Is your company looking to establish manufacturing  operations abroad. Learn why it is a great option doing business in Mexico. 

 Mexico provides promising business opportunities to foreign companies; it is one of the emerging countries most open to foreign direct investment with a FDI of $US 628 billion in 2019. The countries with higher investment  are United States, Spain, and Canada.

Furthermore, Most foreign investment from January to June 2020 is in the manufacturing industry (43.2%), financial services, transportation, commerce, mining and energy; according to the Ministry  of economy.

Moreover, Mexico is  the 15th largest economy in the world as well as is ranked in 60th place, out of 190 economies, of the Ease of Doing Business Ranking 2020 of the World Bank.  According to the same study it is considered one of the top business-friendly environment in Latin America.

Why it is easy doing business in Mexico?

• Strong manufacturing and business environment

Mexico has created different foreign trade promotion policies specifically designed for the manufacturing industry. These policies aim to facilitate international trade operations, create economic incentives, and provide legal security for export manufacturing companies.

• Few trade barriers

Mexico counts with 13 Free Trade Agreements with 52 countries and another 41 other agreements, thereby giving access to 61% of global GDP and over 50% of global trade.

Therefore, Mexico’s competitiveness relies on its extensive free trade agreements as a crucial force for its economic development. Including  the United States-Mexico-Canada Agreement (USMCA), which is one of Mexico’s main traties, has highly attracted foreign investment in the manufacturing sector; as companies can export their products from Mexico to one of the biggest economies (United States) with few trade barriers.

• Tax incentives

Mexico has about 75 tax treaties in force to avoid double taxation, according to Doing Business Mexico.

Furthermore, an important incentive for foreign companies looking to do business in Mexico is the the IMMEX program, which  allows the temporary import of goods, to produce, transform or repair foreign goods imported temporarily for subsequent export, without paying VAT and countervailing duties, and deferring or not paying General Import Tax.

Additionally, another program in Mexico that benefits to the other countries is PROSEC, this is a duty relief mechanism that allows the importation of certain raw materials, machinery and equipment at preferential duty rates, regardless of the origin, among other incentive programs.

• Low labor costs

One of the first things that many manufacturers consider when evaluating an operation in Mexico are labor costs. Mexico has skilled, young, and available workforce, both low-cost workers and high-quality experts.

In Mexico, on average, a direct worker earns approximately $3.50 USD per hour.  Furthermore, the average  general minimum wage for 2021 is around 7.0 USD per day , and it is applicable mostly throughout the country, except for the Northern Border Strip. The Northern Border Strip is subject to a higher minimum wage, about 9.27 USD per day.

• Infrastructure

Moreover, Mexico has a strong network of highways, railways, and international airports, that provide companies with accessibility for doing business, in regards to logistics for goods transportation and traveling for managers

Equally, Mexico’s counts with a valuable location for U.S.-based companies or companies looking to enter the U.S market due to its proximity and the advantage of being in similar  time zones. Its proximity to one of the main markets worldwide, USA, provides Mexico an advantage in logistic cost savings

• Shelter service providers 

Mexico has different companies with which you can support your company to settle in Mexico smoothly, in a more efficient way and through a risk mitigation approach. Furthermore, Shelter services considerably reduce start- up time.

If your company is planning to establish operations in Mexico, a good option will always be to associate with a local company, that counts with experience and know-how of local regulations.

Learn more about Mexcentrix, through our shelter program, our clients can focus on what they do best (production, quality, materials) and let us do what we do best.

For additional information regarding our services or if you need a cost model for your operations in Mexico, contact us.

¿Have you heard of Ally- Shoring?

Due to the COVID-19 pandemic many industries experienced problems and complications in receiving critical components or had to modify their supply chains, leading to an exposure of the weakness and hard dependency of supply chains among various industries.

The US-Mexico Foundation (USMF), a non-profit organization dedicated to promoting bilateral cooperation between the United States and Mexico, recently initiated a campaign to promote the concept of Ally-Shoring, which they consider will help in building U.S. supply chain resilience.

What is the Ally-Shoring?

