ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Economic Benefits The first and obvious advantage is the economic benefit that comes with establishing maquiladoras for Mexico as well as border cities and states where they may be located. Once these factories are set up, they provide a source of labor for local residents and can help boost the local economy.

Detailed explanation-2: -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.

Detailed explanation-3: -The key reason U.S. manufacturers outsource to Mexico is exactly what the Deloitte survey showed-cost reduction. As a developing market economy, Mexico has a lower cost of living than the U.S. and, consequently, lower wages. Energy, materials and transportation are also much more affordable in Mexico than in the U.S.

Detailed explanation-4: -Competitive Labor Cost Relative to the United States, along with most other developed countries, direct labor in Mexico is approximately 70% less expensive. This cost-effective, competitive labor is the driving force behind the success of Mexico manufacturing.