Jesus Aguirre

25Ene

Creation of the National Committee for trade facilitation

enero 25, 2021 Jesus Aguirre

FOREIGN TRADE NEWSLETTER

On January 22 2021, through the Agreement published in the Official Gazette of the Federation (DOF), the Ministry of Economy announced the Creation of the National Committee for Trade Facilitation, which represents greater openness of Mexico to international trade. The purpose of this document is to facilitate coordination between government agencies and entities for the design, execution and evaluation of programs and actions for the facilitation of foreign trade.

The National Committee for the Facilitation of Foreign Trade will be conformed of representatives of the following agencies (who will have the right to speak and vote):

Ministry of Economy (SE).
Ministry of Foreign Relations (SRE).
Ministry of National Defense (SEDENA).
Ministry of Finance and Public Credit (SHCP).
Ministry of the Environment and Natural Resources (Semarnat).
Ministry of Energy (Sener).
Ministry of Agriculture and Rural Development (Sader).
Ministry of Communications and Transportation (SCT).
Ministry of Health.

The representatives of these secretariats must have an undersecretary level and will be chaired by the head of the Ministry of Economy. The Committee, through its president, may invite representatives of certain government agencies to form part of it, including:

Bank of Mexico
Tax administration service
National Regulatory Improvement Commission
Federal Commission of Economic Competition

Among the functions that the Committee in question will have, the following stand out:

Serve as coordinating body of the different dependencies of the Federal Public Administration that have competence and that intervene in the different aspects related to the implementation and application of the Agreement on Trade Facilitation.
Assist with the Ministry ‘zsof Economy and the Ministry of Foreign Relations, according to the competence of their members in the design of policies, programs and actions aimed at the simplification and automation of foreign trade processes, as well as coordinating their execution .
Propose questions related to matters related to the implementation and application of the Agreement on Trade Facilitation, as well as approve questions related to matters related to its implementation and application.
Propose the signing of agreements and conventions between the representatives of the three levels of government and the social and private sectors in the scope of their competences, in order to complement the actions with the aim of achieving improvements in the processes in foreign trade matters.

Analyze and issue recommendations to improve the efficiency of processes and procedures for foreign trade in order to reduce costs and eliminate barriers to trade, in accordance with applicable national and international regulations.
Analyze the regulatory framework on foreign trade and, if applicable, issue recommendations.

According to what was published in the Official Gazette of the Federation, the creation of the National Committee for Trade Facilitation is permanent, and it was established that said Committee must be installed within 35 business days following the entry into force of the agreement.

22Ene

Mexico ‘flirting’ with Ford after U.S. carmaker bails on Brazil

enero 22, 2021 Jesus Aguirre

The Mexican government is trying to entice Ford Motor Company to consider relocating some of its operations to Mexico, a senior official said on Tuesday, after the U.S. carmaker announced the closure of three plants in Brazil.

Mexican Economy Minister Tatiana Clouthier told reporters that officials were considering some kind of overture to Ford .

“We’re now looking to make Ford an offer,” Clouthier said.

She did not go into any further detail, but said the government was “flirting” with the company.

“What do you need? How do you need it?” she said, referring to the automaker and suggesting that the government wanted to better understand tax or other incentives Ford may require in exchange for relocating some of its manufacturing operations to Mexico.

For decades, carmaking has been a key part of Mexico’s manufacturing sector.

Ford’s press office did not immediately respond to a request for comment.

Earlier this month, Ford announced plans to shutter its three plants in Brazil this year while taking pre-tax charges of about $4.1 billion as the coronavirus pandemic pushed the company to reevaluate its manufacturing capacity.

Company officials said at the time that the decision was part of a previously announced $11 billion global restructuring. (Reporting by Sharay Angulo; Editing by David Alire Garcia and Stephen Coates).

Source: Reuters

(https://www.reuters.com/article/mexico-ford-motor/mexico-flirting-with-ford-after-us-carmaker-bails-on-brazil-idUSL1N2JV009)

05Ene

Why Should Your Company Move Manufacturing Operations to Mexico?

enero 5, 2021 Jesus Aguirre

Considering moving your manufacturing operations? Shelter services in Mexico can help you!

