One of the main advantages when nearshoring to Mexico is its cost-effective labor market. However, it’s important to understand the country’s labor framework to stay compliant and build a productive workforce. Here’s what you need to know:

Key Aspects of Mexican Labor Law

Mexico’s Federal Labor Law (Ley Federal del Trabajo or LFT) is the primary legal framework that governs labor relations in the country. It sets out the rights and obligations of both employees and employers, aiming to promote fair labor practices, decent working conditions, and social justice. The law applies to most employment relationships in Mexico and covers various aspects such as employment contracts, wages, working hours, rest periods, occupational safety, and procedures for labor disputes.

Key Principles of Mexican Labor Law:

• Worker Protection: The LFT strongly favors employees in legal interpretation, as it’s based on social justice and constitutional labor rights.
• No Employment at Will: Employees in Mexico cannot be dismissed without cause and without severance; labor laws are much more protective compared to countries like the U.S.
• Mandatory Benefits: Employers must provide specific benefits, including paid vacation, Christmas bonus (aguinaldo), profit sharing, social security, and severance pay if applicable.

Work Shifts and Hour Limits

The law classifies work shifts into three main categories: daytime, nighttime, and mixed shifts, each with specific rules regarding allowable working hours. These classifications are essential for ensuring compliance with labor standards and protecting workers well being. Below is an overview of each shift type:

Daytime

• Hours: between 6:00 a.m. and 8:00 p.m.
• Maximum daily duration: 8 hours.
• Maximum weekly duration: 48 hours.
• Working days: Monday to Saturday.

Night shift

• Hours: Between 8:00 p.m. and 6:00 a.m
• Maximum daily duration: 7 hours.
• Maximum weekly duration: 42 hours.

Mixed Workday

• Combination: Includes periods of the day and night shift, provided that the night period does not exceed 3.5 hours; otherwise, it is considered a night shift.
• Maximum daily duration: 7.5 hours.
• Maximum weekly duration: 45 hours.

 Overtime Pay

Hours worked beyond the established workday are considered overtime and must be paid as follows:

• Up to 9 overtime hours per week: Paid at 200% of the regular hourly wage.
• From the 10th overtime hour per week onward: Paid at 300% of the regular hourly wage.

The law limits overtime to a maximum of 3 hours per day and no more than 3 times per week, meaning a total of 9 overtime hours per week.

Trial Periods

According to Article 39-A of the Federal Labor Law (LFT), when entering into an initial contract for an indefinite period or more than 180 days, a trial period may be established with the following maximum durations:

• Up to 3 months (90 days) for operational, administrative or general positions.
• Up to 6 months (180 days) for management, managerial, or positions requiring specialized technical knowledge.

During the probationary period, the employer may terminate the employment relationship without liability for payment of severance (liquidation), provided that there is objective evidence of lack of aptitude or performance, and the legal procedure is respected.

Minimum Wage

As of January 1, 2025, the official minimum wages set by the National Minimum Wage Commission (CONASAMI) are:

• General minimum wage: MXN 249.00 per day (USD 14.50)
• Northern Border Zone: MXN 374.89 per day (USD 21.80)

Mandatory Benefits by Law

Mexican employers are legally obligated to provide the following benefits:

Common Additional Benefits Offered by Employers

Many companies offer voluntary benefits beyond what the law mandates to remain competitive. These include:

• More than 15 days of Christmas bonus
• Savings funds (Fondo de Ahorro): Often matched up to 13% of salary
• Food vouchers (vales de despensa): Tax-exempt up to a limit (approx. 40% of UMA)
• Transportation assistance
• Private health insurance
• Life insurance

Employee Dismissal

Dismissal in Mexico can be with cause or without cause, but either way, it must follow legal protocol:

• Without cause: Requires a severance payment of

• • 3 months of daily salary
  • 20 days per year worked
  • 12 days per year of seniority bonus (capped at 2x minimum wage)

• With cause: No severance required, but must be justified (Article 47)

Final Recommendations

Here are some best practices for hiring in Mexico:

• Always use written contracts, even for temporary roles.
• Register employees with the IMSS and INFONAVIT on day one.
• Keep detailed payroll records for compliance and audits.
• Partner with a local HR/payroll provider if you’re unfamiliar with local laws.
• Use a compliant payroll software

Mexico’s labor landscape is structured to protect employees but remains employer-friendly when properly managed. Understanding your obligations and offering attractive benefits will position your company as a competitive and responsible employer. For more insights into how shelter companies can help your business, consider contacting Mexcentrix and exploring case studies of companies that have successfully leveraged this model.

Mexcentirx can guarantee 100% compliance with labor laws and facilitate the process of hiring in Mexico. Contact us!