In the report “The Case and Path of Development for Ally-Shoring” prepared by Elaine Dezanski and John Austin for the United States-Mexico Foundation, it is defined Ally-Shoring as:

“A program of sourcing essential materials, goods, and services among partners and allies, reducing dependence on any particular country, particularly those that may not share the same values and long-term interest”

Note that perhaps the best example of the potential for ally-shoring is the US-Mexico relationship, and which represents a big opportunity for Mexico.

Relationship between Mexico and US

The US and Mexico have a unique opportunity to both strengthen and deepen joint manufacturing, R&D, trade, facilitation, security and governance ties through the adoption of an ally-shoring strategy. That is why during this pandemic US turned to Mexico to fill the gap in areas such as medical equipment and Mexico, similarly, was supported by the US.

Off-Shoring, Near-shoring vs Ally-Shoring

As we mentioned in our blog Nearshore vs OffShore, the fist one means transferring your operations across national borders to business operations in another country that is in proximity, with a relatively small-time- zone and cultural differences. While Offshore means transferring your business operations overseas.

Therefore, we can see that Ally-shoring adds a political and strategic component to the commercial relationship, when countries share crucial aspects and making the ties reach an even greater level of rapport within the productive chain of both countries.

Enrique Perret said in an interview for Forbes that:

“The process of seeking that supply chains can be more integrated with Latin America has accelerated, some years ago there was talk of off-shoring, which was the search for the installation of some production processes in locations that were competitive, then there was talk of near-shoring, which meant doing the same thing but in nearby countries, then re-shoring came, which meant returning the process. In the case of ally-shoring, it is about relocating these processes in countries that coincide in fundamental aspects, that is why the opportunity is so great for Mexico.”

Benefits and Opportunities of Ally-Shoring

1. Reduce dependence on critical supplies outside the region, mainly from countries in Asia, and make local supply chains more reliable and less susceptible to geopolitical crises, trade risks and other factors.
2. Accelerate the recovery from the pandemic-induced economic recession on both sides of the border, developing and expanding what is already an interconnected production system in North America.
3. Strengthening policy coordination between Mexico and U.S.
4. Ease job creation and business growth in emerging and highly important economic sectors, such as the technological, through binational R&D initiatives, in order to generate innovative, clean and sustainable production models.
5. Create joint critical infrastructure to improve business operations, enable critical supply chains, facilitate and speed trade and improve security.
6. Leverage the large databases on investments of both governments, to create strategies that attract more FDI to the region, as well as leverage the USMCA to integrate a strong trade region.

Are you thinking of ally-shoring in Mexico?

Through a shelter company, US companies can set up operations in Mexico easily and through a risk mitigation approach.

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

Mexico is an attractive destination for transnational companies, being the world´s fourteenth largest FDI recipient. This is due to the different advantages Mexico offers, among others: strategic geographical position, highly qualified and low cost labor force, its free trade agreements, and its incentive programs, such as the IMMEX program, formally known as the IMMEX Maquiladora Program,  which enables foreign companies to operate in Mexico under a preferential tax structure.

What is IMMEX?

Immex stands for the Maquiladora, Manufacturing and Export Services Industry.

Its objective is to strengthen national exports, and to provide companies with tools to adopt new forms of operation and making business,  modernize and reduce processes, all in an environment that encourages the attraction and retention of investments in the country.

The IMMEX authorization is an instrument which allows the temporary import of goods that are used in an industrial process or service , to produce, transform or repair foreign goods imported temporarily for subsequent export, without paying VAT and countervailing duties, and deferring or not paying General Import Tax.

One of the main requirements for the IMMEX program is to have annual sales abroad of at least USD $500,000, or invoice exports accounting for at least 10 percent of the total company invoices.

Benefits of the IMMEX Program

The main benefit of the IMMEX Program is they can temporary import of raw materials, components, machinery and equipment among others without paying VAT and countervailing duties and deferring or not paying General Import Tax.

Nevertheless, within a fixed timeframe, the finished manufactured good must be exported, transferred to another IMMEX program, or proceed with a change of regime.

