Shelter Service Providers in Mexico: Your Competitive Edge
September 13, 2022
Shelter services in Mexico are a low-risk and low-cost way for a company to expand its manufacturing into Mexico. This is because shelter service providers serve as the legal entity of record under which a foreign company can conduct business in Mexico. While the shelter service provider handles the administrative and legal tasks related to the foreign company’s business, the foreign company handles all production-related activities. Shelter service providers also allow manufacturers to shorten the learning curve associated with doing business in Mexico by quickly allowing them to tap into the economies of learning they have developed over the years. Under the umbrella of the right shelter service provider, manufacturers can maximize the advantages of operating in Mexico.
The role of a shelter service provider
Foreign manufacturers avoid much of the red tape associated with starting a company in Mexico when they set up a maquiladora – or foreign-run manufacturing facility – through Mexico’s IMMEX shelter program.
In addition, using shelter services in Mexico reduces many of the risks of forming a legal entity in Mexico. This is because the shelter company assumes all compliance-related concerns as the employer of record in Mexico. In this regard, the shelter service provider serves as the liaison between the ownership company and regulatory bodies in Mexico for tax, trade, and labor.
What to expect from shelter services in Mexico
The shelter service provider's role is to reduce the administrative burden on its clients. As a result, these companies typically manage administrative functions not related to the core manufacturing operation. While these may vary depending on the type of provider and size, you can typically expect shelter services in Mexico to include:
• Human resources and recruiting
• Employee payroll and benefits administration
• Customs management
• Import/export administration
• Tax and fiscal compliance issues
• Environmental and occupational health and safety
• Purchasing negotiations and vendor relationships
• Facilities leasing and/or management
As needed, a shelter services provider may also handle certain additional functions, such as employee training and project management.
How shelter service providers help you compete
Manufacturers expanding into any new country often face a steep learning curve. However, shelter service providers are an ally to help you navigate issues unique to Mexico – and connect you with valuable local resources.
The advantages of working with a knowledgeable shelter service provider include:
- Faster time to launch. By manufacturing through shelter services in Mexico, foreign companies spend less time securing IMMEX and IVA certifications and waiting for permits. In fact, companies can move from launch to manufacturing in as little as 30 days.
- Lower costs. The Mexican government considers companies operating under the shelter model a beneficial entity because they create local jobs. As a result, foreign investors are often awarded income, consumption, and import/export tax incentives. Shelter service providers help manufacturers maximize these advantages.
Additionally, because shelter companies provide the same services to a range of manufacturers, companies can tap into economies of scale that make it more affordable for them to manufacture through a shelter services provider than on their own.
- Hiring insight. Shelter service providers have insight into local labor markets, hiring norms, and compensation expectations. This access makes recruiting the right candidates for specific industries and functions easier.
- Easier scalability. As a company grows, staffing needs grow too. Rather than incurring the cost of onboarding more administrative staff, shelter service providers tend to absorb this added cost. Their local knowledge also means providers of shelter services in Mexico can efficiently manage the changing needs for warehouse storage space, production square footage, and other real estate.
- Instant access to expertise. Once a manufacturer signs a contract with a shelter company, that manufacturer has immediate access to an experienced team of professionals. Accurate local data, know-how, and relationships are turnkey.
- Local relationships. Many shelter companies have longstanding relationships with local business partners, including labor unions, suppliers, customs departments, government entities, and other experts.
How to find the best shelter company in Mexico
There are many types of companies offering shelter services in Mexico. As a result, it is important to ensure you're selecting the right provider for your needs. A few important areas to investigate upfront include:
- What services does the company offer in specific functional areas such as human resources, import/export, and financial support?
- Do manufacturers enter Mexico under the shelter service provider's business license? Or does the shelter company obtain a separate license for each client? This has important legal ramifications, so it is best to understand upfront.
- Get a detailed list of services included in the shelter service provider's fees and, if possible, charges that might be expected beyond the quoted fee.
- For providers that offer real estate, investigate what is included in the facility's lease costs. Determine if the tenant has responsibility for real estate taxes, building insurance, maintenance, and other expenses or if the shelter service provider assumes all facility-related costs.
Types of shelter services companies in Mexico
Not all shelter service providers offer the same level of service. As a result, it’s important to understand what support you might need before contracting with a provider.
There are six types of shelter service providers that offer varying levels of service.
- Manufacturing communities provide full-service shelter services in dedicated industrial parks. These communities often afford companies with better customer service, greater economies of scale, and amenities such as medical centers and recreational facilities.
- Full-service offerings only. Full shelter services providers offer everything except for industrial real estate. However, some of these companies partner with local landlords to simplify your search.
- Start-up shelter companies. These providers focus solely on getting you up and running, then step aside at an agreed-upon time.
- Contract manufacturers that offer value-added services. These providers provide manufacturing services on a project basis and may offer other specialized services as needed.
- Real estate companies that provide value-added services. While these providers are similar to full-service providers, real estate companies prioritize the sale and rental of Mexican industrial real estate. Due to this, they may not offer as many services as needed.
- "Cafeteria-style" providers. Some companies allow manufacturers to choose from a list of specific service offerings. This ensures you pay only for your specific service needs.
Strengthen your competitive edge today
Becoming well-informed on a shelter company’s methods and services will help you find a partner that offers the expertise necessary to keep your operations running successfully.
Here at Tetakawi, we are happy to answer your questions about shelter services in Mexico. Whether you are wondering about the right mode of entry for you, what costs for launching an operation might look like for your company, or simply want to learn more about the services shelter companies in Mexico provide, we can help. Get in touch with a Tetakawi expert today.
How to Choose a Shelter Service Provider in Mexico
Working with a shelter company is the quickest and most cost-effective way to expand into Mexico. But how do you choose the right partner and evaluate them from top to bottom?
Download this Ebook to make sure you’re getting what you want before signing the dotted line.