Starting a business in Mexico

Incorporating a company from abroad is a complicated task if you do not count with personnel in Mexico with know- how and experience in this process and who can submit all the paperwork required before the public notary and authorities.  As each country count with different processes and regulations for company incorporation, it is important to learn beforehand about the process to know what to expect.

Mexico allows foreigners to incorporate and operate companies in Mexico without limitation in most cases, nevertheless, some activities in Mexico are restricted for foreigners.

Steps for Incorporating a Company in Mexico

The main steps for incorporating a company in Mexico are:

Determining the type of entity.

The 3 most frequently used corporations in Mexico are:

• Sociedad Anónima (“S.A.”).
• Sociedad de Responsabilidad Limitada (“S. de R.L.”)
• Sociedad Anónima Promotora de Inversión (“S.A.P.I.”)

Contacting with an expert is always important to receive advice on which type of entity is best for your company, in some cases even incorporating a company is not needed for establishing operations in Mexico, therefore it is always important to contact the experts, such as Mexcentrix, who counts with legal advisors that can provide advice and consulting on this topic.

Following on determining the type of entity, the company must determine the corporate name of the new entity, which must be authorized by the Ministry of Economy.

Once the name of the new entity is authorized the company shall proceed with the drafting of the bylaws, which must include among others:

• Name of the company and its address.
• Object of the company: You should include the corporate purpose and  the main activities of your business in detail, and every other activity related to the business that the company will carry on.

• Name and data about shareholders/ partners, including number and percentage of ownership. Under the Mexican law all the three abovementioned entities must have at least minimum two shareholders/ partners.
• The partners must appoint the corporations management (either a Board of Managers or a Sole Manager).
• Name of the Statuory Auditor (Comisario)
• Rules on profit distribution
• Powers of attorney granted to individuals: When the new company has foreign shareholders/ partners it is important and recommended to appoint someone in Mexico to appear before the public notary and perform other administrative tasks before the authorities. If the power of attorney is granted to a foreigner, it must be apostilled/ legalized in the country of origin. Afterwards, it must be translated to Spanish by an official translator and notarized in Mexico.
• Characteristics and organization of annual partners/ shareholders meeting.
• A social capital and nationality chapter which must be included when the shareholders/ partners are foreigners.
• Causes and procedure for dissolution or liquidation.

Bylaws signature

• The signature of the by-laws must take place in Mexico, in the State where the company has been incorporated. Incorporating shareholders must appear personally or represented through powers of attorney before the public notary.
• The new company must have a physical address in Mexico for incorporations purposes which can be subsequently changed.
• Additionally, if it’s the case a copy of organizational documents duly notarized and certified by Apostille or legalized, must be provided.

Registration Before Authorities

• Once incorporated, the first step is to register the new company before the Public Registry of Commerce (Registro Público de Comercio).
• Afterwards the company must be registered in the Tax Administration Service (SAT) in order to obtain its tax id (RFC).
• If the company counts with foreign shareholders/partners shall be registered before the National Registry of Foreign Investments (RNIE)
• As most companies hire employees they should register before before the Mexican Institute of Social Security (IMSS) and the Institute of National Housing Fund for Workers (INFONAVIT).

Do you have any doubts regarding the company incorporation process in Mexico? Feel free to contact us, we have helped several of foreign companies to throught the incorporation process in Mexico and to start operations.

Your company has decided to start manufacturing operations in Mexico but do not know where to start from? Site selection in Mexico is within the first steps after after performing a feasibility  study. Nevertheless, most companies do not know that  choosing the right site involves a thorough examination of multiple factors.  

This blog post will navigate you through a site selection, we will explore the detailed steps necessary for finding the ideal industrial building for your operations. 

Geographical Location

• Proximity to Borders and Ports: Businesses that rely heavily on exports should consider locations near the US border or major ports like Veracruz and Manzanillo to streamline logistics and reduce shipping costs. 

• Proximity to Suppliers: Proximity to key suppliers can reduce lead times and transportation costs of raw materials and components. 

• Free economic zones: Being relatively close to a free economic zone such as a “Recinto Fiscalizado Estrategico” can be an important point to take into account for site selection, if it goes according to the business strategy.  

