• The maquiladora industry in Mexico
  
  
• Number of Maquiladoras and employees
  
  
• Imported raw materials value
  
  
• Added Value and Exports
  
  
• Establishing a Mexican Maquiladora
  
  
• Sub Maquila Operations

The maquiladora industry in Mexico

For more than 35 years, the maquiladora industry has received permanent assistance from the Federal Government in order to help the development of their activities.

Many aspects had propitiated the establishment and grow of the export maquila in Mexico. The Federal Government offers incentives for temporally import of goods without paying the import tax, value added tax, and the special quotes, if applies, of all raw materials, machinery and equipment for the company’s operation. There are no sector restrictions and the benefit applies for any region of Mexico.   

Besides, the SICEX-Maquila program makes easier all custom procedures for the company. The government policies to encourage the maquiladora industry had made this sector the most dynamic of all national industry in the last years.

• Maquiladoras

Number of Maquiladoras and employees

The maquiladora industry in Baja California has been successful due to the advantages that offer. The State ranks number one in terms of number of Maquiladoras, and the second in number of employees and added value of all the country.

The maquiladora industry started operations in Baja California due to the Free Zone treaty in the 60’s. This treaty allowed non taxable import of machinery & raw materials, after starting in Baja California, the treaty reach all the bordering States and the whole country.

In the beginnings, USA investments ranked number one, but in the last years the Asian investments are the most dynamic and strongest. 

Some of the established companies in Baja California are: Toyota, LG Electronics, Honeywell, Hitachi, Hughes, Hyundai, Matsushita, Mitsubishi, Samsung, Sanyo, Sony, Thomson, Sharp, Cardinal Health, Emerson, Kenworth, Lockheed Martin, Panasonic, Skyworks, Smiths, Tyco, among others.

• Number of Maquiladoras in Baja California
• Number of employees in Baja California

Imported raw materials value

The electronic components ranked number one of the total raw materials imported. This industry is growing at a fast pace.

Source: INEGI.   p: preliminary numbers  April,  2006

Added Value and Exports

The added value of the maquiladora industry is the total investment on wages, raw materials, packaging, royalties, and all expenses related with the main activity.

The exports are the total amount of added value and raw materials imported; this is the major value of the maquiladora activity.  

Source: INEGI.   p: preliminary numbers  April,  2006

Establishing a Mexican Maquiladora

The Foreign Investment Law allows foreign investors to own up to 100 percent of equity in Mexican Companies, including agriculture companies, without prior approval from the Government, with the exception of a few activities, which are reserved exclusively to the Mexican Government or to Mexican Individuals or Corporations with a Foreign Investment Exclusion Clause. For instance: oil and other hydrocarbons, basic petrochemicals, generation of nuclear energy; among others.

Entities

The most common entities used in Mexico by foreign and domestic investors are the Sociedad Anónima (S.A.), similar to a U.S. corporation, and a Sociedad de Responsabilidad Limitada, (S. de R.L.), which is similar to a U.S. Partnership Company.

The Sociedad Anónima has the following characteristics:

• At least two shareholders are required for incorporation.  These shareholders can be either individuals or entities.
• The paid in capital of the corporation ($50,000.00 pesos Mexican Currency.) is to be distributed as desired.
• In the incorporation of a Mexican corporation an election between a Board of Directors and a Sole Administrator to handle the administration of the corporation must be done upon incorporation.
• An Examiner will be required to be appointed.

The Sociedad de Responsabilidad Limitada has the following characteristics:

• As per Mexican law, a minimum of two partners (individuals or corporations) is required.  The paid in capital of the company ($3,000.00 pesos Mexican Currency) is to be distributed as desired.
• A General Manager may administer by a Board of Managers or the company.  If a Board of Managers is chosen, a minimum of three managers must be appointed.  Alternate managers are optional.
• No Examiner is required.

Both entities may also be incorporated as a Variable Capital entity (or C.V.).

