During the early 1960's, the Mexican Government engaged the services of Arthur D. Little & Company to develop a plan to put Mexican unemployed nationals to work. At that time, the Mexican Government was very interested in finding a way to create jobs along its northern border.

On September 1, 1965, President Diaz Ordaz of Mexico initiated the Border Industrialization Program developed by Arthur D. Little & Company. The program was patterned after a production-sharing model that had been instituted in Portugal. The concept was simple; factories working under the Border Industrialization Program would be treated as an individual Foreign Processing Zones.

Today, a Maquiladora (or Twin Plants) refers to a Mexican company operating under a special Customs Regime. The first Maquiladoras were established in the states of Baja California and Chihuahua. What started as a handful of plants located in Mexico's northern border region has grown to over 3,000 companies operating throughout Mexico.

In an effort to encourage foreign investment under the Maquiladora Program,
the Mexican Government:

• Allows Maquiladoras to be 100% foreign-owned.

• Allows Maquiladoras to import duty-free into Mexico all production-related machinery,
equipment, materials and components produced in North American and covered by a
NAFTA Certificate of Origin.

• Does not restrict what can be produced by a Maquiladora.

• Does not limit the number of foreigners that will manage or support the Maquiladora.

• Allows Maquiladoras to sell a significant portion of their production in the Mexico
national market.

The Evolutionary Changes of the Maquiladora Industry

The Maquiladora industry has changed dramatically since its inception in1965. According to the El Paso Branch of the Federal Reserve Bank of Dallas the industry has undergone three generational changes.

First-generation Maquiladoras are typical of the earliest plants: labor-intensive with limited technology and dependant on decisions made by parent companies. Textile and wearing apparel plants are typical examples of first-generation Maquiladoras.

Second-generation Maquiladoras are oriented less towards assembly and more toward manufacturing processes. Such firms use automated and semi-automated machines and robotics. In addition they employ more technicians and engineers. Maquiladoras that manufacture television sets and electrical appliances are examples of second-generation Maquiladoras.

Third-generation Maquiladoras are oriented toward research, design and development. They rely on highly skilled labor such as specialized engineers and technicians. Technological dependence on the parent company disappears in third-generation Maquiladoras and thus decision-making becomes autonomous. Delphi Corporations Mexico Technical Center in Cd. Juarez is a good example of a third-generation Maquiladora. Delphi's Cd. Juarez operation employs about 700 Mexican engineers to develop patented products, such as oil sensor and brake systems for automobiles.

Today's generation has migrated from labor intensive, High Volume Low Mix facilities to High Mix Low Volume industries requiring a much more educated and skilled worked force.