In the highly competitive global manufacturing landscape, companies are constantly seeking ways to enhance efficiency, reduce costs, and improve their market positioning. One valuable program in Mexico that has helped numerous manufacturers achieve their goals is the PROSEC (Programa de Promoción Sectorial), established in Mexico in 2002.

What is PROSEC?

PROSEC is a program that allows a reduction of the general import tax (IGI) on imported goods to be used in the production of specific products of the 24 PROSEC sectors.

The program is beneficial for businesses that produce goods for both domestic and international markets.  Nevertheless, in order for the company to be able to obtain the PROSEC authorization, it must manufacture the goods listed in Article 4 of the PROSEC Decree, using the goods/materials listed in Article 5 of the PROSEC Decree.

By lowering import costs, PROSEC enables manufacturers to optimize production processes and remain competitive.

Key Benefits of the PROSEC Program in Mexico

1. Reduced Import Duties: Companies enrolled in PROSEC can import necessary materials and equipment at lower or zero tariff rates, significantly reducing operational costs.
2. Increased Competitiveness: By lowering costs, manufacturers can price their products more competitively in both local and international markets.
3. Encourages Investment: The program makes Mexico a more attractive destination for foreign direct investment (FDI) in manufacturing.
4. Eligibility Across Various Sectors: PROSEC is available for a wide range of industries, including automotive, electronics, textiles, and pharmaceuticals, among others.

How to Apply for the PROSEC Program in Mexico?

Manufacturing companies interested in joining PROSEC must:

Rule 8^th (Regla Octava)

According to Article 2, Section II, of the Complementary Rules of the General Import and Export Tax Tariff Law, Eight Rule is an import permit to reduce the general import tax (IGI) for those goods that are not listed in Article 5 of the PROSEC decree. Depending on the criteria to which they are subject, they can be authorized or not by the Ministry of Economy.

To be a company applicable for this permit, it is indispensable to have the PROSEC Program first, and in case of temporary imports, it must also count with an IMMEX Program.

Companies that have a manufacturer’s registration and authorization to import under the 8th rule may import such goods through any of the HTS Codes of heading 98.02 of the tariff of the general import and export taxes (TIGIE), solely and exclusively to expand an industrial plant, replace equipment or integrate an article manufactured or assembled in Mexico.

Obtaining PROSEC or Rule 8^th 

PROSEC and Rule 8^th are both considered valuable tools for manufacturing companies seeking to enhance efficiency, reduce costs, and remain competitive in a globalized economy.  These programs present compelling opportunities worth exploring.

For manufacturing companies seeking to explore these programs and optimize their operations, Mexcentrix can help you!

At Mexcentrix, we can support you in analyzing whether your company is eligible to obtain PROSEC or Rule 8th and assist you through the complete application process and compliance with obligations, such as the Annual Report of Foreign Trade Operations.  

Contact us for more information! 

Is your company considering manufacturing in Mexico?

Mexico has become one of the top manufacturing destinations due to its skilled workforce, proximity to the U.S., cost advantages, and trade agreements like the USMCA. However, choosing the right location within Mexico is crucial to ensuring your operation runs efficiently and cost-effective. Below you will find a guide with factors to consider for selecting the best site for your business.

1. Understand Your Industry Needs

Different regions in Mexico specialize in various industries. Choosing a location that aligns with your manufacturing needs or an already established industry cluster,  will help you take advantage of the local talent pool, suppliers, and infrastructure.

• Automotive: Predominantly in the Bajío region (Guanajuato, Querétaro, Aguascalientes, San Luis Potosí) and Northern Mexico (Chihuahua, Nuevo León, Coahuila)
• Aerospace: Strong presence in Baja California, Chihuahua, Querétaro, and Sonora
• Electronics: Concentrated in Tijuana, Guadalajara, and Monterrey
• Medical Devices: Mainly in Tijuana and Baja California

2. Consider Proximity to the U.S. Border

If your supply chain depends on quick access to the U.S., a northern border state like Baja California, Sonora, Chihuahua, or Nuevo León may be ideal. These regions offer:

• Shorter transit times
• Lower logistics costs
• Established maquiladora (IMMEX) infrastructure

However, if labor costs are a major concern, you may find better rates in central or southern Mexico.

3. Evaluate Infrastructure & Logistics

Your manufacturing site should have the necessary infrastructure, including:

• Road & rail access: Mexico has key highways connecting to the U.S. and industrial railways.
• Ports: If you rely on overseas shipping, look at locations with faster access to  Veracruz, Manzanillo, or Lázaro Cárdenas.
• Airports: If you need fast global shipping, cities like Monterrey, Guadalajara, and Mexico City have major cargo hubs.

