What is manufacturing?
Manufacturing is characterized by transforming raw matter into finished products for sale, whereas the manufacturing industry refers to the use of certain resources (materials, energy, equipment, tools, capital, technology, data, and labor, etc.) in the machinery industry age, according to the market requirements through the manufacturing process.
Manufacture reflects directly on the productivity level of a country, which is an important factor that distinguishes developing from developed countries. An example of this is Mexico, which has been placed as one of the main destinations for foreign investment when talking about manufacture because of multiple factors. Some of these factors are low production cost, its strategic geographical location, economically active population, a wide network of free trade treaties (T-MEC/USMCA/CUSMA), and governmental incentives, such as the manufacturing program (IMMEX).
What is IMMEX?
IMMEX (Manufacturing Industry, Maquila (bonded assembly plant) and Export Services) is a program that facilitates foreign manufacturers to import components and raw matter to Mexico to be transformed into a final product. These final products have a competitive advantage of high-added value since they are free of import duties, compensatory quotas, and value-added tax.
Advantages of Manufacturing in Mexico
There are multiple reasons why foreign investors decide to diversify and establish their manufacturing industries in Mexico. Some of the advantages are discussed below.
1. Governmental incentives
The Mexican government has shown its support to manufacture in the country. IMMEX (Industria Manufacturera, Maquiladora y de Servicios de Exportación, for its acronym in Spanish) as a governmental program has boosted benefits, such as fiscal incentives, that is, Mexican manufacturers that export their products within an established period are allowed to use “temporal” import of production materials and assets without having to pay 16% of value-added tax (VAT/IVA) on these articles. Similarly, if this program is used, VAT/IVA is retained for national purchases, VAT/IVA and IEPS (Impuesto Especial sobre Producción y Servicios, for its acronym in Spanish) are credited for temporary import.
To make good use of this advantage, the companies have to be registered under the IMMEX program as a requirement to obtain VAT/IVA certification. The easiest way to use the benefit is with the Maquiladora program. Manufacturers operate in the same program under the same legal system as shelter service providers. In this manner, manufacturers that come to Mexico to live may reduce the steps to follow, taxes, and in some cases, perform new operations in 30 days.
2. Global market access
The United States has become Mexico’s largest business partner thanks to its nearness; 76.5% of Mexico’s exports are shipped to the border with the US. The companies that search for a point of support in the US market may establish operations in Mexico for the additional benefit of a profitable shipment.
Besides its direct commerce in the US, Mexico has been established as a reliable option for investors. In 2020, Mexico exported goods with the approximate value of USD 418B worldwide. Likewise, Mexico is considered as one of the countries with more free trade agreements (FTA) globally and has been established as a business partner with more than 50 countries with agreements that reach Europe, South America, and Africa. These agreements reduce business barriers, including tariffs and import quotas, thus building solid cooperation in exchanging goods and services.
3. Low cost and qualified labor
Low costs and qualified labor continue to be one of the main advantages that manufacturers view when operating in Mexico. Salary costs in almost all levels, but especially for manufacturing industry workers, are significantly lower in Mexico than in the US. In January 2020, the Federal Reserve Bank of St. Louis calculated the average income of factory workers in the U.S.A. at 22.45 USD / hour. In Mexico, this amount is approximately 4 USD / hour, which makes countries like the US establish in Mexico to invest here and boost the economy to a higher level.
In Mexico, manufacture has been established as the main motor of the industrial sector for making products and causing these segments to be recognized worldwide by increasing foreign investment and making their economic activity grow.
If your enterprise is searching to be promoted and go deeper into manufacturing looking for a new industrial space, VYNMSA has approximately 30 years of experience and has delivered more than 400 projects to international clients totally satisfied. We are one of the main real estate industrial developers in Mexico. We also have the expertise and know-how to develop your projects tailor-made or Build-To-Suit. Likewise, we work actively with industrial brokers as business partners and have around 20 inventory buildings ready to be occupied immediately, which add up to a total space of 1.7 million square feet in the northwestern Bajio region.
Contact us and discover why VYNMSA is your best business partner in industrial real estate in Mexico.
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