Mexico ; Foreign exchange ; North American Free Trade Agreement ; Trade

Lucinda Vargas

English

Research Papers in Economics

BUSINESS
ISSUE 3 – 1998
"In 1998
maquiladoras
have become
the number
one source
of  foreign
exchange for
Mexico as a
result of the
sharp decline
in the price
of oil and the
concomitant
drop in the
country's
oil revenues."
Maquiladora Plants
SOURCE OF PRIMARY DATA:   Instituto Nacional de Estadística,
Geografía e Informática.
Chart 1
0
500
1,000
1,500
2,000
2,500
3,000
1980 1981 1982 1983 1985 1984 1987 1986 1988 1989 1991 1990 1992 1993 1995 1996 1997 1994 Jan.–Sep.
1998
The Maquiladora
Industry in Historical
Perspective
(Part 1)
The maquiladora industry has grown
and evolved over its 33-year life span in
Mexico. Today it is one of the Mexican
economy’s most important sources of
job creation, exports and foreign-
exchange earnings. Maquiladoras have
also been a positive force in the
country’s regional and technological
development. This article, the first in a
two-part series, takes a historical look
at the maquiladora industry by evaluat-
ing the performance of its key indica-
tors. Part 2 will review the industry’s
historical performance by sector and
region.
Key Indicators
Tracking the performance of the
maquiladora industry’s key indicators
from the early 1980s through 1998, it is
evident this sector has progressed
substantially.
Plants
The number of maquiladora plants grew
from 578 in 1980 to 2,941 in the first
nine months of 1998, an increase of 409
percent (Chart 1).
Employment
Maquiladora employment reached
994,379 workers in January–September
1998, up almost 732 percent from
119,546 in 1980 (Chart 2). In 1980,
85.3 percent of maquiladora employees
were direct labor, 9.1 percent were
technicians and 5.6 percent were
administrative workers. By 1998, direct
labor’s share of total employment had
fallen to 81.1 percent, while that of
technicians and administrative workers
had risen to 11.7 percent and 7.2
percent, respectively (Chart 3). The
higher proportion of technicians re-
flects, to an extent, the advanced
EL PASO BRANCH                                         FEDERAL RESERVE BANK OF DALLAS2
Chart 2 Maquiladora Industry Employment
SOURCE OF PRIMARY DATA:   Instituto Nacional de Estadística, Geografía e Informática.
Maquiladora Industry Employment by Type of Worker
January–September  1998 1980
Maquiladora Industry Direct-Labor Employment,
Gender Distribution
Maquiladora Industry Contribution to Mexican Employment
1980 January–September  1998
SOURCE OF PRIMARY DATA:   Instituto Nacional de Estadística, Geografía e Informática.
Jan.–Sep.
1998
1980 1981 1982 1983 1985 1984 1987 1986 1988 1989 1991 1990 1992 1993 1995 1996 1997 1994 Jan.–Sep.
1998
0
200
400
600
800
1,000
Chart 3
Direct Labor
85.3 %
Technicians
9.1 %
Administrative
5.6 %
Direct Labor
81.1 %
Technicians
11.7 %
Administrative
7.2 %
Chart 4
Female
77.3 %
Male
22.7 %
Female
56.6 %
Male
43.4 %
1983 1985 1984 1987 1986 1988 1989 1991 1990 1992 1993 1995 1996 1997 1994
0
5
10
15
20
25 To formal employment
To manufacturing employment
Thousands of Workers
Percent
Chart 5
technological production pro-
cesses that now characterize the
industry. Moreover, the direct
labor employed by maquiladoras
is no longer strictly unskilled but
includes semiskilled and skilled
workers as well.
Women continue to constitute the
majority of the maquiladora
direct-labor workforce, but the
employment share of female
workers has fallen substantially.
More than 77 percent of the
industry’s direct-labor workers
were women in 1980, compared
with a little under 57 percent in
1998. (Chart 4).
The maquiladora industry’s
contribution to Mexico’s formal
and manufacturing employment
has increased, especially in
manufacturing. In 1983, the
industry provided just 2.2 percent
of Mexico’s formal employment
and 7.2 percent of its manufactur-
ing employment. By 1998, the
industry’s share in formal em-
ployment had risen to 7.6 percent
and its share of manufacturing
employment to almost 26 percent
(Chart 5). Undeniably, maqui-
ladoras have become increasingly
important to job creation in
Mexico. In fact, during the
country’s 1995 economic down-
turn, when gross domestic prod-
uct shrank more than 6 percent
and about a half-million jobs were3
Chart 6
SOURCE OF PRIMARY DATA:  Banco de México.
Value of Raw Materials Processed
by the Maquiladora Industry
SOURCE OF PRIMARY DATA:   Instituto Nacional de Estadística,
Geografía e Informática.
Maquiladora Industry Exports
1985 1984 1987 1986 1988 1989 1991 1990 1992 1993 1995 1996 1997 1994 1998
0
10
20
30
50
40
60
1980 1981 1982 1983 1985 1984 1987 1986 1988 1989 1991 1990 1992 1993 1995 1996 1997 1994 1998
0
5
10
15
20
25
30
35
40
Domestic raw materials
Imported raw materials
Billions of U.S. dollars
Billions of U.S. dollars
Chart 8
Maquiladora Industry Value Added
Chart 7
SOURCE OF PRIMARY DATA:   Instituto Nacional de Estadística,
