Mexican Employee Benefit Breakdown
4/14/2008 8:01:54 PM
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As a result of recent tax and labor law changes and market conditions in China, Mexico is becoming a competitive alternative for businesses that once considered the former country as the most viable alternative for their low-cost manufacturing projects.
Those that are interested in learning more about the components of Mexico's fully loaded wage can click on the link provided below. The information that is provided is a breakdown of worker benefits that are mandated by Mexican law.
http://www.offshoregroup.com/employeebenefitsbreakdown.pdf
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Manufacturers Rethink China, Reconsider Mexico
3/7/2008 2:45:25 PM
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During the beginning months of 2008, a significant number of manufacturing
executives have expressed interest in exploring the possibility of relocating
operations from China to Mexico. From their perspectives, changes that
have recently been made in labor and tax laws in China have diminished its
competitive position vis a vis the closer to home Mexico option.
With respect to Chinese labor law, the following changes have been made
as the result of the passage of the Labor Contract Act:
1. Probationary periods for new employees are shortened to a maximum of two
months (one month for employment terms of less than a year) from six months
previously.
2. Workers with seniority can no longer be hired for an indeterminate number
of fixed term contracts. These agreements enabled either party to
terminate the employment relationship by letting the contract expire. Only
workers with 10 years of service were allowed to elect non-fixed term contracts.
Under the new Labor Contract Act the maximum number of fixed term
contracts that can be offered to a worker is two. The Act also contains
employment protection provisions for works with a minimum of 15 years seniority,
as well as for those within 5 years of retirement age.
3. The new legislation strongly encourages the formation of unions in
companies that have 25+ employees.
Tax law changes affecting manufacturers in China include:
1. Equal tax treatment for both domestic and foreign industry.
Beginning in January of 2008, China rescinded special treatment for companies
with at least 25% ownership. Prior to the change, these companies did not
pay the standard 30% income tax during the first two years of profitability, and
paid only half the normal tax rate (15%) for the next three years.
2. Readjusted Value Added Tax (VAT) rebates for exported goods. The
adjustment included the removal of VAT rebates for more that 500 types of goods,
many of which were the subject of complaints from trading partners.
These changes have significantly narrowed the cost differential between
manufacturing in China and Mexico. For more detailed information on the
additional costs of doing business in China please contact 520-889-0022, ext.
1251 to obtain a copy of The Offshore Group's "China Costs" Excel spreadsheet.
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Manufacturing in Mexico: Choosing a Shelter Service Provider
12/11/2007 11:35:18 AM
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New Page 1
The process of choosing a shelter service provider with whom to manufacture
in Mexico requires considerable due diligence. An important decision
making process such as this requires the close consideration of a myriad of
variables.
Below is a link to a check list that The Offshore Group has put together for
the purpose of assisting companies in their review of the various the options
that the market has to offer. The reader is encouraged to download
and print, or save to this information to the hard drive of his or her
computer. We hope that executives seeking to initiate manufacturing
operations in Mexico find it to be of value.
Shelter Service Provider
Check List
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Mexico Will Continue to Develop As Aerospace Hub
12/4/2007 2:30:14 PM
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New Page 1
Given the increasing strength of the Euro against the U.S. Dollar, France's Airbus is considering
opening operations in the Southeastern United States. If the European
aerospace powerhouse does decide to do so, Mexico will become an increasingly
attractive location to industry suppliers.
Listen to or read an interview with David Gow, business reporter for The Guardian
in London, on National Public Radio.
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Mexican Workers Ranked World's "Most Engaged"
12/4/2007 2:03:05 PM
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New Page 1
Mexico's workers are most likely to
feel engaged at their workplaces.
 By
Jonathan
Katz
Dec. 1, 2007 -- When
professional services firm Towers Perrin took a look at employee involvement
levels throughout the world, surprisingly enough Mexican workers ended up at the
top of the list in terms of their feeling engaged.
The survey asked employees to indicate if they were engaged, enrolled (i.e.,
on their way to engagement), disenchanted or disengaged.
