| In
the United States, almost anything goes when it comes to economic incentives.
In Mexico, incentives lurk in the shadows.
But they certainly exist. Foreign companies
entering Mexico need to know what is possible and what may be requested
because Mexico does not actively boast of its incentives.
As in the United States, little in the
way of federal economic incentives exists. Incentives, such as tax abatements,
are found mainly at the municipal level, with state-level incentives offered
as sweeteners.
In Mexico, the action is at the state
level, with occasional add-on incentives available from cities and individual
industrial parks.
Maquiladoras
among Mexico’s draws
“The Mexican government does not offer
a big number of incentives at the federal level,” said Carlos Santos, trade
commissioner of Mexico at the San Antonio office of Bancomext, the Mexican
government bank of foreign trade.
“The government believes Mexico itself
is an incentive; its geographical location, the way it is a gateway to
the United States and to the Central and South American markets and with
its qualified work force,” Santos said.
The federal government also sponsors the
maquiladora program that allows foreign companies to set up production
plants in Mexico which do not pay duties on items transported in-bond into
Mexico. A duty is levied only on the value added in Mexico as items are
exported for sale outside of Mexico.
The maquiladora program, however, is universal
throughout Mexico and has been a Mexican standard for more than 30 years.
The program therefore is not considered an economic incentive that fosters
competition for industry within Mexico's states and regions.
“But states have a variety of incentives,
depending on how eager states are for certain industries,” Santos said.
“They may have reduced land prices, reduced payroll taxes and even a break
in the value-added tax, or V.A.T.
“Some of the V.A.T. goes back to the states,
and so some of them can forego some of that and exempt it for new plants
as an incentive,” Santos explained.
Job creation
is key
“In general, the larger the number of
jobs a new project creates, the more leverage the investors have for their
projects in Mexico,” the trade commissioner said.
In that regard, the acquisition of land
can come into play.
“Land is tied to job creation, and in
some cases land can be acquired very inexpensively,” Santos said. “If a
new plant creates 3,000 to 5,000 jobs, then the states get very interested
in helping a company with the land they need.
“Or if a company is willing to go into
a poor region of the state where the jobs will have a special benefit to
the families and communities there, a state will look into more incentives,
like land, than they would normally provide.”
Incentives lure
high-tech
Nuevo Leon is the northern state that
is home to Monterrey, Mexico's third-largest city and industrial center
that in the past has been referred to as the Pittsburgh of Mexico.
But Monterrey is trying to change that
image to a degree, using a statewide package of economic incentives.
“We are seeking environmentally friendly,
non-polluting industries, such as high-technology. We are trying to create
jobs for the students graduating from our 26 colleges and universities,
many of them with technology programs, and for our high-skilled people,”
said Renata Valdez, foreign investment coordinator for the office of the
Nuevo Leon secretary for economic development.
“We seek high quality jobs because the
goal is to reach a higher quality of life in Nuevo Leon and Monterrey,”
Valdez added.
Nuevo Leon offers an extensive package
of economic incentives. For construction and permits, a fixed-rate subsidized
rate is offered at $2.90 per square meter, a rate representing, in most
cases, a 90 percent reduction.
A state-funded job training program for
technical staff is available, equivalent to a minimum wage for up to two
months and health care for the trainee and his or her family for the same
time period.
Nuevo Leon also allows municipal governments
to reduce land prices and property taxes as incentives. The state pledges
additional support in finding suppliers as needed for new plants.
Steering your
location decision
But with two other incentives, the state
seeks to spread development more evenly across the state.
Reductions in payroll taxes differ. It
is 50 percent if the new plant opens inside Monterrey, but the reduction
swells to 95 percent if it’s located outside of the industrial center.
Likewise, 50 percent of the registration
fee for real estate purchases is waived if the property is within Monterrey,
but the waiver rises to as much as 95 percent outside of the capital city.
Nuevo Leon is not alone in its sophistication
of targeting industries.
“Nuevo Leon, Baja California and Jalisco
are the most advanced in the types of industry they want to attract with
their economic incentives,” Santos observed.
Sophistication
of Mexican incentives on the rise
Of course, Baja California is anchored
by Tijuana, which has a large concentration of consumer-electronics maquiladoras,
while Jalisco's state capital is Guadalajara, known as Mexico's Silicon
Valley.
But the northern border states of Chihuahua
and Sonora are examples of similar sophistication in their packages of
economic incentives.
Intermex, an industrial park operator
and developer active in the state of Chihuahua, lists the states' incentives:
assistance in obtaining licenses and permits, worker training for start-up
operations, development of area supply chains, assistance with local-government
red tape and help with land acquisition.
Chihuahua also seeks to even out development
away from its main industrial cities of Ciudad Juarez on the border near
El Paso and the interior capital of Ciudad Chihuahua.
The state will waive 50 percent of payroll
taxes if new plants locate inside those two cities, but the waiver will
be 100 percent if operations set up elsewhere.
Sonora, to the west of Chihuahua, offers
new corporations an exemption from the 2 percent payroll tax and a 50 percent
waiver on land registration fees across the board.
The Sonora state government also offers
assistance in locating land, obtaining information, expediting applications
and permits and communications with local and federal agencies.
But the big incentive in Sonora is job
training. The state will pay the first eight weeks of the trainee’s salary
at the minimum wage level, along with medical insurance and worker transportation
to the training center.
What states are the most aggressive with
their incentives packages and in economic development in general?
Santos said that in general, the northern
belt of industrial states have been the most aggressive traditionally,
including Sinaloa, Baja California and Tamaulipas, along with Nuevo Leon,
Chihuahua and Sonora.
But further south, Aguascalientes, Queretaro,
Oaxaca and education-rich Guanajuato have been getting into the act more.
Resources, logistics
often are primary site factors
Incentives usually are not a factor in
the first steps of site selection in Mexico, Santos explained.
“When companies come to us, we'll recommend
places that, say, have water resources, if that is what is needed, or concentrations
of certain industries,” Santos said.
“Once we have narrowed the choices down,
we will look at states that are the most eager for that particular industry.
And then we will give hints about using the company's leverage with the
local authorities to obtain economic incentives,” Santos said. |