If an individual from just about anywhere is seeking position or is contemplating a move from one firm to another, the salary offered by the potential employer is always the initial thing that is considered.  However, benefits for workers in Mexico are also of great importance to prospective job candidates.  Although in that nation there are some benefits that are defined and mandated under the country’s labor laws, others are provided voluntarily.  This post will examine both the mandatory and volunteer benefits commonly paid by companies that do business in Mexico.

Benefits for workers in Mexico that are mandatory by law include:

• Profit sharing bonus (Fifteen days pay per year or a proportional part that corresponds to employment of less than a full year);
• Social Security;
• Retirement Fund;
• National holidays off;
• Vacation premium (25% of the workers’ salary corresponding to the vacation period).

Among the nine top non-mandated benefits for workers in Mexico that are not legally prescribed are:

• Productivity bonus – This benefit is dependent upon reaching a business’ objectives and goals is and it is one of the voluntary perks for Mexican workers that is commonly granted to employees. The disbursement of this additional money is useful in that in addition to being advantageous for both the company and its workers, it instills a healthy environment of competition between the worker and his or her colleagues;
• Prescription drugs and food coupons –another form of non-salary perks received by many workers in Mexico includes a monthly number of vouchers for food from local grocery stores and medicinal drugs from local drug stores. These benefits for workers in Mexico are well-received by those that enjoy them;
• Insurance for major medical expenses – In many instances, key employees in Mexico operations are offered an insurance policy that will pay for expenses that are over and above what the country’s Social Security Institute covers. Such policies enable those that have them go to private medical networks for service in cases of emergency;
• Dining area and cafeteria – Many companies offering benefits for workers in Mexico provide their people with a daily breakfast and lunch. Meals in the bigger businesses may be prepared by in-house cooking staff.  Mid-sized companies often hire out their food service out to third-parties, whereas smaller firms may just have a microwave in a meal area with which employees are able to warm their meals.
• Training –Another voluntary benefit for workers in Mexico that is common is training, which is of critical importance. Education promoted within the Mexican workplace not only has a positive effect on productivity but also serves to provides an opportunity for growth within the company those individuals that it employs.  Company paid training is one of the most effective ways that small and medium-sized businesses can hold on to their talent.
• Fund for savings – This benefit is very good for workers that are disciplined in their savings practices. Usually, for each dollar saved by the employee the employing company makes a match of a percentage that is defined by its policies;
• Scholarships – Some businesses award scholarship gifts to its employees, as well as to their employees’ family members, for study at local colleges and vocational and technical institutions. In addition to enabling employees in obtaining a secondary education, a growing number of companies provide assistance to workers that are working to complete bachelors, masters and doctoral programs.
• Company vehicle – This voluntary benefit for Mexican workers is most often reserved for the managerial staff of a company in Mexico. It is a proven means by which top company talent is retained.

Although providing the aforementioned optional benefits for Mexican workers represent additional costs for employers, they often pay for themselves in the form of better educated and more productive and committed workers that are more able to help bring about a company’s growth.  Additionally, the payment of non-mandatory benefits can result in:

• Increased company appeal in the local job market that will make recruitment increasingly successful;
• Better morale because of the offer of an attractive package of worker benefits in Mexico. Employees that are well-compensated stay put and forge lasting relationships with each other thereby forming more productive company teams;
• Better job performance is a result of employing workers in Mexico that care more for their employing company and remain loyal. As a result, individual workers work more diligently.  This inevitably leads to the production of a service or good of greater quality;
• Diminished turnover that will save the company budgetary resources in finding and training new personnel, as well as expenditures related to a loss of worker productivity.

Although Mexico mandates that employers provide certain benefits that a prescribed by law for its workers, many companies go above and beyond what is called for.  They commonly provide of benefits that are voluntary to maintain competitiveness in active and competitive labor markets.

Remember, interested parties can receive Mexico manufacturing information on a weekly basis by SMS Texting the word Tecma to 96000.

Four Mexican states: Guanajuato, Queretaro, Aguascalientes, and Jalisco make up an area known as the Bajio.  The automotive industry in the Bajio is host 50 percent of the country’s productive capacity in this well-developed manufacturing sector.

The rise of the automotive industry in the Bajio, and, by extension, that of the country of Mexico began in earnest in 1994.  At that time, 1,000,000 motor vehicles were churned out of the country’s factories.  By the year 2014, Mexican production of passenger vehicles continued to climb, and the nation’s domestic industry manufactured above 3 million automobiles. Industry experts foresee that by the year 2020 vehicle production rise above five million.  It is the consensus that the automotive industry in the Bajio will be the source of a 50% of the total national production by that year.

With the development of the passenger vehicle industry in the Bajio, Tier one, two, and three suppliers have followed to supply Original Equipment Manufacturers, also known by the acronym OEMs.  In terms of the total number of the firms that are suppliers to the automotive industry in the Bajio, the state of Queretaro leads the rest.  Not only does that state have the largest number of auto suppliers within its boundaries in the Bajio, the state leads all the Mexican Republic.   As regards the expansion that Queretaro has experienced in this sector it is noteworthy to consider that in the 1970s there were only six auto parts manufacturers with a local presence.  Today Queretaro is home to seventy-eight auto parts manufacturers that employ a total of at least 50,000 workers.

