Issue 3, 1998
Federal Reserve Bank of Dallas
El Paso Branch

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 evaluating the performance of its key indicators. 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 reflects, to an extent, the advanced technological production processes 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 manufacturing employment. By 1998, the industry's share in formal employment had risen to 7.6 percent and its share of manufacturing employment to almost 26 percent (Chart 5). Undeniably, maquiladoras have become increasingly important to job creation in Mexico. In fact, during the country's 1995 economic down-turn, when gross domestic product shrank more than 6 percent and about a half-million jobs were lost, maquiladoras added more 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 stayed at 2 percent. The low usage of domestic raw materials should not be seen as an indication 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 underestimated.

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 indicators show. Rather, the decline in value added reflects the impact of the December 1994 peso devaluation 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 exported goods worth about $5 billion in 1984, the earliest year for which there are official statistics for this indicator. Maquiladora exports in 1998 are expected 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 constitute 44.2 percent of all Mexican exports, up from only 17 percent in 1984. Moreover, their share in 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 generators of foreign exchange. In the early 1980s the industry surpassed tourism as the second-largest source of foreign exchange, trailing only the oil sector. In 1998 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).

—Lucinda Vargas

About the Author Vargas is a senior economist at the El Paso Branch of the Federal Reserve Bank of Dallas. About Business Frontier Business Frontier is published by 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 Federal Reserve Bank of Dallas or the Federal Reserve System. Subscriptions are available free of charge. Please direct requests for subscriptions, back issues and address changes to the Public Affairs Department, El Paso Branch, Federal Reserve Bank of Dallas, 301 E. Main St., El Paso, TX 79901-1326; call 915-521-5235 or 915-521-5233; fax 915-521-5228; or subscribe via the Internet at www.dallasfed.org. Articles may be reprinted on the condition that the source is credited and a copy of the publication containing the reprinted material is provided to the Research Department, El Paso Branch, Federal Reserve Bank of Dallas.