Infrastructure

• Transportation Networks: Access to highways, railroads, and airports is crucial for efficient supply chain management. The quality of local roads and the availability of public transportation for employees should also be assessed. 
• Utilities: Reliable access to water, electricity, and gas are essential. Evaluate the capacity and dependability of these utilities in the prospective area.  

Labor Market

• Availability of Skilled Workforce: Depending on the type of workers required, Mexcentrix can guide you on which location can suit best your company needs and to guide you to  regions with a high concentration of skilled labor relevant to your industry.  
• Labor Costs: Wage levels can vary significantly across Mexico. Balancing cost with the quality of labor is vital for long-term sustainability.  

Regulatory Environment

• Local Regulations and Incentives: Some states provide an more attractive incentives package for foreign investor than other. This will also depend on the amount of investment and employment generation. 

Cost of Living and Quality of Life

• Employee Attraction and Retention: Areas with a higher quality of life can attract and retain skilled workers more effectively. Consider factors such as housing, education, healthcare, and recreational facilities. 

• Cost of Living: The cost of living can impact wage expectations and overall operational costs. Balancing affordability with quality of life is important for both business and employee satisfaction. 

Security

• Crime Rates: Assess the security situation in potential areas. High crime rates can affect employee safety, supply chain security, and overall business operations. 

Selecting the ideal site for your business in Mexico involves a comprehensive evaluation of various factors. By considering geographical location, infrastructure, labor market, regulatory environment, supply chain proximity, cost of living, security, and cultural aspects, businesses can make informed decisions that align with their strategic goals. A thorough site selection process not only enhances operational efficiency but also contributes to long-term success and sustainability in the vibrant Mexican market. 

Collaborating with a shelter service provider like Mexcentrix can streamline and accelerate the site selection process in Mexico. Our team of industry specialists will analyze your unique market requirements to identify the optimal location for your operations. Contact us!  

Businesses are continuously looking for ways to maximize cost savings without sacrificing quality or efficiency in today’s global market. Creating alliances with shelter companies is one successful approach that companies are using, especially in the manufacturing industry.

Most importantly, this strategy is especially advantageous for businesses wishing to establish operations abroad, who are not familiar with local regulations and wish to start operations as soon as possible.

What is a Shelter Company?

A shelter company offers international businesses a way to set up operations abroad without having to worry about local laws and regulations, including involved risks and complications of handling legal, administrative, and compliance-related matters. With this model, businesses can concentrate on their core business, such as production, quality control, inventory, and the shelter company will take care of the rest.

Key Benefits of Using a Shelter Company:

• Reduced Start-Up Costs: Under Mexcentrix shelter services your company can save up to 40% during the pre-operational phase and up to 20% after startup. This is due to economies of scale, the already established administrative teams, and local expertise and experience that help you maximize cost savings.

• One-stop shop: Most shelter services fully support investing in Mexico. From feasibility studies and cost analysis, site selection, company incorporation (if applicable), and visas for expatriates, to all administrative tasks upon starting operations.

• Streamlined Administrative Processes: Shelter companies manage all local compliance requirements, such as taxes, labor laws, and environmental regulations. This reduces the need for a company to hire specialized administrative staff or consultants, resulting in substantial cost savings.

• Labor Cost Advantages: Shelter companies manage the recruitment process, and provide recommendations on wages, benefits, and compensation packages to ensure lower turnover rates that lead to cost savings, in addition to finding employees at competitive wages.

• Access to Established Supply Chains: By partnering with a shelter company, businesses can tap into existing networks of suppliers and service providers, reducing procurement costs and improving operational efficiency.

• Risk Mitigation: Shelter companies assume many of the operational risks, including legal and financial liabilities. This allows foreign companies to enter new markets with reduced risk exposure.

Real-World Example: Mexico’s Shelter Program

Moreover, Mexico is a prime example of a country where shelter companies have significantly benefited foreign investors. Additionally, he country offers an attractive blend of low labor costs, a skilled workforce, and proximity to major markets like the United States and Canada.

• Labor Costs: Labor costs in Mexico are significantly lower than in the US and Europe. The average manufacturing wage in Mexico is between 50% to 70% lower than in the United States​.

