This action might not be possible to undo. Are you sure you want to continue?
Business opportunities nearby can help your business stay competitive Marie A. Galindo
• • • • Why Mexico? Automotive Industry in Mexico Guidance on main legal issues Mexico vs. other LCC countries (legal challenges)
• • • • • 9th biggest world economy 7th most important commercial trader 3RD US trader Population: 105.1 million 2007 FDI: $23.2bln (+ 20.8% vs. ’06): U.S. 56.3%; Netherlands 10.8%; Spain 10.0%; UK 4.2%; Canada 3.4%; Germany 2.7%; Japan 2.1% 2007 Inflation: 3.74%. • Rate: approx $10 pesos per dollar.
Most Fortune 500 companies and over 16,000 foreign companies are located in Mexico ENJOYING:
• the benefits of competitive production costs; • low cost skilled labor force creating top quality products and services (annual cost savings vary, but the typical cost savings are from $25,000 to $35,000 per employee per year); • intellectual property protection;
Mexico has a strategic geographic location:
• it connects NAFTA and South America; • lead-times (to the U.S.) of one week or less with normal ground transportation; • serves as the crossroads between the Atlantic (to Europe) and the Pacific Oceans (to Asia). Close to the Panama Canal and with highway systems connecting ports on both oceans: close proximity to suppliers and customers; • well developed communication and utility infrastructure;
• a single time zone (generally CST); • cultural differences easier to transcend; • Mexico has the largest network of Free Trade Agreements (“FTA”) in the world and continues expanding its FTA strategy. FTAs with 43 countries provides a unique opportunity: access to a preferential world market of more than one billion consumers at greatly reduced or no import duties. Mexico is an ideal hub for world-wide production, distribution and trade.
Free Trade Agreements
No other country in the world has signed more FTAs:
43 countries and 6 more under negotiation.
Automotive Industry in Mexico
Geographic location of Automotive Industry in Mexico
JA BA CA N OR LIF IA E RT NO
CHIHUAHUA G. PALACIO
KENWORTH MEXICALI (TRUCKS) TIJUANA TOYOTA
(PICK-UP BOXES OF TRUCKS)
G.M. (PC & UV)
J BA AC R IFO AL UR AS NI A SIN LO
GARCIA NAVISTAR (TRUCKS)
NUEVO LEON TAMPS.
S.L.P. SCANIA (TRUCKS)
S.L.P. GTO. QRO.
CUAUTITLAN YUCATAN D.F.
QU IN T RO O
T RI YA NA
NISSAN (PC & ENGINES) HONDA (PC)
AGS. GUADALAJARA G.M. (UV) SILAO G.M. (ENGINES) CHRYSLER (PC & UV) M.BENZ (PC & UV) BMW (PC)
GUERRERO OAXACA CHIAPAS
SANTIAGO TOLUCA TULTITLAN TOLUCA NISSAN CIVAC (PC & UV) PUEBLA V.W. (PC & ENGINES)
MASA (TRUCKS) VOLVO (TRUCKS)
CHRYSLER (ENGINES & UV)
FORD (PC & UV)
CHIHUAHUA ALCOA FUJIKURA SERVICE VALEO AUMA AVON AUTOMOTIVE ELECTRONICS BERGEN CABLE ETCHNOLOGIES BREED TECHNOLOGIES CAPSONIC AUTOMOTIVE CARLISLE COOPER INDUSTRIES CRONI CUMMINS DIESEL AMERICA DELPHI EAGLE OTTAWA ELECTRISOLA
