Are you thinking about moving your business to Mexico? You’re not alone. Mexico has been attracting a lot of foreign investment in recent years. And it’s no surprise – moving your production offshore comes with an enormous discount.
Some of the factors for businesses moving to Mexico are:
- Lower Labor Costs – Due to the lower costs of living, fair wages in Mexico are lower than in the United States. This offers significant savings in salary costs.
- Favorable Corporate Taxes – As Mexico encourages foreign investments, corporate tax in Mexico is only 30%. This is lower than countries such as India, China, and Brazil. Double taxation is also reduced or eliminated with foreign tax credits.
- Ease Of Business Incorporation And Operations – The process of registering a company in Mexico is made fairly straightforward, as long as you meet all of the minimum requirements. Under ideal conditions, you can start operating under your new business entity in as little as two weeks.
- Strategic Location and Proximity to the United States – Being so close to the U.S., Mexico serves as a great manufacturing hub where shipping times and expenses can be greatly reduced.
- Access To Skilled Workers – Mexico’s workforce contains highly skilled and educated professionals.
But while the financial incentives are obvious, there are also some ethical implications to consider before making the move.
What Are The Ethical Implications Of Moving Your Business To Mexico?
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Taking Manufacturing Jobs from America
When moving manufacturing abroad to Mexico, many American employees who are unable or unwilling to move may find themselves out of a job. With the trend moving towards further outsourcing, they may find it difficult to find new employment.
Having said that, not all jobs will be made redundant in America. The higher-paying, professional or managerial jobs are likely to remain in America. And the United States will still continue to house the headquarters of companies, with the population taking up senior and mid-level positions.
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Lower Waged Workers With Poor Working Conditions
While it is true that fair wages are lower in Mexico due to the lower costs of living. There may be concerns that workers are exploited to accept lower wages than their counterparts in the same industry in the U.S. market.
Another consideration is the working conditions. Mexican law is quite specific when it comes to labor laws and minimum working standards, but someone needs to file a complaint before any investigative action is taken. This may take some time, as people are afraid of losing their jobs.
Unscrupulous employers may take advantage of their new environment by cutting too many costs, leading to unsafe working conditions, long hours and low salaries for their workforce.
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Lack Of Oversight Resulting In Corruption And Bribery
As a developing economy, Mexico unfortunately faces more issues with legal oversight than there are in the US.
A comparative lack of regulatory enforcement can open the door to more cases of commercial fraud, money laundering, corruption, or bribery. Mexico is also facing a historic high in the diversion of public funds due to a lack of judicial independence, as well as favoritism and/or nepotism when it comes to the decisions of government officials.
Mexico has been a long-standing global trading partner of the US, but corruption is a significant issue.
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Potential Risk Of Child Labor
If you’re outsourcing production entirely, it’s very important to vet your contractor. Unscrupulous factories may bend the rules when it comes to the minimum age of its workers. This almost always will happen without the knowledge of the parent company.
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Environmental Pollution
Mexico has much looser regulations on environmental impact for businesses than the U.S. does. This potentially opens the door for unscrupulous businesses to cut more corners here.
Is It Worth Moving Your Business To Mexico?
The good news is that in recent years, Mexico has seen clear advancements in many areas such as investor protection, auditing and reporting standards as well as bankruptcy laws. But corruption scandals and poor working conditions may still affect the day-to-day operations of businesses.
To move your production to Mexico in an ethical way, you will need to partner with a factory you can trust. At Zipfox, we maintain a curated list of Mexican factories who meet our own ethical standards. Click below to get started.