• Operational Efficiency: Shelter companies in Mexico, such as Mexcentrix, have a proven track record of helping businesses achieve operational efficiency. They provide comprehensive support services, including HR management, payroll, customs, and foreign trade compliance, among others.

Steps to Maximize Cost Savings with a Shelter Company

• Select the Right Partner: Choose a shelter company with extensive experience and a robust network of local contacts. In addition to a partner that offers customized solutions tailored to your specific industry needs.
• Leverage Local Expertise: Utilize the shelter company’s knowledge of local regulations, market conditions, and business practices to navigate the complexities of the new market smoothly.
• Focus on your Core Business: Let the shelter company take care of all administrative and compliance tasks, which is what they do best, allowing your team to concentrate on core business activities that drive value and growth.
• Continuous Improvement: Regularly review and assess the partnership with the shelter company to identify areas for improvement and additional cost-saving opportunities.

Therefore, for businesses looking to nearshore will take advantage of maximizing cost savings, partnering with a shelter company can be a game changer. Businesses can achieve operational efficiency by leveraging local expertise, cutting start-up costs, and streamlining administrative processes.

Furthermore, for more insights into how shelter companies can help your business, consider reaching out to Mexcentrix, exploring case studies of companies that have successfully leveraged this model. Contact us!

The Bajio region of Mexico stands out as a top contender when it comes to finding the perfect location for manufacturing. Known for its strategic advantages, this region offers a blend of cost-effectiveness, skilled labor, and robust infrastructure that can significantly boost your manufacturing operations. Here’s why the Bajio region is a hotspot for manufacturers.

Strategic Location

• Central Position: The Bajio region is centrally located in Mexico, providing easy access to major markets within and internationally. It is a strategic location not so far from the main ports such as Manzanillo, Lázaro Cárdenas, and Altamira and relatively close to the U.S. border.

• Connectivity: The region is well-connected by a network of highways, railroads, and proximity to major ports and airports, facilitating efficient logistics and distribution.

Skilled Workforce

• Education and Training: The region is home to several universities and technical institutes that produce a skilled labor force, particularly in engineering and manufacturing disciplines.
• Labor Quality: As the Bajio region, is an important automotive and aerospace hub, you can find workers with previous experience and a high technical expertise.

Economic Incentives

• Government Support: The Mexican government offers various incentives for foreign and domestic investors, including tax incentives, subsidies, and support for infrastructure development, depending on the size of the investment.
• Special Economic Zones: Some areas within the Bajio region have been designated as special economic zones, providing additional benefits to manufacturers.

Benefits of SEZ:

• Tax Incentives: SEZ businesses often enjoy tax benefits, including reduced corporate taxes, VAT exemptions, and import duty reductions.
• Infrastructure Development: SEZs receive significant investments in infrastructure such as transportation, utilities, and communication networks, which facilitate efficient manufacturing and logistics operations
• Regulatory Simplification: SEZs typically offer streamlined regulatory processes, making it easier for companies to establish and expand their operations.

Cost Advantage

• Lower Labor Costs: Compared to the northern part of Mexico, labor costs in the Bajio region are significantly lower, allowing for more competitive production costs.
• Operational Costs: Overall operational costs, including utilities and real estate, are also lower in the Bajio region.

Industrial Clusters

• Automotive and Aerospace: The region has established strong industrial clusters, particularly in the automotive and aerospace sectors, leading to a well-developed supply chain and collaboration opportunities. The Bajío region has approximately 1,000 to 1,200 automotive companies and there are estimated to be around 100 aerospace companies. (DATA MEXICO)

• Supplier Base: A robust network of suppliers and service providers supports manufacturing operations, ensuring the availability of necessary materials and components.

Infrastructure

• Modern Facilities: The region boasts modern industrial parks and manufacturing facilities designed to meet the needs of high-tech manufacturing.

Quality of Life

• Living Standards: The Bajio region offers a good quality of life with modern amenities, making it attractive for expatriates and local employees.
• Safety: Most states in the Bajio region are considered very safe places, which is an important consideration for foreign investors and their employees.

