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Cotton and VAT Tax in Mexico's Maquiladora Industry

24 December 2013
USDA Foreign Agricultural Service

MEXICO - Mexico continues to make strides in its production and commercial capacity. Currently, Mexico is one of the leaders in cost effective manufacturing, along with China and India.

Mexico is currently the 11th strongest economy in the world, based upon consumer purchasing power. According to Reuters, Mexico’s economy is expected to grow 4.25 per cent to 4.75 per cent in the next ten years and will surpass all other Latin American countries and Brazil.

This economic growth has been spurred by rapid expansion in the maquiladora industry in the last twenty years especially in the tax/duty free region of Mexico along the border with the United States. Border cities rely heavily on the industry—for instance, 60 per cent of all the jobs in Ciudad Juarez are occupied by this sector.

Mexico does not have the agricultural capacity at present in domestic cotton production to satisfy demand, and must import the majority of its raw product for consumption from outside sources. Raw US cotton production increased in 2012, which helped spur additional exports of specialty and industrial fabrics by 22 per cent.

For Mexican manufacturers, these products are considered to be shipped and processed on a “temporary basis,” as they are usually manufacturing and exported back to the United States and other countries within a short time period.

Further Reading

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