Doing Business in the Maquiladoras:

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Doing Business in the Maquiladoras


A Shareholder Challenge


Introduction


In 165 the Mexican government developed a program to develop capital investments and to address high unemployment rates in the northern border towns of Mexico. The Mexican government was offering huge incentives for foreign firms to operate in Mexico. These firms could enjoy preferential tariffs and tax breaks. These tax breaks would be the beginning of a shareholders challenge. This would come to be known as the Maquiladoras (Post, Lawrence, & Weber, 1).


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What the Mexican government offered was preferential tariffs and tax breaks. This offer allowed foreign firms to import materials and semi-finished products into Mexico without paying tariffs. When the product was finished these firms could ship or export these products and only pay tariffs in the value added to the finished product. These incentives would allow the foreign firms to produce products in Mexico at the fraction of the cost in would take to produce good in other countries, especially the U.S.


The development project of Maquiladoras according to the Mexican government was a huge success. It estimates that in 1 the Maquiladoras project contributed $4.74 billion in value added worth to products manufactured or assembled in these factories (Post, Lawrence, & Weber, 1). It is this statement that brings huge debate as to the value added to the Mexican people and their communities. Some believe, as do the Coalition for Justice in the Maquiladoras, and this team Techies, that these benefits do not justify the costs incurred by Mexican people.


The Problem


In 10 the Coalition for Justice in the Maquiladoras, an organization of over 60 environmental, religious, community, labor women’s, and Latino organizations emerged to fight for the Mexican people. What they were fighting for was a better way of life for the Mexican people, a way of life that was supposed to be improved by the Maquiladoras project. What the creators of this project failed to realize was the negative impact to the Mexican people, the environment, and the communities. By 16 there were more the ,00 factories located around the Mexican border towns, half of these owned by U.S. corporations. These factories employed about 750,000 workers. This growth brought many problems.


While there were many moral and social issues initiated by the success of the Maquiladoras project we chose to concentrate on the impact to the environment and local communities. Because of the lack of environmental law and the lack of responsibility by foreign firms operating in Mexico, the Mexican people were incurring huge costs, costs to their environment and communities. Many of the corporations operating in Maquiladoras were not acting responsibly. There were no consequences for mishandling waste produced by these factories. According to an article written by Janet Jarman (18), many companies had been known to contaminate local ground water by discharging untreated industrial waste into local ground water. She also explains that 11 a National Toxics Campaign study found levels of xylene more then 6, 00 times above U.S. drinking water standards. The study also found methylene chloride (a suspected carcinogen) 15,000 times the US ambient water quality (Jarman, 18).


The cause


In their article Post, Lawrence, and Weber (1), Sister Susan Mika, president of the Coalition for Justice in the Maquiladoras, is quoted as saying, “Moral behavior knows no borders. What is wrong in the United States is wrong in Mexico, too.” The problem was that the environmental issues in Maquiladoras knew no boundries as well. In an article written by Janet Jarman (18), she writes that Cameron County, Texas officials reported that the probable cause for babies born with neural tube defects and spina bifida was the trans border air pollution from Matamoras industries.


The lack of funds for local communities infrastructure is also a huge problem. The corporations that were operating in Maquiladoras were not supporting the local communities. The communities were growing as a result of the factories. The community populations and employment rate was also growing. What was failing to grow with them was the city infrastructure to support the growth, this created serious health hazards and poor living conditions. Although 80% of Matamoras, Mexico (a city in the Maquiladoras) residents have access to water supplies, insufficient water pressure and lack of adequate treatment facilities add to the poor quality. Sewage is another problem that the city faces. The city has no means of treating sewage for its 500,000 residents. This poses huge health risks for its residents. Wastes pass through open drains as it exits the city to the Gulf of Mexico. Poor storm drainage makes this an extreme health hazard during floods; raw sewage rises to the surface creating pools of aguas negras or black water (Jarman, 18).


The result


As a result of the Maquiladoras, the environment and Mexican communities as suffered. As discussed above the result of the attack in the environment has also affected the U.S. as well. Cameron County residents will deal with this pollution for generations. People lives have been changed forever. This means forever for the children born with defects and the parents who must care for them. The local Mexican communities must deal with challenges of the Maquiladoras. The very thing that was supposed to improve their lives as only hurt them. With no way of supporting the Maquiladoras growth on their own communities they have no way to protect themselves, the community, and the environment.


Proposals


We see the only way to protect the Mexican People against the big Corporations is in invoke a responsibly tax. Those responsible for the growth of Maquiladoras should pay the responsibly tax. This requires a delicate balance. This tax must improve the communities that are hurt by it, but not drive off the corporations that benefit from it. Our proposal is a unique one. The responsibility tax would fund a trust account that would allow local communities to borrow against it. Each corporation that operates in a community has the responsibly to set aside funds to make infrastructure and environmental improvements. The corporation would take risks if they community failed to repay the loan, but also the chance to make interest on funds they did not lose. It would also be in the best interest of the corporations to provide resources to help community government officials make proper plans and resolutions to be successful. The responsibility from the Mexican government would be to subsidize 5% of the funds lost to bad loans; this would be in the form of a tax break on tariffs of exported goods. We feel that this proposal shows merit and allows the local communities to develop instead of taking a hand out. This would also improve the way of life for the communities of Maquiladoras.


Conclusion


We believe that the responsibility to Maquiladoras starts with the corporations who reside there. They have a responsibly to protect, support, the people, and the environment that they impact. We feel that the impact of social activist groups will continue to play a key role in improving environmental and community issues in Maquiladoras. These groups, through public awareness, will continue their campaigns.








References


Jarman, J. (18). Cleaning up free trade. Hemisphere A magazine of the americas, 8(), . Abstract retrieved March ,00, from EBSCOhost database.


Post, J.,Lawrence, A., & Weber, J. (1). Doing business on the maquiladoras A shareholder challange. In Contemporary business issues with readings (pp. -7). New York McGraw-Hills Primis.


References


Jarman, J. (18). Cleaning up free trade. Hemisphere A magazine of the americas, 8(), . Abstract retrieved March ,00, from EBSCOhost database.


Post, J.,Lawrence, A., & Weber, J. (1). Doing business on the maquiladoras A shareholder challange. In Contemporary business issues with readings (pp. -7). New York McGraw-Hills Primis.


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