4. Analyze Labor Availability & Costs

Labor costs vary across Mexico. Border cities typically have higher wages due to demand, while central and southern states offer more affordable labor.

• Higher wages but experienced workforce: Monterrey, Tijuana, Ciudad Juárez
• Balanced costs and availability: Querétaro, León, Aguascalientes, San Luis Potosi.
• Lower wages but growing talent pool: Puebla, Yucatán, Oaxaca (But not much industrial infrastructure or established industries).

Furthermore, labor is more difficult to find in the northern region, due to the competitive market.

5. Review Incentives & Government Support

Many states offer incentives to attract foreign manufacturers. These can include:

• Tax Incentives
• Reduced utility costs
• Training programs
• Customs benefits

6. Assess Security & Business Environment

While Mexico has strong industrial zones, security varies by region. Before selecting a site, consider the following:

• Crime rates & safety
• Local government stability
• Union activity

7. Evaluate Real Estate & Operational Costs

The cost of leasing or purchasing industrial space varies by region. While northern states often have higher real estate costs, central and southern Mexico may offer more affordable and variety of available options.

Compare:

• Industrial parks with built-in utilities
• Custom-built facilities
• Availability of warehouse space

Selecting the best manufacturing site in Mexico requires balancing industry needs, location, infrastructure, labor, incentives, security, and costs. Each business has unique requirements, so conducting thorough research with support from local experts such as Mexcentrix can ensure a smooth expansion into Mexico.

If you’re looking for expert guidance on choosing the right site, navigating legal requirements, or understanding cost structures, contact us.

In recent years, Mexico has positioned itself as a key destination for global manufacturing. For many years international companies seeking to reduce costs,  bring their operations closer to strategic markets or expand abroad,  have found the maquila model in Mexico an attractive option.

The maquila model offers significant tax advantages, allowing companies to reduce operating costs while maintaining high production standards. However, it is crucial to understand current regulations and select the right operating scheme to take full advantage of these benefits.

Maquiladoras in Mexico

There are 6,500 companies in the maquiladora and manufacturing export industry (IMMEX) that play a fundamental role in the Mexican economy, with the following contribution in 2024:

Source: Sector manufacturero: participación en PIB México 2024, INDEX Consejo Nacional de la Industria Maquiladora y Manufacturera de Exportación 2024

Main maquila models in Mexico

Companies seeking to establish operations in Mexico under the maquila model may choose to operate under different structures, among them:

• Maquila Model: Allows the temporary importation of inputs and components without paying some applicable taxes, as long as that the finished products are exported and that they count with the authorization of the applicable programs (Maquiladora and Export Services Industry Program (IMMEX Program) and VAT and IEPS Certification) Maquiladoras operating under the IMMEX Program, can carry out operations in Mexico without being considered as a permanent establishment of the resident foreign company. In order for this special treatment to apply they must import the materials under this program and additionally comply with the several requirements, including among others:

• Ownership of machinery and equipment: The owner of the machinery and equipment used in the transformation process is the foreign company and must not have been previously owned any related party in Mexico
• Income from the maquila operation: The totality of the Maquiladora Companies’ income must derive from their maquila operation. The only income allowed from related activities, for example, selling of scrap, must not exceed 10% of the total income generated by the maquila.
• Double Taxation Avoidance Treaty: Mexico must have a double taxation avoidance treaty in force with the country from which the foreign company belongs, too.
• Toll Manufacturer Model: Under this model, the Mexican company receives materials from abroad on consignment, which then transforms them into the finished goods, and returns the finished goods to the foreigner, without owning the inputs.

Under this model, the Mexican company acts solely as a supplier of manufacturing services to its foreign customers, and the machinery and equipment belong to the Mexican company.

• Shelter Model: Enables a company to provide services to multiple foreign companies and facilitate their operation in Mexico, reducing time, costs and liabilities. Unlike the Maquila Model, this framework exempts the foreign company from establishing a legal entity in Mexico, and therefore a permanent establishment is not created in Mexico.

Taxation of Maquiladoras

A maquila company can calculate their taxable income based on the Safe Harbor method. In which tax profits equals the greatest amount equivalent to one of the following percentages:

• 9% of the value of the assets
• 5% of the amount of ordinary costs and expenses of their operation.

Challenges of the Maquila Model in Mexico

Despite its many advantages, the maquila in Mexico faces several challenges, among them:

• Complex and strict regulation: Failure to comply with tax, foreign trade and operational requirements can result in penalties and loss of benefits. Companies must count with an inventory control software (Annex 24) to control temporary imports, and which can involve significant time investment and administrative burden.
• Compliance strategies: Specialized advice is key to ensure that the operation complies with Mexican laws and international treaties.
• Political U.S Landscape: President Trump policies on tariffs, by imposing duties to mexican goods, can impact the maquiladora industry in several aspects including the closing of plants in Mexico.

