Inside Look: What is a Maquiladora and what are the main industries that utilize them?
Are you aware that there are some great benefits to setting up a factory in Mexico? You can
work with specific companies known as shelters, in the industry who have well established
networks of consultants that are experienced in organizing internal operations like HR, legal
forms, reasonable land and building prices, and skilled labor.
Manufacturing in Mexico with the aim of exporting back to your home market has great
potential with great overall savings to be made.
The setup process is easier than you might think! There are numerous consulting companies in the shelter industry that specialize in helping you set up what is called a maquiladora. By definition this means, "a factory in Mexico run by a foreign company that exports its products to the country of that company."
Without further ado, let's look at some of the best opportunities to manufacture in Mexico.
What are the Advantages to Setting Up a Maquiladora?
Setting up a maquiladora to run your manufacturing operation in Mexico offers various benefits including readily available labor, tax incentives, and cost savings.
Maquiladoras have permission to import various raw materials for the manufacturing
process, and then re-export the finished product to the company that owns the maquiladora. A key benefit of going this route is not only preferential treatment and benefits from the USMCA, but also incentives from having an IMMEX permit that allows you to bypass paying VAT on shipments into Mexico.
Historically, this has been the United States or Canada but there has been a lot of interest
from China, Germany and other countries to expand their operations into Mexico, under the Maquiladora Program.
Another great advantage to manufacturing in Mexico is that the day-to-day admin and
operations are organized by the local based management in Mexico.
Does this System Help the Local Economy?
Maquiladoras have been around since 1964 and were originally a way to provide
employment for local people and improve the economy. The fact that they could be 100
percent foreign-owned made them an attractive proposition for foreign companies to invest.
In the past twenty years, Mexico has changed from being inward orientated to focusing more on export. The maquiladora program has contributed significantly to that growth and
provided widespread employment opportunities, so it can be seen as extremely helpful to the local Mexican economy.
Manufacturing in Mexico: Examples of the most Suitable
There are really no limits for foreign companies that set-up maquiladoras in Mexico with
regard to the types of items that they can manufacture. The only big regulation is for specific weapons like firearms and associated items like ammo, and certain ITAR products.
Some of the popular products which are particularly to manufacture in Mexico as opposed to other offshore location include:
Aerospace and aviation. Maquiladoras have played a huge part in helping the Aerospace and aviation industries growth in Mexico. It is a top performing sector and a great example of growth in the market. Aerospace companies have grown in Mexico from 111 in 2007 to an impressive 330 by 2017. The growth has been heavily supported by the Mexican government with business incentives, new specialist programs in universities, and special workforce training programs.
Automotive Industry. Manufacturing automobiles and associated products played a huge part in the economy of Mexico over the past decades. Mexico has been used to manufacture cars and trucks by Ford, Toyota, GM, Chrysler, and many other well-known brands. It is particularly attractive for American auto companies to do their manufacturing in Mexico due to the cheaper costs of operation and easy transport back to the US. Mexico is now the largest car manufacturer in South America, producing around 4,000,000 units per year. The vast majority of vehicles (estimated at 80 plus percent) are exported.
Clothing and textile. It is now the fourth biggest manufacturing opportunity in Mexico. Clothing and textiles accounts for almost 4% of the manufacturing GDP of Mexico. Skilled workers and easy international shipping make maquiladoras a perfect solution to an industry with notoriously tight margins.
Medical devices. A report from 2018 from ProMexico states that the manufacture of medical devices shows positive growth and great potential. Over the decades 641 factories have set up along the US border, providing over 150,000 new jobs and over $9,000,000 in annual revenue from exports.
Consumer products. Gone are the days of Mexican factories only being used for simple assembly projects. There are now many complex consumer goods companies taking advantage of the skilled local workforce and manufacturing in Mexico. Cost-efficiency has made Mexico an attractive alternative to the ever more expensive manufacturing costs in China. The rise of the middle-class and better educated workers in China will continue and open great opportunities for Mexico. The manufacturers of consumer products have also taken advantage of maquiladoras' friendly duty-free allowance for importing raw materials. Mexico also has certain other advantages with an increase of design specialists and engineers leading to an increase of electron consumer goods production. Mexico is well-placed to take advantage of the biggest consumer market in the world, just over the border in the USA.
Of course these are just a small selection of the opportunities available through opening
your own maquiladoras operation in Mexico. As I mentioned earlier, there are very few
restrictions on the products you are allowed to manufacture, so whatever your manufacturing business is, you should study the opportunities Mexico presents in more detail.
Overall the outlook for the Maquiladora Program (now better known as the IMMEX Program) is outstanding. You can expect further growth in factories opening up and continued support from the Mexican government to boost opportunities for manufacturing in Mexico.
In essence, if you are looking to manufacture with the goal of exporting your product, setting up your manufacturing operations in Mexico utilizing a maquiladora is the most viable option to save money. The tax advantages, skilled and affordable local labor, overall cheap land prices, and running costs are attractive.
There are now various companies that will help you with the set-up process, and ensure that you can get your maquiladora established quickly and cost-effectively.
Reach out to us at Javid LLC To learn more about the opportunities for manufacturing in