Invest in Puebla, Mexico
El grupo de los 7 (G7)
diciembre 19, 2022
Start Nearshoring in Mexico
marzo 17, 2023
Recent international changes have increased the attractiveness of Mexico as a destination for Foreign Direct Investment (FDI). Either for longstanding Offshoring practices or for newly adopted Nearshoring opportunities.
Read more about Nearshoring here.
In the heart of Mexico, lies the State of Puebla. This post highlights some of the elements that are making Puebla an especially appealing place to invest.
The traditional economic sectors in Puebla for FDI, are the automotive, agrifood, textile, and chemical industries.
Services are also a strong economic activity. The Government focuses on ITs, tourism, and financial services, among others. It is noteworthy that the Government has a scope that foresees the importance of new technologies and business models. Therefore, strong promotion is emphasized in the creative industry, clean energies, and electromobility.
Market Factors for Foreign Direct Investment in Puebla
Population in Puebla
The metropolitan characteristics of the State are reflected in its population of 6,583,278 people, from which 2,924,008 are active economically. This makes Puebla a big regional market for itself. Furthermore, it is well connected to Mexico City, the second biggest city (population-wise) in the Americas after Sao Paulo.
Free trade agreements for Investment in Puebla
Since Puebla is a State belonging to the Federal structure of Mexico, is a party to all of the ratified Treaties and Conventions by the country, allowing businesses to have special benefits when trading with other regions, specifically attractive for those seeking to enter the North American market (the United States and Canada).
Operational Factors to consider for Investing in Puebla
Universities for highly skilled labour in Puebla
By 2023, there are 229 universities offering a wide range of studies. Some of the most relevant are Universidad Iberoamericana, Tecnológico de Monterrey, UDLAP, and BUAP.
Being a strong educational hub in Mexico, by 2023 Puebla has an estimated 245,577 students enrolled in a bachelor’s degree. This means that Puebla has highly skilled labour for several industries.
Namely, in 2021 the top bachelor’s degrees for men were in Engineering, manufacturing, and construction (38.1K). During the same period, the top bachelor’s degrees for women were in Administration and Business.
Concerning English proficiency, by 2023, the City of Puebla ranks 9th on a national level according to the EF Proficiency Index.
Regulatory arena in Puebla
In general, setting up a business is a set of defined steps. Though, due to unforeseen bureaucracy, the process can take lengthy roads. Moreover, the expansion strategy might vary due to the characteristics of the foreign legal structure.
In short, the steps to follow are:
- Creation of a legal structure in Puebla.
- There are several that could fit your requirements, for this, counsel is strongly advised. Specifically for the drafting of the constitutive instrument, so it matches the business activities.
- Social Denomination Use Permit: The registering of the legal name.
- Federal Taxpayer Registry in Puebla.
- In Mexico taxes are carried out by SAT (Secretaría de Administración Tributaria). In order to be able to invoice, hire, make deductions, declare taxes, and get licences, among others, it is necessary to have an RFC and a efirma.
- Creation of a bank account.
- The process is less bureaucratic. However, you will have to fill in special forms as a subsidiary would be a Foreign Controlled Company. This can be carried out by any of the legal representatives as stated in the constitutive instrument.
- Registration in the Employer Register of IMSS.
- This is the insurance that will be provided to employees.
- Environment Impact Assessment.
Labour rules in Puebla
In order to hire personnel, the company has to comply with several requirements, as well as grant legally required benefits to its employees. Below we include a set of these elements.
- Social Insurance
- Aguinaldo: a payment provided before the 20th of December of each year which must be equivalent to at least 15 working days.
- Giving notice: in this case, the company must provide the employee with an aguinaldo, holidays allowance, utilities, and antiquity allowance (+15 years working in the company).
- Unjustified Layoff.
- Resting day: every 6 working days. It shall be paid as a normal labour day.
- Paternity and adoption: five working days with full salary payment.
- Maternity allowance: 12 weeks with full salary payment.
- Lactance period: for up to 6 months they’ll have extraordinary breaks of 30 minutes in order to feed their kids.
- Antiquity Allowance: where an employee quits their job and has worked in the company for over 15 years.
- Holidays: up to 12 working days after every laboured year.
In Puebla, the average formal job salary is MXN$5,250 per month which is competitive compared to the national average of MXN$6,630 per month.
Connectivity from Puebla to other regions
Historically Puebla has been a middle point for merchandise flowing from Asia to Europe. Due to its centric location, it provides an efficient route to move products from the ports in the Pacific Ocean less than 3 hours away, to the Atlantic Ocean less than 3 hours away-.
Financial factors
Real State in Puebla
Puebla is growing rapidly, and together with it, the Real State industry. Specifically,l the location of Lomas de Angelopolis which is an exclusive residential area near shopping centres, the Puebla’s City Centre, and Atlixco, a common weekend destination.
Moreover, Puebla has big Real Estate projects being developed near most of the Industrial Parks.
By 2020, 39.7% of housing had 2 bedrooms, while 26.2% had 3 rooms.
Concerning connectivity, 40.4% of houses had internet access
When it comes to greenfield investment, the Government of Puebla has a methodology to assess the requirements of an investor. In light of this, it offers discounts of up to 10% (excluding the automotive industry which is up to 8%).
Tax Structure in Puebla
In general terms, taxation in Puebla is similar to the rest of Mexico, companies are subjects of Corporate Income tax which by local standards translates to ISR. Simultaneously, they could be subject to VAT16% in their daily operations.
Deductions apply as related to their business activities and they can benefit from international operations.
Learn more about the OECD’s BEPS framework here.
Infrastructure in Puebla
Although increasing non-commercial traffic has been interfering with Puebla’s mobility, its state-of-the-art motorways allow the transportation of all sorts of merchandise from the industrial clusters to any of the ports.
Moreover, great efforts have been made to improve public transport. Nowadays it connects most of the metropolitan area in an affordable way. Furthermore, municipal governments are starting to implement smart mobility concepts to improve security for cyclists and pedestrians.
By 2020, the average time travel to work was 31.1 minutes. 77.4% of the population takes less than an hour to move. The means of transportation were 36.6% via bus, taxi, or similar.
Industrial Parks
In total, Puebla has 14 industrial parks, 1 micro park, and 2 industrial parks under construction.
The biggest Industrial Parks are within the Metropolitan Area. Namely, the Parks are Puebla 2000 in the municipality of Puebla Centre, Parque Industrial FINSA in the municipality of Cuautlancingo constituted of 35 companies, and Textile City in the municipality of Huejotzingo conformed of 28 companies.
Incentives for Foreign Investors in Puebla
Taxes discounts
- These are found in sub-secretariats and lean towards allowances.
Equipment
- The Energy Agency of the State of Puebla provides a catalogue of suppliers so that newly established companies can have access to them.
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