The maquila model in Mexico is an excellent option for companies seeking to reduce costs and optimize their production within the nearshoring framework. However, its correct implementation is key to avoiding risks and ensuring regulatory compliance.

Companies interested in this model should analyze the different operating structures, and consider the support of experts such as Mexcentrix who give specialized advice to maximize the opportunities that Mexico offers in the manufacturing industry. Contact us!

Expanding operations into Mexico is a strategic move for many foreign businesses but navigating the complex regulatory and administrative landscape can be challenging. Shelter companies provide an effective solution, allowing businesses to establish a presence in Mexico without dealing with legal and administrative burdens. There are several types of shelter companies, each offering different levels of service and flexibility. Understanding these models can help businesses choose the right fit for their needs.

1. Shared Shelter

A Shared Shelter model enables multiple companies to operate under a single legal entity. This approach allows businesses to share critical regulatory registrations, such as the Importers Registry, IMMEX permit, and VAT & IEPS Certification. Since administrative services like payroll, human resources, and accounting are shared, companies benefit from lower operational costs. This model is ideal for businesses looking for a cost-effective way to establish operations in Mexico with minimal risk and legal exposure.

2. Dedicated Shelter

In a Dedicated Shelter model, the foreign company operates under an exclusive legal entity owned by the shelter service provider. Unlike the Shared Shelter model, this entity is not shared with other businesses. Under this model, companies can still benefit from a full administrative support. Companies opting for this model typically require greater operational autonomy but prefer to avoid the legal complexities of creating their entity.

3. Independent Shelter

The Independent Shelter model allows foreign companies to establish their legal entity in Mexico while still leveraging of the administrative expertise of a shelter service provider. This model is best suited for companies that want to have legal presence in Mexico and full ownership of their operations but that need assistance in managing compliance, HR, payroll, and other administrative functions.

4. Flexible Shelter / Stand- Alone Administrative Services

For businesses that do not require the full shelter service and only need a third party company to take care of some administrative services, some shelter service providers offer this solution. In this scenario, companies can select only the specific administrative functions they need, such as payroll, HR, foreign trade, accounting or tax services, without committing to a full-service package. This is ideal for businesses that already have some operational capabilities in Mexico but need support in specific areas to enhance efficiency and compliance.

5. Contract Manufacturing with Shelter

Unlike other shelter models that primarily focus on administrative services, the contract manufacturing with shelter also integrates production capabilities. There are only a few shelter companies in Mexico that are also contract manufacturers and that operate under this approach.  In which they actively participate and get involved in the whole manufacturing process. This model is particularly advantageous for businesses looking to outsource production.

Choosing the Right Shelter Model

Selecting the appropriate shelter model depends on various factors, including the business strategy of the company and of the expansion, the complexity of operations, and cost considerations. Businesses seeking to entry into Mexico with reduced risk and legal exposure may find the Shared Shelter model appealing, while those requiring exclusive legal entities may prefer the Dedicated or Independent Shelter options.

By understanding these shelter models, businesses can make informed decisions that align with their strategic goals and operational requirements, ensuring a smooth and efficient expansion into Mexico. For more insights into how shelter companies can help your business, consider contacting Mexcentrix, which in addition to the shared, dedicated and independent shelter also offers the Flexible Shelter / Stand- Alone Administrative Services solution.

We adapat to your company needs and requirements. Contact us!

Expanding operations to Mexico has become attractive for manufacturing companies seeking competitive advantages. While the country offers numerous benefits, including reduced labor costs and proximity to the U.S. market, understanding taxation in Mexico is essential to ensuring success and compliance. Below, we outline the key aspects of taxation that manufacturing companies must understand when establishing operations in Mexico.

Firstly, it is important to understand which are the main federal and local taxes:

Main federal taxes:

• Corporate Income tax (impuesto sobre la renta “IT”)
• Value added tax (impuesto al valor agregado “VAT”)
• Special Tax on Production and Services (“IEPS”)
• Import duties
• Social security contributions

Main local taxes:

• Payroll Tax
• Property Aquisition Tax

Now let`s take a closer look at the taxes that are most relevant for manufacturing companies:

Corporate Income Tax (CIT)

According to the Mexican Income Tax Law, residents in Mexico and foreigners with a Permanent Establishment (PE), are subject to income tax, and are taxed on their worldwide income at a rate of 30% on a net basis.

