Keller-Koch Realtors LLC- Maquiladoras

Keller-Koch Realtors LLC

Maquiladoras

Of the six busiest border cities in Texas, the most significant maquiladora activity occurs in the El Paso - Juarez area. According to Solunet, an El Paso firm that tracks maquiladora activity, Juarez is home to more than 350 maquiladora plants employing about 250,000 workers. More than 70,000 people are involved in automobile-related manufacturing and assembly activities alone.

The Maquiladora Program

The Mexican Government began the maquiladora program in the mid 1960's to increase employment along Mexico's northern border. The maquiladora program allows companies to incorporate on the Mexican side of the border, import components for assembly or manufacturing and export them to the US. Duties are paid only on the value added to those goods in Mexico. Tax regulations on Maquiladoras are undergoing constant change as they shift in status from special projects to regular Mexican companies.

The North American Free Trade Agreement (NAFTA)

NAFTA reduces tariffs on goods that originate in Canada, Mexico, and the US, when the goods are traded between those countries. NAFTA, enacted January 1, 1995, will be implemented over a 15 year period, with more goods becoming duty-free each year.

NAFTA 2001

Under NAFIFA regulations, the tax structure on goods from non-NAFTA countries is scheduled to change in 2001. Currently, the maquiladora program allows component parts from non-NAFTA countries to be taxed at the rate of the final product. In 2001, each part will carry its non-NAFTA tax. Example: Today, if a computer chip is imported from Japan and used in a computer made in Mexico, the chip is taxed at the rate of the finished computer - under NAFTA, this is or will be 0%. After 2001, each component in the computer not originating from a NAFTA country, including the chip, is taxed at its non-NAFTA importation rate. This will cause goods made outside of NAFTA countries to be more expensive than goods made in the US, Mexico, or Canada (tariffs range greatly, on many electronic parts they are are 16% or more). The end result is that many Asian and European companies are expected to establish facilities in NAFTA countries in the next few years.

Peso Devaluation

While severely hurting retail sales in the border region, the peso devaluation has been very good for manufacturing. In December 1994, the peso fell from 3.5 pesos to the dollar to 7. It is currently near 11.0 pesos to the dollar. Correspondingly, Mexican manufacturers have seen their labor bills cut drastically. Although Mexican labor is still more expensive than labor in some Asian countries, Mexico's higher productivity rates and proximity to the US boder are contributors for a continued increase in manufacturing.

Top Ten Materials Purchased by Maquiladoras:

Molded Plastics
Repair Supplies for Machines
Packing Materials
Electronic Components
Wire
Metal Stamping
Steel
Chemicals
Apparel Supplies
Wood Products

Site Map | Privacy Policy

Last Updated: