For many years, manufacturing companies have sought to increase the efficiency of their production operations and reduce costs, leading them to establish manufacturing plants in countries other than their places of origin. This has led to an increase in foreign investment and to the origin one of the main industries in the country: the maquiladoras in Mexico.
The maquiladora program was established since 1964 in order to attract foreign investment and combat unemployment in the U.S and Mexico border.
In addition, in 1994 with the signature of NAFTA (North American Free Trade Agreement) which has been ratified and today we know was USMCA (United States- Mexico – Canad Agreement), boosted during the late 90´s the number of maquila plants especially in the border of Mexico and United States.
What are Maquiladoras?
A maquiladora is a manufacturing operation in Mexico which is run by a foreign company and exports goods to other countries.
Maquiladoras import raw materials, components and machinery to process or assemble them in Mexico and then export back the finished manufactured goods. The main advantage of the maquiladoras is that the raw materials, components and equipment for production purposes can enter the Mexico under a duty-free and tax benefit structure.
In 2006 the maquiladora program was transformed and the IMMEX Program was established. The IMMEX Program which is the acronym for Manufacturing Industry, Maquiladora and Export Services, encourages manufacturers to export goods and strengthen Mexican exports.
As of February 2021, according to the National Foreign Trade Information Service of the Ministry of Economy (SNICE), for its acronym in Spanish, there are 6,003 IMMEX Programs in Mexico.
Learn more about the details of the IMMEX Program here.
Benefits of Setting up a Maquiladora in Mexico:
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Tax benefits:
Temporary import of raw materials, components, machinery and equipment among others without paying VAT and countervailing duties and deferring or not paying General Import Tax.
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Free Trade Agreements:
Furthermore, Mexico counts with 13 Free Trade Agreements with 50 countries, leading to a reduction of trade barriers and allowing foreign companies to import some raw materials and products free of duties. Additionally, these FTA’s provide Mexico with access to around 60% of the world’s GDP.
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Cost Savings:
Maquiladoras in Mexico, can benefit from having highly qualified and trained workforce at competitive labor costs.
In addition, if the finished good will be sold to United States, it offers important logistics costs savings due to cheaper shipping costs and shorter overall times for shipping, which also lead to faster delivery.
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Location and Product Flexibility:
A maquiladora can be established anywhere in the country, and still benefit from the tax savings advantages.
Furthermore, foreign companies that establish maquiladoras in Mexico have no limit on the types of items that can be manufactured (with the exception of firearms), as long as the manufactured finished good is exported.
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Fast and easy start-up through a shelter company:
Establishing a maquiladora in Mexico is easier when partnering with a shelter service provider in Mexico. As the shelter company can be the legal entity in Mexico, or can provide service through a new legal entity, while offering a faster and easier start-up due to their experience and know-how on local practices and regulations. In addition to taking care of all administrative matters which the company on and allowing the foreign company to focus on what they do best (production, quality, materials).
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How to establish a Maquiladora through a shelter company?
Hiring a shelter service provider for establishing a maquiladora in Mexico, can facilitate the complete process and is often the easiest way to maximize the benefits that the maquiladora program offers.
Mexcentrix can lead and support you in the complete process for establishing manufacturing operations in Mexico. Our shelter service offers full administrative and operational support including, among others:
- Human resources
- Payroll and benefits administration
- Tax and accounting
- Foreign trade and customs
- Management IMMEX Program
Through our shelter program, our clients can focus on what they do best (production, quality, materials) and let us do what we do best.
Furthermore, through Mexcentrix services, we ensure 100% compliance with Mexican law and regulations, and our clients can avoid unnecessary problems and costly mistakes. In addition, we offer ongoing consulting to keep our clients updated about any changes in applicable laws and regulations.
For additional information regarding our services or if you need a cost model for your operations in Mexico, contact us.