Innovation and Technology

• Research and Development: In the Bajio region, several research institutions and a culture of innovation supporting advancements in manufacturing technologies and processes.
• Adoption of Industry 4.0: Companies in this area are increasingly adopting Industry 4.0 practices, enhancing efficiency and productivity through automation and data exchange.

In summary, the Bajio Region presents a compelling location for manufacturers looking to optimize their operations. From its strategic location and skilled workforce to cost advantages and modern infrastructure, the region offers an integral environment conducive to manufacturing success. By choosing this region, manufacturers can benefit from a competitive edge, operational efficiency, and a supportive business ecosystem, making it an ideal location for both new and expanding manufacturing ventures.

Is your business considering manufacturing in the Bajio Region? Mexcentrix can help you by facilitating the process through a smooth start and running of operations. Contact us! 

Have you heard of a Shelter Service Company?

With its strategic location, skilled workforce, and favorable trade agreements, Mexico is an attractive destination for nearshoring. However, entering a new market can be complex, especially for international investors navigating unfamiliar regulatory frameworks and operational challenges.

In this dynamic environment, leveraging the expertise of a shelter company has emerged as a strategic approach for investors looking to establish a presence in Mexico while minimizing risk and maximizing efficiency.

Understanding  Shelter Companies

A Shelter Service Company offers comprehensive solutions for foreign companies  seeking to establish operations in Mexico. They specialize in providing infrastructure, administrative support, compliance services, and operational expertise.

Each shelter company, counts with different scope of services, nevertheless in its majority investors can benefit from the following services:

1. Start- up services: Includes the site selection process, to help foreign companies find the best location for their operations, in addition to obtaining all permits and licenses to operate in Mexico.
2. Human Resources: Recruiting and managing a skilled workforce is essential for business success. Shelter companies assist with hiring, training, payroll administration, and employee benefits, allowing investors to focus on their core business activities.
3. Foreign trade: Ensuring the arrival of raw materials on time is critical for optimizing operational efficiency and minimizing costs. Shelter companies help streamline foreign trade operations, while helping your company be 100% compliant with local laws and regulations.
4. Tax, Accounting & Finance: Operating in Mexico requires in depth knowledge of the Federal Fiscal Code and local regulations, partnering with an experienced company can help you avoid troubles and fines with tax authorities.
5. Legal Compliance: As mentioned before, navigating Mexico’s regulatory framework can be challenging for foreign investors. Shelter companies possess in-depth knowledge of local laws, regulations, and tax requirements. Thus, ensuring that clients remain compliant at all times.
6. Government Incentives: Mexico offers attractive incentive programs at both federal and state levels, for foreign companies. From land or cash grants, tax incentives, licenses to workforce training programs. Each state offers different incentive package to investors depending on the amount to be invested  and  employment generation. Shelter companies can support in the incentive negotiation process and proof required process.
7. Risk Mitigation: Operating in a foreign market entails various risks, including legal, financial, and operational risks. Shelter companies provide risk management services, including insurance coverage, contingency planning, and crisis management support.

Maximizing Returns with a Strategic Approach

Investing in Mexico offers compelling opportunities for growth and expansion, but success requires careful planning, execution, and risk management. By partnering with a reputable shelter company, investors can mitigate challenges, accelerate time-to-market, and maximize returns on their investment.

As global competition intensifies and market dynamics evolve, proactive investors are increasingly turning to shelter companies to gain a competitive edge and capitalize on Mexico’s vibrant economy. Whether entering the market for the first time or expanding existing operations, leveraging the expertise of shelter companies can position investors for long-term success in Mexico’s dynamic business landscape.

If you’re intrigued by the benefits of using a shelter service company and want to have further information, we encourage you to Contact us! 

Mexcentrix shelter services can help you run operations efficiently, while at the same time reducing risks and costs.

Mexico is a significant player in the global market, as evidenced by its dynamic import and export sectors. Its strategic geographical location, extensive trade agreements, and diverse economy make it an appealing hub for international trade.

However, engaging in imports and exports in Mexico requires understanding its requirements and implications.

Understanding Mexico’s Trade Landscape

 Mexico as an important manufacturing country has among its tops exports:  Automobiles, automobile parts, machinery, electronics, and petroleum products.