For many years, Mexico has been considered an attractive location to establish manufacturing operations. Shelter services in Mexico are becoming more popular due to the different advantages it offers for manufacturing companies, such as:

Competitive Labor Costs:

One of the main advantages driving companies to establish manufacturing operations in Mexico is its competitive labor cost.

In 2021, the minimum wage in Mexico increased by 15%, with an increase from minimum wage will increase from $123.22 MXN pesos to $141.70 MXN pesos per day in most of the country, while in the Free Zone of the North Border it will increase from $185.56 MXN pesos to $213.39 MXN pesos per day. Nevertheless, most workers in Mexico earn more than the minimum wage. The average wage for a direct worker in Mexico $3.50 USD per hour.

The chart below shows the average hourly fully burdened labor rates in USD for different direct labor positions in Mexico. Please note that the above numbers are an average and can vary depending on the region/ state in which the company is established.

Moreover, average manufacturing wages in Mexico are more competitive than other countries that are considered to have low labor costs such as China, which counts with an average manufacturing labor cost per hour of $6.50 USD compared to $4.82 USD in Mexico. Below you can find a chart with the average manufacturing labor costs in Mexico compared to other countries:

13 free trade agreements with 50 countries

Up to date, Mexico has signed over 13 free trade agreements with 46 countries, including one of the most important which is the USMCA (United States-Mexico-Canada Agreement) which allows 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.

No restrictions on foreign ownership

Additionally, compared to other countries, such as China, shelter services in Mexico do not have any restriction on foreign ownership of manufacturing. And the government does not interfere directly with private companies. Furthermore, the government promotes foreign investment by providing incentives to foreign companies.

Economies of scale

Mexico benefits from economies of scale due to its existing industrial clusters. It offers a wide number of customers and supplier options, as Mexico occupies:

Advanced supply chain

In addition, due to the above-mentioned, Mexico counts with advanced manufacturing supply chains from various industries including automotive, aerospace, electro-domestics, among others. Manufacturers can easily find in Mexico strong supply chains which support different activities such as plastic injection, stamping, machining, foundry among others.

Lower shipping costs

As neighbor of one of the most important markets, United States, it offers important advantages such as streamlined logistics, cheaper shipping costs and shorter overall times for shipping.

As an example, it costs around $6,000 to ship a 53 foot container from China to Los Angeles, compared to $720 USD to ship a 53 foot container from Tijuana (in the border of Mexico) to Los Angeles.

Foreign Trade and Tax Incentives Programs

Mexico counts with diverse foreign trade incentive programs such as:

- IMMEX Program: This is an instrument which allows the temporary import of goods that are used in an industrial process or service, to produce, transform or repair foreign goods imported temporarily for subsequent export, without paying VAT (16%) and countervailing duties, and deferring or not paying General Import Tax. In order to not pay VAT, the company in addition to being registered under the IMMEX program must count with the VAT and IEPS certification.
- PROSEC: These programs are aimed at legal entities that produce certain goods, allowing them to import diverse goods for use in the development of specific products at preferential ad-valorem tariffs (General Import Tax), regardless of whether the goods to be produced are for export or the domestic market.
- 8^thRule: It is the license or permits issued by the Ministry of Economy through any of the tariff fractions with heading 98.02, that allows companies to import machinery and equipment, materials, inputs, parts, and components in order to obtain administrative facilities and preferential tariffs.

All the above mentioned are some main reasons why shelter services in Mexico have become a preferred destination for transnational manufacturing companies. Therefore, in Mexico, you can find the manufacturing facilities of some of the biggest companies worldwide. Within the automotive industry, you can find Volkswagen Group, BMW, GM, Toyota, Daimler, Ford Motors among others. In addition to Bombardier INC, Safran, and EATON Corporation from the aerospace industry, among other big companies from various industries such as 3M, Becton Dickinson, GE, Jhonson & Jhonson, and Plexus, among many others.

Is your business considering moving to Mexico? Mexcentrix can help you by facilitating the process through a smooth start and running of operations. Contact us!

30Dic

Advantages of Manufacturing in Mexico

diciembre 30, 2020 Jesus Aguirre

Benefits of Working with Shelter Companies in Mexico

In the last couple of years, several transnational companies have decided to set up manufacturing operations in Mexico, due to the benefits Mexico offers for companies of different industries. Converting Mexico into one of the largest provider of shelter companies worldwide.

