The companies registered in the Maquiladora and Manufacturing Export Industry (IMMEX) program will make investments of 11,000 million dollars in 2022, according to projections of the business body that represents the sector.
From 2015 to 2020, IMMEX companies invested an average of 8,000 million dollars annually.
In 2021, the corresponding amount rose to 11,687 million dollars, a year-on-year increase of 76.3%, although this dynamism was influenced by the low comparative base of the atypical year of 2020.
“This year it is expected that 11,000 million dollars of fixed assets will be brought to Mexico,” projected Luis Manuel Hernández, president of the National Council of the Maquiladora and Export Manufacturing Industry (Index).
Hernández added that the expected amount of investments for 2022 would be higher if Mexico were more competitive in energy supply and in the availability of facilities in industrial parks.
“Industrial warehouse rental prices have increased 15 or 20%,” he added, and immediately argued that companies take into consideration when establishing new facilities if there are spaces with energy, proximity to the United States, regional vocations and growth prospects on the horizon.
Meanwhile, Carlos Palencia, an analyst at Strategic Consulting & Outsourcing (CEO), commented that the growth in 2021 is explained in part by restrictions on operations temporarily caused by the Covid-19 pandemic and because some projects were delayed pending entry in force of the Treaty between Mexico, the United States and Canada (T-MEC), in force since July 2020.
“The biggest competition we have is the southern United States. Mexico can compete with other countries, but it is now competing with the United States, it is generating different conditions with very similar energy and land prices,” Hernández said at a press conference. “That is an issue that is going to generate a bottleneck, but that has not limited the investment to continue.”
Mexico’s maquiladora program, officially known as IMMEX, allows manufacturers in Mexico to import raw materials and equipment into Mexico as a temporary import free of taxes and duties (including value added tax, VAT).
To receive this benefit, the goods to be temporarily imported must be used in an industrial or service process intended to produce, transform or repair goods for subsequent export. These temporary imports must end up being part of a final export.
In the first two months of 2022, Mexico captured 1,159 million dollars in fixed assets from IMMEX companies, but both Hernández and Palencia agreed that the country is benefiting from the relocation of companies as a result of the trade war between the United States and China and by the need to establish shorter and more diversified supply chains.
Land concessions or discounts, tax deductions, and technology, innovation, and workforce development funding are commonly used incentives in Mexico.
Additional federal incentives for foreign trade include: the IMMEX program, which allows companies in the manufacturing sector to temporarily import supplies without paying the general import tax and the value added tax; tax rebates on imports of goods incorporated into products destined for export, and sectoral promotion programs that allow preferential ad-valorem tariffs on imports of selected inputs.
Industries that typically receive sector promotion benefits include footwear, mining, chemicals, steel, textiles, clothing, and electronics.
Manufacturing and other companies have reported to the US Department of Commerce that it is becoming increasingly difficult to apply for and receive refunds of VAT paid on inputs for the export sector.
Palencia explained that the sector has several challenges, in the short term there is the increase in the prices of inputs, for example, steel, chips and other components.
A second factor is the shortage of suppliers due to the effect of the pandemic (outbreaks in Asia) and as a third element are the new labor guidelines and compliance with the rules of origin in the context of the T-MEC.
On the contrary, Palencia indicated that opportunities will open up, for example, in processes, parts and components for electric or hybrid vehicles.
For Mexico and exporting companies, it will mean resizing plants, modifying technology and facilities, but also involving workers and technicians who are not replaceable by robots.