Government incentives: “The cherry on top of the cake”.
If you are currently in the process of analyzing several locations for the establishment of a new operation of your company in Mexico, you should know there are government incentives available that can help you with the final decision. Therefore, the first question would be, how to negotiate government incentives in Mexico? Here we will provide you valuable information that we recommend you take into consideration.
Why is the government providing incentives?
According to figures from the Ministry of Economy of Mexico, the country registered a total amount of foreign direct investment of $26,055.6 million USD. To begin with, United States continues to be the main source of FDI in the country, representing the 34.9%, followed by Spain with 15.5%. Then, Canada representing with 10.4% and Germany with 10.1%. The sectors that most attracted foreign resources to the country were manufacturing, representing the 44.6%, followed by financial and insurance services with 13.9%, and commerce with 11.3%.
In Mexico, there are many reasons why the government can provide support on start-up operations. Local governments understand that by attracting new business will bring many benefits. For example, they will foster the creation of new jobs, develop the local industry, and attract new technologies. As a result, this will increase the quality of life of the people within their states or cities.
According to Nallely Garza, Business Development Manager at Prodensa, knowing the agenda of the local government is important because it helps you to identify what is their main interest, and by that you can highlight how your company will contribute to their current goals.
What incentives can a new company get in Mexico?
Incentives may vary according to the level of government and also by region. Here, we will mention some of them such as:
- Federal incentives
- Decree for the Promotion and Operation of the Export Maquiladora Industry (IMMEX).
- Sector Promotion Programs (PROSEC).
- State incentives
- Payroll Tax deductions
- Infrastructure support
- Training scholarships
- Municipal lobbying
- Municipal / City incentives
- Real Estate Acquisition Tax Discount
- Real Estate Ownership Tax Discount
- Construction Permit Discount
Who decides how much?
The best way to know the Who, How and What is by reading the local laws about incentives, this will give you an idea of what is the best way to have an approach and what is possible to obtain.
“In my experience many companies are expecting to obtain in Mexico similar incentives that they obtained in other countries before.”, mentioned Ms. Garza. In Mexico, every State separates a different amount of budget to stimulate the attraction of foreign direct investment, so the possibility of obtaining incentives will also depend of its current budget.
Another recommendation is to express the interest of your company to be part of the community. During the year, local governments ask the companies to be part of social programs and events, so it is very important that they know they can count on you in the future.
What can Prodensa do for you?
Prodensa is a consulting firm with 35 years of experience supporting start-up of operations in Mexico. Government relationships are very important for us. Since our foundation we have always been active in our local community in order to contribute to the economic development of Mexico. In fact, some of our analysts and consultants are former Undersecretaries, Investment promoters from Ministries of Economy, which allows us to know how local governments work and what is the best way to approach them.
At Prodensa, we always invite our clients to consider incentives as “the cherry on the top of the cake”. Government incentives are additional benefits a company can get by doing new investments. But we understand that you might be interested to know what is possible to obtain and also, how to negotiate these incentives. We are here to help you!
Prodensa offers solutions related to Institutional Relations such as: Business Environment Scenario Planning, Key Stakeholder Mapping, Key Stakeholder Relationship Building Strategy, Incentives Negotiation, Valuation and Implementation, Design and Implementation of Corporate Social Responsibility (CSR) Programs, and Evaluation and Improvement of Corporate Community Image.
For additional information of our solutions, contact us at: https://www.prodensa.com/2020/solutions/
Besides incentives, take into consideration that Mexico itself is a place with many business opportunities, good infrastructure, and skilled labor force that makes it a great place to invest.
The best place to start is here. Prodensa, your partner for manufacturing investment and relocation in North America.
Author: Nallely Garza, Business Development Manager at Prodensa.
About the author:
Nallely Garza, Business Development Manager at Prodensa is based in the northeast of Mexico. Prior to her current position at Prodensa, she held the positions of Political Analyst within the State Congress of Nuevo León and as Foreign Investment Coordinator at the Ministry of Economy of Nuevo León. Nallely Garza has a degree in International Relations from Universidad del Valle de México. Also, she has a degree in Business Administration from Walden University. Currently Nallely Garza is currently pursuing the MBA program at the EGADE Business School of the Tecnológico de Monterrey. During her professional career completed different specialization courses. For instance, among them stands out the Strategic Planning Course of the International Economic Development Council, and the Investment Promotion and Free Trade Agreements Course of the Singapore Cooperation Program.