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Region: mobile maquiladoras

Wednesday, February 22, 2012

Maquiladoras may be on the move, although it’s hard to say where they might go.

In Central America, basic maquiladora operations – especially clothing production and simple assembly – may shift increasingly to Nicaragua, which has the region’s lowest wage rates.

Several plants have already moved to Nicaragua from Honduras in the past two years, in order to reduce labor costs.

Sewing and assembly operations could even return to the United States, if the gap were to become much narrower between domestic wage rates, and those in the developing world.

A move to the United States could in turn produce savings for parent companies, in areas which include transportation and communications.
One of the most aggressive companies, when it comes to moving its plants from one country to another, has been North Carolina-based Hanesbrands.

The world's leading manufacturer of underwear, with annual revenues of $4.5 billion, Hanesbrands has closed plants in Mexico, in order to move operations to Central America, which accounts for half of its total production.

The company has close to 20,000 employees in the region.

During a recent conference call with investors, Richard Noll, Hanesbrands’ chief executive officer, said that the company is seeing double-digit wage increases throughout the entire developing world, as increased costs of food and energy cause workers to push for higher salaries.

In the maquiladora world, a difference of a few cents in the price of an item can be decisive.
The fight for lower costs – especially wage rates – could make maquiladora operations more competitive, and more mobile, than ever.