The tops imported products include a diverse range of goods such as machinery, electronics, vehicles, and consumer goods. Its trade relationships are global, with key partners such as the United States, Canada, China, and the European Union.

Imports’ Requirements

 Importing goods into Mexico requires  adherence to a set of regulations and procedures.

First of all, in order to be able to import, the company must obtain the Registry of Importers. Additionally, specific goods may require permits such as the Specific Sector Importer’s Registry or additional permits, licenses and NOMs compliance might apply depending on the materials and goods to be imported.

For example, certain products, such as food, pharmaceuticals, and chemicals, may require health and sanitary certificates issued by the relevant authorities in the exporting country.

As you might be well aware, importers must pay applicable duties and taxes, which can vary depending on the nature of the goods and their country of origin. Import duties and taxes will be defined according to the tariff classification.

Some of the general documents required on an import process include:

1. Commercial Invoice: This document provides details about the goods being imported, including their description, quantity, value, and terms of sale. It is used for customs clearance and determining duties and taxes.
2. Packing List: This document details the contents of each package in the shipment, including weight, dimensions, and packaging type.
3. Bill of Lading (B/L): The B/L is issued by a carrier to a shipper that details the type, quantity and destination of the goods being carried.
4. Pedimento: It is the main document in the import process, which consists on a detailed customs declaration created by the custom broker and that specifies information about the importer, exporter, goods, value, and tariff classification. It must be submitted electronically through the Mexican Customs Authority’s system.
5. Certificate of Origin: Some goods may require a certificate of origin to qualify for preferential tariff treatment under free trade agreements.

Exports’ requirements

 Similarly, exporting goods from Mexico involves compliance with regulations and documentation.

Some goods, depending on the applicable HTS code, may require an export license or permit issued by Mexican authorities. The specific requirements depend on the type of goods being exported.

Exporters should also take into account the destination country requirements and regulations, including customs procedures and tariffs.

Some of the general documents required on an export process include:

1. Pedimento: Same as with imports, it is the main document in the import process, which consists on a detailed customs declaration created by the custom broker and that specifies information about the importer, exporter, goods, value, and tariff classification. It must be submitted electronically through the Mexican Customs Authority’s system.
2. Certificate of Origin: Similar to the import certificate of origin, this document may be required to qualify for preferential tariff treatment under free trade agreements or to comply with export regulations.
3. Customs Export Manifest: A document listing all goods being exported and their details, submitted to customs authorities.

Implications for Business and Economy

Mexico’s import and export landscape provides numerous opportunities and challenges for businesses and the economy.

Navigating regulatory requirements requires businesses to invest time, resources, and expertise, as compliance is critical for market access and maximizing trade benefits.

Failure to comply with regulations can result in delays, fines, or even the seizure of goods, affecting supply chains and profits.

A strategic business partner and local expert such as  Mexcentrix can help you to be fully compliant in the import and export requirements, minimize risks and to facilitate the complete process.

Contact us! For a free consultation today.

In recent years, nearshoring to Mexico has gained popularity, as it provides numerous benefits to companies looking to expand operations. Mexico offers a compelling proposition in terms of both cost and geographical proximity to the U.S. However, as with any business venture, nearshoring to Mexico presents challenges and potential risks and errors, which are mentioned in the following section of this blog.

Expecting to operate as in country of origin

One of the main errors companies fall into when investing in a new country is thinking everything works and should be done as in the country of origin, nevertheless, it is always important to consider procedures, regulations, laws, and culture among others can be very different in Mexico.

Lack of Cultural Understanding

As above mentioned, of the most common mistakes businesses make when nearshoring to Mexico is underestimating the value of cultural understanding. Mexico has a rich and diverse culture. It is important to recognize cultural nuances, to have a good relationship with employees and partners and to avoid misunderstandings, communication breakdowns, and eventually, project delays or failures.

To minimize the risk of falling into this error, businesses should invest in cultural training for their employees, which promotes cross-cultural awareness and sensitivity. Furthermore, developing strong relationships with local partners such as a shelter company, which can provide invaluable information about Mexican business practices and cultural norms, is always a good idea.