Below you can find 6 of the main advantages of manufacturing in Mexico:

13 free trade agreements with 50 countries: Up to date Mexico has signed over 12 free trade agreements with 46 countries, which allows foreign companies to import some raw materials and products free of duties. Additionally, this FTA’s provide Mexico with access to around 60% of the world’s GDP.
Competitive labor costs: In Mexico direct labor cost is considered to be approximately 70% cheaper than United States. In which on average, a direct worker earns approximately $3.50 USD per hour. Furthermore, the average minimum wage in Mexico is of $123.22 MXN pesos per day, except for the northern area, which is $185.56 MXN pesos per day. According to the minimum wage in most of the country it corresponds to approximate $6.16USD per day (taking into account an exchange rate of $20 MXN pesos per dollar) compared to a minimum wage in the US of $7.25 USD per hour.
Highly educated and skilled labor force. Mexico graduates on average more than 110,000 engineers from universities and technical institutes, per year. In addition
Economies of scale: Mexico benefits of economies of scale due to its existing industrial clusters. It offers a wide number of customers and supplier options, as Mexico occupies:

Competitive geographical location: Mexico has a competitive geographical location, its proximity to one of the main markets worldwide, USA, provides Mexico an advantage in logistic cost savings. It also facilitates transportation, for example managers in the US can take a flight and reach Mexico within a few hours to visit facilities. Furthermore, due to a similar time zone to the USA or Canada, it facilitates communication and there is a less language barrier.
Export incentive programs: Mexico counts with diverse foreign trade incentive programs such as:
- IMMEX Program: Is an instrument which allows the temporary import of goods that are used in an industrial process or service , to produce, transform or repair foreign goods imported temporarily for subsequent export, without paying VAT and countervailing duties, and deferring or not paying General Import Tax.
- PROSEC: These programs are aimed at legal entities that produce certain goods, allowing them to import diverse goods for use in the development of specific products at preferential ad-valorem tariffs (General Import Tax), regardless of whether the goods to be produced are for export or the domestic market.
- 8^th Rule: It is the license or permit issued by the Ministry of Economy through any of the tariff fractions with heading 98.02 of the Tariff of the Law of General Import and Export Taxes that allows companies to import machinery and equipment, materials , inputs, parts and components in order to obtain administrative facilities and preferential tariffs.

Shelter companies play an important role in helping foreign companies establish in Mexico, without dealing with the associated risks such as labor liability, ownership of facilities and limitation of liability in Mexico. Learn more about the advantages of shelter companies in Mexico, and what Mexcentrix can do for your company.

Want to learn more about manufacturing in Mexico? Mexcentrix can support you with a cost model for your operations in Mexico or a feasibility study. Contact us!

24Dic

IN 2021 THE MINIMUM WAGE IN MEXICO WILL INCREASE BY 15%.

diciembre 24, 2020 Jesus Aguirre

On December 23th 2020, it was published in the Federal Official Gazette (Diario Oficial de la Federración, DOF) the resolution by which the Council of The National Minimum Wages Commission (CONASAMI) of Mexico states de general and professional minimum wages that will come into force since January 1^st 2021.

The National Minimum Wages Commission (CONASAMI) of Mexico approved a salary increase for next year of 15%, starting January 1^st 2021.

The minimum wage will increase from $ 123.22 MXN pesos to $ 141.70 MXN pesos per day in most of the country, while in the Free Zone of the North Border it will increase from $ 185.56 MXN pesos to $ 213.39 MXN pesos per day.

In addition, two professions will be integrated into the list of professional minimum wages, which are: domestic workers, with an increase of 25%; with respect to the general minimum wage in the rest of the country in force in 2020. The other profession is agricultural worker, who will receive a 30% increase over the current minimum wage.

With this increase, Mexico climbs eight positions internationally in terms of the minimum wage, ranking 76 out of 135 countries. The aspiration in the current administration is to achieve a position among the first 60 countries with the highest salary perceptions.

