Mexico offering tax breaks for Tehuantepec industrial parks

With three tax incentives, the Mexican government is seeking to attract interest from the private sector in its planned tenders for industrial parks along the Tehuantepec isthmus rail corridor in the southeast of the country. 

The 10 parks that are due to be built along the 308km line that the government is restoring between Salina Cruz port in Oaxaca state on the Pacific and Coatzacoalcos port in Veracruz on the Gulf of Mexico are part of the interoceanic corridor that authorities hope will become a logistics hub similar to the Panama Canal.  

Published Monday by the finance ministry in the official gazette, the first benefit involves total exemption from income tax during the first three years of operations for companies that are accredited by the ministry. A 50% discount on the same tax will be applied in the following three years, although this reduction can go up to 90% if the companies meet their employment goals.  

The second benefit entails accelerated depreciation of investments during the first six years of operations and the third will exempt all operations within the parks from value-added taxes and allow companies to be reimbursed for VAT on purchases outside the poles during the first four years of operations. 

“In addition, companies will be able to access already existing benefits in terms of foreign trade, such as VAT exemptions on temporary imports of inputs, the 0% rate on the export of goods or services and administrative facilities that reduce costs,” the ministry said in a statement. 

"I think it will definitely help, especially to mitigate the additional cost of transportation [versus the border region and the center]," The Nearshore Company co-CEO Jorge González Henrichsen told BNamericas.

"However, that is not the only variable for a company to decide to establish itself in a place. I'm still concerned about the lack of skilled labor [for very specific production processes], the infrastructure, and the lack of clusters," he said. 

In April, the co-head of the Texas-based firm, which has helped over 60 foreign enterprises move their manufacturing operations to northern Mexico, told BNamericas that relocating companies in the southeast was not as attractive to investors as relocating in the north, in part due to the proximity northern states have to the US, but also logistics costs.

At the end of May, President Andrés Manuel López Obrador said the tenders for the first six of the 10 park areas will be launched this month. 

Connecting lines

In addition to the freight line that connects the two coasts, known as line Z, the government added to the Tehuantepec isthmus project rail lines FA that runs 329km from Coatzacoalcos to Palenque in Chiapas state and K that runs 459km from Ixtepec in Oaxaca to Ciudad Hidalgo near the border with Guatemala. 

According to a presentation shared in March by navy ministry Semar, which is in charge of the project, line Z is 79% complete and it will be opened in August. Details of the status of the other two were not released.

The same three lines were subject to a dispute last month between López Obrador and Grupo México CEO Germán Larrea, who refused to hand over its concession for the three lines in exchange for benefits of more than 9bn pesos (US$516mn). Semar personnel ended up taking over the three lines in what the media called a military occupation.