Maquila Reference is designed to serve as a reference/guide for the Maquiladora Industry and Mexico manufaturing.
Manufacturing in Mexico: FAQs
1. What is the fully burdened hourly labor rate in Mexico?
In 2013, the average, fully burdened, unskilled labor rate in Mexico was approximately $2.75 USD per hour.
2. How do the labor laws in Mexico differ from the United States?
In December 2012, Mexico introduced a new labor decree, which included over 300 changes in the Mexican labor laws. Interestingly, many of these changes were to the advantage of employers but the intent was also to improve working conditions and fairness to the employees. Labor laws in Mexico have many similarities to United States labor laws, such as minimum wage, overtime, worker’s compensation and even mandatory severance pay. Perhaps the most noticeable differences in Mexican labor laws are those cultural in nature and therefore a professional human resource firm should be consulted before attempting to open a Mexico manufacturing facility.
3. What is the cost of industrial real estate in Mexico?
Similar to the United States, the cost of industrial real estate in Mexico depends on the location and quality of the building. Within the more developed cities, Class A industrial space is approximately $0.48 USD per square foot. Class B industrial space is approximately $0.38 per square foot. Contacting a local shelter company or industrial real estate broker is advised when researching industrial space in Mexico.
4. What is the cost of electricity in Mexico?
The cost of electricity in Mexico can vary from State-to-State, time of year and even time of day. Each State publishes a rate sheet on an annual basis. For evaluation purposes, it is advisable to contact a local shelter services operator or the local economic development department for more information on electricity and other utility rates in Mexico.
5. Will my product be subject to any duties or tariffs in Mexico?
Depending on the type of raw material, its origin and the finished product manufactured in Mexico, will determine the duty, tariff and tax impact. A complete evaluation by an expert in Mexican customs compliance is highly recommended before manufacturing in Mexico.
6. Where is the best place to start a maquiladora in Mexico?
The best place to start a maquiladora in Mexico depends on the type of product that will be manufactured in Mexico and, more importantly, where the finished product will be distributed. The border cities of Mexico make the most sense if the majority of the finished product will be exported back to the United States and Canada. There is available talent and low-wage labor throughout Mexico; therefore, the decision where to locate should be objective according to the operation.
7. How long does it take to set up a maquiladora in Mexico?
Depending on the type and corporate structure of the operation, starting a maquiladora in Mexico can take anywhere from 8 weeks to 6 months to be fully operational. For simple assembly plants, 12 weeks is easily achievable, especially if operating under a shelter company. For heavy metal manufacturing, 4-5 months is more realistic.
8. Where can I get more information on manufacturing in Mexico?
The best resource for analyzing the feasibility of manufacturing in Mexico is a reliable outsourced administrative and compliance management company, also know as a “shelter company.” A good shelter company will carefully explain all the pros and cons of operating in Mexico and can also provide a detailed financial pro forma. Some of these firms have more than 20 years of experience with helping foreign companies manufacture in Mexico under the IMMEX (formally Maquiladora) program.
9. Is a full-time, foreign manager needed to be successful in Mexico?
Depending on the type of operation, most foreign companies will assign an internal operations manager for at least 3-6 months after the commencement of production in a new facility. Thereafter, it is common for foreign companies to rely 100% on their Mexican staff.
10. Can a foreign company own land in Mexico?
Yes. A foreign company can buy land and build a facility in Mexico or buy an existing building, as well. However, the investment must be made under a Mexican corporation established and owned by the foreign entity. Depending on the Mexican State, the process of buying land can vary. It is advisable to use a good Mexican real estate attorney to help navigate through this process.
11. What are the biggest security concerns in Mexico?
Managing security as a foreign company manufacturing in Mexico is a matter of discipline and understanding your surroundings. The majority of security concerns in Mexico, as they relate to violent crimes, are drug related. It is uncommon for a foreign individual working in a manufacturing facility to be a victim of violent crime in Mexico. While hiring a security firm for personal protection is possible, it may just attract unnecessary attention. Most security experts in Mexico and the United States would agree that the best way to avoid personal security problems in Mexico is to dress casually, do not wear expensive jewelry or drive expensive cars. Blending in to your surroundings as much as possible is the best advise. Private security firms, however, are recommended for protecting the facility from external and internal theft.