Which Types of Businesses Benefit from Mexico Shelter Services (And Which Don’t)06.27.18
Setting up your manufacturing operations in Mexico under a shelter is an easy choice for most companies. This set-up allows you to focus solely on your manufacturing processes without having to worry about administrative operations, like HR, accounting, and trade compliance. Operating under a shelter also shields you from legal risk in Mexico.
At IVEMSA, we almost always recommend our clients at least start their Mexico operations under a shelter. Here’s why:
Operating Under a Shelter Is Best if You…
- Are focused on reducing costs
Working with a shelter provider means you get to take advantage of their economies of scale when it comes to expenses like HR, accounting, and trade software, vendor contracts, and exchange rates. Companies operating under a shelter also don’t have to pay income tax in Mexico for the first four years of operations. This translates to a 30-40% cost savings compared with operating with your own standalone entity.
- Haven’t done business overseas before
Working in another country brings a lot of complexity. You may run into issues simply because you don’t know the right questions to ask. Working with a shelter provider means you get access to all their experts in everything from Mexico labor law to trade regulations. Companies also find it easier to work with a shelter provider that is used to working with foreign companies, instead of working with, for example, an accounting firm that typically only works with other Mexican companies.
In some cases, even companies that have done business in other countries before choose to use a Mexico shelter services provider because they recognize how it simplifies operations.
- Need to get your manufacturing operations in Mexico up and running quickly
Setting up under a shelter usually takes about 3-4 months (with a shared IMMEX/maquiladora license; it can take 4-6 months with a dedicated license). Creating a standalone entity can take 6-12 months.
- Aren’t large enough to dedicate a team to overseeing your Mexican operations
Generally, only very large companies have the resources available to do this. Even those companies often work with a Mexico shelter services provider—they may create their own entity, but use the provider’s BPO services to handle accounting, HR, or trade compliance.
Many companies assume that operating under a shelter means sacrificing control of your operations, but that is not the case. Operating under a shelter is not the same as contract manufacturing or outsourcing—you remain wholly in control of your manufacturing processes and operations. Everything else involved with your Mexico operations, from recruiting to payroll, is simplified because it’s handled by experts in Mexico’s laws and regulations.
When It’s Time to “Graduate”
We call the process of transitioning from a shelter to a standalone entity “graduating” from the shelter. Some of our clients are happy to continue to operate under a shelter for several years, while others decide to establish their own entity once they get enough experience and feel comfortable managing their manufacturing operations in Mexico. A good shelter services provider will assist you with this process (it’s something you should ask when considering different shelter providers). The process can take 12-18 months.
At IVEMSA, we set up parallel teams that gradually take over the work that our teams have been doing for you. The transition process can be difficult, which is why we work with you for every step. In many cases, clients continue to use our BPO services once their standalone entity is fully set up.
Learn more about our Mexico shelter services to decide if it’s the right choice for your company.