The automotive industry in the Bajio, and in the nation, began to reach its apogee in 2010.  As of 2015 Mexico is the 7th largest manufacturer of automobiles in the entire world.  Only China, the United States, Japan, Germany, India and South Korea produce more passenger vehicles annually.

The Bajio is completely level, which makes it an excellent place at which to build production facilities in Mexico.  Also, its position in Central Mexico ensures that it is a place with a sophisticated transportation network that is made up of rail and highways.  It is easy to ship product to the nation’s northern border, as well as to move manufactured automobiles to Mexico’s seaports.

In addition to the automotive industry in the Bajio, the entire nation has become a preferred investment site for the manufacturing of auto parts.  Major Tier 1 suppliers such as Lear, Delphi, Johnson Controls, Pirelli and Continental among many others have a sizeable presence in Mexico.  Beyond well-known companies, Mexico also is host to two thousand small and medium-sized supplier firms that service the automotive industry in the Bajio, as well as auto parts manufacturers in other regions of the nation.

The most production in the automotive industry in the Bajio occurs in the industrialized state of Guanajuato.  In recent times the entity has been the recipient of an estimated US $12.4 billion-dollars of investment capital in the sector.  At a recent Automotive Industry Summit, the Guanajuato’s governor reported that the state’s automotive industry manufactured just shy of 800,000 vehicles, and that production is projected to rise to almost one and one-half million.  When manufacturing activities reach this level 1 out of every 4 passenger vehicles will be made in Guanajuato.

Among the most critical auto parts produced by suppliers in the automotive industry in the Bajio are engines.  At present, just shy of one million engines are produced today in the Bajio.  This number is expected to exceed the million-unit mark in the next several years.  The region is also home to significant production of passenger vehicle transmissions, tires, castings, machined parts, plastic components, cable and electronic assemblies, fiberglass components and stamped metal parts among other inputs.

Perhaps the most significant edge that benefits the automobile industry in the Bajio is the presence of a trained population of workers. In 2017 the Multilateral Fund partnered with the Inter-American Development Bank (IDB) and the Community Foundation of the Bajio to pool resources to promote the education and training of the region’s workforce.  This effort has the backing of 20 of 74 firms located in the City of Irapuato, Guanajuato’s Castro del Rio Industrial.   It is the goal of the Inter-American Development Bank and its partners to encourage and secure the participation of all the residents of the industrial complex by 2020.   Other industrial parks that will take part in the initiative soon are in Silao and the municipality of San Vicente and Cardenas.  Other entities that have taken on a key role in workforce training for the automotive industry in the Bajio include the National College of Technical Professional Education, CONALEP, the Virtual University of the State of Guanajuato and the Higher Technological Institute of Irapuato.

Remember, interested parties can receive Mexico manufacturing information on a weekly basis by SMS Texting the word Tecma to 96000.

After projects that have resulted in further manufacturing in Silao, Guanajuato the city of Irapuato takes second place.  During the last five-years, Irapuato has been the recipient of total capital outlays of more than two and a half billion dollars.  This translated into forty-one industrial projects and twelve thousand three hundred jobs.  Coming in third in terms of foreign direct manufacturing investment in Guanajuato is the city of Apaseo Grande which has attracted almost one and a half billion dollars of foreign investment.  Coming after Apaseo Grande is the city of Leon, in fourth place, and Celaya in fifth.  Over the last five years, Silao and the state of Guanajuato as a whole have been a preferred target of industrial investments in Mexico.

Manufacturing in Silao, Guanajuato has become a popular choice in recent years.  The municipality has become a favorite of companies that seek to make foreign direct investments in Guanajuato, Mexico.  In the last five years, Guanajuato has been the recipient of two hundred and forty-five foreign investment projects that have constituted a total capital outlay of $11.7 billion and have resulted in the creation of 79,500 jobs.  According to information that has been gathered by the Secretariat of Sustainable Economic Development, however, of the total sum, Silao by alone has received a full 24.5% of the state’s manufacturing investment in the last five years.  In that period Silao has had an influx of almost $3 billion dollars, 13,300 jobs, and sixty manufacturing projects.   The municipality of Silao is the preferred city for investors in the Mexican state of Guanajuato in the country’s Bajio region.

One of the central reasons that production in Silao has become a popular option for investment is that the city is the site of Guanajuato’s Puerto Interior (GPI).  The Puerto Interior is a premier logistics center in Latin America and is the first Mexican dry port to be a member of the Inter-American Ports Commission (CIP) of the Organization of American States (OAS).  Manufacturing in Silao, Guanajuato is facilitated by the site’s local, which is in proximity to the Bajio International airport and Mexican Federal Highway Forty-Five.

Manufacturing in Silao, Guanajuato in the Santa Fe Industrial Parks

Manufacturing in Silao takes place in the four industrial sites that are located within the GPI.  The industrial parks are Santa Fe I, Santa Fe II, Santa Fe III, and Santa Fe IV.  The parks’ infrastructure supports the activities of firms engaged in logistics activities, as well as businesses that are involved in light and medium manufacturing.   A list of firms that are contained within the boundaries of the Guanajuato Interior Port includes Malhot of Mexico, Hino Motors (a subsidiary of Toyota), HAL Aluminum, Guala Dispensing, Volkswagen, Pirelli and Teco Westinghouse among others.  Although the facility is in place for manufacturing in Silao, Guanajuato to be conducted, it is only a short thirty-five kilometers from the state’s capitol city of Guanajuato, Leon.

