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Maquiladoras & Drug Trafficking in Mexican Border Towns

Maquiladoras & Drug Trafficking in Mexican Border Towns

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Maquiladoras & Drug Trafficking in Mexican Border Towns

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  1. Maquiladoras & Drug Trafficking in Mexican Border Towns Melanie Sarkissian Phillip Zeller Austeja Vidugiryte Micah Maland Alex Pickett Presenters:

  2. Outline • General background of border towns in Mexico • Economic impact of maquiladoras • Social impact of maquiladoras and drug trafficking • Economic impact of drug trafficking • Impact of maquiladoras and drug trafficking on the Mexican economy as a whole

  3. Mexican Economy • Population ~ 111,211,789 • GDP is $1,473 billion (2009) • GDP by sector (2007 est.) • agriculture: 4% • industry: 26.6% • services: 69.5% • Export-oriented economy • More than 90% of Mexican trade is under free trade agreements with more than 40 countries

  4. Chihuahua State Chihuahua State

  5. Chihuahua State • Largest state in Mexico • Population ~ 3.2 million • Represents 4.5% of Mexico's total GDP (29,826 million USD) • Strong focus on export oriented manufacturing (maquiladoras) • 329,939 people are employed in the manufacturing sector (2005)

  6. Juarez • The 1848 Treaty of Guadalupe Hidalgo established the Rio Grande as the border between Mexico and the US • Located in the Chihuahuan desert • Population ~ 1.5 million • Average annual growth rate from 1990-2000 of 5.3% • 15 of Mexico's largest banks

  7. Juarez • Over 135,000 workers working at more than 320 maquila-related plants • Exports: electronic circuits, leather goods, textiles, printing machinery, medical supplies, automobile engines, etc. • Overall, represents one third of Mexico's exports to the U.S.

  8. Juárez­El Paso population ~ 2 million Largest border community Expanding population of more than 5% a year 4 international ports of entry connecting Juarez to El Paso, Texas Major point of entry and transportation for Mexico Ciudad Juarez & El Paso, Texas

  9. Government--Mexico • The PRI (Institutional Revolutionary Party) held power in Mexico since 1929 • 1977--- electoral reforms • 2000 --- Vicente Fox (PAN) elected • 2006 --- Felipe • Calderon (PAN) • Calderon made • abating drug- • trafficking one of the • top priorities of his • administration

  10. Current governor is Jose Reyes Baeza 9 federal deputies 3 federal senators Hard for the Juarez government to keep up with required services, leading to more crime Government--Chihuahua

  11. Urbanization • Juarez is one of the fastest growing in Mexico • Immigration • Investments in maquiladoras • From 1980 to 2000, Ciudad Juarez's population grew by almost 1,000,000 • People in search of better employment opportunities and higher standards of living • Large areas of slum housing

  12. Maquiladoras • 1960s---the Border Industrialization Program started promoting maquiladoras • 1994---North American Free Trade Agreement (NAFTA) • Favorable conditions • for foreign capital • Factories now • use more sophisticated • production techniques • and require more • skilled labor

  13. Maquiladoras & Employment • Before maquiladoras, border towns had highest unemployment rates in the country • Maquiladoras have become the leading industry in Ciudad Juárez • 60% of all jobs in 2000 • 87% of the city's manufacturing jobs • Majority of those employed are single young women migrating from others states • Many men in border states resent the increasing presence of working females in public areas

  14. Economic Impacts of Maquiladora Industry on Mexico’s Border Towns

  15. Maquiladora Background • Factories on U.S. – Mexico Border • U.S. Inputs • Cheap Mexican Labor • Shipped back to West (i.e. USA)

  16. NAFTA Background • NAFTA signed 1994 • Opened trade barriers • Maquiladora growth attributed to NAFTA • Agreement led to easier trade

  17. Theory • Maquiladoras be mutually benefit border • Increase in exports • Decrease in labor cost for importer • Capitalizing upon competitive advantages => efficiency

  18. The Downfall of Maquiladora Style Liberalizatoin • Sharp growth in maquiladoras during the 1990s proved unsustainable • After October 2002, there was a 21% unemployment increase in the maquiladora industry. • Sluggish growth wreaked havoc on border-town economies, as their success was often tied to exports of maquiladora created goods.

  19. Intended Result of Maquiladoras • The program was meant to establish and foster trade and investment in cities along the border. • Maquiladoras viewed as de facto subordinates of the U.S. economy • Most goods are intended to be sold to the U.S. and other developed Western economies

  20. Theoretical Basis • Industrialized nations should experience an increase in income inequality through trade liberalization • This is purely a function of trade liberalization increasing returns to capital and decreasing returns to labor • This is experienced because industrialized nations are generally capital abundant as compared to labor

  21. Theoretical Basis – Cont’d • On the flipside, in less industrialized countries, where there is labor abundance and relatively low levels of capital we see a different story • Increasing returns to labor due to liberalization • Decreasing returns to capital experienced by liberalization decreases income inequality

  22. Impact on local level • Multinational corporations that participate in foreign direct investment typically pay higher wages than local companies • Foreign direct investment by multinationals often leads to an increase in wages for skilled workers versus unskilled workers, leading to income inequality