For manufacturing companies, understanding the scope of taxable income and deductions is vital, as this 30% rate is applicable to taxable profits.  Common deductible expenses include operating costs, depreciation, and certain employee benefits, including employees profit sharing.

Safe Harbour

Under the safe harbor regime, maquiladoras have the option of paying taxes according to the safe harbour method. In which tax profits equals to the greatest amount equivalent to one of the following percentages:

• 9% of the value of the assets
• 5% of the amount of ordinary costs and expenses of their operation.

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 processing, transformation, or repair of goods must be carried out with temporarily imported machinery and equipment owned by the foreign principal.

Value Added Tax (VAT)

The Value Added Tax (VAT) in Mexico is 16%, applicable to:

• –  Sale and lease of goods.
• –  Rendering of services.
• –  Persons who grant the temporary use or enjoyment of assets within Mexican territory.
• –  Import of goods or services into Mexico.

Manufacturing companies, particularly those operating under Mexico’s IMMEX program and VAT and IEPS Certification, may benefit from exemptions or deferrals on VAT for temporary imports of raw materials and components.

Under these programs,  manufacturers can temporarily import materials without paying VAT as long as the finished goods are exported. Neverthelss, it is essential for manufacturers to maintain accurate records and ensure compliance with VAT reporting requirements to avoid fines or penalties.

Payroll Tax

A payroll Tax is applicable on wages and other expenditures derived from an employment relationship. This tax rate varies per State, but such tax normally amounts to 2% and 3% on the wage paid.

Property Acquisition Tax

The buyer of any type of real-estate property (house, land, building, apartment, among others) is responsible for paying taxes on real-state or land. The applicable tax may vary among the different States in Mexico, but the average is a 2% rate. Nevertheless, the Property Acquisition Tax may reach 6.5% on the sale price in some states.

In addition to the main applicable taxes, it is important to take into consideration the following topics related to taxation in Mexico:

Transfer Pricing Regulations

Mexico enforces stringent transfer pricing rules to prevent tax avoidance through under- or over-pricing transactions between related entities. Manufacturing companies with parent companies abroad must ensure that all cross-border transactions are conducted at arm’s length meaning prices must reflect market rates.

Companies should prepare detailed transfer pricing documentation annually to comply with these regulations, demonstrating that their transactions meet arm’s length standards.

Compliance with Mexican Financial Reporting Standards (MFRS)

Financial reporting in Mexico must adhere to Mexican Financial Reporting Standards (MFRS), which may differ from International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP). Manufacturing companies must ensure their accounting systems align with MFRS to avoid compliance issues.

Large companies are often required to undergo annual audits, and maintaining accurate financial records is critical for both tax reporting and audit purposes. Records must be preserved for at least five years and include invoices, receipts, and all financial statements. Digitalization of these records is recommended to streamline compliance processes.

Next step for understanding Taxation in Mexico: Partnering with Experts

The complexities of Mexico’s tax and accounting landscape make partnering with experienced service providers or shelter companies an invaluable strategy for manufacturers. These partners can handle administrative burdens such as tax compliance, tax recovery, among other administrative tasks,  allowing companies to focus on their core manufacturing operations.

Understanding taxation in Mexico is crucial for manufacturing companies aiming to establish or expand their operations in the country. Manufacturers can optimize their tax strategies by staying informed about corporate income tax, VAT, transfer pricing, and available incentives while ensuring full compliance. Partnering with local experts like Mexcentrix can further enhance the success of manufacturing ventures in Mexico.

With the right knowledge and support, companies can turn challenges into opportunities. Mexcentrix can help you by facilitating the whole process. Contact us! 

In recent years, nearshore manufacturing has emerged as a transformative strategy for businesses seeking cost efficiency, supply chain resilience, and proximity to key markets. Mexico, with its strategic location and robust manufacturing ecosystem, has played a central role in this shift.   So, what can we expect in 2025?

Mexico’s  Manufacturing Market

Mexico’s manufacturing market is expected to have a compound annual growth rate of 1.32% is (CAGR 2025–2029):

   Source: Statista, 2024. Manufacturing- Mexico. https://www.statista.com/outlook/io/manufacturing/mexico

As shown below, the manufacturing market is expected to grow at a moderate pace; nevertheless, it is expected to continue to solidify its position as an important destination for nearshoring.

Several companies are still shifting manufacturing operations from Asia to Mexico to simplify supply chains, reduce lead times, and mitigate risks associated with global disruptions.

Moreover, potential policy changes after the 2024 US and Mexico elections, may have impacts on trade policy and tariffs, supply chains, and in long-term investment in manufacturing.

