There are several ways in which a company can establish operations in Baja California: to establish on their own, search for a manufacture subcontracting, hire a Shelter company for management services, or by constituting and Association or Joint Venture.
Foreign companies conducting manufacturing operations oriented towards export activities, are commonly established by a Mexican subsidiary and conduct operations under the IMMEX program (formerly Maquila Program).
This program allows the import of equipment, raw material, and tax-free components for their processing and subsequent export to other markets. This model has effectively operated for the last 50 years:
Establishing your own company
When establishing your own company, it acquires full legal responsibility and shall have all the direct management positions. This option is most commonly chosen by mid-size and large companies and the State Government, through the Secretariat of Economic Development, will serve as a link between government offices and the company, with the intention of providing the necessary support to achieve its establishment in accordance with the applicable Mexican laws.
If a company decides to subcontract, it does not need to invest in Mexico directly and there are no long-term responsibilities. It is a simple and fast way to begin operations in Mexico, since the only requirement is a printed purchase order or quotation and the agreement signed by both interested parties (client-supplier).
The client usually provides the machinery and specialized equipment, the product specifications and quality parameters, as quell as the direct and indirect materials. When necessary, it also provides the required technical support. The product´s quality control is under the responsibility of the supplier and shall assume full responsibility in Mexico.
The Shelter program consists on the management coordination services (accounting, taxes and payroll, project management, traffic and customs services, and human resources, among others) that a program operator offers to the manufacturing industry, so it may concentrate its efforts in its own processing activities (production, quality control, machinery, equipment and tools, etc.).
In addition, the Shelter operator may assist in the selection of the company´s site for operations by conducting all types of procedures to obtain the licenses for the import of raw materials and the export of the finished product, determining technical problems and their solutions, and supporting the selection of human resources (technicians and management personnel).
Baja California´s industrial experience is open to receive co-investment proposals and initiatives from innovative companies with the ability and process know-how that may be incorporated to production processes of local export companies or to process inputs into a finished product for export.
Upon the strong competency for global markets, the Federal Government through the Secretariat of Economy has implemented public policies to provide Mexican companies, at least with the same conditions that our main competitors offer, which will allow them to position their products and services successfully in the arena of international trade.
With this purpose, on November 2006 the Federal Government published the Decree for the Furthering of the Manufacture, Maquiladora, and Export Services (IMMEX), aiming to strengthen competitiveness in the Mexican export sector, and grant security, transparency, and continuity to business operations, specifying and simplifying the factors of compliance; allowing to adopt new ways of operation and business; diminishing logistic and management costs; modernizing, speeding up and reducing procedures, thus elevating the supervision ability in an environment that encourages the attraction and maintenance of investments in the country.
The companies integrating IMMEX, may temporarily import the goods necessary for an industrial or service process destined to the elaboration, processing, or repair of products from foreign sources for their subsequent export, without covering the general import tax, value added tax, and if applicable, the compensatory fees. The beneficiaries of this program are companies residing in Mexican territory (with previous authorization from the Secretariat of Economy) that tax in accordance with Mexican regulations.
The maquiladora activity has been successful in Baja California for the advantages it offers. It is the region with the most establishments, the second with the most employees and amount of added value in the country. In this state, the maquiladora activity begun under the free zone regime ruling the 60s´and that allowed the free import of machinery and equipment, raw materials and inputs; from this point, it extended through the northern borderline and subsequently to the coastline, then to other borderlines and finally throughout the entire country.
Historically, the main investments have been from the United States, due to the proximity with this country, yet on the last years Asian and European investments have been significant to further the commercial and economic development in a larger extent.
Here we have relevant world firms with manufacture operations: Toyota, LG Electronics, Honeywell, Hyundai, Samsung, Thomson, Sharp, Greatbatch, Carefusion, Rockwell Collins, Emerson, Kenworth, Gulfstream, UTC Aerospace Systems, Lockheed Martin, Panasonic, Skyworks, Smiths, Tyco, etc.
The inputs imported into Baja California for consumption of manufacturers represent an important increase, reaching 15,481 million dollars in 2013.
The added value generated by the maquiladora industry in monetary terms, is the expense of payrolls and wages, raw materials and national auxiliaries, national packaging, other expenses, utilities, and other concepts. The export value is the sum of the added value plus the inputs imported, this makes it the highest added value in the field. In 2013, 15,353 million dollars were generated in Baja California as export value, highlighting the importance of this activity in regional economy.
Establishing a maquiladora business in Mexico
- Constitution of a Mexican Entity
- Registry in the Maquila Program
- Environmental licenses
- Work Visas (FM-3)
- Individual or collective labor agreements
- Industrial facilities
- Sub maquila operations (if applicable)
The main incentives of the Economic Development Plan are in regards to the export of manufactured goods. These incentives apply to all entities, regardless of the percentage of foreign property.
A series of executive decrees and general regulations were created to constitute safe entities that perpetuated the task of conducting export activities and to grant incentives for exporters. These incentives, as well as the programs created to further export, are stated hereafter.