American companies looking to outsource their manufacturing to Mexico constantly approach me for consultation. They usually have many questions. Some wonder about wages in Mexico, others about NAFTA, taxes or the speed of the process.
More telling, though, are the things they DON´T ASK, for it is usually those assumptions that hurt companies making their initial forays at outsourcing.
So here is a list of useful questions that will help your company better understand what to expect while outsourcing in Mexico.
What is the typical wage in Mexico?
- The general minimum wage for workers all across the Mexican territory is $70 MXN per day, as stated by the National Commission for Minimal Wages, on October 2015.That is equivalent to $4.37 USD per day*.
- The Commission also provides an index based on technical skills. At $90 MXN (roughly $5.62 USD per day*), the work of a seamster /seamstress at a factory, is at the upper end of the scale**. Compare to the $10 USD minimum hourly wage in California***.
- On some occasions, wages are established by labor unions and employers through annual negotiations.
Is it true that, because of NAFTA, an American company outsourcing in Mexico is not required to pay taxes in Mexico?
Not entirely. NAFTA does provide tax exemption for products made in Mexico, with Mexican commodities. But if you incorporate foreign supplies to your product –say, Korean cloth or Chinese components, the product will be taxed.
What about the IMMEX program?
IMMEX certification allows companies a duty free, temporary import of supplies for manufacture. This program was created as an incentive for foreign companies looking to outsource in Mexico. Though it is a very attractive concept, the reality is that only a handful of large manufacturers are offering IMMEX product certification. Strict regulations surrounding the program have impeded some manufacturers from qualifying, and discouraged others from applying.
On a practical level, IMMEX may not be worth pursuing by companies planning small or medium scale production.
Do IMMEX or NAFTA exempt the company from transportation costs?