There are different models in which a foreign company can operate in Mexico, including the shelter program, and the following ones:
- Standalone: The foreign company creates a new entity in Mexico, with total control of all operations and total independence from third parties.
- Joint Venture: There is an equal partnership between a Mexican manufacturer and a foreign company. Within this model, the foreign company faces more risks and liabilities than a shelter business model.
- Shelter: A company is hired by another to manage all administrative and legal tasks, while the client maintains full control and can focus on its core business.
- Contract manufacturing: A company is hired by another to produce goods or provide a service; the company does not have full control and oversight of production and quality assurance.
The Shelter Program
The shelter model started in Mexico in the 1980s as a response to an increase in foreign direct investment. Shelter companies help foreign companies in reducing their risk, liabilities and financial exposure associated with entering into Mexico directly.
Overall, this model still offers exposure, costs, and risks reduction. As the shelter company acts as the legal entity of record in Mexico for all compliance-related matters.
Also, the foreign company is exempt from permanent establishment in Mexico and can get immediate access to the IMMEX Program, among others.
The shelter company will take care of all the back-office operations and all administrative tasks while letting the foreign companies focus on its core business. By these means, the foreign company can focus on production, quality control engineering, inventory, sales as well as the many other production-related aspects of the business.
How does the shelter program work?
A shelter company can help since the startup and pre-operational phase, with business case, feasibility studies, cost analysis, site selection among others.
Secondly, once the company has found the best space solution and has obtained its permits and licenses, we will assist with a successful launch and run of operation of its plant in Mexico.
After the company has consolidated its operations, they can evaluate if they would like to stay under the full shelter or to absorb some administrative tasks.
Which includes absorbing one department such as foreign trade, tax, or human resources among others, while letting the shelter company keep doing the rest.
How long should a foreign company stay under the shelter scheme?
There is no specific duration of the shelter model and it may vary according to the needs of the foreign company. The main idea is for our clients to stay under the shelter program as long as it makes sense according to its business case and strategy. Therefore, companies can decide to leave the shelter model at any time or to remain indefinitely.
Moreover, the shelter model has evolved along with the industry and government regulatory reforms since the 1980s.
It is still one of the most popular business models to start operations in Mexico, due to the different advantages the shelter model has to offer:
- Lower investment and operating costs
- Faster start- up
- Economies of scale
- Ensure 100% compliance with mexican regulations.
- Reduced Mexican legal exposure
Looking to start operations in Mexico ? Contact us for more information on the shelter program and the benefits Mexcentrix has to offer to your company.