Info on Maquilas

The Mexican Maquila Industry and the Environment; An Overview of the Issues

Dec 2002


The maquiladora in-bond industry is a key factor for Mexico’s economic development and dominates the economic activity in the region of its principal presence - the northern frontier states. For instance, in the 1993-98 period, the maquiladora exports accounted for 41.5% of the average Mexican export value (Dussel, 2000). As is the case for most industrial activity, the maquiladoras have received much negative attention in terms of their impact on the environment, which can be summarized in three factors: population, traffic and industrial activity (EPA, 2000). The complexity is accentuated by growth of population in the regions of Mexico bordering the United States: projected to double by 2020 from 10.6 million in 2000.

This report examines different aspects of the environmental performance of the maquiladora industry in northern Mexico. One of the greatest challenges faced was the scarcity of data. A special effort was made to gather scattered information to create a broad picture of the variables studied. A set of drivers of environmental performance is defined, and a set of environmental indicators is used to illustrate the maquiladoras’ performance. Specifically, this report aims at filling the gap in existing studies, by considering environmental productionrelated externalities (e.g. atmospheric emissions), indirect socialeconomic externalities (e.g. traffic and population pressure), regional resource constraints (e.g. short-and long term water supply), and by studying different maquila sectors as well as spatial aspects.

According to the research carried out for the present document, the main fields of environmental concern regarding the maquiladoras are direct externalities in terms of hazardous waste generation, and critically, indirect externalities in terms of water use. In this respect, the current transborder water crisis between Mexico and United States is a symptom of the problem in adequately addressing issues of natural resource management and industry policy on both sides of the border, for example the choice of location and high growth rate of the maquiladoras in northern Mexico and their impact on the region’s explosive population growth. These variables cause maquiladora-specific indirect environmental externalities that put long-term regional sustainability under pressure, especially in terms of water supply, and high maquiladora-induced traffic with associated emissions.

Regarding hazardous waste generation, in the 1996-1999 period a scale effect in increasing economic activity resulted in an increase in the waste tonnage returned to the United States (a proxy for waste generation). However, an additional composition and/or improved reporting effect was present, as more waste was returned than should have been induced by the increased economic activity per se. Baja California alone contributed a large part of this aggregate increase. This state, in some aspects, also received a higher share of environmental sanctions than explained solely by its larger waste tonnage.

By maquiladora sectors, the “electronic & electric” maquiladoras in the Mexican border states are more intensive in environmental capital 1 than is the “autoparts” maquiladora-sector (together with “apparel”, which is generally held to be relatively clean, these three make up the dominating maquiladora-sectors in terms of value added). In this respect, a previous study in Tijuana (Kopinak & García, 2000) suggests that part of Baja Californa’s performance is derived from a negative composition effect in terms of a structural shift to more environmentally intensive small scale electronics firms. During the 1993-2000 period, the number of inspections did not keep pace with the increasing quantity of maquiladoras, a fact that resulted in a diminishing share of these firms being inspected. A change in the policy variable is partly attributable, as inspection efforts were concentrated to serious violators.

In spite of the sometimes-harsh environmental critics against the maquiladoras, the report suggests that in aggregate terms, the maquiladora industry performs better than the nonmaquiladora industry with respect to direct environmental externalities. This is explained by the structure of sector-presence of the maquilas, with a bias towards industry sectors dedicated to transformation of intermediate goods, such as autoparts, rather than primary materials, such as metal foundries. Another determinant is the structure of industry-processes, with a bias towards natural resource extensive processes, such as assembling, rather than water- and pollution intensive processes, such as painting. Taken together, these technological characteristics are ultimately determined by, among others, international linkage and stakeholder pressure induced by location choice, technological vintage, as well as Mexico’s competitive advantage in low-cost labor capital endowments.