Managing a Maquiladora in Mexico [A COMPLETE GUIDE]

As a savvy manufacturing executive, you’ve probably considered the various outsourcing options, including Mexico. But if, like most who first encounter this possible option, you still have questions about the ins and outs of managing a maquiladora operation south of the border, this complete guide is for you.

Making the decision to outsource the manufacturing function to a foreign country comes with risk factors and other serious considerations. One such consideration is how to go about managing a foreign operation while remaining profitable and what taking on a foreign factory will entail. Below, we will detail just what it looks like to manage a maquiladora factory in Mexico safely, effectively, and profitably.

Nearshoring in Mexico

Nearshoring as opposed to offshoring removes certain factors from the equation of outsourcing. From a management perspective, there is greater hands-on potential for a factory located just south of the border, reachable within a few hours by plane or car in some cases.

Furthermore, nearshoring in Mexico:

• Reduces transit times
• Better aligns business hours through comparable time zones
• Affords greater control of supply chains
• Provides enhanced flexibility
• Leads to more efficient manufacturing
• Presents less cultural difference for management to overcome
• Minimizes duties and tariff concerns

Additionally, manufacturing in Mexico:

• Gives management access to deeper pools of skilled manufacturing labor
• Opens up more free-trade markets globally
• Reduces management and production costs
• Provides strategic resilience in economic downturns and market disruptions

Selecting A Site in Mexico

Mexico is home to state-of-the-art industrial parks and manufacturing infrastructure. These parks are urbanized areas dedicated to optimal manufacturing and logistics activity. They typically include all the necessary utilities, permits, and infrastructure. They are available for either lease or purchase and often include special certifications to ensure maximum potential for tenants.

Consider the following factors when choosing your Mexican manufacturing site:

• Access to transportation
• Population density and worker access
• Available utilities
• Cost for either rental or purchase
• Total start-up and administrative costs

How to Open a Maquiladora

Properly entering the world of Mexican manufacturing is crucial for long-term success and profitability. Mexico’s IMMEX program allows foreign entities to establish and own factories within their borders for export manufacturing under special duty considerations. 

In order to establish a maquiladora (or maquila) operation under IMMEX, you must properly complete all paperwork and provide all necessary documentation. The process of opening a maquiladora can be quite daunting, but below is a checklist of necessary items:

• A completed IMMEX Application
• Advanced electronic signature certificate (SAT)
• Federal taxpayer registration for owning entity
• An active tax domicile in the federal taxpayer registry
• Certified copy of your company’s articles of incorporation
• Copy of a document certifying possession of the factory property with photographs
• Contract of maquila, showing the orders of purchase your operation will manufacture for
• Copy of your Power of Attorney or Unique Registry of Accredited Persons (RUPA)
• Document detailing which IMMEX guidelines/classifications pertaining to your maquila processes
• Production processes and plant capacity details
• Letter of conformity from the company or companies manufacturing or sub-manufacturing, declaring the specific liability on temporarily imported goods

Next Steps for Managing a Maquiladora

Managing a maquiladora in Mexico means stepping into a completely different workplace culture. Fortunately, the cultural divide is not as stark as with managing in an Asian culture. Nevertheless, there are certain distinct differences with workplaces in the USA.

• The workweek is typically 48 hours long, as workers tend to stay later than the prescribed working hours.
• Mexican workers typically receive more paid vacation time and holidays.
• Benefits like overtime, sick pay, and maternity leave are more generous in Mexico.
• Hierarchy matters, and official titles are widely used, while lower-level workers are not expected to exceed their authority. 
• Time is much more flexible, with workers often arriving 20 minutes late and staying much later than quitting time to avoid being perceived as rude.

When travelling in Mexico to oversee your business operations and relationships, there are certain important considerations for managers:

• Business lunches are expected to be mixed with much personal conversational and even alcoholic beverages and smoking; relax and take your time.
• Formality is important, even when it comes to business attire; bring the proper senior executives to equate to those you are meeting with.
• Driving into the Mexico Free Zone border region requires no special visas or paperwork. 
• If flying into Mexico, use only registered sitio taxi lines in the country, as it can be unsafe to use independent taxi operators.

And speaking of safely conducting business in Mexico:

• Be sure to locate your factory in a safe area of town.
• Hire a reputable security firm to guard your operations.
• Do not be careless with company assets or flashy with personal wealth.
• Know the law and carefully ensure full compliance to avoid risk of blackmail or confusion.

Take the Shelter Shortcut

You can forego much of the guesswork, planning, costs, and exposure by taking a shortcut. Rather than performing all of the necessary research, site set-up, workforce hiring, and compliance paperwork, many US executives find managing a maquiladora much simpler via a proxy.

This proxy comes in the form of a shelter service provider, which provides you with numerous advantages. A shelter company acts as the owner of record of a Mexican corporation and typically has existing workforces and supplier networks already in place. In fact, often, these services already have factories in place awaiting an owner. Additionally, the shelter will have competent labor and top tier suppliers on tap and handle all necessary tariff, tax, and compliance forms, hiring and administration, maintenance, logistics, security, and more.

You can speed up the process of entering the Mexican manufacturing scene, eliminate the headache of sourcing materials and personnel, and devote your management time to core activities like maximizing quality, profitability, and ongoing product design. 

Regardless of how you set up your operation, managing a maquiladora in Mexico can be a highly effective and profitable alternative to offshoring. And with the insights contained in this guide, you are ready to experience the Mexico advantage for yourself.