There are different models in which a foreign company can operate in Mexico, including the shelter program, and the following ones:  

• Standalone: The foreign company creates a new entity in Mexico, with total control of all operations and 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 client maintains full control and can focus on its core business.  
• Contract manufacturing: A company is hired by another to produce goods or provide a service; the company does not have full control and oversight of production and quality assurance. 

The Shelter Program

The shelter model started in Mexico in the 1980s as a response to an increase in foreign direct investment.  Shelter companies help foreign companies in reducing their risk, liabilities and financial exposure associated with entering into Mexico directly.  

Overall, this model still offers exposure, costs, and risks reduction. As the shelter company acts as the legal entity of record in Mexico for all compliance-related matters.

Also, the foreign company is exempt from permanent establishment in Mexico and can get immediate access to the IMMEX Program, among others.

The shelter company will take care of all the back-office operations and all administrative tasks while letting the foreign companies focus on its core business.  By these means, the foreign company can focus on production, quality control engineering, inventory, sales as well as the many other production-related aspects of the business.  

How does the shelter program work?  

A shelter company can help since the startup and pre-operational phase, with business case, feasibility studies, cost analysis, site selection among others.  

Secondly, once the company has found the best space solution and has obtained its permits and licenses, we will assist with a successful launch and run of operation of its plant in Mexico.   

After the company has consolidated its operations, they can evaluate if they would like to stay under the full shelter or to absorb some administrative tasks.

Which includes absorbing one department such as foreign trade, tax, or human resources among others, while letting the shelter company keep doing the rest.  

How long should a foreign company stay under the shelter scheme?  

There is no specific duration of the shelter model and it may vary according to the needs of the foreign company. The main idea is for our clients to stay under the shelter program as long as it makes sense according to its business case and strategy. Therefore, companies can decide to leave the shelter model at any time or to remain indefinitely.  

Moreover, the shelter model has evolved along with the industry and government regulatory reforms since the 1980s.

It is still one of the most popular business models to start operations in Mexico, due to the different advantages the shelter model has to offer: 

• Lower investment and operating costs 
• Faster start- up 
• Economies of scale 
• Ensure 100% compliance with mexican regulations.  

• Reduced Mexican legal exposure 

Looking to start operations in Mexico ? Contact us for more information on the shelter program and the benefits Mexcentrix has to offer to your company. 

Historically, Foreign Direct Investment (FDI) has been one of the most important factors for Mexico. Since January 1, 1994, with the entry into force of the North American Free Trade Agreement (NAFTA), and further on with the entry into force of the Agreement between Mexico, the United States and Canada, the T-MEC or USMCA, it has been possible to observe not only a greater integration in the North American region, but also the transformation of the export sector in Mexico, the creation of jobs and the attraction of investments in the manufacturing sector.  

Moreover, during the 24 years of NAFTA, although Mexico was not benefited in all sectors included in the agreement, it is considered that in terms of foreign direct investment attraction especially in some economic sectors, Mexico benefited the most.

This success is attributed to multiple aspects, from Mexico’s strategic geographic position, which had facilitated land, port, air and rail connectivity and logistics with North, Central and South America, to low labor costs, high availability of qualified labor, low industrial costs,  developed infrastructure (according to ministry of communications and transport Mexico counts with more than 400 thousand kilometers of highways, 27 thousand kilometers of railroads, 77 airports, 117 port) ,availability of suppliers, among others. 

While it is true that these are some of the reasons why Mexico became an attractive destination for foreign direct investment, Mexico is still a strategic place for trade and investment, for the additional following reasons: 

1. Mexico is among the countries with the largest number of Free Trade Agreements in the world. 

     Mexico currently has a network of 14 Free Trade Agreements with 50 countries (FTAs), 30 Agreements for the Promotion and Reciprocal Protection of Investments (APPRIs) with 31 countries or administrative regions and 9 agreements of limited scope (Economic Complementation Agreements and Partial Scope Agreements) within the framework of the Latin American Integration Association (ALADI). 

Furthermore, the free trade agreements give Mexico access to over 60% of the world´s domestic product. Furthermore, this economic opening, has been crucial to diversify Mexico’s trade relations with the world and thus boost the country’s economic growth. 

     2. Mexico is one of the largest countries and economies in the world.

Based on data provided by the World Bank in    2021; Mexico is among the fifteen largest economies in the world and is the second largest economy in Latin America. In view of this data, the Mexican market represents a great potential market, in addition to its rich favorable geography and abundant natural resources. 