FEDERAL MOGUL GOODYEAR TIE&RUBBER VISTEON HONEYWELL T.R.W ITESA SUMITOMO ITT AUTOMOTIVE JOHNSON CONTROLS KENWOOD LEAR CORPORATION LEONI CABLE LETTS INDUSTRIES MANESA MORAINE NICHIRIN COUPLER
RAPID DESIGN ROBERT BOSCH SATURN SETON SHELDAHL SIEMENS SSI TECHNOLOGIES STRATTEC SECURITY STONERIDGE CORP. YAZAKI NORTH SUPERIOR INDUSTRIES TDK USA CORP. TYCO INTERNATIONAL
TIER ONE in Northern Mexico
NUEVO LEON ACCURRIDE AISIN ALLIED SIGNAL ALCOA FUJIKURA AUTOCLIMAS CARUSI CATERPILLAR DELPHI DENSO DONNELLY ENTRELEC FREIGHTLINER GONHER HAYES LEMMERS INT. JOHN DEERE LTH LEAR METALSA MITSUBISH MITSUBA NAVISTAR REMSA NEMAK PARKER HANNIFIN PIOLAX PIONEER RASSINI SIEMENS TAKATA TEKNIK THOMAS&BETTS THOMAS BUILT BUSES TOKIO ELECTRICA UNITED TECHNOLOGIES VISTEON VITROFLEX YAZAKI COAHUILA ALLIED SIGNAL-HONEYWELL BENTELER CASTECH CITATION TOOLS CIFUNSA DELPHI DOUGLAS&LOMASON FEDERAL MOGUL FINDLAY INDUSTRIES GENERAL CABLE IRVIN AUTOMOTIVE JOHN DEERE JOHNSON CONTROLS LEAR CORP. MAGNA INTERNATIONAL MAGNA SEATING SYSTEMS MAHLE MANNESMANN-SACHS MASCOTECH OXFORD AUTOMOTIVE PILOT INDUSTRIES PLASTIC OMNIUM RASSINI STABILUS STEYR-DAIMLER-PUCH TAKATA TEKSID FIAT TENN-MEX TEXTRON AUTOMOTIVE TWB
SONORA AM MEX PRODUCTS ATRONICS BENTELER. CHARLES E. GILLMAN CHATA ENTERPRISE EXEMPLAR MANUFACTURING ITT INDUSTRIES LEONI WIRING SYSTEMS MOLEX OXFORD AUOMOTIVE PRESTOLITE WIRE CORP ST. CLAIR TECHNOLOGIES TRW T.S.E BREAKS TYCO YASAKI’S EWD (ACOSA)
BAJA CALIFORNIA AMERICAN RACING AUTOLIV GONHER KENWORTH NKS SAFETY TECHNOLOGY PARKER HANNIFIN PILKINGTON PIONEER TOYOTA WABASH TECHNOLOGIES
SINALOA DELPHI MEXICORVOS TAMAULIPAS DURANGO COMPAÑIA INDUSTRIAL ARMAS LINAMAR YAZAKI NORTH AMERICA ALPINE ELECTRONICS AMMEX PRODUCTS BBB INDUSTRIES BREED TECHNOLOGIES BRONCO ELECTRONICS DELPHI VALEO DELPHI AUTOMOTIVE SYSTEMS FEDERAL MOGUL FERMAG FUJITSU TEN GLOBE MOTORS GODAM GSW MANUFACTURING HERTZ LEMEZ INVENSYS ITT AUTOMOTIVE KIMKO KONGS BERG AUTOMOTIVE MATSUSHITA MIKUNI TEXAS MINNESOTA RUBBER NAFTEK PRECISION CABLE MANUFACTURING PULLMEX SIEMENS STANDARD MOTOR PRODUCTS TELEFLEX TI GROUP TROSTEL TRW UNITED TECHNOLOGIES VELVAC WELLS MANUFACTURING
Source: ProMexico Auto Division
TIER ONE in Central and Southern Mexico
AGUASCALIENTES BUSSCAR K&S CALSONIC KANTUS COOPER STANDARD MORESTANA COOPLAST MOTO DIESEL FORJAS Y MAQUINAS NABCO GESTAMP POLO MEX SIEMENS YOROZU INDUSTRIA DE ASIENTO SUPERIOR SAN LUIS POTOSI ALFRED ENGLEMANN ARVIN EDSCHA BOSCH CONTINENTAL AG EATON EAGLE-PICTURE INDUSTRIES SAN LUIS RASSINI SCANIA VALEO SYLVANIA
