The Mexican Government and How Maquiladoras and NAFTA Affect It

MEXICAN GOV’T

The Mexican government and how maquiladoras and NAFTA affect it.

From the beginning of the maquiladoras program all foreign companies were located within 20 km of the Mexican border.
In 1996 35% of the maquiladors were located in the interior states of Mexico.
The wage for a new unskilled laborer is $2.30 an hour in a maquiladora.
US customers can save up to 75% on labor cost when operating in Mexico.
If a maquiladora wants to import an approved NAFTA good on a regular basis the company must pay a 10% tax on the value of the good.
Mexico and the US negotiated a tax treaty designed to avoid the double taxation of the maquiladora companies in Mexico.
There are currently 3,000 maquiladoras along the US-Mexican border, employing about one million Mexican workers.
In 1995, maquiladora workforce increased by 20% two years after NAFTA was implemented.

MEXICAN WORKERS

Mexican Workers

Estimated number of jobs is about 60 million according to the U.S. Labor Department.
A complaint filed by Human Rights Watch, report harassment of pregnant workers and pregnant applicants.
Mexico’s labor laws protect workers only after they have been hired.
3 minimum wages based on cost of living
$1.50 an hour is hourly compensation
Mexico city and few other areas offer $4 per hour minimum wage
half of maquiladora workers are home owners
service-sector jobs in hotels and restaurants tend to pay more than assembly jobs in maquiladoras
A majority of maquiladora workers make less than USD $6 a day which is 28.6% of what a family of four has to have to live.
One minimum wage salary in Matamoros only gives its workers 19.6% of what a family of four needs to survive.
It takes at least 4 workers to support a family of four people. In 15 of the cities in Mexico
200 of the women workers as young as 13 or 14 have been raped and murdered since 1993

MEXICAN ENVIRONMENT

The presence of maquiladoras combined with loosely enforced Mexican environmental laws and a lack of suitable waste storage and treatment, cause the border area to be among the most polluted in mexico.
In response to NAFTA competitive pressure, Mexico agribusiness used more fertilizers and other chemicals, costing $36 billion per year in pollution. Rural farmers expanded into marginal land, resulting in deforestation at a rate of 630,000 hectares per year.
Paso del Norte’s growth has had serious environmental consequences, particularly for air quality, which is the worst on the U.S.–Mexico border. Ciudad Juárez exceeds national ambient air quality standards (official norms) for ozone, carbon monoxide, and particulate matter less than 10 microns in diameter (PM10), and El Paso exceeds national ambient air quality standards for ozone, PM10, and carbon monoxide. An overwhelming body of evidence links such air pollution to respiratory and cardiovascular disease, and to premature mortality (U.S. EPA 1999). In addition, air pollution damages visibility, materials, and agriculture. Surveys show that Paso del Norte’s residents are more concerned about air pollution than any of the region’s other environmental problems.
For maquiladoras, the health damages (whether measured in number of cases or in dollars) from uncontrolled emissions are considerably higher than for controlled emissions. For the iron foundry, damages are approximately 17 times as high for uncontrolled emissions as for controlled emissions. For the chemical plant, they are approximately 50 times as high. This illustrates the adverse health affects of pollution from maquiladoras in Mexico as opposed to factories in the US, where environmental policy is much stricter.
Air pollution from maquiladoras has serious consequences for human health, including respiratory disease and premature death.
Many of the environmental concerns, particularly in the border region of Mexico, are attributed to Mexico’s economic development strategies and intense industrialization. The dense number of maquiladoras and the inability of Mexico’s environmental regulatory program to keep up with the rapid growth of the industry over the past quarter of a century have contributed to major environmental problems. Both the United States and Mexican governments claim to be committed to environmental protection, yet environmental policies have not always been enforced.[14] although the La Paz Agreement signed by Mexico and the United States in 1983 requires hazardous waste created by United States’ corporations to be transported back to the U.S. for disposal, some companies avoid paying disposal costs by dumping toxins and other waste into Mexico’s rivers or deserts. The United States Environmental Protection Agency reports that only 91 of the 600 maquiladoras located along the Texas-Mexico border have returned waste to the United States since 1987
Although NAFTA recognizes the need to prevent hazardous waste, Mexico’s waste imports have nearly doubled in recent years, and most of this waste comes from the United States.[16] In Mexico, some maquiladoras lack proper waste management facilities and the ability to clean up disposal sites, which is why some of the hazardous waste is illegally disposed of.[15] Environmental hazards associated with some maquiladoras include polluted rivers and contaminated
drinking water. According to the Southwest Consortium for Environmental Research and Policy (SCERP), all streams and rivers in the border region have suffered some amount of devastation as a consequence of the maquila industry.[17] Furthermore, the United States Geological Survey, the state of California, and the Imperial County Health Department have all asserted the New River, which flows from Mexicali near the border to the Salton Sea in California to be "the dirtiest river in America".[18] Ongoing exposure to toxic wastes can contribute to health problems such as cancer, skin disease, hepatitis, and birth defects. Furthermore, Mexico does not have any laws requiring industries to publicize basic environmental data on their operations, and so Mexico does not keep a very accurate inventory of hazardous waste.[15]
NAFTA's effect on Mexico's environment is becoming painfully obvious. The border region between the U.S. and Mexico has been hit particularly, due to intense industrialization associated with free trade zones and maquiladora industries. The border between Mexico and the United States is an impoverished area ranging some 1,933 miles with a width of 60 miles on each side. This area is also known for its poor drinking water, inadequate sewage treatment, mass squatter settlements with deplorable living conditions, exploding population rates, and rapid industrial expansion by industries whose air and water emissions are insufficiently monitored.
Access to water in maquiladora hotzones is limited due to both pollution put out by the factories and by the factories’ high water usage with little regard to monitoring, etc.
Cuidad Juarez, a US/Mexico border city, has the largest maquiladora labor force in Mexico, and also the country’s worst air pollution.
With the increasing industrialization as a result of NAFTA, the Mexican government struggles to even assess the environmental impact these corporations are having. Every day for example, untracked, unmonitored hazardous waste from maquiladora companies are dumped onto vast stretches of desert near the border cities. Likewise, there is rising concern regarding vast marine pollution and endangered marine resources caused by petroleum spills and wastes from oil operations off the coast of Mexico.
Some studies show that environmental concerns/planning play a relatively small role in maquiladora planning (essentially, corporations that manage maquiladoras pay little attention to environmental impact).
Due to the expansion of multinational corporations into Mexico from the U.S., there is a substantial increase in the transportation of goods across the border. Mass waves of trucks idling in traffic at international bridges and border crossings have led to substantial photochemical smog problems in Tijuana - San Diego and Ciudad Juarez - El Paso.
Opponents of NAFTA argue that if it is passed, capital investment will shift to Mexico where production costs are lower due to low wages and weak environmental standards. Should such shifts occur, Mexico’s already severe environmental problems would worsen. (In essence, they HAVE worsened).

