Mexico’s maquiladora industry is slowly recovering from its worst crisis in almost 40 years. Between October 2000 and March 2002, the industry lost 278,000 jobs — a 21 percent decline.

      During the hardest months of the maquiladora recession, many questioned the industry’s future. Some observers pointed to the ongoing U.S. recession and the American industrial sector’s poor performance as the main causes of the industry’s fall. Others pointed to structural factors, such as higher Mexican wages and increasing foreign competition. This raises the following questions: How much of the maquiladora downturn was due to the business cycle? How much was due to structural change? Is the maquiladora industry ready to face rising global competition?

      With these issues as a backdrop, the El Paso and San Antonio branches of the Federal Reserve Bank of Dallas recently organized a conference titled “Maquiladora Downturn: Structural Change or Cyclical Factors?” This article summarizes papers and speeches presented at the conference.

      Antonio O. Garza, Jr., U.S. Ambassador to Mexico, said that the creation of the maquiladora industry made history as the Mexican government’s first step toward free markets and global competition. Garza noted that maquiladoras make up the largest component of U.S.–Mexico trade, and 79 percent of their ownership is in the hands of U.S. companies.

      “The list of Mexico’s top 100 maquiladora employers is a who’s who of U.S. firms,” Garza said. The list includes Delphi Corp., Mattel, Ford Motor Co., Tyco International, General Electric Co., Solectron Corp., Johnson & Johnson and ITT Industries. The importance of maquiladoras to the U.S. economy lies in the 26,000 companies located...

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