In the challenging early stages of establishing a business, particularly in a foreign country, understanding and dealing with the regulatory and cultural intricacies can feel like a high-stakes juggling act. However, for companies looking to expand their operations, Mexico offers a unique solution: the shelter service model.
Instead of setting up an independent business, forming a joint venture, or establishing a contract manufacturing unit, foreign manufacturing firms have the option to partner with a shelter service provider in Mexico. These providers serve as the official employer and manufacturer in Mexico, offering a comprehensive package of services within a legal framework that alleviates regulatory and financial pressures for foreign manufacturers expanding into Mexico.
This model, also known as the shelter manufacturing model, can be an invaluable tool for companies looking to establish a presence in Mexico without having to navigate the complexities of foreign business regulations and practices. With the right shelter service provider, foreign manufacturers can focus on what they do best: producing quality products and services.
What are the benefits of working with a shelter service provider?
Shelter service providers in Mexico not only help businesses overcome unique start-up challenges, such as securing IMMEX registration and maintaining regulatory compliance, but they also offer numerous other benefits. Here are six primary advantages of collaborating with a Mexican shelter company:
- Faster startup: Shelter service providers in Mexico have a deep understanding of the country's business ecosystem and can expertly navigate the complex regulatory landscape. By already holding IMMEX Certifications, they can help foreign firms enter the Mexican market as a division of the shelter company, which significantly reduces permit waiting times. According to Tetakawi's decades-long experience in aiding manufacturers in setting up Mexican operations, businesses partnering with shelter companies can begin production within 90 days or, in some instances, just 30 days. This means that companies can start generating revenue and building their brand presence in Mexico much faster than if they were to go it alone.
- Reduced risk: Working with a shelter service provider in Mexico offers a level of protection that is hard to replicate when establishing an independent business. These providers act as the official employer and manufacturer in Mexico, effectively managing internal risk by taking care of HR duties, accounting, and other administrative responsibilities. By offloading these tasks to experts, manufacturing entities can focus on their core business operations without worrying about the day-to-day minutiae of running a business in a foreign country.
- Lower costs: The Mexican government offers incentives to foreign companies looking to establish a manufacturing presence in the country via a shelter service provider. These incentives include exemption from permanent establishment status in Mexico, which can lead to reduced operational costs. Shelter companies create economies of scale by offering similar services to various manufacturers, thereby lowering the cost of certain processes. This means that manufacturing entities can enjoy significant cost savings when working with a shelter service provider in Mexico.
- Regulatory compliance: One of the biggest challenges of establishing a business in a foreign country is navigating the complex web of regulations and compliance requirements. Shelter service providers in Mexico offer a legal framework that significantly reduces the risk for foreign manufacturers. Experienced providers ensure that companies adhere to all applicable laws, including those related to labor, employment, trade, tax, environment, social security, and immigration. For instance, failure to register employees for social security and insurance on their hiring day can result in penalties of up to $18,000 USD. By working with a shelter service provider, companies can ensure that they are always in compliance with the law.
- Higher employee retention: Finding and retaining skilled labor is a critical success factor for any manufacturing entity. Shelter service providers in Mexico have deep insights into the local labor market, which allows them to not only recruit skilled labor but also decrease turnover. Tetakawi, for instance, utilizes preferred recruitment methods in various localities to design targeted hiring strategies for its clients, while knowledge about average wages, benefits, and expected bonuses in certain regions helps in reducing staff attrition rates. By working with a shelter service provider, companies can ensure that they have access to the best talent available in the market.
- Improved productivity: Managing the start-up of a new facility can be a full-time job and often requires hiring additional staff to manage administrative tasks. By trusting a Mexican Shelter Company to recruit a skilled workforce and manage startup details, companies can focus solely on their core business operations, thus enhancing productivity. By working with a shelter service provider, manufacturing entities can leverage their expertise in the local market and ensure that they have the resources they need to succeed in Mexico.
How to select a Shelter Company in Mexico?
Maximizing the numerous advantages of working with shelter service providers in Mexico hinges on choosing the right partner for your unique needs. Given that there are approximately 25 shelter companies in the country, understanding the distinctions between them is key to making an informed decision. Based on Tetakawi's market survey, here's a breakdown of the six primary types of services that these shelter companies provide:
Comprehensive Shelter Services: These are all-inclusive shelter companies in Mexico, offering a wide range of services from startup assistance and real estate leasing to accounting and HR support.
Administrative-Only Shelter Services: These providers focus solely on offering administrative support from the onset of your business, but they do not engage in real estate services.
Startup-Specific Shelter Services: These shelter companies are particularly useful for foreign manufacturing entities starting up in Mexico, helping them get on their feet before they set up their own internal support team.
Contract Manufacturing with Additional Shelter Services: These providers offer support through subcontracted workers on an as-needed basis, coupled with some shelter services.
Real Estate Centric with Additional Shelter Services: These are primarily real estate companies dealing with the rental and sale of industrial properties in Mexico, but they can also offer a degree of administrative support.
Customizable Shelter Services: These are flexible services that allow manufacturing companies to select and combine offerings that cater to their specific needs.
To delve deeper into the benefits of partnering with a shelter service provider in Mexico and to discern the best fit among the diverse range of providers, consider scheduling a consultation with Tetakawi. With their extensive experience and market-leading position, they can provide advice and solutions perfectly suited to your business needs.
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