Digital Transformation and AI

Digital transformation, automation and smart manufacturing will play a pivotal role in the nearshore strategy. Mexican manufacturers are expected to adopt advanced technologies like AI. Nowadays, AI is being applied worldwide in various areas, including smart production, intelligent robots that performs tasks effectively, workflow automation, improve quality control among others, which is a key efficiency driver.

Sustainability Practices

Sustainability will be a critical factor for manufacturers in 2025. U.S. clients increasingly demand environmentally responsible practices, influenced by consumer preferences. Mexico’s investment in renewable energy and green manufacturing initiatives provides a competitive edge.

Furthermore, companies are expected to invest in innovation and software development for eco-friendly practices.

Geopolitical and Economic Incentives

The reshoring trend is a response to supply chain disruptions and reflects broader geopolitical and economic shifts. The U.S. is still focusing on reducing dependency on China, creating opportunities for countries like Mexico. This movement aligns with ongoing efforts to foster regional economic stability and enhance supply chain resilience.

Evolving Workforce Dynamics

Mexico boasts a skilled and cost-competitive workforce, making it a top choice for nearshore manufacturing. It is expected that manufacturing companies will invest more in workforce training and development, to upskill workers in advanced manufacturing and innovative technologies. While automation and robotics will play a significant role in enhancing productivity, and might reduce workforce requirements, human capital will keep playing a crucial role for manufacturing companies. Being an important factor in Mexico’s nearshoring success.

Succeding with a Shelter Company

Despite its advantages, nearshore manufacturing in Mexico still presents some challenges. These include potential labor shortages in high-demand regions, regulatory hurdles, potential policy and trade changes from U.S and Mexican government and the need for continued investment in infrastructure.

Manufacturing in Mexico has long been a cost-effective strategy for international manufacturers looking to expand production. Collaborating with a shelter company in Mexico offers the safest and most efficient approach to doing business. It allows manufacturers to concentrate fully on production while retaining complete control over their manufacturing processes.

Furthermore, shelter companies also streamline the transition to manufacturing in Mexico by managing critical administrative tasks. These include site selection, employee recruitment and hiring, tax and accounting management, and ensuring compliance with trade regulations. Mexcentrix can help you by facilitating the process through a smooth start and running of operations. Contact us!

Mexico recently overtook China as the United States’ largest trading partner, marking a significant milestone in the North American trade relations. This shift reflects changes in global trade dynamics and reflects that many companies are taking the decision of manufacturing in Mexico and selling to the U.S.

The Numbers Behind the Trend

In 2024, Mexico accounted for approximately 15.3% of total U.S. trade, surpassing China’s share of 12% to 13%. This includes increased exports from Mexico to the U.S., particularly in automobiles, machinery, and electronics, and a rise in U.S. exports to Mexico.

Source: Statista, 2024. https://www.statista.com/chart/20366/trade-volume-top-us-trade-partners/

Factors such as rising labor costs in China, the U.S.-China trade war, supply chain disruptions, and the benefits of nearshoring have all contributed to this change.

But how does Mexico stack up against China in terms of selling products to the U.S.?  Let’s take a deep dive into the key differences and advantages of each.

1. Proximity and Logistics: A Key Competitive Advantage for Mexico

One of Mexico’s strongest advantages over China is its geographic proximity to the United States. The closer geographical distance between Mexico and the U.S. means that products can be transported land or sea much faster than goods shipped from China.

• Mexico to the U.S.: Transporting goods from Mexico to the U.S. is fast, with land shipments taking 3 to 7 days depending on the region. The established infrastructure along the U.S.-Mexico border allows for easy access to major U.S. markets such as California, Texas, and Arizona.
• China to the U.S.: Ocean freight from China to the U.S. can take 14 to 30 days, depending on the port and route.

Below you can find a cost and time comparison on ocean and air freight:

Sources: Container Shipping Cost Calculator [2024] – Freightos & International Container Shipping | Online Freight Marketplace

2.Tariffs and Trade Agreements: USMCA vs. Tariffs

The trade relationship between the U.S. and Mexico is governed by the United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA in 2020. The agreement provides duty-free access for most goods moving between the U.S. and Mexico, provided they meet certain rules of origin.

• Mexico (USMCA): Due to the USMCA, companies manufacturing in Mexico and selling to the U.S. can take advantage of the reduction or exemption of tariffs. Which is also a factor that provides an attractive option for businesses looking to avoid tariffs that might be imposed on goods from other regions.
• China (Tariffs): Trade tensions between the U.S. and China have led to the imposition of tariffs on several Chinese goods. These tariffs can make Chinese goods significantly more expensive, reducing their competitiveness in the U.S. market compared to products from Mexico, which generally enter tariff-free under USMCA.