JALISCO ARALMEX S&Z ROLMEX ASIENTO SUPERIOR ZACATECAS ATR ROCKWELL AUTOMOTIVE DELPHI BW SAARGUMMI YAZAKI CARBURAT SACHS BOGE CAUSAMEX SIEMENS VDO GRUPO FERRAU SUMIDA HIDALGO HELLA/HEMEX TAKATA CITSA-PPG INDUSTRIES MODINE VOGT ELECTRONICS PIONEER STANDARD WEBB DE MEXICO VERACRUZ AVON RUBBER ROLAMEX YAMAVER SIEMENS GUANAJUATO AMERICAN AXLE GROUP UNIKO ARBOMEX HUTCHINSON AVENTEC MERIDIAN YUCATAN CELAY LAGERMEX AIR TEMP CONDUMEX LEAR CORP. AXA YAZAKI EGANA OXFORD AUTOMOTIVE CHIAPAS FERRANTI PACKARD TENNECO AXA YAZAKI FLEX-N-GATE THYSSEN KRUPP AG MORELOS GKN PLC US MANUFACTURING BRIDGESTONE QUERETARO FREUDENBERG PUEBLA ABC GROUP-CANADA DURA AUTOMOTIVE SYSTEMS MERITOR FIRESTONE BENTELER AMERICAN CAR EQUIPMENT FORJAS SPICER NEW HOLLAND TEMIC BREMBO RASSINI ARVIN MERITOR GRAMMER NORANDA VIDRIO SECURIT SAINTTLAXCALA MAGNA INTERNATIONAL ASPERMEX HARADA INDUSTRIES PPG INDUSTRIES HP PELEZER AUTOMOTIVE ARCOMEX AUMA HBA CAST PRODUCTS ROCKWELL SYSTEMS FORJAS SPICER BROSE HI-LEX MEXICANA TREMEC SIEMENS JOHNSO CONTROLS JOHONSON CONTROLS COLLINS&AIKMAN GROUP IRIZAR TENNECO SOMMER ALLIBERT KEIPER DANA CORPORATION JOHNSON CONTROLS VALEO SYLVANIA FEDERAL MOGUL DELBAR PRODUCTS JOHNSON MATTHEY WOCO DELPHI KSB T.R.W VISTEON CLIMATE SYSTEMS
CD. DE MEXICO Y ESTADO DE MEXICO BARMES GROUP BOSCH CLEMEX EATON DANA CORPORATION FEDERAL MOGUL FIRESTONE FPA GOODYEAR GROUP HAYES LEMMERZ HENKEL KGAA MANNESMANN JOHNSON CONTROLS KRUPP LEAR CORPORATION VALEO LORD CORPORATION ZF HOLDING METALDYNE PARKER PERKINGS TANG INDUSTRIES TOMKINS PLC SARNAMOTIVE BLUE WATER TI GROUP AUTOMOTIVE SYSTEMS MICHELIN CORPORATION MAGNA INTERNATIONAL HITCHINER MANUFACTURING INTERNATIONAL HELLA KG HUECK & CO.
KIEKERT LUK TEXTRON PARKE HANNIFIN SIEMENS SKF TENNECO TRW
U.S. Economy & Auto Industry
Will Mexico’s automotive industry depend on U.S. sales in 2008?
2007 was the worst year for US automakers in a decade and 2008 may not be any better. • This year will hinge on: 1. The success of NEW models offered in US for the first time, and 2. ENERGY-SAVING models.
• Chrysler (Toluca): $1bln flexible line for PT Cruiser and Dodge Journey, 1st crossover SUV
ENERGY SAVING MODELS:
• Fuel-economy (Aguascalientes): Nissan Versa for North & LA (2007 +274% US sales) • Hybrids (Ramos Arizpe): new Saturn VUE Luxury (Hermosillo): Lincoln MKZ (Fusion, Mercury Milan), sales tripled in 2007 • Electric (Puebla): VW-M & Pristine Intl: JV to build all-electronic vehicles for shipment within Mexico, LA and India
Automakers will inject $5bln in FDI in the next 3 years, with another $2,5bln in spending from auto suppliers.
• VW: $1bln to boost Jetta production in Puebla, to ship a substantial portion to Europe. • FAW Group (China) : $150 million plant to produce 100,000 vehicles. Now selling for $6,000 - $8,000 through 823 retail stores, 20 new Mexico City and stand-alone dealerships in 2008, and national wide dealer network in 5 years. Financing available by Banco Azteca. • ArvinMeritor: new axle and brake assembly plant in Monterrey.