Ignoring Legal and Regulatory Compliance

Navigating the legal and regulatory landscape in Mexico can be difficult, particularly for foreign companies unfamiliar with local laws and regulations. Failure to comply with legal requirements may result in fines, legal disputes, and reputational harm. Common areas of oversight include labor laws, tax regulations, and intellectual property protection.
To mitigate this risk, businesses should hire legal experts with experience in Mexican law to ensure compliance with all applicable regulations. Investing in thorough due diligence and understanding the legal framework upfront can save time, money, and headaches in the long run.

Challenges in Communication

 Effective communication is critical in nearshoring to ensure a successful operation.   Language barriers and communication styles can present significant challenges. While English is widely spoken in Mexico, many employees do not speak English or are not fluent. Furthermore, differences in communication styles and expectations can cause misunderstandings and misinterpretations.
To address communication challenges, businesses should offer language training as needed and foster an open communication culture. In addition, using bilingual staff or translators can help teams communicate more smoothly and ensure everyone is on the same page.

Underestimating Infrastructure Requirements

Mexico’s infrastructure varies greatly, and businesses may face challenges with transportation, logistics, and access to reliable utilities, for example, power its availability for high requirements is currently limited in many parts of Mexico. Underestimating infrastructure requirements can lead to production delays, increased costs, and operational inefficiencies.

Before nearshoring to Mexico, businesses should conduct thorough infrastructure assessments and choose locations with adequate transportation networks, access to utilities, and proximity to suppliers and markets. Investing in infrastructure upgrades as needed can help to reduce risks and maintain smooth operations. Local experts such as a shelter partner, that guide you since the site selection can advise you from the beginning on this topic.

How to address risks when nearshoring to Mexico

Nearshoring to Mexico has numerous advantages for businesses looking to expand their global footprint, but it’s critical to approach the process carefully and strategically. Companies can maximize the potential of their nearshoring operation, by minimizing risks and avoiding common mistakes. With careful planning, cultural sensitivity, and help from local experts, businesses can capitalize on Mexico’s opportunities and achieve long-term regional growth.

If you’re looking for expert advice and support during your nearshore transition, don’t wait to Contact us!  Mexcentrix shelter services can help you run operations efficiently, while at the same time reducing risks and costs.

Have you ever heard of a shelter company?  Is your company considering starting operations in Mexico and you do not know where to start from?

Expanding operations to a new country is an exciting venture, but can be overwhelming, especially if you do not count with a local business partner that can help you throughout the process.

Likewise, one strategic approach that has proven to be a game-changer for many businesses looking to start operations in Mexico is partnering with a shelter service company.

What is a Shelter Company

A Shelter Service Company is commonly known as a business service in which a foreign company can establish a presence in a new country without having to set up its legal entity or infrastructure. This model is particularly common in the context of international business expansion and outsourcing.

Above all, in a shelter company setup, the foreign business essentially partners with a local entity that already counts with all the necessary legal, administrative, and operational infrastructure in the target country. This local entity, often the shelter company, assumes certain responsibilities on behalf of the foreign business, which may include aspects such as legal compliance, human resources, payroll, tax management, and administrative support.

Thus, the foreign company can focus on its core business while at the same time minimizes risks and liabilities while operating in Mexico.

Challenges and Risks for Starting Operations in Mexico

Cultural Variations

• Challenge: Successful operations require an understanding and adjustment to Mexico’s distinct business culture.

A local shelter services provider can offer cultural insights to help your company navigate and integrate smoothly.

Complexity of Regulations

• Risk: It can be difficult to navigate licenses, permits, and federal, state, and local regulations, and ensure a 100% compliance if you are not aware of local laws

Furthermore, shelter companies lower regulatory risks and ensure legal compliance due to their extensive knowledge of Mexican regulations.

Labor Law Considerations

• Challenge: Mexico has intricate labor laws that might not be the same as those in other nations, thus making more difficult its compliance.

HR services are handled by shelter service providers, who also make sure that labor laws are followed and reduce risks associated with employment and reduce fines.

Variations in infrastructure:

• Challenge: Regional variations in infrastructure may affect the dependability and accessibility of services and transit.

