For people on vacation, balmy Mexico is a state of mind. For companies investigating new manufacturing sites, incentives are a state of mind in Mexico. Thirty-one states of mind, actually, since Mexico has 31 states, not counting the Federal District at the heart of Mexico City.

Like the United States, Mexico's main industrial incentives are not offered at the federal level. The incentive action mostly is at the state level in Mexico, with sweeteners added by some manufacturing-minded cities.

Since Mexico's states compete with each other, not to mention the rest of the world, the number of incentives seems to grow each year. With the United States and Mexico both emerging from recessionary periods, the competition to get out front is especially aggressive in 2002 as companies try new strategies to enter the coming growth era.

Of course, Mexico has built-in incentives, a youthful 100 million population that neighbors next to the world's largest market, the United States, with which Mexico has become the second-largest trading partner after Canada, surpassing Japan.

The North American Free Trade Agreement continues to promote the relationship. In January 2003, all manufacturing tariffs between the two nations are scheduled by NAFTA to reach a flat zero. That is just about everything other than agricultural trade. The zero tariffs will apply to all goods made in Mexico, the United States and Canada that have sufficient North American content under NAFTA's rules of origin.

Another national Mexico incentive is its large number of free trade agreements with other nations, more than 30, including nearly all of Central and South America, the European Union, Israel and several Asian industrial giants. Goods made in Mexico therefore have preferential treatment when shipped to those markets.

But Mexico's states typically have an impressive lineup of incentives that can include project subsidies or other financial assistance, employee housing, research and development tax exemptions, payroll tax exemptions, supplier development programs and state-paid worker training.

The following are some typical examples of industrial Mexican state inducements, plus one city's add-on incentives. Usually, the incentives are subject to negotiation depending on the industry and size of the investment. The sites are listed in alphabetical order.

BAJA CALIFORNIA NORTE: Anchored by the large manufacturing center of Tijuana, Baja developed initially with electronics and metal mechanics factories but in recent years has expanded its specialties to medical devices, plastics, pharmaceuticals and information technologies, including customer service and data processing companies.

Baja's top incentives are possible project subsidies or contacts with venture capital groups depending on the project, sites for employee housing near the site, 30 percent income tax exemption for R&D, up to two years of exemption on the state's 1.8 percent payroll tax, state-paid worker training wages up to three months and use of a supplier development program that can include possible financing and technical assistance.

"Our strategy is to attract companies with more sophisticated technology, not companies that require cheap labor," said Sergio Tagliapietra, Baja's economic development secretary.

CHIHUAHUA: Led by Ciudad Juarez on the border and the capital city, Ciudad Chihuahua, this state seeks biomedical, aeronautical, software and telecommunications investments along with its mainstays of automotive, auto parts and electronics.

The state boosts the most modern of Ford Motor Co.'s Mexican plants and 11 Philips Electronics sites that produce televisions, electronic components and monitors, all for exportation, said Laura Maria Ruiz Vazquez, promotion director for Chihuahua's industrial development department.

The main state incentives are 95 percent payroll tax exemptions outside of the two largest cities and 45 percent in Ciudades Juarez and Chihuahua, exemption of property registration and commerce fees and training costs of up to 100 percent of wages from one to three months and six to eight hours a day at the plant site or in a technical school.

Municipal incentives in Chihuahua include reductions in construction permit costs, land usage fees, transfer title and property taxes and a local supplier development program.

COAHUILA: "No other state in Mexico has more diverse industries than Coahuila, from mining to high-tech equipment," said Andrea Paula Cardenas Cardenas, international promotion director for Coahuila's planning and development department.

Coahuila, led industrially by the state capital of Saltillo and the cities of Torreon and Monclova, specializes in food, textiles, metal mechanics, electronics, plastics and construction materials.

Companies that do not pollute or use large amounts of water in their plants are eligible for total payroll tax exemptions their first year. The state-paid worker training program lasts from 30 to 90 days and includes the workers' public health benefits, all contingent on the company hiring 70 percent of the trained personnel.