Foreign Companies Mexican Companies
OEM 345 600 30 150 200
30 100 50
TIER 1 TIER 2 TIER 3
Source: ProMexico Auto Division
Guidance on main legal issues in Mexico
USA (Common Law) NAFTA (1994 -2009) MEXICO (Civil Law)
Main Legal Topics
1. TAX 2. INTELLECTUAL PROPERTY 3. CORPORATE 4. INVESTMENT RESTRICTIONS 5. LABOR 6. IMMIGRATION
Overview of the Mexican Tax System
• Mexican fiscal legislation contains different laws related to each tax: Income tax Value-Added tax (IVA) Single rate tax (IETU) • Tax laws have 3 levels of government AND International Treaties (to Avoid Double Taxation).
• Mexican residents: are taxed on all income, from whatever source. • Foreign residents, with a permanent establishment in Mexico: are taxed on the income attributable to such permanent establishment. • Foreign residents with no permanent establishment in Mexico: are taxed on income attributable to Mexican sources.
• The general VAT rate is 15% (except in the border area 10%) • VAT (IVA) is levied on the transfer of goods, rendering of independent services, granting of temporary right to use goods, and import of goods and services. Exports and some other specified items are subject to the zerorate, such as basic foodstuffs and medicines.
Single Rate Tax
• The ASSET TAX has been repealed as of January 1, 2008 and replaced by a “single rate tax” (IETU) that will tax all revenue less certain deductions at a 17.5% rate (16.5 in 2008 and 17% in 2009)
• Main Characteristics of the new flat rate tax: To be determined on cash
basis, prohibition of deduction of interests, related party royalty payments, and non taxable payments to employees.
Intellectual Property Rights
Want to Keep or Increase Quality and Stay on the Edge of New Technologies? But Frightened about Sharing your Technology and/or Patents?
1. Vietnam 3. China 6. Russia 10. Kenya
Source: Business Software Alliance (BSA), 2007
Intellectual Property Protection
IP is governed in Mexico by:
• Copyright Law (CL) 07/23/2003 • Industrial Property Law (IPL) as amended on 01/25/2006 • NAFTA: entire chapter on IP providing cross-border enforcement procedures. • International Treaties: If © protected in the US then also protected in Mexico. (UCC)
• CL recognizes several types of works, like computer software. • When work is made as a result of a labor relation, it belongs to the employer. • The employer can disclose the work without authorization of employee, but not on the contrary. • Foreign authors or entities are subject to equal protection than that offered to nationals.
Industrial Rights (IMPI)
• Right granted to an individual or assignee to exclusively exploit an invention for a 20 year, non-renewable period. • Licenses or assignment of rights must be registered with IMPI. If not, such licenses will not be effective against third parties. • The date of filing in the U.S., is treated as the date of filing in Mexico.
IP Rights Enforcement
• Severe administrative, civil and criminal penalties are provided for those violating copyright and industrial (e.g. patents, trademarks) related rights. • Penalties may include imprisonment, closure of commercial offices, seizure of infringing material and imposition of substantial fines.
Determining Factors for Setting Up a Business in Mexico
• • • • • • Close to customers and/or suppliers Raw material(s) and/or components Labor force Infrastructure Incentives Legal structure
Most Common Type of Companies
MEXICO • Sociedad Anónima (S.A.) • Sociedad de Responsabilidad Limitada (S. de R.L.) USA • C Corporation
• Limited Liability Company
Major differences between:
• • • • • • • S. de R.L. For tax purposes, start-up losses can be deducted in the U.S. Partners do not have to pay taxes on dividends a second time in the U.S. Each partner may only have one share. Minimum capital is $3,000 pesos. At least 50% of the capital must be paid upon incorporation. Min. of 2 and a max. of 50 partners. Not required by law to have a Statutory Auditor. • • • • • • • S.A For tax purposes, start-up losses can NOT be deducted in the U.S. Shareholders may have to pay taxes on dividends a second time in the U.S. Each shareholder may have more than one share. Min. capital is $50,000 pesos. At least 20% of the capital must be paid upon incorporation. Min. of 2 and no max. of shareholders. Required by law to have a Statutory Auditor.
