Sheinbaum Offers Tax Deductions to Spur Mexico’s Nearshoring
(Bloomberg) -- President Claudia Sheinbaum’s administration will offer greater enticements for companies seeking to relocate their manufacturing operations to Mexico to be closer to the US market, including generous tax incentives, according to a presidential decree.
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The decree provides fiscal incentives “to support the national strategy called ‘Plan Mexico’, to foment new investments, encourage dual training programs and drive innovation,” according to the order that was published in the official gazette on Tuesday.
The decree allows deductions of up to 91% for investments in fixed assets, with larger benefits offered through 2026. Eligible items include electric cars, train cars, airplanes for crop fumigation, communication towers and even laptops. In the period from 2027-2030, the cuts would be slightly reduced.
The segment that will have the highest deductions is the “manufacturing, assembly and transformation of magnetic components for hard disks and electronic cards for the computer industry.”
The decree was designed to extend to Mexican and foreign companies alike, and it applies to all sectors of the economy, Sheinbaum said last week during the presentation of the “Plan Mexico,” a framework intended to reduce the country’s imports from China in a bid to support local industry.
The maximum amount of deductions that companies may obtain will be 30 billion pesos ($1.5 billion), according to the document. An evaluation committee, made up of members of the Finance and Economy Ministries, will oversee compliance with the guidelines of the decree in order to “provide transparency and certainty.”
Tax deductions will remain in place until September 30, 2030. The decree provides further cuts if companies train their workers in educational and research institutions. To qualify for this additional benefit, companies must provide their employees with technical or scientific knowledge related to their activities, according to the document.
Mexico has not been able to develop nearshoring to its full capacity due to limitations in providing access to essential services such as electricity and water. Still, the government reported $36 billion of foreign direct investment in 2023, a 27% increase from the prior year.
“It’s important to provide security to investors, promote liquidity, generate greater investment and economic development,” according to the decree.
Trade Policy
Sheinbaum has sought to align her trade policy with the interests of the US and Canada, countries with which Mexico has a trade agreement known as USMCA that is up for review in 2026.
But following Donald Trump’s victory in November, the relationship between the three allies has been shaken, especially by the US president’s promise to impose 25% tariffs on goods from both Canada and Mexico if they do not contribute to curb migration and drug trafficking into the world’s largest economy.
Trump has also expressed concern that China, his main trade foe, uses Mexico as a back door to send cheap goods to the US, affecting local producers.
In a phone call with Trump, Sheinbaum discussed Mexico’s efforts to curb border crossings by undocumented migrants, as well as drug seizures. She has also expressed confidence that the relationship with the US —Mexico’s main trade partner— will be positive, and that the USMCA is the best way to compete commercially against China.
When asked about Trump’s actions after taking office, including declaring a national emergency at the border and pledging again to impose tariffs on Mexico as soon as Feb. 1, Sheinbaum said on Tuesday it’s “important to always keep a cool head and refer to the signed orders beyond the actual rhetoric.”
--With assistance from Maya Averbuch.
(Updates with details of the decree starting in the third paragraph)
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