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February 1998, Volume 5, Number 2

Mexico: Wages, Maquiladoras, NAFTA

Mexico's Foreign Relations Secretariat (SRE) in January 1998 published the new dual nationality law, which becomes effective March 20, 1998. Mexicans who possess or have acquired another citizenship will have to present a Mexican citizenship certificate or passport or birth certificate when they participate in any service exclusively for Mexican citizens.

The new law outlines procedures for becoming a Mexican national. Foreigners must live in Mexico for five years, speak Spanish, know Mexican history and "be integrated into the national culture." Foreigners who marry Mexicans must prove they have lived with their spouse in Mexico for the last two years to obtain citizenship.

Wages. Mexico has three minimum wages based on the costs of living in various places. In January 1998, each was raised less than the inflation rate; Mexican wages remain about one-tenth of US wages. In 1996, according to the US Department of Labor, the hourly compensation of Mexican production workers was $1.50 an hour compared to $17.74 for US workers. For many Mexicans, wages in early 1998 are 15 to 25 percent less in real terms than in early 1994, before the peso devaluation.

In Mexico City and other Zone A cities, the minimum wage is 30 pesos a day, or about $4 a day. About 15 percent of Mexico City workers earn the minimum wage, 32 percent earn up to between one and two times the minimum, 20 percent earn between two and three times the minimum, 16 percent between three and four times the minimum, and 17 percent earn five times the minimum wage or more, the equivalent of more than $550 a month. Some Mexicans want to eliminate the minimum wage, saying it sets a ceiling on wages, not a floor, as employers promise the minimum or a multiple of it.

Mexico's unemployment rate fell to 2.8 percent in December, 1997, the lowest since 1992; some 800,000 jobs were created in 1997. Mexico's unemployment rate is measured in some cities as the number of economically active persons over the age of 12 who tried to find employment but did not work even one hour, with or without pay, during the previous week.

Mexico has no unemployment insurance system, which explains why the unemployment rate is low, but Mexican workers laid off from formal sector jobs are entitled to severance pay, which is a minimum of three months pay.

Predictions of Mexico's economic path in 1998 centered on GDP growth of about 5.5 percent, inflation of 14 percent, and a peso/dollar exchange rate of 8.5 pesos to US$1 by the end of 1998. In 1997, Mexico imported goods worth $110 billion and exported goods worth $110 billion.

Maquiladoras. Some one million Mexicans were employed in 3,700 maquiladoras in December 1997, according to the National Maquiladora Exporting Council (CNIME), up dramatically from 330,000 workers and 1,120 plants in 1987. The CNIME projected that, by 2000, there would be 1.5 million Mexicans employed in 5,000 maquiladoras. Maquiladoras exported goods worth $42 billion in 1997.

CNIME said that the average maquiladora wage is 70 pesos per day ($8.50). Many Mexicans complain that, although maquiladoras produce jobs, in thirty years they have produced very few homegrown spin-off industries or entrepreneurs.

Maquiladoras are foreign-owned plants that typically import components that are assembled in Mexico, and then export the finished products such as televisions or car parts--only five to 10 percent of the parts used in maquiladoras are produced in Mexico. They are often referred to as in-bond plants, since foreign owners are permitted to import machinery and components duty-free; no tariffs are paid if the products are re-exported from Mexico. Since states and cities in Mexico have little authority to levy taxes, most maquiladoras do not pay state and local taxes.

A typical product such as a TV that sells in the US for $150 was assembled in Mexico with $95 of imported components; the Mexican valued added was $5 worth of labor and materials. The TV is sold to a distributor, and with transportation costs may have a wholesale price of $130. The TV is then sold for $150 to $175. About 80 percent of Mexican manufactured goods that are exported are from maquiladoras or other foreign-owned operations.

The US Department of Labor's National Administrative Office in January concluded, after investigating a complaint filed by Human Rights Watch, that maquiladoras administer medical tests to weed out pregnant applicants and harass pregnant workers to coerce their resignation. This practice violates Mexican labor law and the US asked Mexico to investigate.

Mexico responded that administering pregnancy tests to job applicants was not illegal because Mexico's labor laws protect workers only after they have been hired. Refusing to hire women because they are pregnant violates Mexican law.

In Tijuana, it appears that the Baja California state government has recognized the independent union STIMAHCS at the Korean-owned Han Young maquiladora. Protests over procedures for e.g. union representatives to visit the workers in the plant, continue.

