MAQUILADORAS & DRUG TRAFFICKING IN MEXICAN

BORDER TOWNS

Melanie Sarkissian Phillip Zeller

Austeja VidugiryteMicah MalandAlex Pickett

Presenters:

Outline

General background of border towns in Mexico

Economic impact of maquiladoras Social impact of maquiladoras and drug

trafficking Economic impact of drug trafficking Impact of maquiladoras and drug

trafficking on the Mexican economy as a whole

Mexican Economy

Population ~ 111,211,789 GDP is $1,473 billion (2009) GDP by sector (2007 est.)

agriculture: 4% industry: 26.6% services: 69.5%

Export-oriented economy More than 90% of Mexican trade is under

free trade agreements with more than 40 countries

Chihuahua State

Chihuahua State

Chihuahua State

Largest state in Mexico Population ~ 3.2 million Represents 4.5% of Mexico's total GDP

(29,826 million USD) Strong focus on export oriented

manufacturing (maquiladoras) 329,939 people are employed in the

manufacturing sector (2005)

Juarez

The 1848 Treaty of Guadalupe Hidalgo established the Rio Grande as the border between Mexico and the US

Located in the Chihuahuan desert Population ~ 1.5 million Average annual growth rate from 1990-

2000 of 5.3% 15 of Mexico's largest banks

Juarez

Over 135,000 workers working at more than 320 maquila-related plants

Exports: electronic circuits, leather goods, textiles, printing machinery, medical supplies, automobile engines, etc.

Overall, represents one third of Mexico's exports to the U.S.

Ciudad Juarez & El Paso, Texas

Juárez El Paso population ~ 2 million

Largest border community

Expanding population of more than 5% a year

4 international ports of entry connecting Juarez to El Paso, Texas

Major point of entry and transportation for Mexico

Government--Mexico The PRI (Institutional Revolutionary Party)

held power in Mexico since 1929 1977--- electoral reforms 2000 --- Vicente Fox (PAN) elected

• 2006 --- Felipe Calderon (PAN)• Calderon made abating drug- trafficking one of the top priorities of his administration

Government--Chihuahua

Current governor is Jose Reyes Baeza

9 federal deputies 3 federal senators Hard for the

Juarez government to keep up with required services, leading to more crime

Urbanization Juarez is one of the fastest

growing in Mexico Immigration Investments in

maquiladoras From 1980 to 2000,

Ciudad Juarez's population grew by almost 1,000,000

People in search of better employment opportunities and higher standards of living

Large areas of slum housing

Maquiladoras

1960s---the Border Industrialization Program started promoting maquiladoras

1994---North American Free Trade Agreement (NAFTA)

• Favorable conditions for foreign capital • Factories now use more sophisticated production techniques and require more skilled labor

Maquiladoras & Employment

Before maquiladoras, border towns had highest unemployment rates in the country

Maquiladoras have become the leading industry in Ciudad Juárez

60% of all jobs in 2000 87% of the city's manufacturing jobs Majority of those employed are single

young women migrating from others states Many men in border states resent the

increasing presence of working females in public areas

ECONOMIC IMPACTS OF MAQUILADORA

INDUSTRY ON MEXICO’S BORDER TOWNS

Maquiladora Background

Factories on U.S. – Mexico Border

U.S. Inputs Cheap Mexican

Labor Shipped back to

West (i.e. USA)

NAFTA Background

NAFTA signed 1994 Opened trade

barriers Maquiladora growth

attributed to NAFTA Agreement led to

easier trade

Theory

Maquiladoras be mutually benefit border Increase in exports Decrease in labor cost for importer

Capitalizing upon competitive advantages => efficiency

The Downfall of Maquiladora Style Liberalizatoin

Sharp growth in maquiladoras during the 1990s proved unsustainable After October 2002, there was a 21%

unemployment increase in the maquiladora industry.

Sluggish growth wreaked havoc on border-town economies, as their success was often tied to exports of maquiladora created goods.