Facilities in or in proximity to the Guanajuato Interior Port (GPI) include:

Specialized Railway Freight Terminal

The railway freight terminal handles Mexican rail transport to and from any of the points in the country-wide network, including principle Mexican cities, as well as the country’s international borders and seaports.

Customs Services

Manufacturing in Silao, Guanajuato has access to the most modern and best-planned Mexican customs facility in the entirety of the Republic.

International Airport of the Bajio

Manufacturing in Silao, Guanajuato is supported by a modern airport that is in close proximity to the GPI. In addition to the municipality of Silao, the airport serves the state in its entirety. It is one of the country’s best-connected interior airports and provides daily non-stop flights to destinations in the US such as Dallas, Los Angeles and Houston.

Education and Training Zone

Manufacturing in Silao, Guanajuato requires that the area’s Mexico workforce be well-trained.  The Guanajuato Interior Port will also be the home of a campus for the National Polytechnic Institute.  Majors in engineering and others required by manufacturing companies will be offered.  Additionally, a training center for industry will be onsite and will be administered by CONALEP.  CONALEP is Mexico’s National Technical Professional School.  It the organization that is the nation’s largest technical education system and serves low-income individuals at the upper-secondary school level.

Community Service Center(CSS)

This CSS has been put in place for the purpose of supporting individuals and companies involved in manufacturing in Silao, Guanajuato.  It contains a fire station, nursery, and a health center.  The center offers occupational health services and emergency care.  Included in this area is a  sports park for employee recreation.

Services and Innovation District

In an area that is next to the Guanajuato Interior Port (GPI), manufacturing in Silao, Guanajuato is serviced by an area that includes a wide assortment of complementary services.  Not only do the services and innovation district contain firms that participate in providing logistics services, it is also the site of a new Fiesta Hotel and a corporate tower.  Office and commercial space is for rent. Among other uses for the district are banking and financial services, food and convenience services, transport services and more offices for a multitude of other uses.

There an abundance reasons that global manufacturers choose to initiate production operations through a Mexican shelter service provider in the Bajio.

In a world that is becoming increasingly specialized, it is a good option for small to mid-sized operations to focus on what they are in business to do.   They should concentrate on producing product, instead of investing in industrial buildings, paying international attorneys’ fees for services, dealing with accountants and creating their own Mexican human resources infrastructure.  Using a Mexican shelter service provider in the Bajio is a practical way for medium-sized companies to enter a growing market.

Mexican Labor rules are defined by the Ley Federal de Trabajo and is supported by other laws.  Although in some cases it is not flexible, it hasn´t prevented many foreign companies, and thousands of non-Mexican sole proprietors, from establishing profitable operations in Mexico. Many manufacturers enter into partnerships with a Mexican shelter servuce provider in the Bajio, or in another part of Mexico, to help them do so.  It is worth noting that any company entering Mexico to do business should understand both the immediate and historical implications of the Ley Federal and other important, if lesser-known, laws.

Reasons abound for opting to choose a Mexico shelter program to set up production in the Bajio, and elsewhere in Mexico. Beyond offering a complete set of services, shelter companies in Mexico ensure foreign companies’ adherence to labor law in Mexico.

First, a summary:

The revolution in Mexico that commenced in 1910 led to the establishment of Article 123 of the Constitution of 1917. That section of the Constitution gave workers the right to unionize and strike. It also provided for the safeguarding of children and women, the establishment of an eight-hour workday and the payment of a living wage. It was not until 1931, however, that the Ley Federal was put into effect. The law provided for the formation of Boards of Conciliation and Arbitration (Juntas de Conciliación y Arbitraje) made up of employers, representatives of the government, and unions. Those boards have not changed much since their initial formation.

Among features of the Ley Federal and the more recent Social Security law that are considered are:

The Work Day in Mexico

For every 6 days worked (Monday through Saturday), employees are entitled to one off with full payment.

The dismissal of an employee:

Letting an employee go can be costly for Mexican shelter service provider in the Bajio, as well as for companies located elsewhere. In some instances, having a presence in Mexico under through an association with a service provider can lessen this exposure to a certain degree.

If an employee is dismissed without cause, he or she is eligible to collect three months” pay. If that sum is not paid at the time of dismissal, then an employer may be liable for the original sum, plus all wages that would have accumulated had the worker been present in the meantime. If the worker has been on staff for less than a year, the employee is compensated with one half of the salary of the period he received from the company. If this period is greater than one year, then the compensation is to be equivalent to a sum that is equal to six months’ salary of the first year and twenty days per year for each of the additional year of service. The compensation is based on the base salary of the employee during this period. Because a shelter servuce provider in the Bajio and the rest of Mexico is, for the purpose of Mexican labor law, the employer of record, the shelter company can, when possible, reallocate workers from companies from those that are laying off employees to other client companies that have an added demand for manufacturing workers.

