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back to index backLATINtalk June,  2005

Industrial parks increase foreign investment in Mexico

Foreign trade zone-status, higher standards attract more international companies.

It's a busy season for Mexico's industrial parks. One park in San Luis Potosi, has started operating the country's first foreign trade zone, a move that will begin to put Mexico on the same competitive footing as China.

The Association of Mexican Private Industrial Parks (AMPIP) has started a new round of certifications to designate parks offering a high standard of services and infrastructure.

Mexican industrial parks also report that they are fielding more inquiries and signing tenants from more industries than ever.

The Logistik Foreign Trade Zone, now in operation in San Luis Potosi by Grupo Empresarial Logistik, represents a bold step by the Mexican government to become more competitive on a global scale.

The foreign trade zone operates like a U.S. foreign trade zone. Raw materials and components can enter Mexico and reach the foreign trade zone with much less red tape than before, with no duties or tariffs, and no quota restrictions.

The materials can be manufactured, packaged, labeled, reconfigured, as well as receive other services.

If the products are sold within Mexico's domestic market, duties and tariffs are charged when the products leave the foreign trade zone. However, if the products are sold in the United States or other international markets, the products may leave the foreign trade zone without duties or tariffs.

This differs from the laws governing maquiladoras, or foreign-operated twin plants, in Mexico.

Raw materials and components can reach maquiladoras in bond” under preferential tariff treatment that can vary, depending on the amount of North American content. Upon leaving Mexico, tariffs are levied on the final product based on the value added while in Mexico.

Mexico's first foreign trade zone is the product of a law passed by the Mexican congress in 2002.

This first foreign trade zone will change Mexico in all directions,” said Fernando Pablo Villarreal Cantu, president of Grupo Empresarial Logistik. This is a new way of doing business in Mexico. All problems people had with importing and exporting are solved. The opportunities are huge because the benefits are on both sides.”

The foreign trade zone puts Mexico on similar terms as the special industrial districts in China, where raw materials, components and final products can enter and leave China with no governmental contact.

Mexico's law requires that foreign trade zones be highly developed, with an on-site Mexican customs office staffed 24 hours a day, seven days a week, and multimodal logistics equipment.

So far, Grupo Empresarial Logistik partners have invested $60 million in the park, which has the capacity to transfer goods and merchandise in bulk and container loads between rail and truck.

The 1,300-acre site includes a terminal capable of serving 200,000 containers per year and a 330,000 square foot warehouse and distribution facility. Nearly 450 acres remain for expansion.

The park is located only a few miles away from Highway 57, the North American Free Trade Agreement highway corridor stretching from Mexico City to Nuevo Laredo on the Texas border.

Much of the activity so far at Logistik's foreign trade zone involves agricultural products, but industrial activity will not be far behind, Villarreal said.

The foreign trade zone is positioned to benefit manufacturers from many countries, including Chinese companies that are investing in Mexico to stage production of goods for sale in the U.S. market.

Chinese exporters are also starting to avoid the congested Long Beach, Calif., port and are switching to Mexican Pacific ports, like Manzanillo and Lazaro Cardenas.

Those ports have highway connections to San Luis Potosi, which means trade paths may shift. Supply chains will evolve accordingly.

In fact, the University of Texas at Austin's Center for Transportation Research and UT-San Antonio are conducting a study that will project shifting North American trade patterns, incorporating the effect of Mexico's first foreign trade zone and growing Chinese investments in Mexico.

The foreign trade zone law likely is permanent because it is a congressional law that will be difficult to overturn even if another political party reaches office after Mexico's 2006 presidential election, said Felipe Chapula Almaraz, a lawyer in the Mexico City office of Cacheaux Cavazos & Newton.

Industrial Parks Get Higher Certifications

Meanwhile, industrial parks across Mexico are applying for industrial park certification from AMPIP. The Mexico City-based association has been certifying industrial parks, based on infrastructure and services criteria, since 1999 through a code published by Economia, Mexico's commerce department.

Economia recently published higher certification standards, and Rafael McCadden, executive director of AMPIP, said he believes more than 200 industrial parks eventually will be certified, making them eligible for better financing terms and funds for marketing.

The main purpose of the certification program, however, is to distinguish true industrial parks from street-type” developments that lack the necessary infrastructure for industrial activity.

Parks must meet standards involving the availability of power, water, sewage and other utilities; width of streets; and quality of pavements. Certification will give parks credibility for marketing purposes, McCadden said.

Industrial parks do not have to be AMPIP members to apply for certification, McCadden said, stressing the program is not meant to boost AMPIP membership.

Certification, which includes an on-site inspection, takes only four to five weeks to complete if a park's documents are in order, he said.

If activity at Amistad Industrial Developers is any indication, then industrial parks will enjoy an active 2005 in terms of new clients.

Amistad operates eight industrial parks in five Mexican states — Coahuila, Nuevo Leon, Chihuahua, Guanajuato and Queretaro.

Plant investments are arriving from companies of all sizes, especially small and medium-sized U.S. companies with annual sales ranging from $50 million to $90 million, said Raul Barksdale, sales and marketing representative for Amistad.

Industries include aerospace, medical, metal stamping and automotive.

Companies are asking for buildings of all types,” Barksdale said. At our park in Acuna (on the Texas border), five companies are expanding operations. Most of those are in automotive.”

Source: Expansion Management magazine - GAI

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