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Maquiladora industry has much life, says Deutsche Bank Research report
16 Feb '06
2 min read
Mexico's re-export maquiladora industry, which consists of assembly plants located close to the US border, accounts for 50% of the country's exports of goods and services.
Its main products are electrical and electronic equipment (23%), auto parts (22%), textiles and clothing (13%), and electrical and electronic parts (11%)38.
The maquila sector has had a rough ride over the past few years following the downturn in the US in 2001-03 and the simultaneous rise in Chinese competition in the US market as already explored above.
Following average real export growth rates of 17% p.a. in 1995-2000, the sector expanded a mere 1.3% p.a. in 2001-200439. The contraction led to a wave of factory closures and a significant decrease in employment.
The latter contracted by 6% p.a. on average in 2001-03 after rising at an annual average rate of 14% in 1995-2000.
However, maquila exports expanded a solid 15% between January and October 2005 and employment rose 5% p.a. in 2004/05 (see chart 28).
While the labour-intensive sectors within the maquila industry such as clothing, footwear as well as toys and sports products appear to be the biggest losers, electrical and electronics products, auto supply products, and heavy machinery seem to have recovered from the slump.
In addition, stronger FDI inflows in 2004/05 should support growth of the industry going forward.
While we expect that the electronics sector will continue to grow on the back of an ongoing specialisation towards medium and higher-technology products, we are less confident about the prospects for clothing manufacturers.
Its main products are electrical and electronic equipment (23%), auto parts (22%), textiles and clothing (13%), and electrical and electronic parts (11%)38.
The maquila sector has had a rough ride over the past few years following the downturn in the US in 2001-03 and the simultaneous rise in Chinese competition in the US market as already explored above.
Following average real export growth rates of 17% p.a. in 1995-2000, the sector expanded a mere 1.3% p.a. in 2001-200439. The contraction led to a wave of factory closures and a significant decrease in employment.
The latter contracted by 6% p.a. on average in 2001-03 after rising at an annual average rate of 14% in 1995-2000.
However, maquila exports expanded a solid 15% between January and October 2005 and employment rose 5% p.a. in 2004/05 (see chart 28).
While the labour-intensive sectors within the maquila industry such as clothing, footwear as well as toys and sports products appear to be the biggest losers, electrical and electronics products, auto supply products, and heavy machinery seem to have recovered from the slump.
In addition, stronger FDI inflows in 2004/05 should support growth of the industry going forward.
While we expect that the electronics sector will continue to grow on the back of an ongoing specialisation towards medium and higher-technology products, we are less confident about the prospects for clothing manufacturers.
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