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Manufacturing in Mexico has seen a huge rise in popularity in the last 20 years thanks in part to the economy’s growing globalization and the introduction of NAFTA. Mexico’s introduction of the maquiladora program and contribution of high quality at a lower cost has made it a primary source for manufacturing in a variety of industries, including electronics, aerospace and automotive. The IMMEX is a program that enables foreign companies to operate in Mexico under a preferential, low-tax cost structure, while still taking advantage of Mexico’s lower-cost labor. Let’s take a closer look at Mexico’s IMMEX program. We will also advise on how to approach IMMEX certification and permits.
The IMMEX program, formally known as the IMMEX maquiladora program, allows foreign manufacturers to import raw materials and components into Mexico, tax and duty free, under the condition that 100% of all finished goods will be exported out of Mexico within a government mandated timeframe.
The primary goal of the IMMEX Mexico program is to expand the Mexican economy by enabling foreign companies to manufacture in a competitive environment, which creates jobs throughout the entire socioeconomic spectrum. The program also aims to modernize the globalization of Mexico’s manufacturing infrastructure by bringing new, specialized technologies and knowledge to the region. This also provides companies with tax incentives and ways to be cost-efficient while still focusing on the quality of the goods produced and manufactured.
Maquiladoras are factories in Mexico that are owned and run by a foreign company. They manufacture the company’s products in Mexico and then export them to other countries. Maquiladoras in Mexico operate under preferential tax and fiscal programs that are administered and established by Mexico and the foreign country, meaning that most production equipment and materials that the maquiladoras use are allowed to enter Mexico, on a temporary basis, without needing to pay taxes.
The maquiladora program originally began in 1965 by the Mexican government as a means of alleviating unemployment problems along the borders, while providing foreign companies various tax and duty-free benefits, special customs terms and easy access to skilled, affordable labor particularly for the manufacturing industry. By 1985, maquiladoras became the largest source of foreign exchange in Mexico.
The maquiladora program truly boomed in 1994 with the approval of the North American Free Trade Agreement, which opened foreign trade lines between Canada, the United States and Mexico by eliminating most tariffs and other barriers to free trade between the three countries. The agreement also removed quotas that prevented the U.S. and Mexico from fully sharing in their markets, while allowing maquiladoras to manufacture products without the previous limitations in place. Since then, the manufacturing industry in Mexico has made up roughly 50% of all exports of the country and opened up over a million jobs throughout over 3,000 export assembly and manufacturing plants. One of the easiest ways to set up a maquiladora and save on operating expenses is by operating under a shelter company. This way, companies looking to move their manufacturing to Mexico can utilize all the benefits and resources available.
Globalization and competition have forced some U.S. companies to set up offshore assembly plants, particularly in China and other Asian countries. Offshoring is a practice that has existed for decades and continues today. The main reasons for setting up these foreign assembly plants include:
However, when comparing Mexico vs. China manufacturing, outsourcing to China has recently come with drawbacks. Significant wage inflation, rising transportation costs and a general shortage of labor have made manufacturing in China more expensive than Mexico. Also, China is beginning to enforce environmental regulations more strictly, causing factories to upgrade their machinery and equipment and improve their environmental impact practices. Chinese assembly plants still often have poor employee safety standards, which is another issue being addressed by the Chinese government.
Fortunately, offshoring to Mexico has become more viable, especially for companies headquartered in the United States and Canada. Along with the added regulations and tax benefits provided by the maquiladora system and IMMEX, outsourcing to Mexico ensures lower shipping costs and easier factory visits thanks to the shorter distance.
Maquiladoras also offer greater efficiency and quality. This is partly thanks to Mexico’s experience in manufacturing, which spans over 60 years. Most workers are skilled, educated, and at least partially bilingual.
Maquiladoras initially focused on textiles, simple electronics and industrial products but by the 21st century, Mexico has quickly broadened its manufacturing to encompass a wide range of industries. The country is a major auto manufacturer, home to 89 of the world’s top 100 auto part makers. Other common industries include:
NAPS understands complications to receiving IMMEX registration and certification. There are a number of requirements prior to being granted IMMEX permits, not to mention the type of IMMEX certification your company needs. Although it takes time and resources to fill out all the appropriate paperwork, getting IMMEX Certification and the proper permits can take anywhere from three to six months, or more in some cases. Needless to say, the process is a long one, and not very easy to do.
Whether you are manufacturing in Mexico already and need IMMEX certification, or you are having trouble getting into Mexico due to the waiting process and red tape of getting IMMEX Certification, operating under a Mexico shelter company can help expedite the process. This is the fastest way to bypass the long waiting period. By operating under a shelter company, you operate under the IMMEX permits of the shelter company while also gaining access to resources that can help you get your manufacturing up and running faster. The benefit of operating under a NAPS shelter company is that we take care of the IMMEX certification so that you can spend less time worrying about the process of getting IMMEX certified and focus your time on the quality of your manufacturing. This is also the fastest way to get your business up and running because the shelter company would take care of logistics such as human resources, the hiring process, getting the proper licenses and permits, finding the manufacturing sites, and more.
Companies that wish to manufacture in Mexico or want more information about maquiladoras, shelter companies in Mexico, and the IMMEX program or to learn more about us, contact us at (858) 794-7947.
Content reviewed for accuracy & relevancy by:
This content has been reviewed for accuracy by Megan Richford. As NAPS’ Marketing and Communications strategist for the last 7 years, Richford has become an expert in the industry with extensive knowledge of the manufacturing industry in Mexico.
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