• The IMMEX Decree (11/01/06) merged and replaced Maquiladora and PITEX Programs. • IMMEX can import raw materials, machinery and equipment into Mexico with no payment of import duties and VAT, as long as most of the finished goods are exported. • IMMEX operations are defined as the transformation, manufacture or repair of goods, inventory and other supplies provided by a foreign principal.
• Requirements for IMMEX Program to be authorized: (i) annual exports exceeding $500,000 USD or at least 10% of its annual invoicing; (ii) Tax ID, and (iii) Advance Electronic Signature. • Companies with IMMEX Program have to file an electronic annual report with total amount of sales and exports of past year no later than the last day of May.
Mexican Investment Laws
• General Rule: 100% of Foreign Investment is permitted • Reserved Activities:
– Reserved to Federal Government (e.g. oil) – Reserved to Mexican Nationals (e.g. gas stations) – Limited Investment up to 10% (e.g. cooperative), 25% (e.g. national air transportation), and 49% (e.g. Money exchange business) – Activities in which investment may exceed 49% (e.g. port services, legal services)
• Restricted Zone: 100km (62 miles) from the border and 50km (31 miles) from the costal line.
Acquiring Real Estate in Mexico
• Direct Acquisition (Private Property)
– Anywhere, including residential purpose other than in the restricted zone
• Lease, sublease or commodatum (free lease) • Indirect Acquisition (Restricted Zone)
– Mexican subsidiary or Trust – The Trustee is generally a bank – No time limitation for the Trust
Labor & Employment
Mexican Labor Law Basics
• The Federal Labor Law is enforced by State or Federal Labor Boards • Labor Law pro-employee • Burden of proof is on the employer • Any person rendering services to another individual or entity is considered an employee. The key elements are subordination and dependency. Therefore, by law, a labor relationship exists regardless of the existence of a written labor agreement. • No at-will employment or firing. All firing must be for cause and severance will be paid. • Labor Law establishes fringed benefits that can not be waived by the employee. • In the acquisition of an on-going business, the purchaser becomes a substitute employer for the seller.
Labor & Employment Law
• Employment contracts:
– Mandatory for employers to execute individual employment agreements in writing.
• Wages: –Approximately US$5 per DAY
– Minimum wage rate by geographical area (A: $52.59; B: $50.96; C: $49.50 pesos per DAY)
• Paid vacations: After 1 year employment, 6 working days off; • Christmas bonus (Aguinaldo): Not less than 15 days of salary (paid no later than Dec 20); • Housing fund (INFONAVIT): Employers contribute 5% of payroll; • Profit sharing (Reparto de utilidades): Regardless of business size, exceptions apply (paid no later than May 30) • Health System (Seguro Social): fees paid monthly by employer and the employee (via withholding), according to employee’s salary (amounts capped).
– By law, a group of 20 or more employees can form a labor union. – Employers, when starting operations, may select the Union for their workforce. – Strikes are recognized and protected by law as a tool for obtaining improved benefits and working conditions. – Labor authorities try to avoid work Stoppages.
Termination of Employment
• The employer dismissing an employee with justified cause, is bound to deliver him/her a notice in writing stating: The grounds of dismissal, and The date of termination • Employees may voluntarily resign their job at any time without any liability and without any obligation to inform the employer in advance.
Employer may terminate an employee without liability, only if the employee commits acts such as:
• Dishonesty • Insubordination • Disobedience • Disclosure of trade secrets • More than 3 unjustified absences within a 30-day period
Employee is entitled to: reinstatement OR severance: 3 months salary; 20 days salary per year of service; Seniority premium (12 days year of service); Accrued Vacations; Vacation premium (25%); Accrued Christmas Bonus; Accrued Overtime, Days Off, etc.; Outstanding balance of any earned and unpaid benefits; and Back pay (is applicable).
• Foreign employees in Mexico:
– At least 90% of a company’s workforce must be Mexican nationals; except for directors, administrators and other managerial-level employees. – Foreign personnel are subject to the same legal requirements as Mexican employees and are treated equally, both in benefits and sanctions.