Vacation

Mexican employees of a Mexican shelter service provider in the Bajio, and elsewhere, have a vacation each year, which is not less than six working days. For every year an employee labors, he or she is to receive an additional two days of vacation time.  At the end of four years, he or she is to a recipient of two working days for every additional 5 years’ experience. In addition, the employee will be paid no less than a 25% vacation premium calculation on his or her salary during the period in question.

Overtime in Mexico

If an employee works on a holiday, he is to be paid at three times the established hourly wage. Any hours worked over eight for 1 day are compensated at double time.

If an employee leaves a Mexican shelter service provider in the Bajio, or elsewhere in Mexico, the company must compensate him or her with the proportionate part of vacation pay and profit sharing for the year-end. If an employee has labored for more than fifteen consecutive years, the worker shall receive an additional sum equal to twelve days salary (calculated on the last salary received prior to resigning) for each year that he or she has been with the company.

Union Representation

A labor union is permitted in the workplace provided that at least twenty percent of company employees are members. Even so, the registry process is slow and complex.

Profit Sharing

Employees are to be compensated with ten percent of the employers’ profits each year. Included in the payment are works who worked 60 days or more during the applicable period. The distribution is to be made within 60 days of the date workers are required to make their income tax payments. These profit sharing monies do not count for taxation purposes when it comes to determining annual salary amounts.

Mexican Social Security Law

The Mexican Federal Social Security system, which is made up of nationwide medical personnel and facilities, is funded by a mandatory charge to the company. In addition, employers are required to contribute to the Instituto Nacional para el Fomento a la Vivienda para Trabajadores.  This organization manages the national housing fund. Together, these charges account for about 29 percent of an employee’s base. As such, salary is considered to be 129 percent of base salary.

Manufacturing companies that establish wholly-owned entities rather than through a Mexican shelter company in the Bajio, or elsewhere in Mexico, must have staff that is very well versed in Mexico’s labor law in their organization, as well as have access to persons that have a knowledge of Mexican law. Shelter companies in Mexico provide firms that produce goods in the country through their turnkey services with the guidance that they need to navigate these issues, as well as a wide class of others.

Recently, the economy made up of industry in the Bajío region of Mexico has been characterized by an expanding economy that has exceeded that of the nation’s average. This set of circumstances has its origin in the vitality of the region’s manufacturing sector, (more specifically in the portion of the industry’s base that accommodates manufactured items for shipment to foreign consumers), which can ramp up its production beyond the limit of domestic demand.

Prior to the1980s, the manufacturing industry in the Bajio region of Mexico represented approximately twenty percent of the economy of the region, while the share of Gross National Product (GDP) now stands at twenty-six percent in the states that include Guanajuato, Jalisco, Querétaro, and San Luis Potosí.

It is of note that the growth of industry in the Bajio had its start during in the last quarter of the last century.  Before the 1980s, manufacturing represented twenty percent of the region’s economy, while its share of Gross Domestic Product (GDP) now stands at twenty-six percent in the entities of Guanajuato, Querétaro, Jalisco and San Luis Potosí.

Another of the beneficial features of industry in the Bajio region of Mexico is the rapid pace of its growth as of late. While this level of activity marked an average yearly growth of 1.7 percent during the years 2003-2016, Bajio industry expansion was 4.6%. This trend continued in 2017 and is being sustained through the beginning of the current year.

An examination of the industrial activity of the first nine months of 2017 showed that industry in the Bajio the grew at a 5% yearly rate.  This is in accord with information put forth by local economic development agencies. Again, the pace of industrial production of these 4 states surpasses the growth of 3.7 percent that was enjoyed in the country as a whole.

It is with the aperture of Mexico’s borders to foreign trade, through the signing of the GATT, or the General Agreement on Tariffs and Trade, that base of production began to develop.  The opening of the economy of Mexico was a positive of the firms that made up industry in the Bajio region of Mexico.

By state component, San Luis Potosí had the best results in the first nine months of 2017. According to estimates, the production of manufactured products in the state grew 8.5 percent in relation to the same period of 2016; San Luis Potosí followed by Queretaro, which registered a growth of 5.2% during the same period.  Despite the uncertainty surrounding the renegotiation of the NAFTA it is also predicted that the economy of the Bajio state of Jalisco will increase at a three percent pace.  Much of this growth will take place in the manufacturing sector.

An examination of industry in the Bajio, reveals that it is estimated that the sector’s production will expand at a yearly rate of almost four and one-half percent in the current calendar year. In terms of the expansion of the region’s industrial base, Guanajuato grew at just over two percent in 2017 and is projected to expand at 2.5 percent rate during 2018. Guanajuato state is the most active of the producers in the Bajio.

The industrialization of the Bajío region of Mexico has been, and will continue to be, a clear success.  This is the case at a time when using technology from overseas was more convenient when compared to using homegrown know-how. On close inspection, it is evident that the Bajío is an inextricable part of the global chain of production.

Although the economic model that focuses on good shipped from the region has paid off in terms of industry in the Bajío, growth through the satisfaction of the internal market for goods is not being ignored.

Although industry faces the challenge of continuing to evolve at the rate that new technologies are incorporated in the transformation of products, industry in the Bajio, and in Mexico as a whole, there is a possible additional challenge: a potential restriction on foreign trade resulting from the renegotiation of the North American Free Trade Agreement.

