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economic experience of Mexico since NAFTA

Scenario:

Acme Automotive is one of the major US producers of automobiles in Mexico. You have been sent to the Acme automotive plant in Nuevo Laredo, Tamaulipas, Mexico as the new Operations Manager to respond to recent declines in employee morale, productivity, and cost effectiveness at the Nuevo Laredo plant in the past 12 months.

Talk of union organizing is of utmost concern to your supervisor in terms of short run and long run costs of production. Your job is to investigate the productivity/cost effectiveness problem and make recommendations to top management for goals and strategies in line with the Acme Vision. Your first day at the job, you receive the following letter from a disgruntled employee:

(Note- the 'Maquiladoras' to which the writer refers, is the word for companies that process Mexico-imported components, then export them.)

Dear Sir:

I've been working in Maquiladoras since I was 20 years old, and now I'm 27. I've gotten more and more worried, because my job is ruining my health and I have no way out.

Now I work at Acme, where I've been for about a month and a half. "You could say it's forced labor, considering how the foremen talk to the workers and how much psychological pressure they put on people. We work an average of 14-15 hours a day. There's no transport service to and from work, and we get off the shift at 4 o'clock in the morning. Usually we have to wait until 7 AM before we can catch a public bus. And when a bus does come, getting home costs 20 pesos. That makes a very big dent in your take-home pay - 380 to 400 pesos a week ($40-43).

My job is bending steel cables...which are about a centimeter thick, and I have to bend about 3500 a day. Because of what's passing through my hands every day, I can hardly sleep at night - the pain is so bad. Then I have to get up in the morning to do it again. In the future, I know that I can get carpal tunnel problems, which is a very scary idea. I've asked to change to another position, but no one wants to change because whoever works in this job gets a lot of pain in his wrists.

I feel that in three or four years my hands are going to be useless. I've been thinking that I'll have to get another job. What else can I do? They say work in the Maquiladoras is the best paid work here in the city. But there's not much difference from one factory to another.

This is all just normal - the standard. Really, I'm living my whole life in the factory. Because of the time and money pressure, I have no ability to develop myself even as a worker, much less as a human being."

After I had been working in Acme for a month, I went to my supervisor with my concerns about health and safety problems at the plant. He told me that I was putting the Maquiladora workers in danger by making waves. I know that the company's goal is to cut production costs and increase the profits from the engines we produce, but I am hoping you will consider the plight of the poor Mexican workers. I am hoping you will see through our eyes as well as from the eyes of the company officials.

Yours truly,

Enrique Santiago:

Quotes and idea taken from:

Bacon, David. "The Story of a Maquiladora Worker." Metro Detroit Greens. 10 Dec. 2000. Retrieved 20 Jan 2004 from http://detagreens.tripod.com/maquiladora.htm

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Assignment:

You are laying the groundwork for Acme's deployment of key lead operations managers and top level personnel to international manufacturing plants. As such, one expectation the company has for you is that you will research and write relevant economic white papers for the pre-orientation of future deployed employees.

Write a 2-3 page white paper which will help employees understand the economic experience of Mexico since NAFTA. Issues you may want to cover include, but are not limited to, trade liberalization, national sovereignty, worker rights, World Trade Organization and committees, relationship with World Bank and IMF, types of economic development.

Following are sites you will find helpful.

References:

World Bank Group. Global development finance 2001. Retrieved January 7, 2004, from http://www.worldbank.org/prospects/gdf2001/vol1.htm

World Bank Group. (2001). Mexico ? A comprehensive development agenda for the new era. Retrieved January 7, 2004, from http://wbln0018.worldbank.org/External/lac/lac.nsf/Publications/9364AB8A25BABD6085256A4C004B3963?OpenDocument

Solution Preview

The United States, Canada and Mexico started NAFTA and formed free trade agreement in Jan 1994. The express purpose of it was to liberalize trade in goods and services, remove barriers to investment, strengthen the protection of intellectual property rights; and establish a framework for further trilateral cooperation. The agreement is based on principals of non-discriminatory treatment and transparency. It consists of 24 chapters and about1000 pages covering various sectors of economy. The provisions are to eliminate all trade barriers by 2008. There has been significant achievement with elimination of more than 99% trade barriers. The over all impact when comparing with the stated objectives has been extremely positive. The trade has been doubled from $302 billion in1993 to $652 billion in 2003 between the countries. U.S. Exports to Canada & Mexico increased from $142 billion to $267 billion in NAFTA's first decade, significantly higher than average increase of trade with other countries, which stands at 41%. It has proven to be a boon for all the three economies in this decade. American Economy grew by 38%, Canadian Economy by 41%, Mexican Economy by 33%.

The real impact of the agreement has been the increase in productivity to the tune of 55% in Mexico. . This has clear implication on improving the region's competitiveness in the global economy. This has also helped in reducing unemployment level in Mexico from 3.4% to 3.3%.

The main benefit has been NAFTA-related trade and investment liberalization that has allowed U.S. firms to find new markets in Canada and Mexico. It has also helped in maximizing efficiencies gained in terms of global ...

Solution Summary

Acme Automotive is one of the major US producers of automobiles in Mexico. You have been sent to the Acme automotive plant in Nuevo Laredo, Tamaulipas, Mexico as the new Operations Manager to respond to recent declines in employee morale, productivity, and cost effectiveness at the Nuevo Laredo plant in the past 12 months.

$2.19