COVID-19 Response

Maquiladoras on the rebound: Juarez and El Paso benefit

JuarezandElPasomanufacturingMaquiladoras in Mexico have a long history in different regions of the country, particularly for cities such as Ciudad Juarez. The maquiladora program was originally developed in Mexico in 1965 as a job-creation program, Robert Gilmer, Vice President in Charge of the El Paso Branch of the Federal Reserve Bank of Dallas, explains in a recent article in El Paso Inc article titled “Maquilas and El Paso Economy”; Although maquiladoras continue to be an important part of cities such as Juarez, they have evolved over the years to be part of an industry that combines technological innovation with Mexico’s thriving workforce.

                Manufacturing in Mexico changed after 2001 when three different events had near devastating effects on the industry: the United States went into a recession, China entered into the global manufacturing market and the September 11th attacks led to heightened border security. The weakened U.S. economy and tighter border regulations reduced Mexico’s biggest consumer (the United States), while China’s low-cost labor threatened to undermine the very foundation of Mexico’s maquiladora program: low wages. The recession hit the manufacturing industry particularly hard and led to prolonged declines.

Many of the manufacturing sectors that had Mexico’s lowest wages, such as textiles, apparel and toys, fell victim to this recession. However, as Robert Gilmer and Roberto Coronado, a Sr. economist at the Federal Reserve Bank of Dallas in El Paso explain, Mexico was able to adapt.  Rising fuel costs have meant that shipping large, bulky or fragile items across the ocean became prohibitively expensive, forcing some of those industries to nearshore their operations again. Mexico’s wealth of universities also allowed it to combine a well-trained and veteran workforce that was able to handle increasing technology demands. Finally, Mexico’s superior intellectual property control helped the maquiladora industry recover, gradually leading to a steady influx of higher-paying jobs.

One of the cities that has most been able to benefit from the resurgence of the maquiladora program is Ciudad Juarez due to many factors that make manufacturing there particularly desirable. First of all, the Northern city has three different public universities: the Instituto Tecnologico de Ciudad Juarez, the Universidad Autnoma de Ciudad Juarez and the Instituto de Estudios Superiores de Monterrey. These have helped establish a highly skilled group of workers and engineers that are able to staff the factories. As a result, Juarez has become home to over 300 maquiladoras that have formed highly specialized “clusters”, allowing them to achieve excellence in fields such as automobile manufacturing, medical devices and electronics and the aerospace industry. Although this new maquiladora model does not produce jobs at the same rates as the old model, the jobs are higher-paying and help provide some of the driving force that is fueling the expansion of the Mexican economy. Truly, the maquiladoras have been forced to evolve but have survived the changes of 2001 to come back in a different, more resilient form.

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