The timeframe in which the temporary imported materials may remain in national territory, according to article 4 of the IMMEX Decree and Article 108 of Customs Law is as follows:

• 6 months:
  • The goods subject to transfer by means of virtual operations, will have a period of permanence of up to six months.
• 18 months:
  • Fuels, lubricants and other materials that are going to be consumed during the production process of the export merchandise.
  • Raw materials, parts and components that are going to be used entirely to integrate export merchandise.
  • Bottles and packages.
  • Labels and brochures.

• 2 years:
  • Container and trailer boxes

• For the validity of the program
  • Machinery, equipment, tools, instruments, molds and spare parts for the production process.
  • Equipment and devices for pollution control, research and others mentioned in article 108 of the Customs Law.
  • Equipment for administrative development.

Categories of IMMEX program

There are 5 different types of IMMEX registrations:

• IMMEX Holding Company Program:

  Applies when the manufacturing operations of a certified company called holding company and one or more controlled companies are integrated into the same program.

• IMMEX Industrial Program:

  Applies when an industrial process of elaboration of transformation of merchandise destined for export is carried out.

• IMMEX Services Program:

  Applies when services are performed on export merchandise or export services are provided, solely for the development of activities that the Ministry of Economy determines

• IMMEX Shelter Program:

  Applies when one or more foreign companies provide the technology and productive material, without operating the program directly.

• IMMEX Outsourcing Program:

  Applies when are certified company that does not have facilities to carry out production processes, carries out manufacturing operations through third parties that it registers in its Program.

How to take advantage of the benefits of the IMMEX program in Mexico

The application of the IMMEX program is a complex process and contains several requirements that need to be fulfilled. Furthermore, to maintain the authorization the company must comply with several reporting requirements among many other obligations such as maintaining an automated inventory control (Annex 24), maintain the goods at the addresses that are registered in the program, among others. Therefore, many foreign companies, partner with experienced partners such as a shelter service provider, like Mexcentrix, for a quicker and correct access to the benefits of the program. .

Mexcentrix can support your company in the full process since the application of the IMMEX program and management of it, including filing required reports and fulfilling all obligations.

Contact us for a free consultation today and learn about the best option for your company.

For many years, manufacturing companies have sought to increase the efficiency of their production operations and reduce costs, leading them to establish manufacturing plants in countries other than their places of origin. This has led to an increase in foreign investment and to the origin one of the main industries in the country: the maquiladoras in Mexico.

The maquiladora program was established since 1964 in order to attract foreign investment and combat unemployment in the U.S and Mexico border.

In addition, in 1994 with the signature of NAFTA (North American Free Trade Agreement) which has been ratified and today we know was USMCA (United States- Mexico – Canad Agreement), boosted during the late 90´s the number of maquila plants especially in the border of Mexico and United States.

What are Maquiladoras?

A maquiladora is a manufacturing operation in Mexico which is run by a foreign company and exports goods to other countries.

Maquiladoras import raw materials, components and machinery to process or assemble them in Mexico and then export back the finished manufactured goods. The main advantage of the maquiladoras is that the raw materials, components and equipment for production purposes can enter the Mexico under a duty-free and tax benefit structure.

In 2006 the maquiladora program was transformed and the IMMEX Program was established. The IMMEX Program which is the acronym for Manufacturing Industry, Maquiladora and Export Services, encourages manufacturers to export goods and strengthen Mexican exports.

As of February 2021, according to the National Foreign Trade Information Service of the Ministry of Economy (SNICE), for its acronym in Spanish, there are 6,003 IMMEX Programs in Mexico.

Learn more about the details of the IMMEX Program here.

Benefits of  Setting up a Maquiladora in Mexico:

• Tax benefits:

Temporary import of raw materials, components, machinery and equipment among others without paying VAT and countervailing duties and deferring or not paying General Import Tax.

• Free Trade Agreements:

Furthermore, Mexico counts with 13 Free Trade Agreements with 50 countries, leading to a reduction of trade barriers and allowing foreign companies to import some raw materials and products free of duties. Additionally, these FTA’s provide Mexico with access to around 60% of the world’s GDP.

