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Head of Latin America, TMF Group
15 August 2023
Read time
5 minutes

Nearshoring in Mexico: local expertise makes all the difference

Mexico is an attractive nearshoring destination for overseas companies looking to establish manufacturing and supply operations to serve north and central America. However, setting up and operating in the country does come with some complexities. Tapping into local expertise helps to ensure that things run smoothly and successfully right from the start. 

Mexico’s nearshoring environment is a dynamic and fast-growing one, which is attracting firms from around the world, as we outlined in our previous article on the topic. At the same time, Mexico still ranks as one of the most complex jurisdictions to do business in according to TMF Group’s latest Global Business Complexity Index.

This is why many companies are making the strategic choice to work with an experienced in-country service provider – in areas like entity management, accounting and tax, and HR and payroll – as they establish and build nearshoring operations in Mexico.

Local knowledge and expertise can make all the difference when it comes to navigating the intricacies of the Mexican business environment, while ensuring compliance with the country’s laws and regulations and, ultimately, enjoying commercial success.

Here are some benefits that a local partner can provide to your company:

1. Do business like a local

It really pays to have people on the team with comprehensive knowledge of Mexican company law, tax regulations, and accounting practices. Partnering with an in-country provider helps ensure compliance and minimises the risk of costly errors, delays, and potential legal consequences.

For example, Mexico’s Foreign Investment Law (FIL) states that a company must be registered with the Foreign Investment Registry within 40 business days of the incorporation, branch registration, acquisition or execution of the relevant trust agreement. Foreign investors who do not register their investment with this registry are subject to administrative fines.

Nearshoring companies can benefit from working with a dedicated local team of professionals with the complementary expertise needed for different aspects of running the firm. This team can guide firms through the process of establishing legal entities, help them understand tax obligations, and ensure accurate and timely financial reporting, for example.

2. Right-size operations

Finding the right talent to set up and run a successful organisation is a challenge in any new market: partnering with a local provider can short-cut the process significantly. It gives nearshoring firms quick access to the knowledge and experience they need, while saving significant effort and resources.

Instead of hiring and training in-house professionals, organisations can leverage the resources of an established team of experts. This eliminates recruitment and training costs, as well as the need for ongoing employee benefits and infrastructure expenses.

As operations grow, and compliance requirements increase, nearshoring companies can easily scale up their outsourced services without the hassle of internal restructuring. A third-party provider can quickly adapt to changing demands, while maintaining seamless support and reducing the administrative burden on the company. Global outsourcing partners can also offer access to a much broader, international talent pool.

3. Mitigate compliance risks

Falling foul of Mexico’s company laws, tax regulations, and accepted accounting practices can result in significant penalties, legal disputes, and reputational damage. By outsourcing compliance services to a specialist provider, companies can mitigate these risks substantially.

According to a 2022 report from Gartner, keeping up with the changing risk landscape is one of the biggest challenges for legal and compliance leaders. Some 60% of those leaders surveyed identified risk management processes lagging behind changes in the risk environment as their most significant challenge.

Professional service providers have robust systems in place to monitor regulatory changes and adapt quickly. They can perform regular reviews and audits to ensure adherence to regulations and identify any potential compliance gaps – enabling nearshoring firms to proactively address issues before they become an issue.

4. Focus on core activity

Establishing and operating nearshoring operations in Mexico involves numerous strategic and operational considerations. By tapping into the specialist knowledge and experience of a trusted local partner, internal teams are free to focus on the core business and strategic initiatives.

As a result, companies can direct their resources and energy towards activities such as production, innovation, and customer satisfaction – helping them drive growth, improve productivity, reduce time-to-market, and build a competitive edge.

For outsourcing to work well, it is key for the nearshoring firms to select a partner that has a strategic understanding of its business, with services that are fully aligned with commercial objectives. For the partnership to work, it is important to set clear goals and responsibilities, aligned at all levels of the organisation.

Support throughout the nearshoring lifecycle

With decades of experience supporting overseas organisations in Mexico, TMF Group can provide a single source of entity management, accounting and tax, and HR and payroll services throughout the nearshoring lifecycle.

To learn more about how TMF Group can provide tailored compliance services for overseas companies setting up and operating in Mexico, please contact us today.

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