Maquila sunrise or sunset? Evolutions of regional production advantages

Abstract

The initial economic rationale for the border maquiladoras production sites appears to be waning. In particular, NAFTA and the rising cost of labor in the border area would seem to argue for such firms’ dispersion. However, the evolution of sectoral competitive advantages, which places a premium on proximity to both market and supply networks, in fact could produce a renewed retrenching of the pioneer border firms. A simple theoretical model provides a framework for understanding the interaction between geography and economics in the maquila industry context. Examination of quantitative and qualitative evidence based on this structure indicates that, even with the growth of interior plants, the border sites are thriving. Intensive border-zone production is likely to continue over the longer term, highlighting the need to better assess the environmental costs of such clustered activity.

Notes

1 Tel.: [phone].

1 His predecessor, López Portillo, also devalued the peso immediately prior to leaving office in 1982.

2 The current figure is 50% of the previous year’s production total. Source: NAFTA Facts Document #3008.

3 Source: INEGI (1999).

4 The data in this section were drawn from the Mexican economical statistics office, El Banco de Información Económica (BIE) del Instituto Nacional de Estadı́stica, Geografı́a e Informática (INEGI). INEGI distinguishes between the five “Border States” of Baja California, Sonora, Chihuahua, Coahuila, and Tamulipas; and other states, which are labeled as the “Rest of Mexico”.

5 The worker productivity index was calculated by dividing the regional maquilas’ annual earned revenues, in 1993 pesos, by the total number of employees (including line workers, technicians, and administrators) for that year.

6 By dividing the wage ratio for each region by its corresponding annual worker productivity from 1990 to 1996, the graphed wage to productivity index was calculated.

7 In addition to the sources cited, observations in this section were drawn from the co-author’s 1999 field work.