With the expansion of free trade and the Asian experience of export-led growth, many Latin American countries have targeted the manufacturing sector for further development. With their entry into regional trading blocks (from NAFTA to MERCOSUR in the Southern Cone) and their offering of free trade zones for export products, substantial increases in foreign direct investment in manufacturing have occurred.
The environmental aspects of this growth in export-based manufacturing have been the subject of considerable controversy -- particularly between the US and Mexico. Under NAFTA, are US industries moving to Mexico in order to escape stringent environmental requirements? In the Mexican free trade zones along the US border (the 'maquiladoras'), what is to be done to address the increasing demand for clean water in the face of increasingly polluted water supplies? 1
Two reports on the relationship between manufacturing FDI and the environment are summarized in this chapter. The first takes a different approach from the agricultural cases. It involves a survey of multinational investors in Mexico on whether and why they have made environmental investments in their manufacturing operations. 2 The second is a case study similar to those on agriculture. It examines the environmental aspects of the rapidly expanding manufacturing free zones in Costa Rica. 3 As with the agricultural cases, both of the manufacturing studies shed light on the reasons why environmental improvements sometimes accompany FDI, as well as the opportunities