  23. Effect of Maquiladora Industry

  24. Social Impact of Maquiladoras and Drug Trafficking on Chihuahua State

  25. Murders in Chihuahua State • Over 400 killed since 1993 • Mainly in the city of Juarez but has spread to around the state • Most women are Maquiladora workers • Women activist movements have deemed it “femicide:” the mass murder of women simply because they are women

  26. A bigger problem: • It is not just about these women being killed • It is an economic, social and cultural problem • “The men who are doing this have political and economic power and know that nothing will happen to them for doing these things.” Alma Gomez - lawyer representing victims’ families co-founder Justicia Para NuestrasHijas • “From corruption and drug trafficking to the foreign owned companies, these menhaveno regards for these women’s lives.” LuchaCastro – lawyer representing victims’ families co-founder Justicia Para NuestrasHijas

  27. Description of Murders • Most women have been found with similar murder descriptions: - Raped (sometimes by numerous men) - Tortured in various ways - Strangled or stabbed - Bodies discarded in the desert

  28. Families Reaction • Until 2005 there was a 72 hour mandatory waiting period after the report was filed until the start of the investigation • Most victims’ families are poor with little influence over authorities to investigate the crimes • Many have started grouping together and creating marches, singing songs and painting pink crosses around the community as the official symbol • Many family members who cause too much of a stir have been found killed themselves

  29. Symbol representing murders in Juarez

  30. Maquiladoras • 70 percent of maquiladora workers are women • Majority of women are abducted on their way home for maquiladoras • Some companies provide busses home but only at certain hours and drop off points are far from homes

  31. Maquiladoras Conditions • Very poor working conditions: • No protective devices • No unions • Psychological abuse from line manger • Inhalation of fumes – no ventilation • 16 hour days • High injury rate without medical attention

  32. Who is responsible? • Investigators believe many of the killings are done by men associated with drug cartels • Some are done to “celebrate” a successful run • "Sometimes, when you cross a shipment of drugs to the United States, adrenaline is so high that you want to celebrate by killing women.” Former drug cartel member

  33. Who is responsible? • Some believe it is a combination of people who just have no regard for women’s lives: - Drug cartel members - Police Officers - Serial Killers - Copy-cats

  34. Drug Cartels • The size of the Mexican drug trade is estimated to be at least $30 billion US a year • Juarez has become a potent symbol for Mexico’s escalating drug wars • The ongoing drug gang warfare in Juarez leads to more than 500 killings a year

  35. American’s Influence • Estimates say 90 percent of drugs that pass through Mexico go to the US • Approximately 65% of all cocaine smuggled in the US enters via Mexico

  36. Police Involvement • Officials believe at least 20 officers in Chihuahua state and Juarez police departments double as enforcers and traffickers for the Juarez drug cartel • 2005 reports released by a Federal Prosecutor appointed by the Mexico’s President confirms police involvement • Some police officers are bribed by drug traffickers • Drug cartels spend about 10% of their gross yearly income (over US $3 billion) on bribes

  37. Police Involvement • Although Mexico has signed international anti-torture laws they do not follow them • Police try to find men, arrest them and torture them until they confess to the crimes • Once they find someone to blame, even if unjust, they consider the case closed and the investigation finished

  38. The Battle “Whether justice can be found in Ciudad Juarez has become an important test of Mexico's efforts to establish a rule of law, human rights and law enforcement.” Mexican authorities

  39. Economic Impact of Drug Trafficking

  40. Rise of Mexican Cartels • US Prohibition • Columbia’s Diminished Role in Drug Smuggling • Demise of Columbian Cartels, Medellin and Cali • 1989: Closing Trafficking Route in Florida

  41. Mexican Cartels • 7 Cartels: 3 Major • Gulf Cartel (21 States) • Eastern US-Mexico Border, down the gulf coast • Simaloa (17 States) • Juarez (13 States) • Smuggle cocaine down Western part of border

  42. Alliances • Tiajuana and Gulf • “Federation” • Simaloa • Juarez • Valencia

  43. Operations • Mexican Cartels - wholesale distribution • Street Gangs - retailing • Utilize approximately 200,000-300,000 employees • Some involved in transportation, security, banking, and communications industries

  44. Statistics • 70% of cocaine, 30% of heroin, 80% of marijuana enter the US through Mexico (US State Department) • Earn $27-$30 billion in revenue, $7 billion in profits • Wholesale estimates are $13.6-$48.4 billion • Smuggle $8.3-$24.9 billion into Mexico for laundering.

  45. Government Response • 24,000 soldiers and police to 9 states • Increase salaries of troops in anti-cartel 50% • “Platform Mexico” initiative to improve exchange of information

  46. US Assistance • “Interdiction and eradication” • International Narcotics Control and Law Enforcement (INCLE) • $27.8 million to Mexico • 35% of budget to border security

  47. Benefits and Externalities • Benefits • Employment • Cash flows • Investment • Negative Externalities • Corruption • Violence • Productivity losses • Increased demand

  48. •Correspondence with NAFTA • Exports grew 16% annually thanks to VAT of Maquiladora’s (‘95-’96) Impact of Maquiladoras on Mexico’s GDP

  49. Border-Town Maquiladoras & Mexican Employment • Helped in offsetting weak national job creation • 70% of Maquiladora production; 62% of employment • Unemployed Mexicans are provided employment