CANADIAN GOV’T

The Canadian government had concerns with the economic aspect of the trade agreement. In 1999, Sun Belt Water Inc., an American asked for compensation claiming $105 million as a result of Canada's prohibition on the export of bulk water by marine tanker, a move that destroyed the Sun Belt business venture.

In 1996, the gasoline additive MMT was brought into Canada by an American company. At the time, the Canadian federal government banned the importation of the additive. The American company brought a claim and eventually under the ITA got the additive back into Canada and had comprised with America ending with the US paying 13million.

The United States and Canada have had a long standing dispute over the US wanting a 27% duty on Canadian lumber imports. The Prime minster had to step in (2006) and make a compromise, but it has yet to be ratified (due to domestic opposition).

In Canada, just like the maquiladoras in Mexico foreign investment has sky rocketed. Between 1983 and 1992, before NAFTA, the stock of FDI in Canada increased by $44 billion U.S. dollars. In the decade after NAFTA, between 1993 and 2002, the stock of FDI increased $202 billion, an increase of 354% over the decade before NAFTA.

In Canada, a decade of heightened competition with the United States is eroding social investment in public spending on education, health care, unemployment compensation, and a wide range of other public services.

In Canada, where NAFTA shaped a more competitive economy, those growing pains where cushioned by a strong social safety net that the US and Mexico don’t have.

More than 10,000 Canadian companies had been taken over by foreigners, and that 98% of all foreign direct investments in Canada were for foreign takeovers.[34]

Today Canada’sbusinesses are more export oriented they created more than 500,000 jobs in just the year 2003.

Canada was far better situated than Mexico to befit from free trade. They had a better educated middle class.

CANADIAN MNC’S

NAFTA has increased Canada’s trade with the U.S. t0 80% and doubled it with Mexico
Canada’s NAFTA exports have risen and been successful in high value products
NAFTA has improved access to the Mexican economy
Canada firms are actively involved in the transportation sector through the provision of consultation services in Mexico’s railways
Canadian MNC’s place maquiladoras in Mexico to save money on wages and transportation because there are no tariffs
5 years before NAFTA the U.S and Canada had their own free trade agreement in 1988. this cause major economic troubles for Canada results that one in five jobs were lost for Canadian citizens.
Canada has a social healthcare system wich makes it easier on companies and their social safty networks and improving competition of companies.

U.S. Gov’t

6. United States government (negotiations; economic indicators re: since NAFTA/maquiladoras and more)

NAFTA:

Gains for UnitedState’s Economy:

Lower priced consumer goods for the United States due to no import taxes for goods from Mexico/Canada
Increased corporate earnings
Thinly spread across United States
Export related job growth
Increasing trade
Doubling American agricultural exports to Mexico
Supports quality UnitedState’s jobs
Rising pay because they do not have to pay for import/export costs (NAFTA eliminates border tax cost)

Losses for UnitedState’s Economy:

Concentrated losses(in places like Midwest with large factories/ many lost jobs)
Manufacturing jobs have been lost to Mexico and Canada
Loss of health benefits (due to job loss)

Maquiladoras:

Gains for UnitedState’s Economy:

Affordable human labor from Mexicans, because UnitedState’s workers do NOT want medial tasks (i.e. slaughter houses)
Due to exchange rates, US’s corporations are able to pay Mexican workers less than US workers
Products are more affordable for US consumers

Losses for UnitedState’s Economy:

Jobs lost to Mexico

* Most losses occur in Mexico

U.S. MNC’s

U.S MNCs

U.S Multinational Corporations in Mexico: Coca-Cola, Google, Reebok, Nike

Why do U.S MNCs go to Mexico?

Mexican labor is inexpensive
Thanks to NAFTA, taxes and custom fees are nonexistent which benefits MNCs.
Environmental and safety regulations are lest stricter in Mexico
Minimum wage is only 49 pesos in Mexico.
Less Mexican crossing the border illegally

U.S. Workers

US reaction to maquiladoras

Manufacturing plants in Mid-West have moved to Mexico and Canada to save costs
By 2002, the department had certified that 408,000 workers qualified for extensions of unemployment benefits granted under the act for job losses attributable to employers' moving work south to Mexico.
NAFTA eliminated 766,030 actual and potential U.S. jobs between 1994 and 2000
More US jobs are lost to Mexican plants every year.