MAQUILADORA: CHARACTERISTICS, TYPES, ADVANTAGES AND DISADVANTAGES - DUDAS - 2025

A maquiladora is a manufacturing or factory operation that imports materials and / or equipment for the production of goods tax-free. These finished products are exported to other countries under an exclusive program that grants them exemption from taxes and other benefits.

The concept was created to encourage industrialization in northern Mexico, since these factories are generally located near the border. They are also known as maquilas or twin plants.

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The maquiladora emerged as a way to meet the growing global demand for low-cost production. With this, Mexico has had as its main objectives the transfer of technology, the creation of jobs and the generation of foreign exchange.

This concept offers tax and labor benefits to foreign companies that own a maquiladora. Although they are currently found throughout Latin America, Mexico is the headquarters of the vast majority of them.

It is generally exported to the United States, but recently the interest of China and other countries around the world has increased the ownership of maquiladoras in these regions.

Maquiladora characteristics

Provision

It is established so that the corporate company has its headquarters in the United States and the manufacturing operation is in Mexico.

Companies in the United States can send equipment and raw materials to factories in Mexico for assembly or processing, without having to pay import duties. The finished product is subsequently exported to the United States or also to a third country.

The foreign company is responsible for manufacturing know-how, controlling long-term goals and strategies. However, the management of daily operations and administrative tasks are managed by a management in Mexico.

Company rights

-Participation of foreign investment in the capital, and up to 100% in the administration, without the need for any special authorization.

-Receive exclusive treatment at customs, as it recognizes the tax-exempt importation of machinery and materials, as well as office equipment such as computers.

Production types

- The complete manufacture of a product, using raw materials from various countries, including Mexico.

- The assembly of different imported parts.

- Any reasonable combination of the different stages involved in manufacturing.

- Operations that are not industrial in nature, such as data processing, packaging and coupon sorting.

Where are the maquiladoras located?

Maquiladoras are located mainly in underdeveloped, developing and emerging countries. The reason is that they are economically desirable places for multinationals due to cheap labor.

The relocation of companies is not done randomly, but is adjusted to places where the cost of production, taxes and duties are reduced. Reason why they relocate their productive areas and take the figure of the maquiladoras in peripheral countries to achieve this end and continue in force in the globalized world.

Mexico

The Mexican border states that make up the border where the maquiladoras are located are: Chihuahua, Baja California, Nuevo León, Coahuila, Tamaulipas and Sonora, although they can also be found throughout Mexico.

On the other hand, a large number of maquiladoras are advantageously quite close to railways and shipping ports.

Types of maquiladoras

Industrial

A company carries out an industrial process of transformation of raw materials into finished products, or of assembly of products, destined for export.

Holding company

In the same maquila, the operation of a certified company is integrated, which acts as a controller for the Mexican manufacturing plant, together with the facilities of one or more affiliated companies. In this way, you do not have to register each subsidiary separately.

Outsourcing

It happens when a company is certified with its own legal entity in Mexico, but it does not have facilities to carry out the production processes, executing the manufacturing operation through subcontractors that it has registered in its maquila program.

Hostel

It results when one or several foreign companies supply the production material and technology to the maquiladora, without being directly operating in the program. That is, a third party provides "shelter" to other foreign companies that can operate without establishing a legal entity in Mexico.

Services

A service provider manages or executes services to the products that will eventually be exported, or provides export services only to promote certain activities.

Advantages and disadvantages

- Advantage

Tax free

Maquiladoras can import materials, production equipment and assembly components duty-free.

Enabled workforce

Mexico's workforce is growing and improving the technical skills required to make quality products.

Less labor costs

In recent years, maquiladora workers have received an average wage of $ 2.5 per hour. These wages represent savings ranging from $ 16 to $ 39 per hour paid for skilled labor in the US.

Low shipping costs

Mexico is adjacent to the US, which represents a great advantage over other countries. Thus, products made in Mexico can be delivered to US companies in a few hours, saving time and money on transportation costs.

- Disadvantages

Customs compliance

Due to special import / export handling, in addition to tax exemptions, the government requires maquiladoras to use technical software in order to scrutinize all exports and imports.

Accounting compliance

Accounting compliance is extremely important due to the reduction of tax obligations, so that foreign manufacturers can maintain their status and certification.

Changes in tax regulations

Starting in 2014, maquiladoras were hit by a tax reform law with a value added tax (VAT) on their imports. This VAT, which must be paid when the goods are imported, is subsequently credited with the export, creating cash flow problems.

Maquiladoras in Mexico

Maquiladora in Mexico

In Mexico's industrial sector, maquiladoras are second only to oil, producing clothing, household appliances, auto parts, and electronic devices.

Maquiladora program

In 1964, Mexico launched IMMEX (Industria Maquiladora de Servicios de Manufactura y Exportación), also known as the Maquiladora Program. Its goal was to attract foreign investment, create jobs, foster industrialization, and boost Mexico's economy, especially along the United States border.

The program is managed by Mexico and also by the US, providing fiscal incentives to non-Mexican companies to allocate financial resources to the country's labor and production.

During the first years of the program there were some 1,900 maquiladoras in Mexico with half a million workers. In 1995, the North American Free Trade Agreement spurred the growth of maquila plants, more than doubling these numbers in just a few years.

The expansion of the maquiladoras has greatly increased employment, especially along the border. Currently, 79% of the products manufactured in the country are sent to the United States, with maquiladoras responsible for 64% of Mexican exports.

References

1. Acrecent (2020). Maquiladoras in Mexico: Benefits and Challenges. Taken from: acrecent.com.
2. The City of San Diego (2020). Maquiladoras / Twin Plants. Taken from: sandiego.gov.
3. Tetakawi (2020). Quick Guide to Maquiladoras in Mexico: Definition and Benefits. Taken from: insights.tetakawi.com.
4. Will Kenton (2020). Maquiladora. Investopedia. Taken from: investopedia.com.
5. Ivemsa (2020). Maquiladoras: What You Need to Know. Taken from: ivemsa.com.