22Dic

Advantages of Shelter Companies

diciembre 22, 2020 Jesus Aguirre

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

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

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

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

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

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

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

Mexcentrix - Advantages of Shelter Companies

Advantages of using a business shelter

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

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

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

Which Shelter company is the best option for your company

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

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

Meet Mexcentrix

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

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

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

01Dic

Overview of the Automotive Industry in Mexico

diciembre 1, 2020 Jesus Aguirre

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

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

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

Main reasons for automotive companies manufacturing in Mexico

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

Main facts about light vehicle production in Mexico

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

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

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

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

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

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

20Nov

How to incorporate a company in Mexico from abroad without problems

noviembre 20, 2020 Jesus Aguirre

Start a business in Mexico. Incorporating a company is simple with a shelter company.

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 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, some activities in Mexico are restricted for foreigners. 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 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 to receive advice on this topic.

Outsourcing in Mexico - Mexcentrix - Shelter Company

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 you will carry on.
- Name and data about shareholders/ partners, including the number and percentage of ownership. Under Mexican law, all three abovementioned entities must have at least a minimum of two shareholders/ partners.
  
  The data that will be requested for the shareholders/ partners is the following:
  - Date and place of birth
  - Nationality
  - Address
  - Main occupation
  - Age
  - RFC and CURP (if applicable)
- The partners must appoint the corporation’s management (either a Board of Managers or a Sole Manager).
- Name of the Statutory 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. Afterward, 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 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 by an attorney-in-fact before the Notary to incorporate the company.

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).

Depending on the business activities of the company it may need to obtain additional registrations before different government agencies.

At Mexcentrix, depending on the nature of your company, we can get your company running in as few as 30 business days with a cost-effective and flexible shared business services plan.

Do you still have doubts? Feel free to contact us, we have helped several foreign companies through out the incorporation process in Mexico to start operations.

30Oct

Manufacturing in Mexico vs China

octubre 30, 2020 Jesus Aguirre

Choosing Between Mexico vs China for Manufacturing

The manufacturing industry has been growing exponentially, therefore, lately, companies within this sector seek to move or expand their production to other locations, looking for a more cost-effective location, taking into account, among others: labor costs, supplier network, logistics. In order to find the location that best supports their growth strategy. Let’s compare the manufacturing in Mexico vs China.

China and Mexico are considered low-cost manufacturing countries, therefore they are most of the time considered as an option for nearshoring or offshoring. So which country could be the best option for your company to settle in?

In this document, we will focus highly on the best option for US manufacturing companies. According to a PwC study, currently, US manufacturers have been considering transferring their production to Mexico, moving it from China, as they can reduce operating costs, on average, by an additional 23% (PWC, 2020).

According to this same study, PWC taking into account the operating cost of a hypothetical product, estimated producing it in China was 27% less expensive than producing in the US, and as in Mexico logistics and tariff and fees costs are much lower companies could save the additional 23% before mentioned.

Mexico vs China - Manufacturing Operations Cost

Main factors that could impact the operating costs in manufacturing in Mexico vs China.

Mexico vs China: Labor cost

Within the most important factors taken into account when performing analysis for expansion of operations is the labor cost. One of the main competitive advantages of Mexico and China is their low labor cost. Which according to Statista the average manufacturing labor cost per hour in China is 6.5 USD per hour with an increase of 13% from the previous year. While in Mexico it is 4.82 USD per hour, with an increase of only 4% from 2019 (Statista, 2020). Which shows a trend of a higher increase in wages in China compared to Mexico.

The above mentioned year per year increase has also been impacted by the MXN – USD exchange rate, the devaluation of the MXN peso against the USD in the last years have reduced the effective labor rate inflation.

It is important to take into account that the manufacturing labor costs for both countries are just an average as a means of providing insight, as labor costs will vary per region, workforce skills, and level requirements, among others.

Furthermore, the minimum wage in Mexico is $123.22 MXN per day in almost all regions of the country, except in the Northern Border which is $185.56 MXN per day with an average minimum wage per month of $220.9 USD compared to $368.5 USD in China.