• Cost Savings:

Maquiladoras in Mexico, can benefit from having highly qualified and trained workforce at competitive labor costs.

In addition, if the finished good will be sold to United States,  it offers important logistics costs savings due to  cheaper shipping costs and  shorter overall times for shipping, which also lead to faster delivery.

• Location and Product Flexibility:

A maquiladora can be established anywhere in the country, and still benefit from the tax savings advantages.

Furthermore, foreign companies that establish maquiladoras in Mexico have no limit on the types of items that can be manufactured (with the exception of firearms), as long as the manufactured finished good is exported.

• Fast and easy start-up through a shelter company:

Establishing a maquiladora in Mexico is easier when partnering with a shelter service provider in Mexico. As the shelter company can be the legal entity in Mexico, or can provide service through a new legal entity, while offering a faster and easier start-up due to their experience and know-how on local practices and regulations. In addition to taking care of all administrative matters which the company on and allowing the foreign company to focus on what they do best (production, quality, materials).

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How to establish a Maquiladora through a shelter company?

Hiring a shelter service provider for establishing a maquiladora in Mexico, can facilitate the complete process and is often the easiest way to maximize the benefits that the maquiladora program offers.

Mexcentrix can lead and support you in the complete process for establishing manufacturing operations in Mexico. Our shelter service offers full administrative and operational support including, among others:

• Human resources
• Payroll and benefits administration
• Tax and accounting
• Foreign trade and customs
• Management IMMEX Program

Through our shelter program, our clients can focus on what they do best (production, quality, materials) and let us do what we do best.

Furthermore, through Mexcentrix services, we ensure 100% compliance with Mexican law and regulations, and our clients can avoid unnecessary problems and costly mistakes. In addition, we offer ongoing consulting to keep our clients updated about any changes in applicable laws and regulations.

For additional information regarding our services or if you need a cost model for your operations in Mexico, contact us.

The manufacturing industry is the main economic activity in the State of San Luis Potosi.

There are several advantages of manufacturing in San Luis Potosi. Therefore, the manufacturing industry in San Luis Potosi, is extremely important and represents approximately 25% of its Gross Domestic Product (GDP). For instance, San Luis Potosi counts with a total of 9,962 manufacturing companies.

Furthermore, San Luis Potosí ranks in fifth place of the ten world cities with less than two million inhabitants that show the greatest economic potential, according to the ranking Global Cities of the Future published by the Financial Times magazine. Likewise, the capital of San Luis Potosí, ranks ninth among cities for the highest business profitability.

Moreover, San Luis Potosí occupies second place within Mexico, in terms of the specialization of the states in the automotive industry due to its added value of 39.4%, according to the Government of the State of San Luis Potosí. The manufacturing sectors with the highest participation in the state are transportation equipment (automobiles and auto parts), industrial machinery and equipment, electric appliances and electrical power generation equipment.

Why is San Luis Potosi one of the main manufacturing States in Mexico?

San Luis Potosi is an attractive state among the manufacturing industry, due to its competitive and highly skilled labor force, its privileged geographical location, and its existing clusters such as the automotive, logistics and medical cluster, which as a result you can find numerous suppliers from these industries in the State. In addition to its extensive number of highly developed industrial park, among other advantages San Luis Potosi offers for manufacturing companies.

Some of the main advantages that make San Luis Potosí an attractive state for companies looking to establish manufacturing operations in Mexico are listed below:

• Privileged geographical location 

San Luis Potosí is located in the center of Mexico, having access in a range of 2 to 7 hours by land, to the main cities and ports of the country, as well as the EE.UU border.  Certainly, due to its strategic location, companies have access to a concentrated supply chain, in a 300 km radius there is access to more than 850 automotive suppliers and 9 assembly plants.

• Supply Chain

San Luis Potosi, counts with a fast growing automotive supply chain.  The establishment of two OEM Plants (BMW and GM) which together employ more than 3,300 employees, led to strengthening the local automotive cluster, leading to more than 200 companies from the automotive industry in the State.