| Region |
Engaged |
Enrolled |
Disenchanted |
Disengaged |
| Global |
21% |
41% |
30% |
8% |
| Mexico |
54% |
30% |
13% |
3% |
| Brazil |
37% |
38% |
22% |
3% |
| India |
36% |
46% |
15% |
3% |
| United States |
29% |
43% |
22% |
6% |
| Switzerland |
23% |
50% |
23% |
4% |
| Canada |
23% |
44% |
25% |
7% |
| Spain |
19% |
35% |
31% |
15% |
| Russia |
18% |
46% |
30% |
7% |
| Germany |
17% |
47% |
28% |
8% |
| China |
16% |
51% |
27% |
6% |
| United Kingdom |
14% |
42% |
33% |
11% |
| Belgium |
13% |
47% |
31% |
9% |
| Netherlands |
13% |
47% |
32% |
7% |
| France |
12% |
41% |
35% |
12% |
| Italy |
11% |
40% |
36% |
13% |
| Poland |
9% |
37% |
39% |
15% |
| Korea |
8% |
45% |
40% |
7% |
| Hong Kong |
5% |
36% |
46% |
13% |
| Japan |
3% |
25% |
56% |
16% |
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Offshore Group Magazine Available On-Line and in Hardcover
10/31/2007 3:13:59 PM
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New Page 1
The Offshore Group, in conjunction with Imagenes de Sonora, S.A. de C.V., has
recently published and released has 71 page, four-color glossy magazine designed
to provide interested parties with comprehensive Offshore Group information such
as: company history and scope of services, manufacturing locations and
industrial parks descriptions and photos, profiles of manufacturers operating in
Mexico under its Shelter Program, as well as an introduction to The Offshore
Group's ownership and senior management staff. Interested parties can
download the publication at:
http://www.offshoregroup.com/pdf/offshoregroupmagazine.pdf
Those wishing to obtain a hardcopy may do so by contacting Steve Colantuoni,
Director of Market Research and Communications, at 520-889-0022, ext. 1251.
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Shelter v. Stand-Alone Analysis
8/10/2007 7:57:04 PM
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The following link will take the reader to a Powerpoint presentation done by a third party for The Offshore Group. It is a highly quantified analysis of the cost of operating under The Offshore Group shelter plan v. setting up a wholly-owned subsidiary in Mexico.
Not only will the presentation provide the reader with numbers associated with such a study, but will also serve to illustrate other key considerations that should be taken into account when deciding how to set up operations in Mexico.
http://www.offshoregroup.com/analysis/analysis.htm
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European Manufacturers Increasingly Look Towards Mexico
7/19/2007 5:33:57 PM
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European Union merchandise exports
to the United States exceed € 250 billion annually. This represents more
than 20% of the total manufactured goods exported from the EU's 27 member
states. Historically, the largest European investors in Mexico have been
Spain and the Netherlands. Today the increasingly competitive nature of
the North American market is motivating other EU investors to examine the
bottom-line benefit of accessing North America through Mexico.
Foreign Direct Investment Magazine
provides us with a top level breakdown of the composition of the
manufactured exports coming to the United States from the European Union:
metal products, machinery and
equipment
36.5%
food, drinks and
tobacco
27.5%
chemicals
17.9%
basic
metal
5.6%
non-metal
minerals
2.6%
other subsectors
10.0%
Several factors negatively effect
the competitiveness of the above listed European manufactures coming into the
U.S. market vis a vis similar products made on North American soil
(1) European manufactured exports
incur higher transportation costs than those manufactured in the NAFTA
region. These additional cost are passed on to the consumer.
(2) Products shipped to the U.S.
from the EU may be affected by duties that would not be applicable if those
items were of North American origin.
(3) Fully burdened wages in
countries in Europe's biggest economies: Germany, the UK, and France are higher
than those paid in the U.S., Canada and Mexico.
(4) The current Euro/Dollar
exchange rate is €1.38 = $1.00, while the Pound/Dollar exchange rate is £2.00
Taking the aforementioned
information into account it is not surprising that an increasing number of
European manufacturers have been considering the option of manufacturing in
Mexico over the past several years. The firms include primarily suppliers
to the automotive and aerospace industries. Also, this possibility is arousing
the interest of medical device manufacturers, as well as those companies that
manufacture large household appliances.
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The Longer the Supply Chain the Greater the Potential for Supply Pain
5/30/2007 2:16:37 PM
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The Boston Consulting Group has recently released a study that examines the
relationship between supply chain dynamics and overall profitability. BCG
asserts that many companies "are blindly walking into a strategic risk,
" when they travel the globe chasing the lowest wages. Although wages
may be favorable, "irregularities in the supply chain can drive up costs, create an opening for a competitor, and reduce profitability"
The case of China in particular is examined. China has been greatly
expanding its ports' capacity to ship ever increasing volumes of
manufactures, while the U.S. capacity to absorb more ocean containers has not
kept pace. The result is bottlenecks at the national
ports that result in costly delays.
Also negatively affecting the manufacturer are direct and indirect
costs. As supply chain lengthens to be considered are "the cost of
shipping, the cost of nesting and de-nesting of containers on both ends of the
ocean pipeline, inventory storage, handling costs, procurement, the cost of
insurance and overall financing". Indirect cost that have a negative
impact on profitability include: "lost gross margins resulting form
instances in which the product is not available to the consumer and the cost of
inventory write-downs from having an oversupply of obsolete inventory".
One of the several suggestions that BCG makes is that producers consider
"manufacturing in Mexico or at home" when seeking to maximize
their profitability. Often savings in labor are lost due to complex and
irregular supply chains. This study in its entirety can be accessed by
clicking here.
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