By assisting in the selection of sites, shelter companies can provide useful information on the availability of adequate infrastructure that can help reduce operational difficulties further on.

Advantages of Partnering with a Shelter Company

1. Quick Market Entry: Shelter companies have pre-established legal entities, that already count with the necessary permits and licenses, enabling rapid market entry without the need to set up a new entity from scratch.

2. Cost Savings: Shared infrastructure and administrative personnel, result in significant costs savings compared to independently establishing and maintaining a legal entity.

3. Regulatory Compliance: Shelter service providers have a deep understanding of local regulations, ensuring legal compliance and reducing the risk of regulatory issues.

4. Human Resources Management: By handling HR duties like hiring, payroll, and benefits administration, shelter companies streamline processes and can help with the company’s personnel ramp-up in a short amount of time.

5. Operational Support: Shelter companies often provide support with logistics, distribution, and supply chain management, ensuring smooth operational processes.

6. Cultural and Language Support: Local expertise from shelter companies facilitates effective communication, understanding of cultural nuances, and smoother business interactions.

In conclusion, partnering with a shelter service such as Mexcentrix when expanding to Mexico is a strategic decision that addresses challenges, mitigates risks, and provides a streamlined entry into the Mexican market.

Furthermore, our expertise, support and cost-effective solutions contribute to the success and sustainability of businesses seeking to establish a strong presence in Mexico. Contact us! 

Nearshoring has had an important impact in Mexico manufacturing industry in the last years, as the number of companies looking to nearshore operations to Mexico has increased significantly, including an increase in FDI from Chinese companies, as shown in the graph below.

New Investments in Mexico per year (US $M)

Fuente: Deloitte (2023): Nearshoring en México. 

Nearshoring Impact 

According to a study performed by Morgan Stanley, it believed  that FDI driven by nearshoring could reach about $46 billion in the next five years, helping boost Mexico’s annual GDP growth to around 3% in 2025 to 2027.

Why Chinese Companies are Choosing Nearshoring to Mexico. 

 United Stated and China Trade War  

Chinese companies started to consider Mexico as an ideal place to establish manufacturing operations since 2018 when Donald Trump, America’s president at the time, launched a trade war that included raising tariffs on imports from several products from China.

USMCA

The United States-Mexico-Canada Agreement increased regional value content requirements for products to be considered as North America origin, by those means, manufacturers had to think about relocating their supply chains.

Moreover, Chinese companies by establishing operations in Mexico, can take advantage of the USMCA (United States-Mexico-Canada Agreement) preferential duties, if complying with the rules of origin.

Geographical Proximity and Economic Stability

Mexico’s strategic geographic location adjacent to the United States, Canada, and Latin America is a cornerstone of its appeal. This proximity minimizes logistical complexities, reduces transportation costs, provides time zone alignment and  ensures easier access to key markets.

Chinese companies are moving production closer to customers in United States to limit their vulnerability and risks of supply chain disruptions, as well as geopolitical tensions. Furthermore, some of these customers are demanding their suppliers to establish a plant in North America or nearby, to minimize the risks of logistics disruptions that companies were exposed in the pandemic.

Cost-effectiveness and Operational Competence

 Mexico remains a popular destination for nearshoring due to cost-effectiveness, mainly due to its low labor costs and availability of qualified personnel, which allows companies to maximize operational costs while upholding high standards.

Government Support and Investment Initiatives

The Mexican government has proactively implemented policies and incentives to encourage foreign investment. Initiatives aimed at improving infrastructure, fostering innovation, and providing tax incentives for businesses have created a favorable business environment. These incentives provide confidence among investors and further solidify Mexico’s position as a nearshoring hotspot.

Perspective for the future

 As before mentioned, Nearshoring to Mexico seems to be headed in a favorable direction. With companies looking for maximize cost savings and minimize risks, Mexico´s  strategic advantages will probably help the country stay on top as a nearshoring destination.

Mexico’s rise in nearshoring is, in short, more than a trend; it’s a calculated decision that will shape the nature of global business in the future.

Is your company looking to nearshore its manufacturing operations to Mexico? Mexcentrix shelter services can help you run operations efficiently, while at the same time reducing risks and costs. Contact us! 