In addition, the State counts with a strategic tax scheme (Recinto Fiscalizado Estrategico), which provides a competitive advantage due to time saving in the supply chain of companies.

• Labor Force 

The state has a population of 2.8 million, with approximately 1.2 economically active individuals. Of these, approximately 20% are employed working in manufacturing industries.

San Luis Potosí has international educational institutions, universities, and technological institutes with programs focused on the needs of the industry, including dual programs. According to the Secretary of Public Education (SEP), from 2016 to 2019 there were more than 54,000 graduates from universities or technical institutes of which more than 30% of these are professionals in engineering and telecommunications careers.

Furthermore, the state counts with training centers, and centers for research, innovation and technological development in this area.

In addition to highly skilled labor force, San Luis Potosi counts with competitive labor costs.

• Infrastructure 

The state has the largest intermodal terminal in Mexico (RFZ) where approximate 20,000 loading and unloading maneuvers are carried out monthly.

Furthermore, San Luis Potosi counts with more than 20 industrial parks. The availability of highly developed industrial parks reflect the opportunities for new investments, and facilitates companies to transfer their products to other states and worldwide.

Due to the manufacturing advantages San Luis Potosi offers, several foreign companies have decided to  establish manufacturing operations within the State.

Despite of the difficult economic situation that the world and all states in Mexico are going through, San Luis Potosi was one of the top 5 states with greater foreign direct investment (FDI) in the first semester of 2020, reaching a total of $880.20 million dollars, according to Lider Empresarial. 

 Are you thinking of establishing manufacturing operations in San Luis Potosí?

Mexcentrix can help you, our headquarters are established in San Luis Potosí.  We count with over 20 years of experience providing strategic guidance for low risk manufacturing in Mexico. We assure your company a successful and timely start of operations in Mexico.

The business services we offer are, among others:

• Start- up & shelter
• Human Resources
• Foreign Trade and IMMEX Program
• Tax and Accounting
• Consulting and Auditing

Our services are 100% guaranteed, we are committed to the high quality service that our clients deserve, and we count with the know-how, experience and infrastructure to make it happen.

Start your Mexico manufacturing operation successfully, with help from the experts.

Contact us 

Mexico presents advantages for manufacturing companies in 2021

Last year (2020) was a tough one for all industries, including the manufacturing industry, as they had to lead with a significant reduction in income and sales and which led to many changes and need to adapt.  Among the top industries affected are the automotive and aerospace industry, and service industries such as restaurants, hotels, etc..  Nevertheless, 2021 is a more hopeful year for most industries, including manufacturing.

The opportunities for the manufacturing industry in Mexico for this year

The pandemic challenged all industries, but it also presented an opportunity to analyze costs, ways of improvement, and to overcome changes. Which has led companies to search for alternatives, make better use of their resources and cut costs.

In which Mexico through its high skilled labor and competitive labor costs can play an important role.

Furthermore, the US and China trade conflict is still ongoing, as even though after several negotiations and that U.S. – China phase 1 trade deal was signed on January 13^th, it cut some U.S tariffs on Chinese goods in exchange of China agreement to expand purchases of certain US good and services and address some U.S objections on intellectual property practices.  But still, some of the imposed tariffs remain unchanged.

Therefore, additionally to the abovementioned, the challenges caused by Covid-19, the increased labor costs in China and the rising tensions in the South China Sea, have raised concerns about manufacturing goods in China and shipping halfway around the world, leading some companies to reconsider where to set up operational manufacturing  facilities, and to look for other options including onshoring or nearshoring.

In addition to the fact that the current travel restrictions between U.S. and China due to pandemic have complicated the situation.

Mexico plays an important role in this field, as in 2019 and 2020, Mexico overcame China to become U.S. number one trading partner, and many foreign manufacturing companies have decided to invest in Mexico and establish manufacturing operations in the last years.

