Executive Briefings

With Competition from Other Low-cost nations, Whither Mexico's Maquiladoras?

When Mexico set up the first maquiladoras half a century ago, they were sweatshops that simply bolted or stitched together imported parts, then exported the assembled product north across the border to the United States. America got cheap goods; Mexico got jobs and export revenues. Now, with competition growing from other low-cost locations, and with the government cutting some of their tax breaks, the maquiladoras are having to step up their efforts to become innovative.

With Competition from Other Low-cost nations, Whither Mexico's Maquiladoras?

On October 18th, the lower house of Mexico's Congress approved President Enrique Peña Nieto's proposal to sweep away a range of deductions and allowances that the maquiladoras enjoy. In general, Mexico collects less tax than other middle-income countries, and the government is striving to raise more revenues to improve its lamentable public services. But the maquiladoras already face stiff competition from other countries offering juicy tax breaks to manufacturers: KPMG, an accounting firm, last year rated Mexico worse than five of its main rivals in terms of tax competitiveness. Accountants at another firm, Deloitte, reckon the reforms, if passed by the upper house in the coming days, will raise the maquiladoras' effective income-tax rate from 17.5 percent to at least 30 percent.

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Keywords: emerging nations, low-cost manufacturing, nearshoring, Mexican manufacturing, supply chain management, international trade

On October 18th, the lower house of Mexico's Congress approved President Enrique Peña Nieto's proposal to sweep away a range of deductions and allowances that the maquiladoras enjoy. In general, Mexico collects less tax than other middle-income countries, and the government is striving to raise more revenues to improve its lamentable public services. But the maquiladoras already face stiff competition from other countries offering juicy tax breaks to manufacturers: KPMG, an accounting firm, last year rated Mexico worse than five of its main rivals in terms of tax competitiveness. Accountants at another firm, Deloitte, reckon the reforms, if passed by the upper house in the coming days, will raise the maquiladoras' effective income-tax rate from 17.5 percent to at least 30 percent.

Read Full Article

Keywords: emerging nations, low-cost manufacturing, nearshoring, Mexican manufacturing, supply chain management, international trade

With Competition from Other Low-cost nations, Whither Mexico's Maquiladoras?