A maquiladora is an industrial plant that assembles imported components into products for export. It may be owned by foreign or domestic entities. The term derives from the Spanish word maquilar, "to process [flour, grain, oil, etc.] in exchange for a portion of the product." The Mexican government coined the term in the mid-1960s as part of its Border Industrialization Program, an effort to attract foreign investment and jobs to the northern border region. The initiation of the program led to foreign-owned factories establishing themselves along the border. United States firms-particularly in electronics, textiles, footwear, and toys, and later in auto parts-responded enthusiastically to the lure of cheap labor. By 1990 Mexico had more than 1,500 maquiladora plants with 400,000 workers, located primarily in the cities bordering the United States; these numbers were expected to nearly double by 1995. Maquiladoras became a major stimulus to growth in Texas border cities such as El Paso, Eagle Pass, Laredo, McAllen, and Brownsville, in terms of both retail trade and jobs from warehousing and distribution. In fact, during the Texas recession of the 1980s, the border cities were the most notable growth spots in the state. This fact in turn prompted additional efforts by the state government and border communities to capture manufacturing jobs to provide the components needed by the maquiladoras. Yet the maquiladora industry has been shrouded by controversy, from its early image as a fly-by-night sweatshop system that exploited powerless young Mexican women and left most of the unemployed former braceros and other male jobseekers unemployed, to its later image as a direct cause of job loss in United States manufacturing and a toxic contaminator of air and water along the Rio Grande.
Following the examples of Hong Kong, Taiwan, and other Asian countries that had successfully attracted United States assembly industry to their shores by offering tax breaks along with cheap labor, the Mexican government started the maquila industry as its own version of export processing. In the mid-1960s, soon after the United States dismantled the bracero program, which allowed Mexican laborers to work in United States agriculture, the Mexican government authorized private companies that located along the border to import quantities of parts free of duty as long as all those imports were exported in finished products. The establishment of the maquila industry never required special legislation by the United States. Rather, it took advantage of existing tariff regulations dating back to the 1930s that allow the reimport of assembled goods without paying duty on the United States components. By the mid-1980s the Mexican maquila industry had easily outstripped its Asian and Caribbean rivals to capture a larger share of the United States re-export industry than any other developing country. A major boost to this growth was the dramatic string of peso devaluations that began in 1982. While Mexican maquila wages averaged two dollars an hour in 1982 before the devaluation, they averaged $.67 an hour (plus fringe benefits of about 50 percent, for a total of one dollar per hour) in 1987, which was lower than Asian wages; by March 1988 the daily minimum wage was $3.57. Concomitantly, the number of maquila plants and workers nearly doubled in those years. The increasingly competitive world economy of the 1980s also drove many United States corporations to change the nature of their maquila operations. First-generation maquiladoras were set up to cut the cost of routine assembly by using cheap labor. In the late 1980s a second generation responded to the competitive pressures for quality and flexibility, as well as cost. As a result, up-to-date automation and new management practices were being introduced side-by-side with cheap labor. Second-generation maquiladoras, led by makers of auto parts, added more manufacturing (as opposed to pure assembly operations), computer-controlled machines, "just-in-time" inventory practices, advanced quality-control methods, and new shop-floor practices such as quality circles and job rotation. As a result, labor productivity in the maquiladoras in 1985 was more than three times greater than that in 1975.
Toward the end of the 1980s, the Japanese had begun moving some of their factories to Mexico in order to offset the yen revaluation and restrictions on imports and take advantage of the devaluation of the dollar. Studies indicated that the Japanese presence would be of benefit to Texas because of increased employment, both in the factories themselves and in the construction of facilities; by 1988 the construction of Japanese plants and warehouses in El Paso had produced more than 10,000 new jobs. By 1991 an estimated 100 Japanese firms had moved to border towns in Texas, New Mexico, Arizona, and California.
While the maquiladora industry was adapting to the changing global economy and its position in the late 1980s looked strong, there remained a worst-case scenario: (1) labor unrest in Mexico, stemming from the shrinking share of productivity gains going to maquiladora workers, and (2) possible protectionist backlash in the major market for the maquiladoras-the United States. Also in question was whether Texas might have lost its opportunity to develop a manufacturing base for supplying the maquiladoras, as these plants themselves have begun to manufacture some of their own inputs and buy a growing-albeit still small-share from Mexican manufacturers. One of the fastest growing areas of United States business expansion into Mexico, by 1990 the plants were assembling "everything from computer disks to cassette tapes to automobile windshield wiper blades," in the words of the regional general secretary of the Confederations of Mexican Workers. In the 1990s the maquiladora industry was undergoing a change of increased capital investment resulting in such products as engine manufacturing from block casting to tool and die work and final assembly. A significant question for the future of this exciting, yet controversial, international concept is whether a transition is (or can be) underway from exploitation of cheap labor to high technology manufacturing.