The state department also offers infrastructure, site study information, legal help on land, municipal profiles, an investors guide and legal counseling to investors.

DURANGO: This state's main sectors are electronics, automotive engines, harnesses and parts, metal mechanics, apparel, wood products and furniture, food and beverages and mining.

"We decided to come to Durango," said Larry Price, Sun Apparel Group chief financial officer, "mainly because of the resources available. Number one, the labor force. We started eight years ago with a single plant in the city of Lerdo. Currently we operate five plants in Lerdo, a large plant in the city of Durango, and we employ around 4,000 people. The government here has been really supportive."

State incentives feature payroll tax exemptions up to four years, reductions in property registration fees and state-paid training up to 60 days. For companies employing more than 500 workers, the state will pay for site leveling, access roads, power extensions, water supplies and railroad spurs.

Durango city incentives include 50 percent off numerous city fees and services, including solid waste disposal.

IRAPUATO: This city in the interior state of Guanajuato and the area around the city specializes in the metal mechanical, automotive and auto parts and agroindustrial sectors.

"The state of Guanajuato has been very helpful with hiring programs, training assistance, financial support and training, logistical support, additions and updates to the infrastructure around the plant," said Hank Hale of the General Motors Corp. plant at Silao.

Irapuato also offers land and warehousing financing, one-stop-processing and paid training for three months.

SINALOA: This state is proud of its new Walbro Engine Management plant at Los Mochis that was opened in ceremonies in April 2002, attended by Mexico President Vicente Fox. Sinaloa specializes in textiles, food, automotive, information technologies and services.

"Let me comment that the main reason for our decision is the people of Sinaloa. We see here a very good vision for long-term business," said Bill Roland, president of Harris Corp.

Sinaloa's main incentives are exemptions for payroll and real estate acquisition taxes, property registration and land use fees, water and sewage fees and a reduction in property taxes. The state also offers two months of government-paid worker training and plant set-up services.

SONORA: A worker training agreement is signed with the state when a new corporation moves to this Northwest Mexico state. The company designs the training, hires the instructors, provides the equipment and materials and must hire 70 percent of the trainees.

For its part, Sonora pays the first eight weeks at the minimum wage level, along with the trainees' medical insurance premiums.

New corporations also are exempt from paying the state's 2 percent payroll tax for one year and get a 50 percent reduction on land registration fees.

TAMAULIPAS: This state is loaded with industrial cities, ranging from Nuevo Laredo, Reynosa and Matamoros along the Texas border to the capital of Ciudad Victoria to the port city of Altamira.

The main industrial clusters are electronics, auto parts, chemical, petrochemicals, textiles and agroindustrial. Companies active in Tamaulipas include Sony, Nokia, Philips, Black & Decker, Whirlpool, Delphi, TRW, Lee Manufacturing, BASF and Dupont.

Tamaulipas allows a 50 percent payroll tax discount to new companies and to those who add employment during 2002. The rebate is extended for two years if the company generates 150 new permanent jobs or more.

The state also grants a 50 percent discount on property registration, including plants that expand. Industrial land is offered at special prices in the cities of Victoria, Matamoros and Altamira.

Government-paid state training to new companies lasts for two months.

YUCATAN: This peninsula state in southern Mexico developed first industrially in textiles and garments. But new generations of maquila-doras arriving in the state are in the aerospace, electronic and medical parts sectors.

Because Yucatan is in the southern half of Mexico, it qualifies for a special federal incentive started by President Fox that is comprised of a four-month training subsidy and infrastructure development.

"From the Port of Merida-Progreso we can reach easily not only the U.S. market but also the European," said Fabio Atti, manager of La Perla Industries.

Adds Jean Freyre, manager of PCC Airfoils, "After two years of searching, our company found the right place in Yucatan for many good reasons."

Yucatan state incentives include freight costs and insurance on machinery shipments and assistance in site selection and the installation of basic utilities like water, electricity and telephones.

David Hendricks is business columnist for the San Antonio Express-News.