Maquiladora Advantages to U.S. and Mexico Economies

A maquiladora is defined as a factory that imports materials and equipment on a duty-free and tariff-free basis for assembly or manufacturing and then re-exports the assembled product; usually back to the originating country. After 2006, the Government of Mexico chose to rename the Maquila decree to the INMEX program.

There are a total of 247 maquiladoras located in Matamoros and Reynosa with 174,000 employees. Reynosa and Matamoros have well-known firms with maquiladora operations, including TRW Automotive, LG, Jabil Circuit, Bissell, Maytag, Nokia, Panasonic, Delphi, Brunswick, Emerson and Black & Decker, just to name a few.

Wages and Benefits

The average wage and benefits package for the border region has a minimum wage of 49 pesos per day, however the average starting wage for most maquiladora workers is 110 pesos per day. Employees work a 48 hour work week and receive a full day pay on Sunday. Employees can expect a 20% increase after 6 months of employment. The benefits package includes:

• Socialized medical system to which every employer must contribute
• Social Security, severance pay, paid holidays, mandatory bonuses and child care.
• The wage for unskilled laborers working in a maquiladora is $2.30 taking into consideration all the cash and non-cash fringe benefits.

Taxation

Corporate Income Tax - Companies operating under the Maquila program can choose to pay their corporate income tax in one of three ways that is deductible from U.S. corporate income tax.

• 6.9% of the total value of all assets that the company posses in Mexico
• 6.5% of the operating cost and expenses for that year
• Arrange to have a transfer pricing agreement approved by the appropriate US and Mexican tax authorities.

Real Estate Tax - There is a nominal real estate tax on industrial real estate.

Employment Tax - A maquiladora has to pay an employment tax in addition to the normal employee income tax it must take out of its employee wages.

Value Added Tax (IVA) - Maquiladora companies are exempt from paying VAT in Mexico.

Customs
All raw materials, parts and machinery are imported into Mexico on a temporary basis duty free for up to 18 months. For machinery this can be renewed indefinitely. Raw materials and parts, they must leave the country as finished goods on a first in first out basis over the 18-month period. If a Maquiladora wishes to import a NAFTA good into the country on a permanent basis, it may do so with no duty but the company will have to pay the Mexican VAT rate of 10% on the value of the good.

Population

Tampaulipas, Mexico by Municipality Population Historical Trends 1980 - 2000

							Percent Change
	1980	1990	1995	2000	2005	2007	1995 to	2005 to
Municipalities	Census	Census	Census	Census	Census	Estimate	2000	2007
Matamoros	238,840	303,293	363,487	418,141	462,157	418,141	15.0%	-9.5%
Reynosa	211,412	282,667	337,053	420,463	526,888	700,000	24.7%	32.9%

Source: INEGI 1980-2005 Census, 4-3-2008; Mexico Site Selection-2007 Estimate