3. Labor Costs and Manufacturing Efficiency

Labor costs play a pivotal role in determining the overall competitiveness of products sold to the U.S. In the past, China was seen as the go-to destination for low-cost manufacturing. However, wages in China have risen steadily over the years, narrowing the gap between Chinese labor costs and those in other countries, including Mexico.

The average manufacturing wage in Mexico is approximately $2.60 to $4.80 per hour, depending on the role and sector. In contrast, labor costs in China have increased steadily, with hourly wages exceeding $6.50 per hour.

4. Manufacturing Clusters and Industry Specialization

Both Mexico and China have developed strong manufacturing sectors, but their strengths differ by industry. While China is known for its electronics and textiles, Mexico has become a major hub for automotive manufacturing, aerospace, electronics, and medical devices.

5. Intellectual Property

Furthermore, it is considered that manufacturing in Mexico count with a lower risk of intellectual property theft than in China. Still both countries have strong work to do in intellectual property protection matters.

What’s Next in regards to manufacturing in Mexico?

The dynamics of global trade have shifted, and for many companies, Mexico is proving to be a more advantageous option for selling products to the U.S. than China. While China remains a dominant player in many sectors, the trade war, rising labor costs, and increasing geopolitical risks have made it a less attractive option for U.S.-bound goods in recent years.

Politics in each country play a very important role, as if import duties in United Sates are increased for products manufactured in Mexico, the scenario can change.

For foreign companies seeking cost-effective, efficient, and nearshore manufacturing, Mexico offers clear advantages in terms of speed, cost savings, and flexibility. As such, it’s no surprise that manufacturing companies are choosing Mexico over China for its manufacturing process and selling goods to the U.S. market.

In Mexcentrix we can help you by facilitating the process through a smooth start and running of operations. Contact us!

Mexico’s potential in semiconductor manufacturing extends far beyond its geographical proximity to the U.S. Over recent years, the country has made impressive strides in enhancing its technological capabilities. Traditionally known as a hub for low-cost, labor-intensive manufacturing, Mexico has gradually transformed its workforce to include more advanced manufacturing skills.  The availability of more highly- skilled professionals opens its doors to other industries.

As worldwide demand for semiconductor chips remains insatiable, Mexico can play an important role.  As the graph below show demand and revenue has grown significantly in the last couple of years:

Semiconductors Revenue in Mexico

Source: https://www.statista.com/outlook/tmo/semiconductors/mexico

In regards to manufacturing, historically, Taiwan has been the largest semiconductor producer in the world. Nevertheless, with the United States taking the initiative with the CHIPS Act, there has been a growing interested in establishing chip manufacturing facilities in North America.

The above- mentioned, leads to Mexico playing an important role in supporting the North American market.

Supporting the North American Market

Even if Mexico doesn’t develop full-scale semiconductor manufacturing, as the country isn’t considered ready for this, it can still play a supportive role in the North American semiconductor supply chain:

• Reduced Reliance on Asian Markets: Rather than attempting to build end-to-end semiconductor manufacturing capabilities, Mexico could focus on less capital-intensive, yet crucial, stages of the semiconductor process like TAP (Testing, Assembly, and Packaging). By contributing with this special process or focusing on a specific area of the supply chain, it can help North America reduce its dependence on Asia for certain semiconductor manufacturing steps.
• Enhanced Supply Chain Stability: Mexico’s location next to the U.S. means quicker shipping times and reduced transportation costs, which can be crucial during periods of high demand or supply chain disruptions.
• Complementary Manufacturing Capabilities: Mexico’s strengths in manufacturing and assembly can complement the high-tech, capital-intensive manufacturing facilities located in the U.S., creating a balanced ecosystem that strengthens the entire North American semiconductor market.

By following this roadmap, Mexico can position itself as an essential part of North America’s semiconductor supply chain, supporting the region’s technology goals and contributing to a more resilient and integrated semiconductor industry.

Nowadays, there are already important players in the semiconductor industry in Mexico,  including R&D centers, assembly and test manufacturing.

Which include among others:

• Intel: Guadalajara.
• Texas Instruments: Aguascalientes.
• Infineon Technologies: Tijuana.
• Skyworks Solutions: Mexicali.
• QSM Semiconductors: Queretaro

Furthermore, the future of semiconductor manufacturing in Mexico looks promising. With its strategic advantages, growing skilled workforce, and supportive government policies, the country is well-positioned to become an important part of the global semiconductor supply chain.