     3. Mexico offers programs and decrees that encourage foreign investment in the country. 

At the Federal level,  Mexico offers programs and decrees to encourage foreign investment in the country, among which the following stand out: 

• 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 the general import tax , VAT and countervailing duties.  

• PROSEC 

The Sectorial Promotion Programs (PROSEC) are an instrument aimed at legal entities that produce certain merchandise, through which they are allowed to import various goods with a preferential ad-valorem tariff (General Import Tax) to be used in the elaboration of specific products, regardless of whether the goods to be produced are destined for export or for the national market. 

• DRAWBACK Program 

The objective of the Drawback Program is to return to exporters the value of the general import tax paid for imported goods or supplies that are incorporated into export merchandise, imported merchandise for repair or alteration, or merchandise that is returned in the same state. 

Therefore, global companies can take advantage of the incentive programs offered by the Mexican government. While at the same time share the best practices of experience in other countries, as well as the values they advocate, including competition, ethics and the promotion of diversity, which is why Mexico has been committed for years to facilitate and provide the right conditions for multinational companies to benefit from Mexico´s advantages.  

If your company has future plans to invest in Mexico, Contact us for a free consultation. 

Mexico is a country that highly depends on foreign trade, it has signed 13 free trade agreements (FTA) with 50 countries, therefore, mexican products have preferential access to the main markets worldwide that represents more than 50% of world GDP. The above mentioned makes Mexico an attractive country for manufacturing for a subsequent export, mainly in the automotive and electronic industries, Mexico plays a fundamental role in exports.

According to data from banco de Mexico, in 2020 exports of goods and services form Mexico totaled more than 400 billion dollars, equivalent to 47% of the national GDP, with Mexican production fully integrated into global value chain. Mexico ranked  as the 11^th exporter and 13^th importer worldwide in 2020, according to the World Trade Statistical Review 2020 prepared by the World Trade Organization (WTO).

Mexico Exports

According to INEGI data in September 2021, exports totaled USD $41,680 million. In general, the. Main exported products are the following:

• Vehicles

The export of cars in Mexico has been increasing each year and represents 11% of the country´s total exports, Mexico is the 5^thlargest exporter and manufacturer of specialized and heavy vehicles and of automotive parts (making up 7% of total exports). United States and Canada receive the largest number of exported light vehicles from Mexico.

• Oil

Around 48% of the national oil production is exported, its main destination is United States, but it also supplies to Canada, China, Japan, New Zealand, Australia, and Germany.

• Minerals

Mexico occupies currently the 9th place in regards to exports of copper worldwide. Due to Mexico’s natural resources, different countries such as Canada, Germany, the United States, Japan, and Spain have been investing in this sector.

Source: (Trading Economics, 2020)

Mexico Imports

In September 2021, imports from Mexico totaled USD $44,078.46 million. In general, the main exported products are the following:

• Autoparts

The most imported goods in 2020 were autoparts with a value of USD$ 22 billion in 2020, and mainly imported from United States, China, Japan and Germany.

• Electrical and electronic Components

Within the second most imported category are electronic integrated circuits with a value of 18.8 billion, which main countries of origin are Malaysia, China, Taiwan and South Korea. Other relevant goods imported within this sector are:  telephones, computers, data processing machines, machinery parts, electrical wires and cables among others. 

• Petrleum Oil

The third most imported category in 2020 was composed by oils of petroleum or bituminous materials which more than 90% is imported from United States.

Mexico receives refined oil form the United States, as it cannot meet its demand and turns to foreign refined oil, since the Mexican economy is highly dependent on oil to run its industries and assembly plants.

Source: (Trading Economics, 2020)

The manufacturing industry in Mexico has widely promoted exports and both have helped drive the growth of the economy in Mexico. The forecast for the next few years is that exports will continue to grow.

Are you thinking of investing in Mexico?

If your company is interested in investing in Mexico and importing or exporting from our country, consult our foreign trade services, we facilitate your operations and guarantee 100% compliance with the obligations, and we use our knowledge of Mexico´s trade agreements in an effective strategy for your business, significantly reducing costs and streamlining logistics.

Sources:

• Data Mexico. (2021). Mexico. Retrieved from https://datamexico.org/en/profile/geo/mexico
• Trading Economics. (2020). Mexico Exports by Category. Retrieved from https://tradingeconomics.com/mexico/exports-by-category
• Trading Economics. (2020). Mexico Imports by Category. Retrieved from https://tradingeconomics.com/mexico/imports-by-category
• WTO. (2020). Mexico. Retrieved from Trade Profiles: https://www.wto.org/english/res_e/statis_e/daily_update_e/trade_profiles/MX_s.pdf