Expanding to Mexico independently is rife with challenges. From finding experienced suppliers and choosing a location to hiring and managing a skilled workforce, offshoring the production process to Mexico without the proper guidance can lead to significant operational issues. However, these aren't the only barriers manufacturers encounter when they offshore without the aid of a shelter company.
The Mexican government continues to reform the country's labor standards, environmental laws and tax policies. While Mexican environmental controls and safety and health standards are similar to those in the U.S., numerous differences remain. For U.S. businesses, offshoring manufacturing to Mexico without understanding the legislative climate of the country can cause problems before any material is even produced.
Reforms continuing in Mexico
When offshoring to another country, businesses need to keep in mind not only the laws and policies of their home country but also the other country's. And the Mexican government continues to change its labor standards and taxes. According to Reuters, the government recently proposed fiscal reforms that include tax hikes. Mexico's ruling party, the Institutional Revolutionary Party (PRI), has already introduced plans to reform many parts of the country's policies.
Reuters reported the new tax reform hopes to retain the recent growth the Mexican economy has experienced. According to the Cato Institute, Mexican President Enrique Peña Nieto's fiscal reform bill may simplify the country's complex tax system. Even Mexican businessmen spend hundreds of hours every year calculating what they owe to the government. While the bill promises to ease this burden by removing loopholes and special tax rates, it will increase taxes across the board.
Yet, tax reform isn't the only legislative changes the country continues to examine. According to The Associated Press, Peña Nieto's predecessor proposed alterations to Mexico's labor standards. In fact, the Society of Human Resource Management reported the labor laws passed earlier this year. Combined with Peña Nieto's energy reform bill, the country is experiencing significant overhauls in its policies.
Compliance means hiring experts
It can be easy for U.S. businesses to watch these legislative reforms occur in Mexico and believe expanding to the country would be a headache. The Mexican legal system is a complex entity that strictly enforces its rules and regulations on businesses, whether they are headquartered in the country or not. Plants can be closed if an environmental compliance inspection has found violations; in fact, 100 facilities have been shut down permanently since 1993 alone. With manufacturing activity growing in the country, this number may rise if businesses don't take the proper precautions and remain sensitive to environmental laws in Mexico.
However, employing a shelter company with experienced law and industrial safety compliance professionals can help manufacturers offshore their production process smoothly. Shelter companies work with businesses regarding compliance requirements, are able to go through the necessary channels to acquire proper permits and can even act as a liaison between the business and the Mexican government.