The Mexican industrial real estate market is in a phase of rapid growth and transformation. While the economy has been weak for the past three years, demand for manufacturing, warehouse and distribution space has remained stable but slow. Meanwhile, institutional investment capital has increasingly flowed into the country through major REITs, pension funds and other foreign sources. This has created an environment with strong demand for investment opportunities and a relatively limited demand for new facility leases. This combination has made Mexico’s industrial real estate market increasingly competitive and is generating significant opportunities for new companies looking to buy or lease a facility in Mexico.
Mexico’s General Importation Law specifies different import rates depending on the CIF (Cost, Insurance, and Freight) value. The normal import duties for goods that come from countries which do not have a trade agreement with Mexico vary from 13% and up to 30%; the average is usually 18%. Prior to NAFTA, Mexico’s average duty on U.S. goods was 10%. Today, over 80% of U.S. manufactured goods enter duty free.
Mexico’s transportation infrastructure is on the road to becoming a bright spot for the country, but it is not there yet. Over the past 10 years major improvements have been made to the country’s highway, railroad and port networks, but it may be another 10 years before the full benefits are realized. Without doubt the most important component of Mexico’s transportation system is the 70,000-mile road network. Almost 86% of all trade between Mexico and the U.S. is handled by over-the-road trucks. In some areas the system is excellent, such as Highway 57 (the NAFTA Highway) running from Mexico City to Laredo, Texas.
Foreign investors and companies must understand the Mexican legal system. Despite the attempts by the Mexican government to clarify and facilitate the process necessary for establishing and maintaining a maquiladora operation, there are some legal requirements imposed that call for specialized attention. These requirements include filings with each of the authorities that regulate foreign investment, customs, taxes, social security, transportation, environmental protection and immigration.
Over the last 40 years, Mexico has made concerted efforts to open its economy and expand its industrial base. Starting with the Border Industrialization Program in 1964, Mexico has tried to lure foreign investment into the country through a series of trade, customs and economic policies. We have outlined below the key policies and how they affect manufacturing operations in Mexico.
Mexico will continue to attract increasing levels of Direct Foreign Investment (FDI) during 2012 by continuing to maintain a stable wage rate structure for the country’s manufacturing sector. The primary source of employment for the majority of Mexico’s manufacturing labor force will remain the maquiladora industry.