Doing Business in Mexico: Labor Considerations and Foreign Investment

By Alejandro Lara | Board Member at American Industries Group®
Published 10/11/2022

One of the main reasons Mexican manufacturing has been so popular, especially for US companies, is its competitive labor rates.

This means significant savings, but at the same time, companies will need to comply with labor laws and regulations in place to protect workers’ rights. For example, companies are required to engage in profit sharing with employees and keep written employment agreements for each worker that specify their working shifts and benefits. Mexico also has a mandatory day off each week, usually Sunday, and employers must provide Christmas bonuses to all employees.

Overall, to take advantage of Mexico’s labor rates, it is key for international and US companies to work closely with experts, like an experienced provider of Shelter services, to adapt their processes and regulations. In addition to legal and regulatory differences, it is also important to consider cultural and linguistic differences that must be integrated into human resources processes and company culture.

Mexico’s labor rates

Mexico has historically been known as a country that welcomes foreign investment. This is evidenced by its numerous trade agreements with countries worldwide—including the most important in North America, the USMCA—and the several incentive programs available to international companies, including the IMMEX program and VAT certification. Another important figure unique to Mexico that helps foreign companies set up businesses quickly and easily is the shelter model. Using a provider of shelter services in Mexico, companies can do business under the “umbrella” of its legal entity and administrative services, minimizing risk and costs.

Statistics show that the country with the most foreign direct investment in Mexico is the United States. Other countries making significant FDI in Mexico include Spain, Canada, China, Japan, and Germany.

As far as sectorial statistics, most recent data available shows that the top sector for FDI in Mexico is manufacturing, which represented 40% of the country’s total FDI in 2021 of US 31.6 billion dollars. Other important sectors for FDI include the financial and insurance, transport, retail and wholesale, and mining industries.

International trade agreements

Mexico’s labor rates, international trade agreements, and many other benefits that manufacturing in Mexico provides, give international companies a competitive advantage, allowing them to expand and adapt in a constantly changing world. Learn more about labor rates in Mexico, incentive programs, the benefits of working with a shelter company, and other considerations for doing business in Mexico on our blog.

Sources: doingbusiness-mexico.com / santandertrade.com

Alejandro Lara

Board Member

American Industries Group®

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