Maquiladora (Twin Plants)

Overview

Maquiladora, also known as Twin Plants, are manufacturing operations located in Mexico, primarily near the U.S.-Mexico border. These factories take advantage of duty-free and tariff-free mechanisms to import raw materials and equipment for the purpose of assembly, processing, or manufacturing. Once the products are fully or semi-assembled, they are usually re-exported primarily to the United States. Maquiladoras take advantage of lower wages and beneficial trade policies to process inexpensive goods which plays a considerable role in cross-border economic activities.

Examples

Electronics Manufacturing Plants: Factories like those operated by companies such as Foxconn, where components for consumer electronics, computers, and other gadgets are assembled and then shipped to the U.S. and other global markets.
Automotive Parts Assembly: Many car manufacturers have maquiladora operations where automobile parts are assembled or manufactured. Companies like General Motors and Ford leverage these facilities to produce components that are integrated into vehicles sold globally.
Textile and Apparel Factories: Numerous firms in the textile and clothing industries establish maquiladoras to take advantage of the lower labor costs in Mexico. Apparel is assembled and often sent back to the U.S. and other international buyers.

Frequently Asked Questions (FAQs)

What is the primary advantage of using a maquiladora?

Maquiladoras provide significant cost advantages for companies due to lower labor costs in Mexico and reduced tariffs and duties under trade agreements like NAFTA (now USMCA). Companies can also benefit from shorter supply chains and reduced transportation costs due to their proximity to the U.S.

Are maquiladoras only located near the U.S.-Mexico border?

While many maquiladoras are located near the U.S.-Mexico border due to logistical benefits, they can be found throughout Mexico. Key Mexican border cities like Tijuana, Juarez, and Reynosa are prominent locations for these manufacturing operations.

Can any company set up a maquiladora in Mexico?

Technically, any company can establish a maquiladora, but they must comply with Mexican laws and regulatory requirements, including permits and adherence to labor laws. Partnering with local expertise and governments is also essential for a successful operation.

NAFTA (North American Free Trade Agreement): A former trade agreement between Canada, the U.S., and Mexico that facilitated trade by reducing tariffs and other trade barriers. It has since been replaced by the United States-Mexico-Canada Agreement (USMCA).
Duty-Free: The import of products by maquiladoras that are exempt from paying customs duties.
Export Processing Zone (EPZ): Specific areas within countries where the imported machinery, goods, or raw materials are processed, and the finished products are re-exported without the need for an export license.
Shelter Company: Firms that help foreign companies establish maquiladoras by providing administrative and operational solutions.

Online Resources

References

Sargent, J., and Matthews, L. (2006). “The rise and fall of maquiladora industry: Mexico’s cross-border factories”.
Kimberly, N., and Kimberly, B. (2015). “Maquiladoras: The view from inside”. University of Texas Press.

Suggested Books for Further Studies

“Border Boom Town. Ciudad Juarez since 1848” by Oscar Martínez.
“Labor Rights and Multinational Production” by Layna Mosley.
“Maquila Women: Gender, Transnationalism, and Globalization” by Leslie Salzinger.

Quizzes

Real Estate Basics: Maquiladora Fundamentals Quiz

### Where are most maquiladoras typically located? - [x] Near the U.S.-Mexico border - [ ] In the heart of the United States - [ ] In Canada - [ ] Throughout South America > **Explanation:** Most maquiladoras are strategically situated near the U.S.-Mexico border to facilitate easy import and export between the two countries. ### Which trade agreement heavily impacted maquiladoras by reducing tariffs? - [x] NAFTA - [ ] CAFTA - [ ] MERCOSUR - [ ] European Union Trade Agreement > **Explanation:** The North American Free Trade Agreement (NAFTA) played a crucial role by reducing tariffs and other trade barriers, thus promoting the maquiladora industry. ### What is a primary reason companies choose to operate maquiladoras? - [ ] Superior engineering talent - [x] Lower labor costs - [ ] Higher quality materials - [ ] Access to European markets > **Explanation:** One of the main attractions for companies is the significantly lower labor costs available in Mexico, making manufacturing operations more cost-effective. ### What happens to the products manufactured in a maquiladora? - [ ] They are sold locally in Mexico. - [x] They are primarily re-exported to the United States. - [ ] They are used solely for company records. - [ ] They are freely distributed in Canada. > **Explanation:** Products assembled or manufactured in maquiladoras are primarily re-exported to the United States, leveraging the reduced tariffs and trade barriers. ### What regulatory changes do maquiladoras benefit from? - [ ] Enhanced local taxes - [ ] Restrictions on employment - [x] Reduced tariffs and duties - [ ] Additional environmental regulations > **Explanation:** Maquiladoras benefit significantly from reduced tariffs and duties on imported raw materials and equipment. ### Which item is most likely NOT produced in maquiladoras? - [ ] Electronics - [ ] Automotive parts - [x] Perishable foods - [ ] Textiles > **Explanation:** Maquiladoras are less likely to be involved in the production of perishable foods due to the inherent challenges in maintaining quality and logistical complexities. ### What does a shelter company do for maquiladora operators? - [x] Provides administrative and operational support - [ ] Acquires raw materials - [ ] Market and sell finished products - [ ] Provide internal housing for workers > **Explanation:** Shelter companies offer essential administrative and operational support to foreign companies setting up maquiladoras, making it easier to navigate regulatory and operational challenges. ### How can maquiladoras benefit the local Mexican economy? - [ ] By reducing environmental regulations - [x] By creating jobs and economic growth - [ ] By importing more American products - [ ] None of the above > **Explanation:** Maquiladoras generate numerous jobs and stimulate economic growth in the regions where they operate, substantially benefiting the local Mexican economy. ### What type of manufacturing typically occurs in maquiladoras? - [ ] Artistic craftsmanship - [ ] Military equipment - [x] Assembly of electronics and automotive parts - [ ] Financial services > **Explanation:** The typical manufacturing activities in maquiladoras involve assembling electronics, automotive parts, textiles, and similar goods. ### What sets apart a maquiladora from a regular factory? - [ ] It produces completely different products. - [ ] It operates under significantly different labor laws. - [x] It imports raw materials duty-free for re-export. - [ ] It is primarily government-owned. > **Explanation:** The distinctive feature of a maquiladora is its ability to import raw materials and equipment duty-free for assembly or manufacturing and then re-export the finished products typically back to the United States.