NovaLink Uses Maquiladoras in Mexico
The maquiladora model is the primary labor source for manufacturing production at NovaLink. A talented & educated worker population with a mean age of 26 years, the maquiladoras in Mexico have demonstrated the capacity to construct & create sophisticated products for our clients manufacturing in Mexico.
Operating under the maquiladora model has allowed Novalink to take advantage of numerous benefits such as a affordable labor pool, diverse client/product base and the benefit of using the cost savings to invest into innovations and features for customers and employees.
If you would like to know more about how your company can benefit for affordable labor in Mexico, click the graphic.
What Is a Maquiladora?
“Maquiladora” is a manufacturing solution created in the 1960’s to utilize preferential tariff agreements between the U.S. and Mexico & to encourage foreign investment in that country. Today, the Maquiladoras in Mexico are referred to as the IMMEX program (Industría Manufacturera Maquiladora y de Servicio de Exportación).
A Maquiladora in Mexico refers to a factory or plant that is based typically near the Mexico/U.S. border. The manufacturing operation is staffed by workers from Mexico, but is commonly owned & operated by a U.S. company (although other countries such as China, can also operate a Maquiladora in Mexico.) A Maquiladora allows factories to be largely duty free and tariff-free.
This approach has many benefits for businesses looking to outsource their manufacturing needs. These needs may be due to cost competitiveness or availability of labor to meet demand.
What Are the Benefits to Using the Maquiladora?
The benefits to a U.S.-based business relate primarily to the cost, quality and availability of labor, and the proximity to market. 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 essential 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?
The Maquiladora industry is currently benefiting from a revival of manufacturing in the Americas. 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.”