Recently the Tecma Group has made the decision to expand along with industry a Silao in the Bajio region of Mexico.  It is listing the region as one of its locations to be included with already established manufacturing sites in Tijuana, Baja California and Ciudad Juarez, Chihuahua.  It’s shelter services for manufacturers in Mexico represent a turnkey means by which factories can establish factories with a minimal amount of risk and the greatest degree of organizational security.  Global manufacturers bring their know-how, their equipment, and material inputs to Mexico.  The Tecma Group takes charge of all activities that are not related to a company’s main manufacturing processes.  Among the services included are: recruitment and human resources administration, accounting, payroll and the purchase of MRO items, and site selection and facility choice.   The Tecma Group’s manufacturing shelter services in Mexico can also enable companies to cut their manufacturing costs up to fifty percent.

As of this writing, the Mexican automotive sector is experiencing a period of uncertain conditions due to the ongoing renegotiation of the NAFTA

As of the end of the past year, the three countries that are a party to the NAFTA have not come to an agreement on the form that the updated rules of origin will take.  It is the hope of the three NAFTA countries that a determination of the new regime for the Mexican automotive sector, as well as in Canada and the United States will take place during the North American Free Trade Agreement renegotiation sessions that are scheduled to take place during the first quarter of 2018.  In the upcoming fourth round of talks, the Trump administration will be seeking to raise the regional content in the automotive industry from 62.5% to 85%.  He also is stipulating that fifty percent of that content be produced in the United States.  One of the main purposes of seeking this change is a desire to reduce the United States’ commercial deficit with its Southern neighbor.  Most of the imbalance in trade with Mexico is due to the fact that the United States imports more than it exports in the automotive industry to its NAFTA partner.

One of the main points of differences in the renegotiation of the North American Free Trade Agreement is the rules of origin for the Mexican automotive sector, as well as for the automotive sector in the United States and Canada. It is generally agreed upon that a modification or a change of the rules will not only cause changes in Mexico but will also influence the United States and Canada.  More specifically an alteration of the rules for the automotive sector under the NAFTA may have a disruptive impact on the North America-wide supply chain that has formed over the two-plus decades that the NAFTA has been in effect.

In terms of the major products exported from the US to Mexico, transportation equipment (including motor vehicles) accounts for some fifteen percent of all shipments to that country.  In addition to the Mexican automotive industry, the US exports a significant volume of electronics and computer products.  Last year 5% percent of items shipped consisted of these products.  Finally, shipment of crude oil to Mexico stood at 2.5%

The trade deficit of the United States with Mexico increased from thirty-four billion dollars to sixty-one billion dollars from 2012-2016.   The commercial deficit that the United States has with Mexico is elevated when compared to that between itself and its northern neighbor.  The United States’ deficit with Canada now stands at a much lower $10.9 billion.

What will happen to the Mexican automotive sector should the rules of origin be changed?

Some industry watchers, including Eduardo Solis who is the executive director of the Mexican Association of the Auto Industry (AMIA), is of the opinion that the North American Free Trade Agreement has been good for the Mexican passenger vehicle industry, as well as for the auto sectors in both Canada and the United States.  He believes that a change in the NAFTA automotive rules of origin is not necessary.  Other individuals such as Luis Aguirre of the National Council of the Maquiladora and Export Manufacturing Industry (INDEX) opine that higher costs in the price of vehicles to consumers sold in the NAFTA region will not only adversely affect buyers but also will not be a positive for the automakers.   Experts believe that if there is a measurable alteration in the automotive rules of origin under a renegotiated North American Free Trade Agreement, adjustments should be put into place over a reasonable timeframe and not be altered from one day to the next.   This is because a change to the current rules would weigh upon not only the end price of vehicles to the consumer but would also be something that would tangibly impact firms’ manufacturing processes and investment decisions.   Due to Mexico’s pending presidential election season, NAFTA negotiators hope to resolve this issue by March.   Should negotiations extend beyond the conclusion of the upcoming Mexican elections, the Mexican automotive sector, as well as those in the Canada and United States will experience an even longer period of uncertainty.

Those that track the automotive industry such as Gabriella Siller, director of Economic and Financial Analysis at Banco BASE, are of the opinion that an alteration in the rules of origin, or a potential departure of the United States from the North American Free Trade Agreement, will have a measurable effect on the three of the countries’ automotive industries.   Taxes raised on car and auto part imports from the Mexican automotive sector to the United States and Canada will precipitate a restructuring and possible dislocation of the NAFTA region supply chains.  Increased taxes on imports of Mexican product into the US will result in consumers paying more for automotive industry outputs.

There are many parties to interact with when initiating business operations in Mexico

When initiating business operations in Mexico there are certain requirements and legal procedures that must be complied with.   This article briefly points out some of the governmental authorities that are involved in the process of business start-up.  When considering this information, it is important to remember that under the shelter program model of initiating manufacturing operations in Mexico most interaction government regulatory entities is undertaken by the shelter service provider.

The Ministry of Foreign Affairs

The Ministry of Foreign Affairs (SRE), through the General Directorate of Permits and Article 27 of the Mexican constitution authorizes the creation of a company.  To open a business in Mexico it is necessary to establish and register its name.  The SRE is responsible for making sure that the name has not already been utilized by another party.