Lastly, Mexico is considered to have greater productivity with 48 hours work week compared to a generally 40-hour workweek, in which after this overtime must be paid.

Mexico vs China: Tariffs and taxes

Due to the US-China trade war, the US has imposed tariffs on more than $360 billion of Chinese goods. Although this year a tariff agreement was signed, and the U.S. agreed to lower tariffs on $120 billion of Chinese goods to 7.5%, tariffs are still higher than in Mexico, and it is also important to take into account that some of the most challenging issues weren’t solved.

On the other side, the United States- Mexico- Canada Agreement (USMCA), allows goods to be exported and imported between the US and Mexico free of tariffs under specific conditions.

Furthermore, Mexico counts with foreign trade incentive programs such as IMMEX, VAT and IEPS Certification, PROSEC, Rule 8^th. One of the most common is the IMMEX Program which is an instrument that 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.

Mexico vs China: Logistics

One of the most known competitive advantages is Mexico’s favorable geographic location, due to its proximity to the United States and its access to the Atlantic and Pacific. In regard to goods being shipped to the United States, according to Mexico Business, Mexico counts with an 80% logistics time advantage due to its proximity to the U.S., and 75% logistics cost advantage over China. Thus making Mexico a better option when deciding manufacturing in Mexico vs China.

Mexico vs China: Supply Chain

All the mentioned factors affect the supply chain cost structure. Therefore, it is important to take into account when analyzing supply chain sourcing. According to the before-mentioned PwC study, through an analysis taking into account labor content and Product Value density, based on $450 billion of manufactured goods imported from China to the US in 2019, 20% of those goods could achieve cost efficiencies if nearshore to Mexico (18%). (PWC, 2020).

Comparison table Mexico vs China

As a summary from the above-mentioned discussed factors, pleased find below a comparison table of manufacturing in Mexico vs China:

Are you thinking of moving or installing your manufacturing to Mexico?

Mexcentrix offers high-value, cost-effective and flexible shelter services and outsourcing that will get your operation in Mexico highly functional at a lower cost and successfully producing within a shorter timeframe than you can achieve on your own—all while significantly reducing the risks associated with a start-up. Contact Mexcentrix for a feasibility study or cost estimation today!

12Oct

Do you know what OEA is?

octubre 12, 2020 Jesus Aguirre

The Authorized Economic Operator (OEA) is a program that aims to strengthen the security of the foreign trade logistics chain through the implementation of minimum security standards internationally recognized, in coordination with the private sector.

Everything you need to know about the OEA

OEA Benefits

Some benefits for OEA certified companies are:

Rectifications of orders of their import operations in the first 3 months, without need for authorization
Import and export operations will have expedited crossings at the border
Customs flexibility, and in some cases fines are waived.
Virtual transfers to companies that do not have an IMMEX program.
When the authority detects surplus or undeclared merchandise in definitive imports and exports, there will be a period of 10 days from the notification of the corresponding procedure, to process the definitive import or export petition
Customs clearance of merchandise susceptible to individual identification without the need to indicate in the order additional data such as brand, model, etc. As long as an updated registry is carried out in the inventory control system.

Do you know the recently added benefits?

In the event that a cancellation cause is updated of the Import Register and/or Importer Register of Specific Sectors and/or Sector Exporter Register, the registration in the Scheme will not be canceled immediately
The company is not obliged to submit the Manifestation of Value in regard to temporary import operations carried out under the IMMEX Program
Goods imported temporarily under the IMMEX program can stay in the national territory for up to 36 months. Regarding virtual operations, the term may be up to 18 months.
Consolidation of the cargo of goods, covered by several orders in the same vehicle
Processing weekly or monthly consolidated orders
Application of the procedure established in article 152 of the customs law instead of article 151.

