Comparing Shelter Services vs. Wholly-Owned Subsidiary in Mexico

Entering the Mexican manufacturing sector is an exciting yet challenging endeavor. With its growing economy, strategic location, and competitive labor costs, Mexico offers immense opportunities for global manufacturers. 

But what's the best entry model: shelter services vs a subsidiary in Mexico?

This article compares the two strategies, helping you make an informed decision tailored to your business needs.

Different Ways to Manufacture in Mexico

Mexico has positioned itself as a manufacturing hub, drawing companies from a wide range of industries. There are two primary entry routes:

1. Partnering with a shelter service partner

2. Incorporating a wholly-owned subsidiary

Each model offers a unique approach to entering the market, and operational models exist for nearly every business case.

Note - this article does not explore options like joint ventures or contract manufacturing.

What are Shelter Services in Mexico?

Shelter services in Mexico offer a turnkey solution for manufacturers. They provide legal, HR, tax and compliance support, allowing foreign companies to focus on production while operating under the IMMEX Program.

PROs of Shelter Services in Mexico

1. Reduced Risk and Liability: shelter providers manage compliance, minimizing legal exposure.
2. Quick Start: an operations partner can streamline the startup process and timeline.
3. Focus on Core Activities: outsource the administrative overhead.
4. Economies of Scale: shared services reduce costs in the early years.
   

CONs of Shelter Services in Mexico

1. Limited Control: a shared shelter model may restrict operational autonomy. An independent shelter setup offers more control.
2. Limited Flexibility in Operational Model: the IMMEX Program restricts domestic sales; a separate entity is required for internal market access.
3. Potential Unexpected Costs and Taxes: shared costs or tax exposure for capital-intensive companies can arise under some shelter models.

By partnering with a provider of shelter services in Mexico, companies can benefit from various administrative and legal services that simplify the setup process. 

What is a Wholly-Owned Subsidiary in Mexico?

A wholly-owned subsidiary in Mexico means establishing your own legal entity in Mexico. This model gives complete autonomy and is often suited for larger or long-term ventures. 

PROs of Wholly-Owned Subsidiary

1. Full Control: operate with your own policies, staff and infrastructure.
2. Flexibility in Operations Model: greater tax and operational flexibility.
3. Long-Term Investment: position your company as a lasting stakeholder in Mexico.

CONs of Wholly-Owned Subsidiary

1. Initial Planning & Investment: requires significant capital and planning.
2. Complex Regulatory Environment: deep local knowledge is essential.
3. Full Team Structure: higher initial HR and admin costs.

For larger corporations with a dedicated team experienced in international operations, a wholly-owned subsidiary can give the flexibility needed to meet varying business goals and needs.

Shelter vs Subsidiary: which is right for you?

Operational Support Services: a Hybrid Path

Flexible operational support can compliment either model. Services include:

• Consulting: strategic guidance on entry
• BPO: finance, HR, tax, trade compliance
• Logistics: supply chain setup
• HR & Recruitment: hiring and retention strategy

Why Prodensa?

Prodensa is Mexico's leading shelter services provider and operational partner for wholly-owned subsidiaries in Mexico. With over 40 years of experience, we guide companies through every stage of The Mexico Journey®. 

• Market Entry Support: from market analysis to full-scale feasibility model.
• Regulatory Expertise: IMMEX, labor law, trade compliance.
• Start-up Program: supported over 1,000 manufacturers.
• Flexible Models: shared or dedicated IMMEX solutions tailored to your goals.

Choosing between shelter services vs wholly-owned subsidiary in Mexico depends on your operational goals, risk tolerance, and timeline.

Prodensa helps you assess these factors and implement the most efficient, compliant, and scalable model. Whether you need a fast track to market or a long-term local footprint, Prodensa is your strategic partner in Mexico.

Ready to take the next step?

Contact us today to learn more about how Prodensa can help you achieve your business goals and thrive in the Mexican market.