 Public Notary/Public Registry of Commerce

Initiating business operations in Mexico is formalized through a contract called a “constitutive writing.” This document establishes the rules and requirements under which a business will operate.  Among the informational items contained therein are:

General information regarding the partners to the endeavor;

• The purpose of the corporation;
• Company name;
• Information regarding the time during which the company will operate;
• Amount of capital invested

The contract referred to as “the statutes,” must be in writing and notarized.  Following notarization, the company must be registered with the Public Registry of Commerce (SECOFI).

Municipal Government

When initiating business operations in Mexico, certain activities require that an operating license be issued by the municipal government of the locale in which the activities will be conducted. This operating license must be kept in sight.  Also, some municipalities, including the Federal District, require that a Land Use Permit be issued.

Ministry of Finance and Public Credit

Within a month after initiating business operations in Mexico, the company must be registered in the Federal Register of Taxpayers with Mexico’s Ministry of Finance and Public Credit, or “Hacienda.” Hacienda is the Mexican equivalent of the IRS in the United States.

Banking Institutions

When initiating business operations in Mexico companies must select a banking institution through which it will conduct its financial transactions.   Through this bank account payment of all taxes will be made, as well as payment for all services utilized such as telephone, electricity, and gas.  In addition to registering with the IMSS, companies in Mexico must register with the Savings System for Retirement.  Deposits of workers’ retirement fund must be deposited into a special account for this purpose on a bi-monthly basis.

Mexican Social Security Institute

When opening a business in Mexico, the employer must register all workers with the Mexican Social Security Institute within a period of five days in order to be in compliance with Mexican labor laws.  The employer’s activities will be classified by the IMSS according to the Regulation of Classification of Companies.  This is done to determine the “risk factor” associated with the activities that the company will perform.

 Mexican Business Information System (SIEM)

When initiating business operations in Mexico, factories must register with the SIEM in accordance with the Law of Business Chambers and their Confederations.  The SIEM provides business with tools to find suppliers, to increase sales and to find potential customers.  It also provides support to businesses in that it provides information about public sector procurement programs.

Initiating Business Operations in Mexico: Unions

Even though, when establishing a business in Mexico, unionization is not required by law, entities of over twenty workers can be unionized.

Establishing a business in Mexico: Secretary of Commerce and Industrial Development

Another governmental organization with which parties that are establishing a business in Mexico must engage is the Secretary of Commerce and Industrial Development (SECOFI).  Among SECOFI’s responsibilities is the verification and authorization of all equipment dealing with weights and measures. SECOFI also registers and regulates the Official Mexican Standards or NOMS.  NOM registration for certain products is obligatory.  Among them are measuring and testing equipment, clothing, footwear and healthcare products.   Additionally, SECOFI is the government entity that records trademarks, trade names, patents and other forms of industrial property.

Establishing a business in Mexico: National Institute of Statistics

Upon establishing a business in Mexico, and subsequent years thereafter, certain information regarding the business must be provided to the National Institute of Statistic or, as it is known by its Mexican acronym, INEGI.

Coparmex, or Federation of Employers of the Mexican Republic

The Employers Confederation of the Mexican Republic (COPARMEX) is a voluntary membership business organization, looking through representation in the workplace and society. Its more than 36,000-member companies across the country are responsible for 30% of GDP and 4.8 million formal jobs

Other entities which also interface with those establishing a business in Mexico include the Secretary of the Environment, Secretary of National Resources and Fisheries, the Ministry of Labor and Social Security, and the National Water Commission among others.

Remember, that under shelter program business model for manufacturers, most of the interaction with the above-mentioned organizations and entities is undertaken by the shelter service provider.

Mexican salaries are Latin America’s lowest

Among the main goals of the North American Free Trade Agreement was to build a middle class in Mexico that has the economic power necessary to consume goods imported from its two NAFTA partners, the US and Canada. In reality, however, and in certain instances, depressed Mexican salaries have been a competitive advantage in practice.

The Trump Administration would like to see Mexican salaries rise in order to achieve its objective to reduce the number of US-based firms that cross the country’s southern border. Low Mexican salaries, which many of the country’s economic policymakers attest make the whole North American Free Trade Agreement region more competitive, is among the primary reasons that many businesses find investing in Mexico to be an intelligent strategic decision.  However, according to Trump this is one reason why the United States has a substantial, US $64 billion trade imbalance with its southern neighbor.

While Mexican salaries have on average increased 424% across the breadth of the Mexican economy since the treaty took effect, this upward movement has not been enough to build a level playing field for Canadian and American laborers.  In the Mexican productive sector, wages have had a real decline of almost fifteen percent during the last decade, while the salaries of US manufacturing workers have risen at an average rate of just below nineteen percent. Taking this data into account there are 5 reasons that U.S. President Donald Trump wants to see salaries in Mexican salaries rise.

Minimum Wage: Low

When the North American Free Trade Agreement came into effect in the early 1990s, the minimum salary in Mexico was equivalent to about 5 US dollars per day, while in the United States the minimum salary was US $34 for every 8 hours worked.  This means that when the free trade pact began, Mexican minimum wage workers earned just fourteen and one-half percent of what US workers earned in dollar terms.

