Can the maquiladora industry act as a catalyst for industrial development in Nicaragua? Some thoughts based on the study of Nien Hsing Textile Co.

Abstract

Nicaragua, the poorest country of Central American, gives shelter to many foreign owned plants in its free trade zones (export processing zones). In December 2006, some 80.000 persons worked in these industrial zones. The great majority of these plants belong to the clothing industry and most of them are of Asian capital. But, does this maquiladora industry - an assembly industry of imported intermediate goods that benefits from a preferential tax and tariff treatment - contribute to a genuine industrial development of Nicaragua? This paper tries to give some elements of answer to this question by studying the evolution of a Taiwanese maquiladora enterprise assembling jeans and casual wear in Nicaragua: Nien Hsing Textile Co. Our study casts doubts on the contribution of such a foreign enterprise to the development of a perennial local industrial structure: there are no backward linkages, the Nicaraguan employees are not qualified and realise manual and routine tasks, and management is mostly composed of expatriates. Moreover, our comparison between the situation in 2007 and the one in 1998 shows us that there have no been significant changes: the enterprise remains an economic enclave manufacturing a basic or standardized garment whose permanence in the country still depends on specific trade policy advantages (with an expiry date) enjoyed by Nicaragua.