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Doing Business in Mexico

doing business in mexicoMexico has entered into a number of Free Trade Agreements over the past several years, most notably NAFTA. This has opened up many business opportunities that previously were restricted. Also, recent changes to the laws now allow 100% foreign ownership of Mexican companies. Though there are still some restrictions in areas considered as being in the nations best interest (oil, communications, transportation, etc) there is a wide field of opportunity from factories and assembly plants to local small business.

What is a MAQUILADORA?

Maquiladora comes from the Spanish word maquilar meaning "to perform a task for another." Today, maquiladora refers to a Mexican corporation, wholly or predominantly owned by foreigners, which assembles products for export to the U.S. or other foreign country or Mexico Market. Foreign corporations wishing to reduce their manufacturing costs in order to become more competitive in a global economy may achieve this goal by setting up a Maquiladora or Shelter of operations in Mexico. This means taking advantage of a special customs treatment, less expensive labor costs and lower operating expenses available in Mexico. A Maquiladora or Maquila is a plant in Mexico that retains a Maquiladora Permit from the Mexican government to import raw materials duty free into Mexico for manufacturing, assembly, repair or other processing. The Maquiladora Program was created in 1965 with the Border Industrialization Program. It was designed to generate employment, foreign investment, and stimulate industry in Mexico. The program was part of a worldwide movement known as global production sharing. With the passage of the North American Free Trade Agreement (NAFTA), in 1994, U.S. companies have rushed to Mexican border towns to comply, and avoid high tariffs.

What is a MAQUILADORA?

The Maquila Industry has transformed the border area of Baja California, which includes the cities of Tijuana, Ciudad Juarez and Mexicali, from tourist and agricultural areas into thriving industrial centers. As of May 2002, there are over 3600 maquiladora plants employing over 1.1 million people in Mexico.

How does a Maquiladora work?

A maquiladora typically performs assembly, or sub-assembly, operations. Components are imported duty-free to Mexico, whereupon a maquiladora performs the assembly needed to complete the work. The finished product is then exported out of Mexico, or in some cases to other maquilas where it is used in another assembly operation. Typically, maquiladoras work best for labor-intensive manufacturers. Such businesses range from electronics manufacturers to pet products, medical equipment, sporting goods, apparel, cable assembly and toy makers. The essence of the maquiladora system is to reduce labor overhead. That’s why in the more than 30 years since maquiladoras were introduced, there are more than 3,500 companies, including but not limited to Sony, Ford, General Electric, General Motors and Zenith that have set up Maquila Operations in Mexico.

The degree of difficulty in establishing a business in Mexico depends on the size and complexity of the business. Large companies will naturally elicit assistance from professional consultants to establish their business, where a small business may only use a Notario to register the business and a local accountant to handle the reporting requirements.Guadalajara is known as Silicon Valley in Mexico

Mexico, as a whole, and specifically the State of Jalisco, are extremely pro-active in encouraging foreign investment. The opportunities are definitely there.

Resources for doing business in Mexico:

* Mexico Business Directory - http://www.mexicodataonline.com/

Mexico Business Opportunities and Legal Framework – www.mexico-trade.com

* US-Mexico Chamber of Commerce – www.usmcoc.org/

* Canadian Chamber of Commerce to Mexico – no current website


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