What is a Maquiladora?

15 Jul 2014

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What is a Maquiladora?

A maquiladora identifies a legal entity in Mexico that manufactures goods in the country through a foreign company. A maquiladora, also known as maquila, has preferential tariff programs agreed on by the U.S. and Mexico. The Mexican government recognizes the benefits derived from foreign companies establishing manufacturing operations in the country and therefore extends certain tax and trade benefits to maquila operations. For example, manufacturing materials and equipment can enter into Mexico duty-free, while Mexican made products exported into the U.S. are at a lower tariff or free. To be eligible to capitalize on tax and trade benefits, Mexican legal entities must satisfy a number of conditions to be considered a maquila operation.


The Maquiladora Program

The Maquiladora Program was established in 1964 to enhance border employment and the border economy of Mexico and the U.S. The program is also meant to continue to attract foreign markets in conjunction with the National Border Industrialization Program - a program that encouraged foreign investment that helped stimulate Mexico's domestic market. In 1994, the Maquiladora Program changed under the North American Free Trade Agreement (NAFTA) and began to thrive with companies investing in Mexico for its high skilled labor, proximity, and low costs.