An Interview with Veronica Contreras, VP of Sales & Marketing for Co-Production International

About Veronica
Veronica Contreras has over sixteen years of experience setting up manufacturing operations for one of the top shelter companies in Mexico, Co-Production International. She has worked on over 75 expansion projects in the México region and has lead the expansion projects for notable companies such as ICON Aircraft, Broan Nu-tone, Smiths Aerospace Division, Conesys, Aspen Medical Products, Southwire and Todco, just to name a few.

Veronica walks manufacturing companies through the estimated annual costs of a manufacturing operation in México (start up costs and manufacturing overhead costs) and their timeline for their projects in Mexico. She guides CPI’s customers through a feasibility study, the labor market, and site selection. She also helps investors understand the advantages and disadvantages of the different cities. Veronica currently travels the country educating global manufacturing companies on how to get started in Mexico.

What Challenges Do Companies Face When Evaluating an Expansion of Manufacturing Operations in Mexico?

The biggest challenge for a company interested in setting up their own manufacturing plant in Mexico is getting the operation up and running. From start to finish it can take a company anywhere from 8 months to a year, which can be a frustrating lead time for a company that is ready to sign a lease agreement, start importing equipment, and begin training employees.

Additionally, "the know-how and know who,” is important in being able to set up a manufacturing facility. Being able to find the right people who are going to set up the Mexican entity, obtain all the permits, help identify the right city and state for the plant, and hire an administrative team, are important considerations. Each of these steps poses challenges the manufacturer, especially if they are going at it alone and with an in-house staff. That’s where CPI comes in. With our decades of experience and network of partners, our job at CPI is to remove or minimize these barriers and challenges and allow the manufacturer to focus on what they are good at.

Is Contract Manufacturing a Good Way to Get Started in Mexico?

Subcontracting in México can work and can be a good way for a company to get started without completely setting up the infrastructure and making that initial investment. However, not all projects lend themselves to subcontracting (or contract manufacturing). Subcontracting is a good option on a product that has low labor content or if you wish to be very hands off in the production process.

Finding a manufacturer that is willing to take on your product and manufacture it in México can be challenging. For example, in Baja California there are 600 manufacturing plants, but many are not set up for final export of product. This means that many those manufacturers are not ideal for subcontracting. This can come to a surprise because you see the success in the México manufacturing community and one often wonders why these companies can’t manufacture your products as a contract manufacturer. It is this reality that encourages most incoming foreign companies to set up their own manufacturing operations under a shelter. It comes down to control, oversight and infrastructure to get your products seamlessly back to market, which saves money in the long run.

What Is the Fastest and Most Cost-Effective Way for Foreign Companies to Start Manufacturing in Mexico?

If you are a US, Asian or European manufacturer interested in setting up a plant in Mexico, the fastest and most cost-effective way to get started would be the shelter program. Over 40 years ago the shelter program or a shelter type of company (maquiladora-IMMEX program) was developed to give companies a way of easily and legally establishing themselves in Mexico. A shelter is essentially an already existing entity that’s been permitted by the government allowing the new company to operate under it and get started in México immediately. There are two main advantages to the shelter company: speed and limited risk exposure.

Addressing the time it takes to get established, using a shelter allows a manufacturing company to set up their maquiladora and be up and operational as quickly as 2 to 3 months; or as quickly as it takes for the tenant improvements of the facility to be ready. The shelter streamlines almost every aspect of getting up and running, providing a quick ramp up and managing the Mexican facility from an administrative stand point.

For example, CPI just started an operation in Tijuana Mexico for ICON Aircraft and were able to get them started in just three months. ICON wanted to set up a facility in Mexico to make composite structures for their recreational aircraft while working hand-in-hand with their Vacaville California facility. Initially, ICON occupied a 35,000-square foot facility where they began testing equipment. Then they brought in their ovens and all sorts of equipment and started training employees while their 300,000-square foot facility was being built. Within a matter of 6 months they moved into their larger facility and are in the process of ramping up to full production for this aircraft.

The CPI Shelter Program sets up the Mexican legal entity, it obtains all the permits, it imports all the equipment and raw materials to get the product started and manufactured, the logistics, the environmental health and safety for the operations and assists the company in facility buildout and tenant improvements. Additionally, the shelter provides all the administrative support functions, including human resources, payroll processing, labor recruitment, and so on.

Herein lies the benefit for manufacturers – your company focuses on production and getting employees trained, while CPI focuses on the administrative burden of getting that operation up, running and legal. By working with CPI’s experienced team with your company’s team, valuable time is saved which is essential when setting up a new facility anywhere in the world.

Addressing the legality and risk exposure benefits, the shelter is legally responsible in Mexico. CPI is the one on the hook for everything that is happening, thereby minimizing its clients’ exposure and risk at their Mexican facility. This also highlights the benefit of a shelter versus an independent or standalone corporation in Mexico. The main advantages for shelter companies in México are quick set up time and a more cost-effective solution. The administrative team of the shelter is already trained and experienced in their respective fields, thereby eliminating the learning curve of figuring it out on your own. A shelter company has the local expertise and the know-how, provides the existing infrastructure, the software, and navigates all the programs they are required be legally compliant in Mexico.

How Does the Currency Exchange Rate Benefit Foreign Manufacturers?

Over the last few years the currency exchange rate has emerged as a top reason why companies are expanding or moving their manufacturing facilities to Mexico. Four years ago, the exchange rate was 12 pesos to the US dollar and last year moved to a new low of 21 pesos to the US dollar. This México exchange rate allows manufacturing companies to realize additional savings in the purchase of materials and components for their manufacturing operations in Mexico. This has pushed México to the top of the list for manufacturer’s exploratory departments. I would encourage a company to contact a shelter provider to help and evaluate the cost of their manufacturing facility in México to see how the exchange rate can benefit their operations.

About Co-Production International
Co-Production International (CPI) is strategically headquartered in San Diego, CA. A 40-year-old business administration and shelter services provider for companies manufacturing in Mexico, CPI handles the complete setup of the new facility and manages the day-to-day administrative duties in accordance with Mexican regulations, allowing the company to focus 100% on quality and production.