There are 11 minimum standards each company must meet in order to qualify for the OEA Certification:

Planning for security in the supply chain
Physical security
Access controls
Business Partners
Safety process
Customs management
Security for Cargo vehicles, containers, trailers and semitrailers
Personnel Security
Information Security
Safety Training
Management and incident investigation

OEA is a voluntary program, nevertheless, OEA certified companies are considered safe, trustworthy by the authorities, and better business partners and with higher investments in supply chain security by other companies.

The requirements for the OEA certification will vary according to the different modalities which are:

What are the requirements?

Requirements

To be a company incorporated according to Mexican law.
Be up to date with your tax and customs obligations, as well as authorize SAT to make public the positive opinion.
Have employees registered in the IMSS or through the subcontracting of employees, as well as being up to date with the obligation to hold and notify the Income Tax on workers
Not to be in the list of companies non- compliant or with nonexistent operations, published by the SAT.
Have valid digital signature certificates to issue digital tax receipts
Have registered before SAT all establishments in which economic activities or foreign trade are carried out.
Have an electronic email for the purposes of the Tax Mailbox
Not be suspended in the Importers Registry, in the Importers Registry of Specific Sectors or in the Sectorial Exporters Registry.
Allow AGACE personnel access to your facilities all the times, to carry out the initial inspection or supervision visit.
Having clients and suppliers abroad directly or indirectly linked to the customs regime
In case of having national suppliers, a file must be presented with the name and RFC of the input suppliers acquired in the national territory of the last 6 months, also considering the companies with the IMMEX Program with which are making the virtual transfers.
Have the legal use of the property or properties where the production processes or the provision of services are made.
The SAT must not have filed a criminal complaint or complaint against the partners or shareholders, legal representative or members of the administration, or in its case, declaration of damage, during the last 3 years prior to the presentation of the request.
Have an updated and automated inventory control.
Keep the accounting in electronic media and enter it monthly through the SAT Portal.
The partners or shareholders, legal representative with ownership rights, and those who carry out the paperwork to the SAT and members of the administration must be up to date in the fulfillment of their fiscal obligations.
The partners, shareholders, or members of the administration must not be related to any company whose registration in the Company Certification Scheme has been canceled.
To have made foreign trade operations during the last two years prior to your request.
Comply with the payment of rights.
Make the designation of transport companies authorized to make the transfer of foreign trade goods.
Prove compliance with the minimum security standards for each one of the facilities where you carry out foreign trade operations.

28Sep

Outsourcing Administrative Processes: What is it and how does it work?

septiembre 28, 2020 Jesus Aguirre

Outsourcing Administrative Processes can improve the efficiency of your company, discover how Mexcentrix can facilitate your business processes

In a globalized world where there are increasing ways to innovate and generate new processes to simplify a company’s projects, outsourcing administrative process is an option to facilitate processes. Outsourcing has become increasingly important in companies, as it allows a company to be more efficient and focus on different tasks.

Do you already know what outsourcing is and how it can improve the administrative processes of your company? Before diving into this topic, it is important to understand well what outsourcing is.

What are Outsourcing Administrative Process Services?

Surely you’ve already heard the term outsourcing, but in case you haven’t, it is the process by which one company hires another, or an individual, to take care of an activity or production. Outsourcing is closely related to the sub-contracting of services, since it involves the search for an external source that can efficiently provide certain services for a company.

At Mexcentrix, an outsourcing company in Mexico, we work to provide strategic guidance and business services to manufacturing companies. The ultimate goal of outsourcing administrative processes is for the contracting company to have more time to focus on the key aspects of their business.

Mexcentrix provides strategic guidance and personalized business services, among them are the services of:

Startup and shelter program
Human resources
Import, export, and logistic services
IMMEX program management
Tax and accounting
Consulting and audit

Now that we know what outsourcing is and the processes that can be outsourced, let’s talk about its advantages.

What are the Advantages of Outsourcing?

Outsourcing administrative processes offer different advantages, depending on the line of business. Before working with an external company for outsourcing services, it is important to analyze the impact this will create for your company and be prepared for these changes. As we mentioned before, an administrative outsourcing company provides a lot of advantages, among others:

Focus on core business activities

Outsourcing processes gives your company the possibility to respond and adapt quickly to business changes and can free up the company from other tasks. Thus allowing the company to focus on its strengths and on the key areas of its business.