Labor militancy is spreading to Central American maquiladoras. Some 2,800 workers employed at the Chentex Garment factory in the Las Mercedes Free Trade Zone in Managua, Nicaragua went on strike January 26, 1998 to protest the firing of 21 of the 90 workers who had signed papers in support of a union in the factory. Under Nicaraguan law, workers petition the Labor Ministry for recognition of a union, and in this case, it appears that the Labor Ministry turned the list of union supporters over to the employer, who fired some of the workers.

The Los Angeles Times on January 26, 1998 profiled Tijuana, a city of 1.5 million with a one percent unemployment rate, and so much in-migration that 60 percent of city's residents were born elsewhere in Mexico. Monthly wages for professionals such as many police, teachers, journalists and bank employees are almost $500 per month, far higher than elsewhere in Mexico.

Economic success in Tijuana is apparent in the fact that Tijuana has a higher percentage of homeowners than most other Mexican cities; an estimated half of the maquiladora workers are home owners, and service-sector jobs in hotels and restaurants pay more than assembly jobs in maquiladoras.

A new book by Los Angeles Times reporter Sebastian Rotella details life along the Tijuana-San Diego border. Rotella, Sebastian. 1998. Twilight on the Line: Underworlds and Politics at the U.S.-Mexican Border. New York. W.W. Norton.

NAFTA. The North American Free Trade Agreement (NAFTA) was four-years old on January 1, 1998. Evaluations of NAFTA's effects on Mexico-US migration generally agree that NAFTA has not significantly reduced the flow. (Some observers believe that NAFTA helped Mexico to recover faster from the economic crisis and peso devaluation of 1994-95 than it would otherwise have done, so that NAFTA may have prevented an even-larger increase in Mexico-US migration.)

The best current estimates are that about 300,000 Mexican-born persons settle in the US each year, and that over half are unauthorized. There appears to be little that can be done within the NAFTA framework to deal with (unauthorized) migration. NAFTA's migration provisions deal only with trade-related migrants, such as intra-company transfers, and with professionals--a maximum of 5,500 a year can enter the US, but only 243 arrived in FY96.

Second, there is no strong desire in Canada and the US to take the steps toward closer integration that might justify significant foreign aid or other assistance for Mexico, or to relax immigration restrictions. Instead, sensitivity to sovereignty issues seems to be rising as economic integration proceeds, so that, for example, US immigration restrictions can be increased even as Mexico becomes one of the major trading partners of the US.

There is little sentiment to shift some US border control expenditures to promote economic development in Mexico, because there is too little certainty that such a shift would reduce (unauthorized) migration in any predictable time period.

Mexico on February 27, 1992 revised Article 27 of its constitution, ending land redistribution, permitting peasants to rent or sell ejido or communal land, and permitting both foreigners and corporations to buy land in Mexico. Under Article 27 of the Mexican Constitution of 1917, peasants could petition Mexico's agrarian reform ministry to redistribute large private land holdings to communal ejidos, and then to grant ejidatario members and their heirs rights to the land as long as they actively worked and lived on it. In this manner, ejidos internalized population growth, resulting in ever-smaller plots of land as the rural population increased.

Some observers expected the revision of Article 27 to unleash a wave of Mexico-US migration. However, empirical studies suggest that Article 27 is not the primary cause of increased migration for two reasons. First, there was already a considerable amount of illegal and quasi-legal land selling and renting before 1992, especially by the families of workers who migrated to the US. Second, the Mexican government has been very slow to organize meetings and distribute titles to ejido land to ejidatarios and communal farmers, so that ejido land can be rented and sold. Third, the more immediate factors involved in migration seem to be the peso/dollar exchange rate, the reduction of agricultural subsidies in Mexico and the demand for Mexican workers in the US.

Population. Within Mexico, Mexicans are becoming more mobile. In 1992, 20 percent of all Mexicans lived outside their state of birth. States with high percentages of natives living in other states included Mexico City (DF)--42 percent of those born in Mexico City lived in another state in 1992 and Zacatecas, 32 percent. States with low outmigration to other Mexican states included Chiapas and Nuevo Leon--only eight percent of the natives of these states lived in another Mexican state in 1992.

Mexican states attracting large numbers of in-migrants from other states in 1992 included Quintana Roo--60 percent of residents were born in another state--and Baja California, 50 percent of residents were born in other states.

Anne-Marie O'Connor, " Mexico's City of Promise: Immigrants from across the country are pouring into Tijuana," Los Angeles Times, January 26, 1998. Sam Dillon, "Sex Bias at Border Plants in Mexico Reported by US" New York Times, January 13, 1998. Sidney Weintraub, "Mexico: Workers' 15-Year Nightmare," Los Angeles Times, January 11, 1998.