Intended Result of Maquiladoras

The program was meant to establish and foster trade and investment in cities along the border. Maquiladoras viewed as de facto subordinates

of the U.S. economy Most goods are intended to be sold to the U.S.

and other developed Western economies

Theoretical Basis

Industrialized nations should experience an increase in income inequality through trade liberalization

This is purely a function of trade liberalization increasing returns to capital and decreasing returns to labor This is experienced because industrialized

nations are generally capital abundant as compared to labor

Theoretical Basis – Cont’d

On the flipside, in less industrialized countries, where there is labor abundance and relatively low levels of capital we see a different story

Increasing returns to labor due to liberalization

Decreasing returns to capital experienced by liberalization decreases income inequality

Impact on local level

Multinational corporations that participate in foreign direct investment typically pay higher wages than local companies

Foreign direct investment by multinationals often leads to an increase in wages for skilled workers versus unskilled workers, leading to income inequality

Effect of Maquiladora Industry

Plan

ts

Empl

oym

ent

(thou

sand

s)

Impo

rted

Raw M

ater

ials (B

illio

ns)

Domes

tic M

ater

ials

(Bill

ions

)

Tota

l Raw

Mat

eria

ls (B

illio

ns)

Value

add

ed (b

illio

ns)

Expo

rts (b

illio

ns)

3590

1285

54 2 55 18 79

3270

1122

43 1 44 12 60

Year 2000 Year1999

Social Impact of Maquiladoras and Drug

Trafficking on Chihuahua State

Murders in Chihuahua State

Over 400 killed since 1993 Mainly in the city of Juarez but has spread

to around the state Most women are Maquiladora workers Women activist movements have deemed

it “femicide:” the mass murder of women simply because they are women

A bigger problem:

It is not just about these women being killed It is an economic, social and cultural problem “The men who are doing this have political

and economic power and know that nothing will happen to them for doing these things.”

Alma Gomez - lawyer representing victims’ families co-founder Justicia Para Nuestras Hijas

“From corruption and drug trafficking to the foreign owned companies, these menhave no regards for these women’s lives.”

Lucha Castro – lawyer representing victims’ families co-founder Justicia Para Nuestras Hijas

Description of Murders

Most women have been found with similar murder descriptions:

- Raped (sometimes by numerous men) - Tortured in various ways - Strangled or stabbed - Bodies discarded in the desert

Families Reaction

Until 2005 there was a 72 hour mandatory waiting period after the report was filed until the start of the investigation

Most victims’ families are poor with little influence over authorities to investigate the crimes

Many have started grouping together and creating marches, singing songs and painting pink crosses around the community as the official symbol

Many family members who cause too much of a stir have been found killed themselves

Symbol representing murders in Juarez

Maquiladoras

70 percent of maquiladora workers are women

Majority of women are abducted on their way home for maquiladoras

Some companies provide busses home but only at certain hours and drop off points are far from homes

Maquiladoras Conditions

Very poor working conditions: No protective devices No unions Psychological abuse from line manger Inhalation of fumes – no ventilation 16 hour days High injury rate without medical attention

Who is responsible?

Investigators believe many of the killings are done by men associated with drug cartels

Some are done to “celebrate” a successful run

"Sometimes, when you cross a shipment of drugs to the United States, adrenaline is so high that you want to celebrate by killing women.”

Former drug cartel member

Who is responsible?

