ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -NAFTA classified Northern Mexico as an export processing zone, thereby allowing foreign corporations to manufacture goods in Mexico at lower production and labor costs.

Detailed explanation-2: -Following adoption of the North American Free Trade Agreement (NAFTA) in 1994, maquiladora activity became increasingly correlated with U.S. manufacturing production and, thus, susceptible to recessions and expansions north of the border.

Detailed explanation-3: -The Maquiladora Program was developed to foster border region employment rates as well as further attract foreign investment, and a 1989 decree relaxed Mexico’s foreign investment laws even more, allowing maquiladoras to sell up to 50% of their products to Mexican domestic markets.

Detailed explanation-4: -Some NAFTA-related changes unequivocally encourage the expansion of maquiladora activities. As an example, Echeverri-Carroll (1999) notes that NAFTA eliminated all Mexican programs that favored specific industries.

Detailed explanation-5: -Maquiladoras (also known as “twin plants") are manufacturing plants in Mexico with the parent company’s administration facility in the United States. Maquiladoras allow companies to capitalize on the less expensive labor force in Mexico and also receive the benefits of doing business in the United States.