Maquiladoras in Mexico are used by NovaLink
NovaLink’s manufacturing production relies primarily on the maquiladora model. Featuring a skilled and educated workforce with an average age of 26 years, the maquiladoras in Mexico construct and create sophisticated products for our clients manufacturing in Mexico.
Novalink has benefited from operating under the maquiladora model in numerous ways, including an affordable labor pool, a diverse client/product base and the ability to invest the cost savings into innovation and features for the benefit of customers and employees.
If you would like to know more about how your company can benefit for affordable labor in Mexico, click the graphic.
The term “Maquiladora” refers to a manufacturing solution created in the 1960s to take advantage of preferential tariff agreements between the U.S. and Mexico & to encourage foreign investment in that country. Maquiladoras in Mexico are now referred to as IMMEX (Industría Manufacturera Maquiladora y de Servicio de Exportación).
A Maquiladora in Mexico is a factory or plant that is located near the Mexico/U.S. border. It is staffed by Mexican workers, but owned and operated by a U.S. company (although other countries, such as China, can also operate a Maquiladora). A Maquiladora allows manufacturers to operate duty-free and tariff-free.
Businesses outsourcing their manufacturing needs can benefit from this approach in many ways. These needs may result from cost competitiveness or the availability of labor to meet demand.
What Are the Benefits to Using the Maquiladora?
U.S.-based businesses benefit from low cost, quality, and availability of labor, as well as proximity to markets. Other benefits of operating through a Maquiladora include:
- Unlimited duty-free imports
- Unlimited foreign capital investment
- Limitless options for type or amount of product that can be manufactured
- Reduced manufacturing costs
- High-quality product
- Reduced transport time and cost (specifically in comparison to manufacturing in eastern countries)
According to the Wall Street Journal: “Mexico has remained consistent with costs and taxing, which allows companies to plan budgetary needs in advance and avoid any surprises that may set them back. It has also permitted U.S. companies to rely on Mexico as a manufacturing partner. As of 2015, 90% of Fortune 500 companies have investments in Mexico, making the maquiladora industry vital to the U.S. economy.”
What Role Does the Maquiladora Play in the Mexican Economy?
Maquiladoras are also vital to the Mexican economy. According to the Maquiladora Guide: Doing Business in Mexico, which was published by PriceWaterhouseCoopers, “Maquiladoras are the foundation on which Mexico’s GDP is built, and without their support the Mexican economy would suffer. Maquiladoras are responsible for more than 65 percent of the country’s manufacturing exports, and employ 80 percent of the manufacturing labor force.”
What Benefit Does the Maquiladora Provide for U.S. Manufacturing?
As a result of a manufacturing revival in the Americas, the Maquiladora industry is currently experiencing growth. According to a study by the Federal Reserve, “Whereas China benefitted tremendously when the country entered the World Trade Organization in 2001, today the pendulum is swinging back. China’s GDP climbed from approximately $2 trillion in 2005 to just under $11 trillion in 2015 and as the country grew wages nearly quintupled over the same time horizon, making China less competitive today. Trade agreements between the U.S. and Mexico, and Mexico’s reliance on maquiladoras have led to stable and consistent costs of labor, which are major benefitting factors for companies looking to outsource some or all of their manufacturing needs.”