In 2017, the status quo has not changed greatly.  Those who earn the minimum wage in Mexico today earn eighty pesos per day.  This means that their income rises to only US $4.46 a day.  This shows a 9.3% reduction since 1994.   Currently, a Mexican that earns this salary in Mexico collects only 7.7% of what an American worker earns in dollar terms.  The minimum wage in the US has stood at US $7.25 since 2009.  This represents US $58 for an 8-hour workday.

Mexican Salaries in Manufacturing: Very Low

The present US government believes that Mexico’s low manufacturing salaries is the primary reason why many of the country’s private sector decision makers are opting to move jobs to Mexico.

United States Department of Labor information demonstrates that at the end of 2016, manufacturing job salaries reached an average of US $20.44 an hour, while Canada’s average maximum manufacturing wage was recorded as being US $18.7.  The result is that in 2016 Mexican manufacturing wage represented only 26.6% of the United States’ and 23 percent of the Canadian.

The Lowest Wages in Latin America

Mexico’s minimum wage is not only low when compared to those of its North American Free Trade Agreement trading partners, but is also reduced in when compared to workers’ wages in the other Latin American nations. For example, Mexico’s minimum wage is forty-four percent of that of Brazil and is only twenty-seven percent of what laborers in Argentina earn. As a point of a comparison with a country outside of Latin America, Mexico’s minimum wage is only sixteen percent of Spain’s.

Purchasing Power

Although it is generally agreed that low wages are a limitation on its workers, it can be said that the country is “cheap” to reside in compared to other countries. The purchasing power in Mexico is higher than in some Latin American nations due to the reduced prices of several products. Although this is the case, the Trump administration points out that low wages in Mexico prevent its citizens from buying US imports, therefore, creating a greater trade imbalance between the two countries.

A Limited Wage Recovery

Although the Mexican minimum daily salary has risen significantly, primarily because of yearly adjustments (from 15.27 Mexican pesos a day to 80.4 pesos), this nominal growth has not been sufficient to match those of Canada and the United States because of Mexico’s depreciation of its national currency.   Due to the fact that Mexican salaries have not grown as quickly as those in the United States and Canada, for a vast percentage of the population, living standards have not improved greatly since 1994.  The Trump administration sees a higher standard of living in Mexico as an important factor to lessen undocumented immigration to the United States.

For a continuing series of articles on Mexican Salaries or Wages in Mexico the reader is encouraged to visit our blot Tecma.

Skilled Human Resources are Critical to the Growth of Mexico’s Maquiladora Plants.

Historically Mexico’s maquiladora plants have operated as factories that have been involved in the assembly of foreign-supplied and produced inputs into finished goods that were subsequently shipped to foreign consumers.   Although there is room for improvement, Mexico is increasingly becoming a locale for advanced manufacturing.  Mexican maquiladora plants now produce advanced manufactured items for a variety of industries.  Included among them are automotive, aerospace, the food industry, mechatronics, industrial robotics, and plastics.

Because of the substantial expansion and increasing complexity of Mexican industry, the nation is becoming viewed worldwide as a supplier of advanced products.  In 2015, in excess of US fifteen billion dollars’ worth of sophisticated goods had Mexico as their producer.  Products manufactured in Mexico that are in this category include advanced electronics, biotechnological items, medical devices, optical components, mechanical goods, and advanced items for the aerospace and aviation industry.

Over the last three decades, Mexico has changed from what was an essentially closed and government-controlled economy to be one of the world’s most open today.  During this period, Mexico’s maquiladora plants have played a key role in making the country the fourth most prolific exporter in the world following only Germany, Japan and South Korea.  Mexico now has one of the most highly developed and sophisticated manufacturing sectors in Latin America.

One of the most challenging issues facing Mexico’s maquiladora plants today is adequately educating the nation’s labor pool to expand its capacity to meet the needs of positions in advanced industries. A key way by which this is done is by forging a solid linkage between business and educational institutions.  Mexico has been diligent in these activities.  Among the organizations working to fortify academics and business connections are the National Council of Science and Technology (Conacyt), the Ministry of Finance and Public Credit (SCHP), the Secretariat of Public Education (SEP), and the Ministry of Economy (SE).  As of now in Mexico, there are sixty-three engineering industry-related majors being given by Mexican universities and technical schools.  These have been designed to meet the demands of Mexico’s maquiladora plants.  Furthermore, the country has a Center for Advanced Technology (CIATEQ) whose main installations can be found in the state of Queretaro.  CIATEQ represents a collection of Centers that focus on advanced manufacturing that, in addition to its central location, is found in eight states in the Republic of Mexico.  CIATEQ’s offerings are divided into several of important areas. Among them are:

• Plastics and advanced materials
• IT, Electronics and Control
• Virtual Engineering and manufacturing
• Engineering and construction of plants
• Measurement systems
• Mechanical systems

The organization also offers laboratory services in the areas of:

• Metrology
• Destructive and non-destructive testing
• Characterization of plastics and materials

Also, CIATEQ offers advanced degrees in complex manufacturing.

Automotive Mexican maquiladora plants will also require more highly-trained workers. Eduardo Solis, the executive director of the Mexican Association for the Automotive Industry (AMIA), asserts that Mexico will have to educate more skilled workers to meet the needs of an industry which is constantly innovating and improving the quality of its output. He suggests that companies not only to view Mexico as a source of inexpensive labor but also as a source of individuals that have the capacity to rise to the challenges that come with a complex industrial sector.

