariffs that may otherwise be imposed.

From a functional standpoint, the aforementioned import/export benefits eliminate the financial burden frequently associated with foreign trade, which in turn allows the maquiladora to access Mexico's workforce (the primary benefit of manufacturing in Mexico). 

What does "Maquiladora" NOT mean?

The word "maquiladora" is NOT synonymous with "contract manufacturing" (a common source of confusion).  Just because a company is organized as a maquiladora, does NOT mean that they will produce products on behalf of anyone else.  As a matter of fact, the overwhelming majority of maquiladoras in Mexico are NOT contract manufacturers as they are subsidiaries of Fortune 500 companies who are not interested in manufacturing anything aside from their own products.

History of the Maquiladora Program:

The word "maquiladora" originated from the Spanish word maquila, which was the payment that millers collected for processing grain in colonial Mexico.  

 

The "maquiladora program" as we know it today was created out of the ashes of the Bracero Program, which provided temporary agricultural work for immigrants in the United States during the Second World War. When this program ended in 1964, it left thousands of people jobless. Although some small-scale manufacturing operations already existed in Mexico, the Maquila Decree of 1989 promoted extensive foreign investment in manufacturing. The Mexican government allowed duty-free, temporary, importation of equipment and materials, with the only provision added being that the finished products are shipped out of Mexico. Today, this provision has been repealed and finished goods can now be sold directly to the Mexican market.

Most maquiladoras have historically focused on labor-intensive processes such as final assembly and packaging. However, as a result of Mexico's steadfast commitment to higher education, many maquiladoras are now starting to incorporate Mexico's burgeoning availability of highly competent, formally trained, engineers into their strategic plans. 

The maquiladora industry has never stopped evolving and is still broadening its horizons, allowing the benefits of the system to be reaped by an ever expanding and diversifying clientele. However even in the face of all the change over the years, the one thing that brought foreign manufacturing to Mexico in the first place has remained the same; access to Mexico's workforce.

Maquiladora Statistics

The following are some statistics about the maquiladora industry in Mexico that speak volumes about the viability of manufacturing in Mexico:

  • There are currently over 3,000 maquiladoras in Mexico

  • The maquiladora industry is Mexico’s second largest contributer to its GNP Mexico has a labor force of around 45 million people

  • Maquiladoras provide jobs for over one million Mexican workers – i.e. approximately one out of every 45 people in the country are employed by a maquiladora

  • Over 50 billion USD worth of materials are imported into Mexico under the maquiladora program annually

  • Over 45% of Mexico’s 270 billion USD worth of exports come from maquiladoras

  • Over 75% of all of Mexico’s exports go to the United States

 

Corporations / Industries with Maquiladoras

The country of Mexico has spent the last 20 years transforming itself into a globally- competitive manufacturing location. Mexico’s country-wide dedication to the maquiladora industry has prompted a diverse list of major companies from around the world to move their production to Mexico.

  • Automobile Assembly – Ford Motor Company, General Motors, Hyundai, Honda, Toyota, Nissan, Volkswagen, Kenworth...
     

  • Automobile Parts – Mercedes Benz, Parker, Bosch, Delphi, Molex, Uniroyal, Bridgestone, Pilkington...

  • Aerospace – Honeywell, Lockheed Martin, Gulfstream, Bombardier Aerospace, Northrop Grumman, Cessna...
     

  • Consumer Electronics – Sony, Sanyo, Pioneer, Philips, JVC, Nokia, Alpine, AT&T, Yamaha, LG Electronics, Zenith...

  • Large Appliance – Bosch, Sony, Panasonic, Maytag, Hoover, Electrolux, Kohler, Bose, Samsung, Whirlpool, GE...
     

  • Food Processing – Cargill, Tyson, Kellogg’s, Gerber, Nestle, Pillsbury, Del Monte, Kraft, Coca-Cola...
     

  • Metal Working / Tools – Stanley, Black & Decker, Alstom, Bosch, Komatsu, Price Pfister, Dremel...
     

  • Chemical / Plastics – DOW, BASF, 3M, DuPont, Finacril, Plexco, Plasson, ExxonMobil, Praxair...
     

  • Textile / Apparel- Levi’s, Lee, Wrangler, Vanity Fair, Nautica, Warner’s, Sara Lee, Fruit Of The Loom...
     

  • Medical Equipment – Tyco, Arrow, Baxter, Johnson & Johnson, Kimberly- Clark, Cardinal Health...

All of the aforementioned companies (and thousands more) did their due diligence and determined that the quality, cost and availability of both specialized and general labor warranted moving their operations to Mexico. Don’t be left behind – call us today to see how CaliBaja can help you stay competitive by manufacturing in Mexico. 

Benefits of Manufacturing with a Maquiladora:

The omnipresence of fortune 500 corporations currently manufacturing their products in Mexico (either through a contract manufacturer or through a subsidiary) should attest to the economic viability of manufacturing in Mexico - simply pay attention to the country-of-origin marking on some of your favorite products and the point will be quite clear.

 

While the fiscal benefit of manufacturing in Mexico is immediately obvious / most quantifiable benefit, and generally the primary driver behind the decision to move manufacturing to Mexico, it is in no way shape or form the only reason to make the move.  The following is a short list of some of the other ancillary benefits of manufacturing with a maquiladora:

  • Scalability 

  • Short Lead Times 

  • Easy Oversight 

  • US-Based Supply Chain

Maquiladora Basics