Companies with high quality requirements must make sure their contract manufacturer can meet and maintain their standards. Intellectual property should also be protected.

This option allows companies to control factors like production or product quality and, at the same time, to benefit from the experience of an organisation that understands the local market. Investment in physical assets and human resources is also not needed.

Shelter service providers allow a New Zealand manufacturer to initiate operations quickly without the need to establish a legal presence in Mexico. In some cases, a shelter can be operational within 45 days of signing a contract. In such instances, companies operate in the country as a ‘department’ of their chosen service provider.

Firms are ‘sheltered’ from some risks and liabilities that normally affect organisations choosing to incorporate in Mexico.

Under typical shelter arrangements:

• manufacturers send raw materials and supervisory personnel to train and manage a Mexican workforce.
  
• the shelter company performs the tasks and functions not core to the manufacturing process. Services shelter companies offer include human resources, payroll and benefits administration, accounting, licences, permits, logistics, plant and park management, procurement, environmental and customs compliance and real estate leasing.

One noteworthy benefit of a shelter is New Zealand companies can pursue strategies of leveraged growth. Under a shelter arrangement, company expansion absorbs only a portion of the additional overhead required.

The New Zealand company can also enjoy significant savings in local income taxes and duties. Shelter services are more suited for labour-intensive, rather than capital-intensive, businesses because of on-cost surcharges on labour rates. They may represent a substantial percentage of operating costs.

Joint ventures (JVs) can be an effective means to achieving goals, given a local partner's knowledge of the North and Latin American markets. Joint ventures with firms in Mexico that have established distribution channels in the US can be of particular value to New Zealand companies wanting to supply finished products to that market.

Establishing a JV comes with its challenges. Both parties must understand each other’s culture and share objectives. Good chemistry between partners is not always easy to find. In order to make this less difficult, New Zealand Trade and Enterprise can provide options for the company to consider.

Establishing an operation in Mexico through a wholly-owned subsidiary can be complex, costly and risky. New Zealand companies willing to make a ‘bricks and mortar' investment must take the time, make the effort and assume the cost of assembling the skill sets required to operate successfully. Advice must be sought, acquired and retained in diverse areas such as labour and environment law, Customs and real estate.

IMMEX programme plants (formerly Maquiladoras) are manufacturing or assembly facilities – often referred to as ‘maquiladoras’ – in which raw materials or component parts are temporarily imported for assembly in Mexico. Previously, the end product had to be for exports. However, now the end product can also be sold in Mexico.

IMMEX companies represent nearly 80 percent of manufactured exports in Mexico. There are more than 6,000 companies under this programme, nearly 80 percent US-based. Three-quarters are located along the border with the US.

IMMEX benefits include:

• temporary import of goods duty-free for manufacture in Mexico provided the goods used in the production process remain in Mexico for a set time.
  
• equipment and materials, such as machinery, equipment, tools, moulds and spare parts for the production processes; may remain in Mexico for as long as the programme is in effect.
  
• a single government contact or portal for exporters with operations in Mexico.
  
• extended deadlines and simplified procedures for import and export documents.

New Zealand companies can enjoy these benefits as a holding company, through an industrial investment, by establishing a services operation for exports, under a shelter contract or through outsourcing.

General advice on choosing a model.

[Additional sources: Venture Outsource, Business Week]