If your company is considering nearshoring to Mexico and benefit from the several advantages Mexico has to offer for manufacturing companies.

One of such advantages if the availability of skilled workers and competitive labor costs, therefore it is important to learn the basics of the Mexican Federal Labor Law, including its key regulations and workers’ rights.

What is the Mexican Labor Law

The “Mexican Federal Labor Law (Ley Federal del Trabajo)” states the regulations that apply to the employer and employee in Mexico, and governs its relationship.

For the employee it represents a document that grants labor rights and gives clarity in regards to :

• Specific obligations in the employment relationship between the employer and employee
• Working hours
• Place and time where the workday start.
• Payment days
• Rules to prevent working risks.
• Permits and licenses.
• Disciplinary measures and their application.
• The benefits you receive for your work: salary, breaks, vacations, social security, law and additional benefits.

Working contract

Employment contracts are required in Mexico, among the most common are the following:

• Indefinite period contracts: Of the most used in Mexico. It is one that establishes a working relationship in which there is no term of duration. To be considered an employment relationship for an indefinite period of time, it must exceed 180 days.
• Definite period contracts: set for specific periods of time. In this, the duration of the contract is expressly written in the document.
• Seasonal contracts: This type of contract serves those labor relations that are developed for an indefinite period, but to perform discontinuous tasks.

Severance Payment

 Employees hired for an undetermined term who are dismissed without a justified cause are entitled to claim a severance payment, which includes the following:

• 90 days of daily wage of indemnification
• Accrued salaries and pro-rata benefits (such as pending vacation days, vacation premium, christmas bonus and any other applicable accrued benefit).
• 20 days of daily wage for each worked year.
• Seniority Bonus which is equal to 12 days of wage for each year of service tat the employee has worked. It applies  only if the employee has at least 15 years of continuous service with the employer.

 Working hours and Overtime  

According to Article 61, the maximum length of a working day is eight hours during the day shift (48 hours per week), seven hours in the night shift (42 hours per week) and seven and a half hours when mixed (45 hours per week).

Overtime pay rate applies one the employee exceeds the above-mentioned working hours per shift. The first 9 hours of overtime are paid at twice the normal base salary rate. For any overtime going beyond 9 hours per week, employees must be paid 3 times their normal base salary rate.

Minimum Wage 

According to Article 85 of the Federal Labor Law, it is not allowed to pay an employee less than the legal minimum wage.  Nowadays Mexico’s minimum daily wage is $194.07 pesos, except for the Northern Border Zone which the minimum daily wage is higher  corresponding to $291.52 pesos.

Even though the above mentioned are the established minimum wages, a common practice in all areas is paying above the minimum wage in order to attract skilled workers and reduce turnover rates.

Social security

The first step for being able to hire employees is registering your company before the social security institute as an employer known as IMSS (Instituto Mexicano del Seguro Social), all employers are required to register and pay the contributions to the IMSS.

Social security payments cover among others: occupational accidents, retirement and survivor pensions, disability, sickness, maternity leave, childcare and other social service and medical benefits.

Vacation and holidays

On December 14^th 2022, the Senate approved the Labor Reform bill of articles 76 and 78 of the Federal Labor Law, to increase workers vacations from 6 to 12 days the annual paid vacation period for Mexican workers,  once the employee completes one year is his job. This reform became effective on January 1^st, 2023.

After the second year of service, two days of vacation will be increased  each year, until reaching 20 days in the fifth year, and after the sixth year of service, the vacation period will be increased by two days for every five years of service, as shown in the following table:

Furthermore, the national paid holidays in Mexico are the following:

1. January 1 New Year’s Day
2. February 5 constitution day
3. March 21 Benito Juarez day
4. May 1 Labor Day
5. September 16 Independence Day
6. November 20 revolution day
7. December 1 presidential inauguration day every six years
8. December 25 Christmas day

Are you looking to start operations in Mexico?

If your company is considering nearshoring operations to Mexico it is important to count with all the relevant information regarding the Mexican Labor Law and the regulations that will apply for your employees in Mexico.

One of the main advantages of working with a shelter company is that your company will get all the expertise, advice and guidance from professionals who understand fully the labor law in Mexico and its implications.