Whether in-bond or Maquiladora assembly, Shelter Plans,or contract manufacturing; Beta Concepts, a U.S. corporation, can help you succeed.

A Wholly-Owned Maquiladora

Under this arrangement, foreign investors own a 100% equity stake in a maquiladora. Wholly-owned maquiladoras have parent companies abroad, usually in the U.S., that retain direct control of patents, technology and day-to-day operations. Whole ownership requires the largest investment - a company must rent or lease a building, bear 100% of its operating costs and hire a Mexican workforce. But it is also the option that has typically yielded the highest return.

Management Services

Occasionally a foreign company that sets up its own maquiladora will contract with a management firm to run its plant on an interim basis. This arrangement is attractive to foreign companies new to Mexico that require outside expertise in accounting, customs regulations and local labor practices. Usually the parent company will assume control after an agreed-upon term.

Shelter Program

This program is ideal for small and medium-sized companies. Manufacturers that opt for this alternative are generally unwilling to assume the financial responsibility of owning a full-scale maquiladora, but are looking for full control over operations.

A shelter agreement is fairly straightforward. The shelter provider obtains the legal permits, owns the building, hires the production staff, and handles customs, accounting and other production support activities.

In turn, the client brings in a production manager and technical staff to oversee the production process and train the operators. The client also provides all the raw materials and machinery involved in production. Payment is according to an agreed upon per-hour labor rate.

There are enough shelter operators in Chihuahua that investors typically solicit competing bids from 3 or more firms. They are usually be up and running in less than a month after contract signing.

Contracting/Subcontracting

Under this arrangement, the client contracts a Mexico-based company with the expertise and equipment to deliver finished products.

Subcontractors own their own facility, handle import/export procedures and take responsibility for final product quality. The client is only responsible for providing imports and specialized equipment as needed. The client also provides technology and know-how, and coordinates employee training with the subcontractor.

Subcontractors take care of all the details and charge either on a per-hour or piecework basis. Contracts can range from a single run to long term.

Joint Ventures

Local investors with expertise in the maquiladora industry are always on the look out for opportunities to establish joint ventures. The benefits of finding a Mexican investment partner include gaining access to local expertise, sharing start-up costs and reducing risk.

Legal Framework

Before getting started in Mexico, it is important to understand the legal framework under which the maquiladora industry operates.

To begin with, a maquiladora is a Mexican corporation. It operates under special provisions established by the Mexican Secretariat of Economy (SE) in its "Maquiladora Program." The program entitles foreign parent companies to: 1) foreign investment participation in capital and management, and 2) special customs treatment.

Basically, these rules allow foreign companies to import raw materials and components into the country in-bond on a temporary basis and many times, duty-free depending on the product's origin. Products leaving the country are subject to export duties only on the value added. These special provisions make it possible for foreign manufacturing companies to benefit from lower labor and production costs in Mexico.

There are several critical steps to be followed when establishing a maquiladora:

• Incorporation in Mexico
• Application with SE for maquila program status
• Application for operating license with the Secretariat of Urban Development and Ecology (SEDUE)
• Negotiation of a labor contract