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For more information please visit: http://dof.gob.mx/nota_detalle.php?codigo=5608587&fecha=23/12/2020

22Dic

Advantages of Shelter Companies

diciembre 22, 2020 Jesus Aguirre

There are different options in which a foreign company can operate in Mexico, depending on the business model that fits best their needs:

Standalone: The foreign company creates a new entity in Mexico, with total control of all operations including administrative functions, and with total independence from third parties.
Joint Venture: There is an equal partnership between a Mexican manufacturer and a foreign company. Within this model, the foreign company faces more risks and liabilities than a shelter business model.
Shelter: A company is hired by another to manage all administrative and legal tasks, while the other company can focus on its core business. Through a shelter company, there is no need to hire personnel for administrative functions.
Contract manufacturing: In which a company is hired by another to produce goods or provide a service. Nevertheless, the company does not have full control and oversight of production and quality assurance.

Shelter companies help foreign companies start operations faster, more effectively, and through a risk mitigation approach. If a company is planning to establish operations in Mexico, a good option will always be to associate with a national company, with experience and know-how of local regulations.

Shelter companies can support to manage important administrative business tasks such as:

Human resources
Tax and accounting
Logistics
Foreign trade operations
Environmental Health and Safety
Legal

They can facilitate the start operations without the need for an established and legal presence in the country.

Currently, Mexico has signed 12 trade agreements with 44 countries, counts with a competitive and highly skilled labor force, among other advantages that have converted Mexico into a strategic location for transnational companies within the manufacturing industry.

Mexcentrix - Advantages of Shelter Companies

Advantages of using a business shelter

Having a shelter company allows foreign companies to establish operations without dealing with the associated risks such as labor liability, ownership of facilities and limitation of liability in Mexico and with reduced exposure, while at the same time saving time by being able to provide a faster start-up and money.

Companies from all over the world have found in Mexico a safe investment ally, such as shelter service companies. The advantages of working under a shelter company are among others:

Reduced legal risk and liability
Faster start-up
Savings due to economies of scales
Lower border crossing costs
Lower labor costs
Ensure 100% compliance with Mexican labor, tax, and foreign trade regulations.

Which Shelter company is the best option for your company

To find the shelter service that best suits the needs of your company, it is essential that you make a cost- benefit analysis. Services with low rates do not always mean a better option, you must take into account what the company’s priorities are and the quality of their services.

Remember that the main objective of a shelter company is to provide you with guidance, experience, solutions and protection.

Meet Mexcentrix

Mexcentrix is a shelter company with well-established operations that can accommodate the fastest start-up possible. We can get your operations up and running in as few as 30 business days with a cost-effective and flexible shared business services plan.

Through our shelter services, we enable companies to improve cost- efficiency and reduce the risk of manufacturing in Mexico by outsourcing the administration of the Mexico manufacturing facility including Human Resources, Tax, and Accounting, Foreign Trade among others.

By these means, our clients can focus primarily on production functions and quality control, while we handle the rest. Contact us for more information.

16Dic

UK and Mexico sign post-Brexit trade agreement to avoid harsh No Deal tariffs

diciembre 16, 2020 Jesus Aguirre

The UK has signed a continuity trade deal with Mexico worth more than £5 billion to avoid tough tariffs on exports after Brexit, the government has announced.

International Trade Secretary Liz Truss said the agreement will allow the two countries to “take our trade to new heights” as it seeks to negotiate a further trade deal next year.

The UK-Mexico Trade Continuity Agreement is expected to benefit the automotive, pharmaceutical, textiles, agriculture, food and drink sectors, as well as other manufacturing industries.

The deal will keep tariffs on car and UK drinks exports at 0%, saving tens of millions of pounds in duties which would have been applied under World Trade Organisation terms.

The countries have also agreed to start negotiating a new free trade agreement next year which hopes to go further than the existing deal.

Ms Truss said: “This deal supports a trading relationship worth more than £5 billion and locks in access to each other’s markets.

“We look forward to working together with our Mexican friends and allies on a new and ambitious trade agreement in 2021. This will allow our two countries to go much further in areas such as data, digital trade, investment, intellectual property and services.

“This is also the seventh trade deal we’ve secured with a member of CPTPP, the grouping of 11 dynamic economies around the Pacific. So, it’s another really important stepping stone toward the UK joining CPTPP, and I look forward to making our application to do just that early next year.

“Together we’ll enjoy even more success by seizing this opportunity to take our trade to new heights. International trade will help us to overcome the challenges of coronavirus and drive economic growth across our United Kingdom.”