Geografía e Informática.
NOTE:   1998 value is estimated.
NOTE:   1998 value is estimated.
NOTE:   1998 value is estimated.
lost, maquiladoras added more
than 65,200 jobs to the economy.
Raw Materials
The value of total raw materials
processed by the industry grew
from under $2 billion in 1980 to
an estimated $38.5 billion in
1998, an increase of over 2,000
percent (Chart 6).The share of
imported raw materials has
remained at around 98 percent
throughout 1980–98, while the
share of domestic raw materials
has stayed at 2 percent. The low
usage of domestic raw materials
should not be seen as an indica-
tion that maquiladoras are not
becoming more integrated with
the overall economy. A growing
number of Mexican companies
are providing the maquiladora
industry with direct and indirect
inputs. However, some—if not all
or at least the majority—of these
companies are organized as
maquiladoras themselves and may
be using imported raw materials
to produce the inputs they sell to
other maquiladoras. Domestic-
content statistics on raw materials
do not capture these inputs,
which are essentially produced by
Mexican companies. As a result,
the maquiladora industry’s use of
Mexican suppliers is underesti-
mated.
Value Added
Maquiladora industry value
added, under $1 billion in 1980, is
expected to reach an estimated
$10.6 billion in 1998, an increase
of almost 900 percent. As Chart 7
shows, though value-added
growth was positive overall
during 1980–98, it dropped in
1995. This does not indicate an
industry slowdown, however, as
positive growth in other indica-
tors show. Rather, the decline in
value added reflects the impact of
the December 1994 peso devalu-
ation on its dollar-denominated
value in 1995. In fact, when
measured in real pesos, value
added in 1995 rose 14.5 percent.
Exports
The maquiladora industry ex-
ported goods worth about $5
billion in 1984, the earliest year
0
2
4
6
8
10
12
Billions of U.S. dollars
1980 1981 1982 1983 1985 1984 1987 1986 1988 1989 1991 1990 1992 1993 1995 1996 1997 1994 1998
for which there are official statis-
tics for this indicator.  Maqui-
ladora exports in 1998 are ex-
pected to reach an estimated
$52.7 billion (Chart 8). The
industry’s consistent export
growth has positioned it as a key
sector in Mexico’s overall trade.
Maquiladora exports now consti-
tute 44.2 percent of all Mexican
exports, up from only 17 percent
in 1984. Moreover, their share inBusiness Frontier is a publication of the El Paso Branch of the Federal Reserve Bank of Dallas.
The views expressed are those of the author and do not necessarily reflect the positions of the
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Articles, or portions thereof, may be reprinted on the condition that the source is credited and a copy of
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Federal Reserve Bank of Dallas.
Chart 10
Top Foreign-Exchange Generators for Mexico
SOURCE OF PRIMARY DATA:  For the oil sector, data through 1987 is PEMEX; remaining oil
data are from Banco de México, Secretaría de Hacienda y Crédito Público and Instituto Nacional de
Estadística, Geografía e Informática.  Maquiladora and tourism data are from Banco de México.
1980 1981 1982 1983 1985 1984 1987 1986 1988 1989 1991 1990 1992 1993 1995 1996 1997 1994
-2.0
0
2
4
6
8
10
12
14
16
18
Jan.–Sep.
1998
Billions of U.S. dollars
manufacturing exports has been consistently high. In
fact, in 1991–94, maquiladoras produced more than
half of Mexico’s manufactured-goods exports. In 1995,
nonmaquiladora manufacturing exports rebounded
significantly as a result of the 1994 peso devaluation,
driving down maquiladora exports to their 1984 level
of 46.7 percent. However, due to the maquiladora
industry’s vibrancy since 1995 and a slower growing
nonmaquiladora sector, in 1998 maquiladora products
made up almost half (49.4 percent) of  Mexico’s
manufactured-goods exports (Chart 9).
The maquiladora industry’s prominent role in Mexican
trade has made it one of the country’s largest genera-
tors of foreign exchange. In the early 1980s the indus-
try surpassed tourism as the second-largest source of
foreign exchange, trailing only the oil sector. In 1998
—Lucinda Vargas
Senior Economist
Oil
Tourism
Maquiladora
Maquiladora Exports' Participation
in Mexico's Trade
SOURCE OF PRIMARY DATA:  Banco de México.
Chart 9
1985 1984 1987 1986 1988 1989 1990 1992 1993 1995 1996 1997 1994 Jan.–Sep.
1998
1991
15
20
30
35
40
45
50
55
25
Percent
Percent share of manufacturing exports Percent share of total exports
maquiladoras have become the number one source as a
result of the sharp decline in the price of oil and the
concomitant drop in Mexico’s oil revenues (Chart 10).

The maquiladora industry in historical perspective: part 1

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The maquiladora industry in historical perspective: part 1

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