Maquiladora Basics


What is a Maquiladora?

The word maquiladora originated from the Spanish word maquila, which was the payment that millers collected for processing grain in colonial Mexico. A current day maquiladora is a factory or assembly facility that takes advantage of the open trade partnerships between Mexico and the United States. Due to treaties such as the North American Free Trade Agreement, maquiladoras can import material and equipment across the border of Mexico and the United States without the payment of duties or tariffs. This allows foreign corporations the ability to save millions of dollars annually by utilizing Mexico’s inexpensive labor market for many of their manufacturing needs. Mexican maquiladora’s can be completely foreign-owned, and usually focus primarily on labor-intensive processes such as assembly. Most maquiladora’s are located right along the United States-Mexico border, although some of the larger more specialized facilities have begin to branch out throughout the rest of Mexico.

History of the Maquiladora System:

The maquiladora system 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 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 Today, this provision has been repealed and finished goods can now be sold directly to the Mexican market.

The maquiladora industry has never stopped evolving and is still broadening it’s 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; inexpensive labor.

Benefits of Manufacturing in a Maquiladora:

The omnipresence of fortune 500 corporations currently manufacturing in Mexico under the maquiladora system should attest to the economic viability of manufacturing in Mexico. The fiscal benefits of outsourcing manufacturing operations to Mexico stem from a combination of diverse advantages:

 

  • Low labor costs
  • Incentive programs – NAFTA
  • Quick startup – can range between 90 days to one week
  • We take care of all government permits, taxes, and documentation you will need to manufacture your product in Mexico.
  • We take care of all the importation and exportation of your raw materials and finished products.
  • You can choose the level of involvement in the manufacturing process that will best benefit your business; either hands-on shelter manufacturing or a more detached contract manufacturing scenario.