After a company or corporation is organized, it will be required to file for its Taxpayer Registry Number, or “RFC”.  The entity will require the RFC to begin operations, e.g. issue invoices, and open bank accounts.  To file for an RFC, the entity will need to show evidence that it has a bona-fide business address in Mexico. After the RFC application is filed, the Mexican Treasury will deliver the RFC identification card (cedula) to the company’s legal representative.

Additionally, the company or corporation needs to be recorded with the Public Registry of Property and Commerce, as well as with the National Registry of Foreign Investment.

Establishing a Maquiladora Company

In order to qualify and set up a Maquiladora de Exportacion or In-Bond Exporting Plant (also known as Production Sharing Plant) to operate as an exporting industry, the Mexican entity (corporation with or without foreign investment) must apply for the corresponding maquila status with the Ministry of Economy (SE). Approvals are usually granted within then to fifteen days after submittal of application.

Virtually, all Maquiladora companies are organized as wholly owned subsidiaries of foreign corporations.  The steps involved for setting up a Maquila operation is:

• Formation of a Mexican Entity.

This process requires that the Ministry of Foreign Affairs authorize the corporate name of the entity.  Once secured, the by-laws and articles of incorporation or organization need to be formalized before a Mexican Notary Public.  Please note that procedures with Mexican Notary Public are very formal, and are totally different from the U.S.

Once incorporated, the by-laws and articles of incorporation or organization will be recorded with the Public Registry of Property and Commerce, and the “R.F.C.” will be secured.

• Securing a Maquila Program.

The most important process for establishing a maquila operation, is securing a maquila program authorization from the Ministry of Economy. In order to file for such authorization, the company will be required to have an executed lease agreement or, in its case, a title of the property where the operation will be established; a maquila (or service) agreement with the foreign entity to which it will render services; list of the raw materials, machinery and equipment to be imported into Mexico.

In the application process, personnel of the Ministry of Economy will inspect the facilities that will be used for the maquila operation.  The approval, or denial, is granted within 10 to 15 working days after filing the application, which require to be filled in a prescribed format.

Maquiladoras may import all items required for the production program, such as components, raw materials, packaging, equipment, administrative support equipment, and containers duty free (it’s recommendable to check the NAFTA article 303). All equipment and accessories must eventually, be returned abroad or imported on a permanent status basis.

As of the year 2001, Maquiladoras may sell part of all of their production in the national marketplace.

Once the production program is approved together with the import permits, a special registration number of a permanent nature is assigned to the Maquiladora, commonly known as ̏ Clave del Registro Nacional de la Industria Maquiladora˝ (Number in the National Registry of the Maquiladora Industry) and is identified in all pertinent documents with the SICEX-Maquila program.

• Environmental Permits.

Mexican environmental laws are similar to those in the United States.  In order to start a maquila operation, an operation license must be secured.  The production process and materials to be used will determine if State or Federal authorities have jurisdiction.

• Working Visas (FM-3).

Any foreign personnel that will be working at the Maquiladora facility will be required to have a valid Mexican working visa. Working visas may be applied for once the Maquila program has been authorized with the Mexican Ministry of Interior. Any foreign individual visiting the Maquiladora facility will be required to secure proper visas.

• Individual or Collective Labor Agreements.

For purposes of hiring personnel, the employees can be hired by individual agreements or through a collective agreement entered with a local labor union.

• Industrial Facility.

The industrial facility may be leased or purchased. Please note that in either case, negotiations are required, thus, this is one of the fist steps that a company needs to undertake.

Sub Maquila Operations

The sub maquila operations involve all those complementary industrial or service processes, destined to the transformation, production or repair of the activity subject matter of the program, performed or rendered by an individual or entity different from the entity with an authorized Maquiladora program.

The sub maquila operation can be better understood with the following example: Company ‘A’ assembles all parts required for a lap top computer. Company ‘A’ transfer to Company ‘B’ part of its components for assembly. Company ‘B’, assembles such components (that uses raw materials imported by ‘A’ under its maquila program), which will eventually be incorporated to the lap top computer assembled by ‘A’, thus, company ‘B’ is rendering a sub maquila operation for company ‘A’. However, a sub maquila operation can be carried out among Maquiladoras or between a Maquiladora and a non-maquiladora company.