Migration Dialogue
MIGRATION NEWS
Vol. 3, No. 2 February, 1996
Mexico ran a trade surplus of $7.4 billion in 1995, versus a deficit of $18.5 billion in 1994. Exports were $80 billion, including $67 billion of manufacturing goods, both from maquiladoras ($30 billion) and from Mexican-owned factories. Maquiladoras buy only about two percent of their components in Mexico.
Maquiladoras are foreign-operated assembly plants, most along the US border, that import components into Mexico, assemble them into products that range from televisions to auto parts, and re-export from Mexico the finished products--Mexican taxes are paid only on the value added by Mexican worker assembly activities.
The maquiladora sector expanded in 1995 while domestic manufacturing shrank, so that over 3,000 maquiladoras employed 743,000 workers at the end of 1995-- maquiladoras now provide about one-in-five Mexican manufacturing jobs.
The value of the finished products exported from Mexican maquiladoras was over $30 billion in 1995, or 34 percent of the total value of Mexican exports, second only to oil.
The US in 1994 made a net $3.3 billion in new investment in Mexico, including $2.4 billion in manufacturing. About 40 percent of the new 1994 manufacturing investment was in vehicles.
In response to US pressures, the US has taken three steps that have the effect of slowing the implementation of NAFTA--indefinitely postponing cross-border trucking, shifting to a weekly measure of Mexican tomato imports, and defining Florida winter vegetables as an "industry" so that growers there can more easily petition for relief from injury.
Mexico's GDP shrank seven percent in 1995, and inflation was 53 percent. Mexico denied rumors that it was going to raise its 15 percent value-added tax.
Borrowers of up to one-third of the loans made in Mexico are not paying interest on their loans. Mexico has a banking crisis--money was lent for buildings and other purposes that cannot be repaid, and the cost of rescuing the banks could be equivalent to 12 percent of Mexican GDP (the Savings and Loan crisis in the US cost about 3.5 percent of the GDP to clean up).
The Mexican government expects to phase out subsidies in 1996 that keep the price of tortillas at about 1.10 pesos per kilogram, or about seven US cents per pound. Mexicans eat about 10 million tons of corn tortillas each year, or about 200 pounds per person--these tortillas currently cost about $14 per year.
In December 1994, the US and 33 other western Hemisphere nations met in Miami for a Summit of the Americas that ended with a pledge to create a Free Trade Area of the Americas by 2005. Some 23 working groups have been established to implement the summit's goals.
There were year-end protests in several areas of Mexico, with some rural residents and members of the opposition Party of the Democratic Revolution (PRD) protesting several ruling Institutional Revolutionary Party (PRI) electoral victories in October, 1995. For example, on January 3, 1996, police evicted campesinos who had occupied the La Gloria ranch on the Pacific coast, arresting about 25 PRD members.
"John Maggs, "US to Press Mexico on Winter Vegetable Exports," Journal of Commerce, January 26, 1996; "Mexico's maquiladoras provide 742,700 jobs," Journal of Commerce, January 12, 1996; Mini-Rebellions in Mexican Villages and Mexico City," Weekly News Update On The Americas, December 31, 1995.