One technology-dense industry that is leading the way in steadily establishing a strong presence in Mexico is the aerospace and aviation sector. Just 13 ago, there were only 100 US and European companies manufacturing in this sector.  Today that number has become a significant 330.   In order to expand further into the future, however, aerospace Mexican maquiladora plants will need a supply of trained workers in areas such as forging, CNC machining, casting, metrology heat treating and other highly skilled positions.

A state in Mexico that has seen a visible rate of advanced manufacturing expansion in the last several years is Jalisco.  In the last 5 years, the entity has registered an expansion of over six percent, which includes firms in the metal mechanics, aerospace,  automotive,  software, and robotics industries.  As a measure of overall economic growth, the state is position in fourth place in the country behind Monterrey, Mexico City, and Queretaro.  According to Francisco Castaneda, director of the robotics cluster of Jalisco, it is necessary that labor is trained sufficiently to take advantage of job opportunities that are now appearing.   According to Castaneda, a deficiency of skilled labor will impede not only the Jalisco’s economic expansion, but also that of the Mexico as a whole.

Emerging Industries Will Require the Workforce in Mexico to be Trained

According to Hays, a global talent acquisition form, among the posts that industries in new jobs in the workforce in Mexico will be numerous in the following areas:

• Engineering plant managers
• Senior managers
• HR generalists
• Quality managers
• Sales managers/directors

As Mexico’s industrial base continues to grow and develop, finding the appropriate individuals to fill increasingly demanding and numerous positions will become more of a challenge. This is particularly true in sectors that are gaining momentum in Mexico.  More specifically, medical device, energy, aerospace, and telecommunications companies will have to increase and improve their talent acquisition capabilities in order to access trained employees.  The country will have to make growing a workforce with the ability to capitalize on future job requirements and challenges the workforce in Mexico a priority.   It is prognosticated that, in the coming years, the workforce in Mexico will be in need of approximately 500,000 trained workers.

Four growing industries: Energy, Telecommunications, Medical Devices, and Aerospace.

An area of Mexican industry that is thriving is telecommunications.  This is, in great part, because in 2014 the government of Mexico undertook significant reforms in the sector. Over the course of that year, the Federal Telecommunications Institute (IFT) took measures to stimulate and create competition in what was an industry characterized by monopoly.  Due to these reforms, in 2016 the IFT reported that telecommunications industry enjoyed growth of 8.5%.  This rate of expansion was the highest among all sectors of the of Mexico’s economy. Importantly, the telecom sector growth was more than three times higher than that of the Mexican economy in its entirety.  The Mexican gross domestic product (GDP) grew at a rate of two and one-half percent in 2016.

The provision of energy is one of the areas in Mexico that will grow at a healthy pace. The industry was opened to private investment in 2013, after mostly in government hands since 1930.   Deregulation resulted in the lifting of strict federal government power over the gas, electricity, and oil sectors. Recently, these activities have become the recipients of both private foreign direct and private investment.  There is a hope that the opening of the energy industry to outside investment will attract the trained Mexican workforce required to fully exploit the country’s deep-water and shale oil deposits.

More jobs for the workforce in the Mexican in the telecommunications industry will materialize as a result of massive investment that has recently been made in the sector. According to the Federal Telecommunications Institute in excess of thirteen billion US dollars has poured into the industry over the last three years.  Government sources project that the sector will gain another $US 7 billion to further build the Mexico’s telecom network.  This growth will require a trained workforce in Mexico with the skills that the modern telecommunication industry demands.

Additionally, Aerospace is the another of the country’s industries to have benefited from a steady rate of growth over the last decade.  Although the industry is relatively new to Mexico, it has impressive clusters of production in places like Baja California, the western state of Sonora, and the state of Queretaro, in recent years, the Mexican government has initiated a number programs to create aerospace employment opportunities for the Mexican workforce.  These include workforce training programs, business incentives, and the founding of universities and technical institutes to support the industry’s growth.  The aerospace industry is an excellent example of foreign investment attraction, growth, and job creation.  Beyond employing 63,000 in 2016, the aerospace industry in Mexico logged an average yearly growth in exports of 20% over the years 2013-2015.  As one of the industries in Mexico that is experiencing significant levels of growth, the aerospace industry will increasingly more trained individuals in the workforce in Mexico.

Finally, another sector of future growth will take place in the medical device manufacturing industry.  Today, the country is host to some of the sector’s most well-known names.  Among the firms with a strong presence in Mexico are Becton Dickinson, Johnson & Johnson, Cardinal Healthcare, Stryker,  Tyco, Siemens, GE, Medtronic, Boston Scientific, Kimberly Clark and others. Mexico has this impressive amount of activity in the medical device sector due to the fact that, over the years, its workforce has become increasingly better trained and has become increasingly adept at producing these sophisticated products.  A combination of factors such as its workforce and its preferential access to the world’s largest market will be what propels the industry’s future growth. According to Mexico’s National Institute of Statistics and Geography (INEGI), the value of Mexican production of medical devices is projected to be over US$ 15 billion by 2020.  As is the case with both the telecommunication industry and energy, healthy growth in the medical devices industry will require greater numbers of the workforce in Mexico.