Visas for performing business in Mexico
• FMN (Business Visitor) • FM3: Business Traveler Board Member Working Permit
Immigration Entry Forms
• U.S. citizens (among citizens from other countries) do not require a visa to enter and visit Mexico. • However, a “Forma Migratoria” (FM), an Immigration Form, has to be filled out on every entry into Mexico (regardless of the purpose of the trip). • The form must be completed at the beginning of each trip and must be cancelled at the end of each trip by returning it to the immigration officer at the time of leaving Mexico, to avoid fines on future trips.
FMN (Business Visitor)
• For occasional traveling for business meetings (E.g. at the Mexican subsidiary/sister company venue or at a customer/supplier location), the “FMT/FMN” Form can be obtained on the airplane, at the port of entry (at the border, if entering by land), by travel agencies or at the nearest Mexican Consulate.
FM3 (Business Traveler)
Valid for up to one year, for multiple entries and renewable for up to 5 years: • 1. Business: travel for business meetings and with the purpose of acquiring new contacts, sales promotions or to explore new investment opportunities in Mexico. • 2. Technical Support: travel to provide either verbal or manual technical support assistance, to give conferences, training, business audits, teaching of new techniques, installation, service or repair of equipment repair, installation of software, and any person who undertakes a job or performs any labors relative to the company, design or initiate the operation or construction of a plant or specific investment project.
FM3 (Board Member)
• For any foreign individual to serve as a Board Member for the Mexican legal entity and/or has the capacity to act as the attorney-in-fact for that entity, and in order for the performance of such authority to be valid in Mexico, that individual requires a FM3 that recognizes him/her as Board Member/Legal Representative of the Mexican entity. • This FM3 must be processed in Mexico at the National Immigration Institute (INM). • It has up to one year validity and up to four one year renewals for multiple entries may be granted.
FM3 (Working Permit)
• If the visa applicant will work in Mexico, that individual must have a work permit. • Such permit has to be processed/requested by the employer to the National Immigration Institute (INM). • It has up to one year validity and up to four one year renewals for multiple entries may be granted. • The applicant is allowed to temporarily import a vehicle and household goods without paying taxes or importation duties, as long as they are returned abroad upon the expiration of the authorization.
(Legal Challenges) Mexico vs. other LCC countries
Foreign Investment Challenges
Property: •Private & indirect •NO time restriction Reserved Oil Activities: Restricted Border & Zone: costal line
•Private & indirect •NO time restriction Oil, mining, telecom
•Government owned •max. 50 years lease
Banking, telecom, environmental…
Foreign Free Trade investment in Zones certain types or real property
29-58 Days $270 Capital $ $180 Gov fees Business •SA – C Corp Types •SRL – LLC •Maquila Enforce 184-671 Days
19-152 Days 48 Days No minimum $150 mill $1000-8000 •SA - Corp •SRL - LLC 546-1,473 $280 •RO •WOFE •JV 241 Days
Source: The World Bank
From a U.S. Perspective
•Logistic and just -in-time savings NEAR the US
•Assemble or manufacture large products •Mexican labor differential is still significant •Products for the Mexican market and/or North and Central America
•Just-in-time, FAR from the US, inventory, logistics:not an issue
•Just-in-time, FAR from the US, inventory, logistics, time difference:not an issue •Assemble or manufacture small, labor intensive products •Require additional labor savings
•Products for the Brazilian •Products for Chinese and/or and/or South America other Asian markets market •Few sharing of IP and trade secrets
•Have a concern about patents •No big IP infringement and IP protection in general risk •Want to take advantage of the multimodal inland ports and infrastructure •Want to take advantage of the Free Trade Agreements
Initial experienced guidance to make the best decisions, will prevent future setbacks.
Detroit ● New York ● Washington DC ● Lansing ● Ann Arbor ● Bloomfield Hills ● Holland ● Boca Raton ● Palm Beach Mexico City ● Monterrey ● Shanghai ● Beijing
Marie A. Galindo
313-225 7057 firstname.lastname@example.org
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.