Mexico Needed Strategies to Retain & Attract Maquiladoras
In the past, challenges on the Mexican side for competitiveness in retaining the maquiladoras in the country have included high business taxes, pricey highway tolls and the need for energy reforms (Canas, Coronado & Gilmer, 2004). Also, the cost of labor and services and international competition have thwarted the ability of Mexico to retain maquilas. In this paper we see how Mexico’s ways of doing business, how the government and other factors influence the retention or attractiveness of maquilas and what Mexico, as a country, could do/continue to do in order to place itself in a more competitive place.
In the early 2000s, the ...view middle of the document...
Mexico’s proximity to the United States allows a competitive edge that other maquiladora-model containing countries cannot surpass. The maquila model has been the “largest and most succeesful” export processing zone initiative in the region (SARGENT & MATTHEWS, N.D.). However, in today’s competitive world, enhancing all aspects of doing business places a market as more attractive, things such as “cutting manufacturing costs, modernization of production infrastructure and logistics, ongoing training of labor, regulatory and administrative simplification initiatives, trade liberalization” and legal certainty as well as alleviating tax burdens (“Tax Competitiveness of the Maquiladora Industry…”, 2012). In 2011, over 5,045 maquiladoras were operating, concentrated mostly in the United States- Mexico border states, up from about 1,920 maquilas in 1990. These maquilas employ close to two million employees (“Tax Competitiveness of the Maquiladora Industry…”, 2012).
One way Mexico can attract new or increase the retention of existing maquiladoras within the country is by focusing on high-technology plants, high-complexity plants that are attractive to a higher end customer (Canas, Coronado & Gilmer, 2004). Brands look for “a quality system with managerial support” as their brand is reflected in the quality of the product, reputation is impacted when quality standards are not met. Training employees and having managerial support from Mexico’s increasingly trained and reliable workforce further aid the retainment of foreign maquilas (Beck, 2012). Further, promoting productivity and more quality-filled processes increases the competitiveness of the company in the global market (“Tax Competitiveness of the Maquiladora Industry…”, 2012).
Referencing the proximity to the United States, a definite competitive advantage, Mexico can attract businesses that are responsive to volatile markets as import time would be less than if goods were sent overseas and then had to be shipped back. Aside from time, cost would be another incentive tied to this proximity, as costs for transporting goods is less. Today, according to Sargent and Matthews (n.d.), Mexico’s free export zone industry “is now composed of a mixture of labor intensive, low-tech assembly facilities, medium-tech manufacturing plans, and a significant number of firms utilizing advanced technology and capital intensive systems” for complex manufacturing and assembly.
Copied from: Canas, Coronado & Gilmer, 2004
In order for increased retention, the Mexican government needs to cooperate to assist the industry, to facilitate the rules and regulations. Furthermore, the government needs to provide “incentives for technology, job training and supplier development” (Canas, Coronado & Gilmer, 2004). According to Ralph Watkins of the U.S. International Trade Commission at the time of the aforementioned summit, Mexico has a competitive edge when there is a “high ratio of weight to...