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Some manufacturers have dedicated expansion teams to establish a manufacturing operation in Mexico that allow them to start up on their own. Even so, the cost, learning curve, and slower ramp-up times of going it alone necessitate local experts to get up and running within desired timelines plus a strong administrative team to ensure the new facility is operating at peak performance with minimal costs and full compliance to Mexican laws and regulations. That said, there are three major approaches for expanding into Mexico:

1. The Shelter Maquiladora Program in Mexico

Using a shelter services provider is the most popular of these methods. Think of the Mexican shelter company acting as an already existing umbrella that allows your company to come in out of the rain without having to build the umbrella from scratch yourself. In not so many words, the Mexico shelter company method is faster, safer, and the most cost-effective way to start manufacturing in Mexico.

By operating under a shelter, your company takes advantage of the shelter’s already existing permits, certifications, legal structure, and local administrative support staff. Not only are the liabilities and risks limited when under a shelter company, but the annual cost to operate is significantly lower than running an operation as a standalone independent corporation. The entire responsibility for your operation falls on the shelter services provider, from facility permitting, legal and fiscal obligations, to labor law and environmental law compliance. Using a shelter company provider can save newly-landed companies anywhere from 12–25% in annual operational costs for facilities with 50-100 employees.

“We considered a number of options, including the possibility of opening our own facility or utilizing a shelter service. We considered locations such as Mexicali, Ciudad Juarez, Rosarito, and Tijuana. We chose Tijuana for its proximity to our Irvine, California Headquarters, the quality of the workforce in Tijuana and the ability to work with a shelter company provider,” said John Hamilton, Aspen Medical Products’ Vice President of Strategic Initiatives and Special Projects. The California-based Aspen Medical Products is a leader in spinal bracing products and orthotics.

Working with a maquiladora shelter services provider allows the manufacturer to focus 100% of their efforts on the manufacturing side while the provider handles all the background details. The manufacturer is still involved in major decisions, especially in regard to site selection, build out, and recruiting qualifications. Companies that utilize a shelter company provider can stay under the shelter exactly as long as they want to. Some choose to permanently remain under the shelter and others, over time, transition to their own independent corporation while still utilizing the local administrative support offered by the provider.  LEARN MORE ABOUT THE SHELTER PROGRAM

2. The Independent Mexican Corporation

Starting off with an independent corporation is the second most popular method. Establishing your independent corporation means setting up your own Mexican corporate entity and obtaining your own permits, such as the IMMEX certification for tariff-free temporary imports. Firms that offer shelter company services will usually offer this option as well, allowing manufacturers to establish their own business entity while providing support along the way.

The ramp-up time is longer and the exposure greater, though often a choice for manufacturers with 500 employees or more and those wishing to establish a long-term presence in the region. Additionally, some OEMs just prefer to have their own Mexican corporation. Manufacturers who choose the independent corporation option will often work with local shelter company firms, taking advantage of their team’s administrative, legal, HR and tax specialists familiar with both US and Mexican laws. 

 3. Contract Manufacturing in Mexico

Contract manufacturing is the third most popular option. This is ideal for start-ups and companies looking to re-shore operations back to North America from overseas. For US manufacturers, it can be more cost effective to have their labor-intensive processes done in Mexico, while concentrating their US operations on innovation, research and development.

Other OEMs also cite the ability to “test” the quality of Mexican CMOs and the local labor force. Using a contract manufacturer is the least expensive step a company can take before establishing their own operations in Mexico under a shelter or foreign independent corporation.

Figure 4 Comparing Methods for Getting Started in Mexico

The manufacturing industry in Mexico is not a passing fad, but rather a robust, well-established and well-supported megaregion representing a long list of benefits for manufacturers looking to expand their footprint and free-up capital for innovation.

Request a Cost Analysis for Manufacturing in Mexico

By: Kate Reifers, Co-Production International,
Kate Reifers is a writer and researcher for Co-Production International, specializing in manufacturing in Mexico and Baja California.

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