Some believe it is a combination of people who just have no regard for women’s lives:

- Drug cartel members - Police Officers - Serial Killers - Copy-cats

Drug Cartels

The size of the Mexican drug trade is estimated to be at least $30 billion US a year

Juarez has become a potent symbol for Mexico’s escalating drug wars

The ongoing drug gang warfare in Juarez leads to more than 500 killings a year

American’s Influence

Estimates say 90 percent of drugs that pass through Mexico go to the US Approximately 65% of all cocaine smuggled in

the US enters via Mexico

Police Involvement

Officials believe at least 20 officers in Chihuahua state and Juarez police departments double as enforcers and traffickers for the Juarez drug cartel

2005 reports released by a Federal Prosecutor appointed by the Mexico’s President confirms police involvement

Some police officers are bribed by drug traffickers Drug cartels spend about 10% of their gross

yearly income (over US $3 billion) on bribes

Police Involvement

Although Mexico has signed international anti-torture laws they do not follow them

Police try to find men, arrest them and torture them until they confess to the crimes

Once they find someone to blame, even if unjust, they consider the case closed and the investigation finished

The Battle

“Whether justice can be found in Ciudad Juarez has

become an important test of Mexico's efforts to establish a rule of law, human rights

and law enforcement.”Mexican authorities

ECONOMIC IMPACT OF DRUG TRAFFICKING

Rise of Mexican Cartels

US Prohibition Columbia’s Diminished Role in Drug

Smuggling Demise of Columbian Cartels, Medellin

and Cali 1989: Closing Trafficking Route in Florida

Mexican Cartels

7 Cartels: 3 Major Gulf Cartel (21 States)

Eastern US-Mexico Border, down the gulf coast

Simaloa (17 States) Juarez (13 States)

Smuggle cocaine down Western part of border

Alliances

Tiajuana and Gulf “Federation”

Simaloa Juarez Valencia

Operations

Mexican Cartels - wholesale distribution Street Gangs - retailing Utilize approximately 200,000-300,000 employees Some involved in transportation, security, banking, and

communications industries

Statistics

70% of cocaine, 30% of heroin, 80% of marijuana enter the US through Mexico (US State Department)

Earn $27-$30 billion in revenue, $7 billion in profits

Wholesale estimates are $13.6-$48.4 billion

Smuggle $8.3-$24.9 billion into Mexico for laundering.

Government Response

24,000 soldiers and police to 9 states Increase salaries of troops in anti-cartel

50% “Platform Mexico” initiative to improve

exchange of information

US Assistance

“Interdiction and eradication” International Narcotics Control and Law

Enforcement (INCLE) $27.8 million to Mexico 35% of budget to border security

Benefits and Externalities Benefits

Employment Cash flows Investment

Negative Externalities Corruption Violence Productivity losses Increased demand

Impact of Maquiladoras on Mexico’s GDP

•Correspondence with NAFTA• Exports grew 16% annually thanks to VAT of Maquiladora’s (‘95-’96)

Border-Town Maquiladoras & Mexican Employment

Helped in offsetting weak national job creation

70% of Maquiladora production; 62% of employment

Unemployed Mexicans are provided employment

Employment within Mexico—Highlighting Drug Industry• Just under 90% of illegal drug trade operates within border towns=> 421,200 employed in drug trade along border towns

Cost-Benefit of Drug-Trade Industry

• Drastic impact on tourism economics• Decreasing profit gap within the industry• Extortion of local businesses• $200 million loss over past year in tourism industry alone; 5% decrease annually over past 3 years• Cartels profit; nation suffers

Border-Towns:Focal Points of Billion Dollar Industry

Current Action

Various organizations throughout America have taken action to education people about the murders

Various celebrities have gone to the Mexican president to urge him to do more to stop the killings

Numerous human rights organizations have done protests and forced pressure on authorities to do more to solve the problem

American’s Influence

“The US cannot just sit and enjoy the drugs, they are

causing the misery of thousands of people.”

Charles Bowden – Author, “Juarez: the Laboratory of Our Future”

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2000 Nathan M. Jensen and Guillermo Rosas International Organization, Vol. 61, No. 3 (Summer, 2007), pp. 467-487 Published by: Cambridge University Press on behalf of the

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• From the Economic Policy Institute; A journal examining the impact of corporate globalization on communities:  http://www.ratical.org/co-globalize/NAFTA@7/mx.html

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