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Maquiladoras settling differences over Mexico's tax changes

By: Stephen Downer

January 31, 2014

MEXICO CITY — Mexico's maquiladora industry has largely settled its differences with the government over fiscal issues, according to the sector's new leader Emilio Cadena Rubio.

"We have resolved some but not all" of the differences the industry had with the federal government, Cadena, president of Index, the national maquiladora council, told reporters Jan. 28.

The one outstanding bone of contention is an increase in the rate of income tax — from 17.5 percent to 30 percent — levied on Mexico's 6,000 or so maquiladoras, most of which are represented by Index, Cadena said at a news conference in Mexico City.

"But that should not be a reason why a company has to close," he said.

The Mexican Congress's approval of a tax bill, called the Reforma Hacendaria, in October not only increased the industry's income tax bill but removed tax exemptions, such as those relating to value-added tax. Some of the exemptions were subsequently reinstated by decree in December and the bill is now law.

Index, an acronym for Consejo Nacional de la Industria Maquiladora y Manufactura de Exportación AC, is an umbrella council for 20 maquiladora associations across Mexico.

According to Cadena, who was elected as Index's president for 2014 and 2015, the maquiladora industry employs 2.3 million and accounts for 80 percent of Mexico's non petroleum exports, "a fact which makes us key for the future of the country."

He told Plastics News in a separate interview that maquiladora company exports totaled almost $200 billion in 2013.

During the news conference he said that 40-50 percent of Index's members work for the automotive industry "and many of them have injection molding operations."

But he said that plastic injection molding is one of the manufacturing activities that Index must develop if it is to remain competitive and attract more sophisticated manufacturing to Mexico. "We have fallen behind," he said.

The most radical of Index's strategy for the next two years will be to develop human talent, he said. "The infrastructure, such as schools, universities, etc, is there but we don't have sufficient pupils coming in… Insufficient numbers are graduating from the technical schools."

Cadena said he considers Mexico's major manufacturing competitors to be the United States, Germany and South Korea, not Central America.