Next Steps for Semiconductor Manufacturing in Mexico

• Build Specialized Facilities: Developing specialized semiconductor fabrication facilities requires substantial investment but can be done in phases. Mexico can start by establishing facilities focusing on specific parts of the semiconductor manufacturing process, such as wafer testing, packaging, or assembly.
• Expand Education and Training Programs: Partnering with universities and technical institutes (both locally and abroad) to create specialized programs in semiconductor engineering and advanced manufacturing will be critical to further develop a skilled workforce. Scholarships, internships, and apprenticeships can attract students to these fields and provide hands-on experience.
• Government Support and Incentives: Offering tax incentives, subsidies, and funding grants can help attract international semiconductor companies to invest in Mexico. Furthermore, policies that support R&D tax credits and provide favorable loan terms for infrastructure projects can further enhance investment projects.
• Availability of adequate infrastructure and utilities: Availability of water and electricity supply are critical for different processes in the semiconductor manufacturing industry.

Investing in Mexico

As the demand for semiconductors continues to grow, Mexico’s role in this industry is likely to expand, offering exciting opportunities for businesses and workers alike.

Whether you’re a company looking to invest or a professional seeking opportunities in the semiconductor field, now is the time to pay attention to Mexico’s burgeoning semiconductor landscape. Mexcentrix can help you by facilitating the process through a smooth start and running of operations. Contact us! 

Mexico has rapidly become a significant hub for electronics manufacturing, driven by a combination of strategic location, cost-effective labor, skilled workforce, and favorable trade agreements. This blog explores the factors behind Mexico’s rise in the global electronics manufacturing landscape, the challenges it faces, and the potential for future growth.

Strategic Location and Proximity to the U.S.

One of Mexico’s most significant advantages is its proximity to the United States, the world’s largest consumer market. This geographical advantage facilitates just-in-time delivery, reduces shipping costs, and enhances the ability to respond quickly to market demands. The shorter supply chains compared to those in Asia offer manufacturers the flexibility to manage production more efficiently, especially in the context of the ongoing global supply chain disruptions.

Cost-Effective and Skilled Labor Force

Mexico offers a competitive labor market with wages significantly lower than those in the U.S. or Europe but higher than in many Asian countries. This cost-effectiveness does not come at the expense of quality. Mexico’s workforce is known for its technical skills, especially in electronics, automotive, and aerospace manufacturing. Numerous technical schools and universities in Mexico offer specialized programs in engineering and electronics, ensuring a steady supply of skilled workers.

Trade Agreements and Regulatory Environment

Mexico’s participation in the United States-Mexico-Canada Agreement (USMCA) and its network of free trade agreements with over 50 countries provide manufacturers with tariff-free access to key markets. This regulatory environment makes Mexico an attractive destination for foreign direct investment (FDI), as companies can produce goods in Mexico and export them globally with fewer trade barriers.

Growing Infrastructure and Technology Ecosystem

Mexico’s infrastructure, particularly in its northern industrial zones, has seen significant improvements. Modern industrial parks, reliable energy supplies, and robust transportation networks are crucial for high-tech manufacturing. Moreover, the Mexican government has been proactive in supporting the development of a technology ecosystem, promoting innovation and investment in electronics manufacturing.

Challenges Facing the Industry

Despite these advantages, Mexico’s electronics manufacturing sector faces several challenges, including political instability due to the change of presdient can create uncertainty for investors. Additionally, in some cases, Mexico faces challenges in intellectual property protection, which can be a concern for companies dealing with high-value, innovative products.

The Main Electronics Manufacturing companies in Mexico and where are they located

Mexico is an important center for electronics manufacturing, with many companies operating in the country. Here are some of the main companies and their locations:

The Most Manufactured Electronic Products in Mexico

The Future of Electronics Manufacturing in Mexico

The future of electronics manufacturing in Mexico looks promising. The ongoing trend of nearshoring, where companies relocate production closer to their home markets, is likely to benefit Mexico. As companies seek to mitigate risks associated with long supply chains, Mexico’s strategic advantages become even more pronounced.

Investments in education and infrastructure, coupled with government support for innovation, will be key to sustaining growth. Additionally, Mexico’s ability to adapt to global trends, such as the increasing demand for green and sustainable manufacturing practices, will determine its long-term success in the electronics manufacturing sector.

Mexico’s rise as a global hub for electronics manufacturing is the result of a strategic blend of location, skilled labor, favorable trade agreements, and growing infrastructure. While challenges remain, the country’s potential for growth is significant. As global companies continue to seek efficient and reliable production bases, Mexico is poised to play an increasingly important role in the electronics manufacturing industry.

Interested in Manufacturing Electronics in Mexico?

If you are a company in the electronics industry interested in manufacturing in Mexico, it is important to have a reliable partner for a hassle-free start of operations.  Mexcentrix can help you by facilitating the process through shelter services and flexible solutions that guarantee long-term success. Contact us!