Maquiladoras in Mexico: What are the Benefits?

May 01, 2020

If your company is considering expanding manufacturing activities in Mexico, operating under the maquiladora model has many advantages. In this post, we'll explore four main benefits of Mexico's maquiladora program and how shelter services providers can make setting up a maquiladora easy.

What is the maquiladora program in Mexico?

What is a maquiladora? definition

Before diving into the mechanics of Mexico's maquiladora program and exploring its many advantages, it is essential to understand what a maquiladora is. The simple definition of a maquiladora is any foreign-run operation in Mexico that exports goods to other countries.

First established in 1964, Mexico's maquiladora program began as a way to boost investment in the Mexican economy. An untapped resource for many years, maquiladoras were designed to bolster industry, labor, and economy in Mexico. In 2006, the development of IMMEX (Industrial Manufactuerera Maquiladora y de Servicios de Exportacion, which translates to the Maquiladora, Manufacturing and Export Services Industry) modernized the maquiladora program and is the current way the program is governed in Mexico today.

Learn more about the history of maquiladoras in Mexico here.

Overview of the advantages of maquiladoras

Maquiladora Employees in Mexico

When operating under the maquiladora model, foreign-owned companies can make use of labor, tax, labor, and other benefits as dictated by regulations in Mexico. Import of raw materials can be conducted duty- and tariff-free, and the finished product can then be exported to the company of ownership. In general, management based in Mexico conducts daily administrative operations. The foreign owner remains in control of all manufacturing expertise and operations related to production, including process improvements and long-term goal planning.

Modern maquiladoras are well-run, easily managed operations that allow businesses to capitalize on their core competencies. Operating under the maquiladora model is beneficial for many reasons. The advantages that companies find most attractive include:

  1. Location flexibility
  2. Fast, efficient start-up of operation
  3. Flexibility in products of manufacture
  4. Numerous cost and tax benefits
Must Read: Everything you need to know about manufacturing in Mexico

Benefit #1: Flexibility of maquiladora locations in Mexico

Where can maquiladoras be located in Mexico? As long as the finished goods are sold outside of Mexico, a foreign company can build a maquiladora virtually anywhere in the country. A customs tax applies if this is not the case. Still, the additional cost a company may incur is minor when weighed against the many other significant benefits associated with manufacturing in Mexico.

Whether you want access to one of the country's many robust industry clusters or establish your maquiladora close to the border, there are several location options in the country. Popular locations include Empalme, Guaymas, Hermosillo, Guanajuato, Monterrey, Queretaro, Saltillo, and Tijuana.

Explore eight popular destinations for locating your maquiladora in Mexico here.

Benefit #2: Easy start-up with a shelter services provider

Establishing a maquiladora in Mexico is easy when paired with the shelter services mode of entry. Mexico's shelter service program allows a foreign company to conduct business in Mexico through a "shelter" provider. The shelter service provider is the legal entity and employer of record in Mexico for all administrative matters, allowing the foreign company to focus all of its expertise on production related activities. Beyond offering critical knowledge necessary for fast, easy start-up, shelter services providers generally also handle:

  • Human resources and recruiting
  • Employee payroll and benefits administration
  • Customs management and import/export matters
  • Tax and fiscal compliance issues
  • Environmental and occupational health and safety
  • Purchasing negotiations and vendor relationships
  • Facilities management and real estate

One of the easiest ways to manufacture in Mexico is to operate through a shelter services provider that offers a manufacturing community. More than an industrial park, these communities provide several value-added services that include building leasing, permit obtainment, payroll management, customs access, zoning, and more.

To learn more about shelter services providers in Mexico and how to get started, click here.

Benefit #3: Flexibility of product or service offering

Maquiladoras in Mexico have virtually unlimited access to the types of items that can be manufactured. A caveat is the production of handguns and other firearms, which require a specific permit. Additionally, products involving radioactive or nuclear components require notification and permitting from the Mexican Nuclear Regulatory Agency.

For an overview of the major industries that benefit from Mexico's maquiladora program, click here. 

Benefit #4: Cost Benefits and Tax Incentives

Low labor and shipping costs, fast delivery, and duty-free production materials are some of the significant benefits of choosing to use the maquiladora structure. If not using this structure, compliance with associated regulations can additionally be costly and complicated. Maquiladoras, however, offer a variety of benefits for corporate income tax, payroll tax, and VAT tax (value-added tax) payments.

For an explanation of what it costs to set up and manage a maquiladora in Mexico, click here. 

How to establish a maquiladora with a shelter services provider

The benefits of Mexico's maquiladora program are numerous and extend beyond the benefits mentioned here. Working with a shelter services provider is often the easiest way to fully maximize the benefits that the maquiladora program offers. At Tetakawi, we provide a comprehensive array of shelter services in Mexico that provide a low-risk, cost-effective method for establishing manufacturing under a maquiladora.

To learn more about how to establish a maquiladora in Mexico or to learn about working with a shelter services provider,  contact a Tetakawi expert here.

 

 

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