Companies have been considering establishing manufacturing operations in Mexico due to the different advantages it offers such as:

• Competitive labor costs
• Highly skilled labor force
• Proximity to US, which due to a similar time zone facilitate communication and travel and which leads to lower shipping costs.
• 13 Free trade Agreements with 50 countries
• Foreign Trade and Tax Incentive Programs, such as the IMMEX Maquiladora Program.

The above-mentioned are some of the advantages Mexico has been offering for manufacturing companies in the last years and which will remain in 2021. These are some of the benefits that had led manufacturing in Mexico to rise in popularity in the last 2 decades.

Are you looking to capitalize on the advantages of manufacturing in Mexico in 2021?

If you are looking to take advantage of the benefits Mexico offer for manufacturing companies, Mexcentrix can lead and support you in the complete process for establishing manufacturing operations in Mexico. Our shelter service offers full administrative and operational support including human resources, payroll, tax and accounting, foreign trade, customs, management IMMEX Program among others. Through our shelter program, our clients can focus on what they do best (production, quality, materials) and let us do what we do best.

Through Mexcentrix services, we ensure 100% compliance with Mexican law and regulations, and our clients can avoid unnecessary problems and costly mistakes. In addition, we offer ongoing consulting to keep our clients updated about any changes in applicable laws and regulations.

Furthermore, our specialized and highly qualified teams have helped our clients during these difficult times due to the pandemic, to implement measures designed to decrease the impact of the economic crisis in their operations and to be able to adapt in the most effective way.

For additional information regarding our services or if you need a cost model for your operations in Mexico, contact us.

Mexcentrix will support your company for a smooth start and running of operations in Mexico.

The aerospace industry in Mexico has become one of the nations top industries

The aerospace industry is currently one of the most important in the world and in Mexico. North America is the region with the largest participation, with 51.1% of the total, according to Mexico Industry. In Mexico all the components of an aircraft are manufactured, including engines, cargo doors, fuselages, landing gears and connection system. Mexico ranks as the 14^th largest aerospace manufacturer in the world, according to IHS Markit, and 12^th place worldwide regarding exports of the aerospace industry.

In 2019 the aerospace industry exported a total of $9.5 billion dollars, the main destination country being the United States. Nearly 75% of Mexican aerospace industry’s production is consumed by the USA, and around 20% by Europe.

Aerospace Industry in Mexico has grown 14.4% in 15 years

The aerospace sector has reached an annual growth of 14.4% in the last 15 years (Mexico Industry, 2020), becoming one of the nation´s top industries.  According to the FEMIA (Mexican Aerospace Industry Federation), aerospace suppliers in Mexico grew from 100 companies in 2004 to over 300 in 2019). By the end of 2020 there were approximately 350 aerospace companies in Mexico.

Out of the total number companies within this sector, according to Verónica Rojas, research professor at the College of Engineering of the Center for Technical and Higher Education, 79% are dedicated only to maquila, 11% to repair and construction of engines and 10% to research and innovation in this area. Showing that Mexico has managed to consolidate itself as one of the main manufacturing centers.

The main states that contribute to this industry are Baja California, Chihuahua, Sonora, Nuevo León and Querétaro; which, due to the great growth in production and demand, have already developed academic programs together with universities and technical institutes that are linked to the needs of that industry. As of 2019 the existence of aerospace companies within the states abovementioned summed a total of 290, divided as follows:

Mexico’s competitive advantages have brought investment in the aerospace industry

Some of the countries that have already invested in Mexico within this sector are the United States, Canada, France and Spain; which have seen the competitive advantages that the territory has, such as the quality of the workforce, the low cost of production, the geographical position and the commercial agreements that give access to large markets.

Are you thinking of establishing your aerospace company in Mexico? Contact us. Our array of incorporation, shelter services and outsourcing has helped set up several aerospace companies with a successful and timely start of operations in Mexico.

We can support you with the following activities, among many others:

• Site selection
• Company incorporation 
• Permits and licenses procurement
• Recruiting, training and outsourcing payroll.
• Managing all administrative functions, including finance and labor.
• Tax and accounting outsourcing
• Import and export operations, customs, freight and logistics coordination, among others.

Sources:

• Mexico Industry
• IHS Markit