With a booming aerospace industry and an economy ranked 15th worldwide and second in Latin America, México has been the basis of foreign investment speculation in 2017. The country also boasts an ever-growing tech sector. Greenfield Advisors recently hosted in its Seattle office Fernando Paz Pous, ProMexico Director of the Trade and Investment Commission for the US Northwest Region.
Paz Pous is responsible for coordinating strategies aimed at strengthening México’s participation in the international economy, supporting the process of exporting firms established in the country, and coordinating activities aimed at attracting foreign investment.
During the meeting, Paz Pous discussed key sectors for foreign investments and Free Trade Agreements between Mexico and other nations that make México an attractive place to do business and invest.
According to Paz Pous and ProMexico, México has signed 32 Reciprocal Promotion and Protection of Investments Agreements with 33 countries, 10 free trade agreements spanning 45 countries, nine partial scope and economic complementation agreements within the framework of the Latin-American Integration Association (ALADI), and it is a member of the Trans-Pacific Partnership Agreement (TPP) .
México actively participates in multilateral and regional organizations and forums like the World Trade Organization (WTO), the Asia-Pacific Economic Cooperation (APEC), the Organization for Economic Cooperation and Development (OECD), and the aforementioned ALADI.
Moreover, because the Mexican government has signed trade agreements in three continents, the country has become a platform from which a potential market of over a billion consumers and 60% of the world’s GDP can be accessed.
Other attractive investor programs include:
Foreign trade incentives programs
- Import Tax Refund to Exporters (DRAWBACK): The refund offers the possibility of paying back a duty previously paid on exporting excisable articles or on re-exporting foreign goods
- Manufacturing, Maquila and Export Service Industry (IMMEX): The IMMEX Program is an instrument which allows the temporary importation of goods that are used in an industrial process or service to produce, transform, or repair foreign goods imported temporarily for subsequent export or provision of export services, without covering the payment of general import tax, value added tax and, where appropriate, countervailing duties.
- Sectorial Promotion Programs (PROSEC): These programs are aimed at legal entities that produce certain goods, allowing them to import diverse goods for use in the development of specific products at preferential ad-valorem tariffs (General Import Tax), regardless of whether the goods to be produced are for export or the domestic market.
Tax incentives programs
- Immediate deduction: It is a deduction that applies to encourage investment in the country, except in the metropolitan areas of Mexico City, Monterrey, and Guadalajara. However, this deduction applies to projects that require the use of labor-intensive, are non-polluting, and do not intensively use water.
- Federal tax incentives for companies that do not have established residence in México: Eligible maquila companies (now IMMEX) under certain conditions are granted a significant reduction in the payment of income tax.
- Tax credit for federal tax on R&D: Eligible companies can receive a tax credit of 30% of total spending on research and development activities (R&D), including process and design.
Technological development and innovation programs
- Innovation incentives programs: These supporting programs for companies that invest in research, technology development, and innovation are aimed at developing new products, processes, or services.
- International Fund: It is an International Cooperation Fund for the promotion of scientific and technological research between México and the European Union which supports projects in the following formats: joint research projects and the creation and strengthening of research networks.
For more information on these and other programs, contact the National Council for Science and Technology (CONACYT): http://www.conacyt.gob.mx/en/Paginas/default.aspx
The most anticipated economic development project in the Americas, Cuidad Creativa Digital in Guadalajara, is geared to be the first large scale smart city in the hemisphere. The creative city is speculated to increase participation in the media and entertainment industry, representing annual sales higher than $1.5 trillion, generating $15 billion in investment, creating 550 new businesses, generating $2 billion in export, creating 30,000 jobs in 10 years and 15,000 specialized jobs in 15 years.
Cuidad Creativa Digital is a dynamic technological ecosystem, a product of more than 50 years of evolution that started with manufacturing services for the electronic industry and later expanded towards software development, cybernetics, special services installation, and the creative digital industry. There are currently more than 600 companies in the technologic sector – which represent 50% of the state’s export. The technologic sector settled in Jalisco, encompassing companies of electronics and aerospace manufacturing, electronic and automotive design, and software development, among others – contributes to the creation of more than 87,000 jobs and generates an investment of over $4.56 billion in the state.
The youth population in Guadalajara is substantial, with 42% of the population under 24 years of age, and 34% is between the ages of 15 and 34. It has a high Human Development Index (HDI: 0,882) and over 18,000 Information Technology graduates. With 13 top level universities and 37 technical teaching centers that offer altogether more than 80 educational programs, Guadalajara is an important university center with more than 100,000 students and more than 1,000 scholars subscribed to the National Researchers System (SNI) of the National Council of Science and Technology.
Finally, Paz Pous provided insight on important regulatory laws which will allow foreign investors to directly purchase real property near Mexico’s beaches and borders without having to purchase properties through Trusts. This bill passed the Mexican House of Representatives and is geared to pass the Senate within the next two years. Today, Article 27, Section I of the Mexican Constitution prevents this direct foreign ownership on Mexico’s beaches and borders.
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