Time optimization

Regardless of your business operation, by outsourcing your administrative services you will save costs and time. At Mexcentrix, we can get your operations up and running in Mexico 50% to 75% sooner.

Within Mexcentrix’s human resources department you are guaranteed greater agility in the hiring process. With an extensive database of potential prospects, staffing time is dramatically shortened. In addition, by being able to find the right and experienced candidate for your company less time will have to be invested in training, while also leading to cost reduction.

Cost saving

Outsourcing your administrative tasks is cheaper than hiring several permanent full time staff to do the job. In Mexcentrix, our team of excellence works to constantly bring improvements to deliver a high quality service and save up to 40% during the initial stages of your company and up to 20% after start up.

Increased efficiency

When you outsource your administrative tasks with an outsourcing partner like Mexcentrix, they bring along years of experience in business practices and solutions. Therefore, through their knowledge and understanding of a specific business area, they can do a professional job which leads to an increase in productivity and efficiency in the processes.

Risk mitigation and no legal processes

By outsourcing your administrative processes to an expert, you will benefit from their expertise within that field and their ability to plan and mitigate potential risks. Furthermore, an outsourcing company will often provide the option of carrying out all your tax and legal processes, including payroll and tax payment on time.

At Mexcentrix we have treasury management services, tax declaration, compensation, tax refund, among others. We ensure 100% compliance with legal requirements, guaranteeing no fines or legal issues. We are the best option for outsourcing administrative processes in Mexico so that your business focuses on the main activities.

Are you interested in Mexcentrix’s outsourcing services? Contact us!

These are just five of the many advantages worth considering for hiring an administrative process outsourcing company. If you still have doubts or are hesitant to hire an outsourcing company in Mexico, we invite you to contact us and we will guide you throughout your shelter or outsourcing process.

At Mexcentrix, we offer added value services to start up your business in Mexico. Select only the services that your company requires to reach your company’s goals. With our outsourcing services, we’ll make certain that your company goals are met.

Our objective is to focus our services so that the start of your operations is smooth and highly functional. We seek to reduce the costs and times for the start of your production, while also significantly reducing the risks associated with a start-up. To learn more about the services we offer at Mexcentrix, contact us!

25Jun

Nearshore vs Offshore

junio 25, 2020 Jesus Aguirre

Nearshore vs Offshore

One of the main objectives for industrial companies is expanding their operations and being able to be more cost-effective. Based on the company’s supply chain needs, the company can decide between nearshore vs offshore.

Nearshore vs Offshore: Choosing what's best for your company

What is Nearshore?

It 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. This in order to be more cost-effective and save time.

Whats is Offshore?

It means transferring your business operations overseas. The main objective is also cost reduction, by looking for qualified employees with low labor costs.

The Main advantages of nearshoring are:

Geographical proximity and share time zones facilitate communication.
Fewer travel expenses and reduction of traveling time.
Lower shipping costs compared to overseas operations.
Cultural integration is more fluid.

Both nearhsoring and offshoring can help a company to reach their objectives and be successful, the decision of nearshore vs offshore will depend on the company’s needs.

One of the most effective ways to save money is the combination of nearshore or offshore with outsourcing.

Outsourcing allows your company to focus primarily on production, quality control among others while letting the experts take care of the rest. With offshore or nearshore outsourcing you do not have to worry about not knowing the culture, laws, and regulations of the country where you will transfer your operations, as the outsourcing company will take care of payments to employees, utilities, suppliers, taxes, among others.

Nearshore and Offshore in Mexico

Nowadays Mexico is one of the most attractive countries for expansion or relocation of operations, due to its several advantages such as:

o Highly skilled and competitive labor costs

o High-quality infrastructure

o Free trade agreements

o Export incentive programs

o Low energy costs

Are you thinking of nearshoring or offshoring in Mexico?

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