It comes as the UK continues post-Brexit trade talks with the European Union – with just over two weeks until the transition period ends.

It is unclear whether a deal will be struck as the clock runs down and crucial issues remain to be resolved.

Three topics are yet to be agreed on – governance, the ‘level playing field’ and fisheries.

It is understood concessions may be being made by both sides in a last-ditch attempt to come to a deal.

Source: LBC

( https://www.lbc.co.uk/news/uk-signs-post-brexit-trade-deal-mexico-avoid-no-deal-tariffs/)

08Dic

Marelli North Carolina USA is moving operations to Mexico

diciembre 8, 2020 Jesus Aguirre

A manufacturer with a long history in Lee County is closing its Sanford plant and moving the operation to Mexico, a move that means more than 300 local layoffs.

Marelli North Carolina USA, a subsidiary of Italian automotive part maker Marelli, is permanently closing the site, ceasing all production in the second half of 2021. In a layoff notice filed with state officials last week, the company said the closure means job losses for 329 employees.

The plant is located at 2101 Nash Street, southeast of downtown Sanford.

“The automotive industry is facing a number of prolonged challenges,” the company’s general counsel, Michael Monday, said in the WARN notice provided to the North Carolina Department of Commerce. “Vehicle volumes are trending downward, exacerbated by Covid-19 while the introduction of new technology from non-traditional suppliers is forcing Tier 1s to review their operations to increase competitiveness.”

To compete, the firm needs to stay ahead of those trends, Monday said in the notice.

“As part of Marelli’s ongoing strategy to strengthen its market position, we will relocate our US-based powertrain manufacturing operations to Saltillo, Mexico,” he adds. “This move will increase efficiency, enabling the company to become more cost competitive while meeting customer demand.”

The plant has been an institution in Sanford for more than 40 years. Inaugurated in 1976, the plant produces automotive powertrain technologies.

Over the decades, the plant evolved from producing carburetors to modern powertrain systems, including intake manifolds and engine control systems for automobiles, motorcycles, power sports and industrial engines.

Marelli didn’t immediately return a request to comment on the situation.

Source: The Business Journals

(https://www.bizjournals.com/triangle/news/2020/12/07/marelli-sanford-close-layoffs-auto-parts-jobs.html)

01Dic

Overview of the Automotive Industry in Mexico

diciembre 1, 2020 Jesus Aguirre

The automotive industry in Mexico began in 1921, with the arrival of the first Buick assembly plant; continuing with Ford Motor Company in 1925 and General Motors in 1935. The industry has grown exponentially, both in sales, export, and production of vehicles and auto parts, expanding the manufacturing in Mexico business.

Nowadays the automotive industry is a key sector for the Mexican economy; it represents 3% of Mexico’s GDP and a 16% participation of the manufacturing GDP. It is currently the 7th world producer of light vehicles, the 3rd largest exporter of vehicles, and the 4^th largest exporter of automotive parts; the main destination countries USA, Canada, and Germany.

Mexico is one of the main countries with the highest investment in this sector. Unlike other countries with CKD production (Vehicles completely assembled from components supplied by another plant), production in Mexico is 99% CBU (completely built-up) which means, finished products ready to sell in the domestic market or for export without the need to require assembly after finished.

Main reasons for automotive companies manufacturing in Mexico

Mexico’s 12 free trade agreements with 46 countries. USMCA plays an important role within this sector.
Mexico counts with an extensive and developed network of Tier 1, Tier 2, and Tier 3 suppliers as a result of the 30 automotive OEM plants located in Mexico. Furthermore, 24 states of Mexico have the presence of automotive supplier companies.
Competitive and qualified labor force.
Mexico has a great strategic geographic location. Its short distance from countries with high car sales, such as the United States, is an important consideration for companies manufacturing in Mexico.

Main facts about light vehicle production in Mexico

In Mexico, there are 22 companies affiliated with the Mexican Association of Automotive Industry (AMIA), which had a total production of light vehicles from January to October 2020 according to 2,465,439 vehicles. As it can be observed in the following graph General Motors, Nissan, FCA Mexico, and Volkswagen count with the highest production.

