Maquiladoras are manufacturing facilities in Mexico that are owned and managed by a foreign company. The factory (in Mexico) manufactures the company's products and then export them to other countries.
Maquiladoras are governed under the Mexican government's program formally known as the IMMEX maquiladora program. The program allows foreign manufacturers to import raw materials and components into Mexico on a tax and duty free basis with the provision that 100% of all finished goods will be exported out of Mexico within a government mandated timeframe.
The system of maquiladoras was started by the Mexican government in 1965 to alleviate unemployment along the border region while also providing foreign companies with various tax benefits, special customs terms and easy access to skilled and affordable labor. Maquiladoras initially focused on textiles, apparel, and simple electronic assembly operations, however by 1985 they became the largest source of foreign exchange in Mexico. This happened largely due to Mexico's educational institutions partnering with multinational manufacturers to develop skilled and educated workers to serve more complex sectors such as automotive, aerospace, medical devices and general consumer products.
With the advent of the North American Free Trade Agreement (NAFTA) in 1994, the maquiladora industry opened foreign trade lines between Canada, the United States and Mexico by eliminating most tariffs and barriers to free trade between the three countries.