Maquila Sector Has Worst Performance in 35 Years

  
The Mexican Solidarity Network (www.mexicosolidarity.org) reports that last year was by far the worst in the 35-year history of Mexico's maquiladora sector. Baja California suffered most of all: Nearly 62,000 jobs at the state's foreign-owned factories were eliminated, according to government statistics. This represented a 44% drop, compared to a 6.4% contraction in employment nationwide. The maquila sector lost more than 238,000 jobs in Mexico as a whole.

The group attributes the job loss to economic troubles in the United States, which imports some 90% of maquila production, as well as the strong peso. Some maquiladoras are reported to have shifted production to China, Malaysia, Thailand, Ecuador, Guatemala and Honduras, where wages are even lower than Mexico's legal minimum of 52 cents an hour.

By the end of 2001, overall maquiladora employment declined to about one million, the lowest level in four years, with nearly 350 factories closing down operations. Mexico's maquiladora production slipped 9.2%, a sharp contrast from the previous year, when production grew by 14.9%. Foreign investment - a total of $2.17 billion - was off by almost $1 billion from the previous year. In the last quarter of 2001, foreign investment in maquiladoras barely reached $500 million.

Baja California was hardest hit because of the state's concentration of consumer electronics and toy and recreational equipment manufacturers. Companies that left Baja California last year included ALPS, a large Japanese electronics manufacturer; Aldila, which shifted its golf club production to China; Saft, a French battery producer; and Kisho Electronics, a Korean television and computer circuit board maker that moved to the Philippines.

Maquiladoras were introduced to Mexico in 1965, when the government opened the first free trade zone, offering tax and tariff breaks to foreign companies that permitted them to manufacture goods for the US market. The industry experienced one of its most significant growth spurts after NAFTA went into effect in 1994.

Note: A strong peso is not an economic plus for Mexico. It forces jobs for the working poor out of the country and increases pressures on the US, as displaced workers in Mexico seek employment across the border. As China continues to expand its international presence through its membership in the WTO, these pressures will increase both in Mexico as well as other countries in the region. Trade will be less of a safety valve for the social ills of Central America, and as the US tightens up its immigration policies, the other safety valve of immigration and remittances will be reduced. This could add to social instability in the region. With no long-range work force improvement or new industrial policies, governments in the region might be betting too much on the FTAA and the Central American FTA.