It is important to mention that 2020 mainly due to its current situation of COVID-19, has recorded a lower vehicle production compared to 2019, a year in which there was a production from January to October of 3,288,589. According to Deloitte, in April and May 2020 the industry reported its lower level of production in history. And according to Statista it has been projected that the production of light vehicles in Mexico will decrease by 23.7% in 2020.

Out of the total vehicles produce from January to October 2020, over 85% are exported, with a total of 2,119,022 light vehicles exported within this period. 80% of these exports were headed to the United States, followed by Canada with 6% and Germany with 5.8% of total exports.

The main companies that led the above-mentioned exports are being General Motors, FCA México, Nissan, and Volkswagen, as can be seen in the graph below. While the brands with the least export were premium brands such as BMW Group and Mercedes-Benz. The export of vehicles in Mexico represents 17% of total exports.

As above mentioned, due to the current pandemic situation Mexico’s automotive industry has been affected and production of vehicles and auto parts has decreased. According to Deloitte, with information from HIS Markit, it is expected that the level of production in Mexico in 2019 and sales is reached again in 2024, due to its sales reduction in the USA and other countries.

Are you thinking of settling in Mexico? Mexcentrix can help you. We assure you a successful and timely start of operations while providing strategic guidance in order to help your company reach its goals.

25Nov

Ikea plans to open its Mexico City store early next year

noviembre 25, 2020 Jesus Aguirre

The first brick-and-mortar Ikea store in Mexico is scheduled to open in the first quarter of 2021 in Mexico City, although the company’s recently opened online site is already busy from unexpected demand.

“We are excited to open Ikea in Mexico only three years after the decision was made to enter the Mexican market, especially under the tough Covid-19 conditions in Mexico City,” said Ikea Mexico retail country manager Malcolm Pruys in a press release. “It took significant collaboration and support across the Ikano Group and the retail business to make this possible. We now look forward to opening the first store early next year,”

Ikano Group is a corporation that operates franchised Ikea stores in Singapore, Malaysia, and Thailand. A conglomerate with businesses across several industry sectors, it announced in August that it plans to build a 100,000-square-meter manufacturing plant in Ramos Arispe, Coahuila, for mattresses and sofas to be sold in North American Ikea stores.

Ikea store manager Annie Chandler told the newspaper El Financiero that the new physical store will be an anchor in the Encuentro Oceania mall, currently under construction in a former industrial zone in the Moctezuma Section 2 neighborhood in Venustiano Carranza.

Originally, the brick-and-mortar store was meant to open before the online one, but Covid-related issues forced the company to open the online site first. The website opened with a soft launch with no publicity as the company wanted to get to know the Mexican market and work out long-term details like the kind of vehicles it would use in its delivery fleet.

But customers found the site anyway. Within two days, the company was overwhelmed with orders from all over Mexico.

“We launched in a very discreet manner because we hoped to grow slowly,” Pruys told Forbes México. “There was a 1000% more demand than predicted, for which we were not prepared.”

The online site is currently dealing with the unexpected avalanche of orders with only about 150 customer service employees. The website warns customers that deliveries could be delayed up to 15 days.

Meanwhile, plans proceed slowly but surely to install the brick-and-mortar store in the Encuentro Oceania mall. The shopping center, which will have 85,000 square meters of commercial space available, will contain green spaces and will involve the renovation of the Romero Rubio Metro station and sidewalks in the neighborhood, said Galo Rosello, legal director for Pulso Immobiliario, the development company building the over 500-million-peso (US $25-million) project.

According to the Ikea website, the brick-and-mortar store is expected to create around 350 direct jobs and more than 1,000 indirect ones.

Mayor Claudia Sheinbaum recently announced that the mall will also host one of the 300 Pilares community centers she plans to open by 2021 to revitalize community life and reduce crime.

Source: Mexico News Daily

(https://mexiconewsdaily.com/news/ikea-plans-to-open-its-mexico-city-store-early-next-year/)

Jesus Aguirre

FOREIGN TRADE NEWSLETTER

Considering moving your manufacturing operations? Shelter services in Mexico can help you!

Competitive Labor Costs:

13 free trade agreements with 50 countries

No restrictions on foreign ownership

Economies of scale

Advanced supply chain

Lower shipping costs

Foreign Trade and Tax Incentives Programs