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Efforts made to integrate domestic firms into the maquiladora supply chain promote economic growth

Efforts made to integrate domestic firms into the maquiladora supply chain promote economic growth

Boosting the amount of local content and value-added into manufactured end products is about meeting the challenge to integrate domestic firms into the maquiladora supply chain.

As of January of 2015, domestic content incorporated into products manufactured in Mexico by foreign manufacturers under the maquiladora, or IMMEX program, represented a total of twenty-eight percent of their value. This number experienced a year over year drop when compared to the 28.6% registered twelve months prior.

Ever since manufacturers began to gravitate towards the US-Mexico border in the mid-1960s, the effort to integrate Mexican domestic firms into the maquiladora supply chain has been a challenging proposition. Historical issues that have constrained and limited the ability of domestic companies to do business with the international firms operating in their midst have included:

  • an inability to meet quality standards, volume demands and deadlines imposed by larger manufacturers;
  • difficulties breaking into supplier networks that had been established outside of the country, which gave preference to foreign companies;
  • the absence of policies aimed at promoting and boosting the productive capacity and levels of technological sophistication of local manufacturers;

Although Mexico has made some strides in closing the gaps that would enable it to integrate domestic firms into the maquiladora supply chain, there is still much more room for progress to be made.

For instance, studies have shown that the presence of multinational manufacturers on the border, and, increasingly, in the country’s interior has created spin off businesses that are composed of one hundred percent domestic capital and personnel.

In a 2008 study published Elsie Echeverri-Carroll, an economist at the University of Texas at Austin, it was discovered “that many large firms in Monterrey, in Northern Mexico, concentrated their activities in “core competencies.” She found that this focus resulted in opportunities for “some skilled workers to create their own start-ups.” Over th years the Mexican government has been more proactive in its efforts to put policies into place at the federal and state level to integrate domestic firms into the maquiladora supply chain by encouraging universities to establish technological business incubators, and to bolster curriculum that encourage industrial entrepreneurship as well. Today, quality standards being met, volumes are up and deadlines are being met by local firms more so than in the past.

An example of current efforts being made to integrate domestic firms into the maquiladora supply chain is that being led by Mexico’s National Maquiladora Association, also known by its Spanish acronym, INDEX. INDEX is teaming up with Mexico’s Secretariat of the Economy, and the federal government’s economic development promotion organization, ProMexico, to introduce local suppliers to purchasing personnel from major international manufacturers such as IBM, Flextronics, Jabil Circuits, Continental, Samina and Emerson during the course of this year.

The first event of this sort will take place in Guadalajara, Jalisco on June 18-19, 2015, while another similar meeting is scheduled for the fall in Ciudad Juarez for in the fourth quarter of the year.

The Mexican federal government sees the importance of making it a priority to integrate domestic firms into the maquiladora supply chain in terms of overall national economic growth, development and job creation, while INDEX, and its membership, sees the obvious benefit of having a larger pool of experienced and quality suppliers in close proximity to their manufacturing operations.

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