Begin with the Toy Industry;
The U S Toy Industry consumption has already become almost all imported;
Mexico has existing toy factories with installed capacity available;
Join the best factories in Mexico with complimentary non-competing lines in a union to form a single exporting entity as the biggest and the best;
Include contract manufacturers as a separate division;
Compose a group of Sales and Marketing Representatives in USA;
Compose a group of Sales and Marketing Representatives for Canada;
Follow with a marketing group for South America;
Follow with a marketing group to Europe; and elsewhere. India and Africa are growing;
Provide education for efficient production to the Mexican partner companies;
Seek U S government and Mexican government support.
Advantages for USA
- Good neighbor policy;
- Support NAFTA – USMCA;
- Hemispheric stability;
- Retain the domestic jobs for the domestic work force;
- Keep the cash in the home hemisphere; (previously poor, China is now ‘rich enough’);
- Lower cost of goods;
- Goods more readily available;
- USA loses nothing by adding another supplier for product already produced off-shore;
- ‘Several sources of supply’ is a healthier socio/economic/political position;
- Competition begets efficiency and lower prices.
Advantages for Mexico
- More work, greater earnings, less violence in Mexico;
- When one is busy working, he will not have time to “get into trouble”.
- Greater earnings, greater purchasing power;
- Nationals remain home;
- Greater earnings create greater income hence greater tax income for government;
- Exporting generates income to improve the gross national balance of payments; and
- Domestic production eliminates the need for importation of certain consumer goods;
- Greater market will increase the volume – with increased volume comes economy of scale; The costs per unit in Mexico shall decrease;
- Lower consumer product cost in Mexico due to the new efficiency and supply.
- Mexico is close to the USA and Canada – landlocked in the same continent;
- Save time and cost for shipping; to order in China it can take 180 days including the lead time, ocean freight etc. while Mexico is only hours away by truck;
- Same time zone – Mexico time is “Chicago time”; (in China, day is night, night is day!)
- Language – Mexico speaks Spanish and much of the USA also speaks Spanish. Most of the USA speaks English and much of Mexico speaks English. English and Spanish are both Romance rooted languages more similar to each other than Asian languages.
- Similar, almost identical alphabet. The English 26 letters are all in the Spanish alphabet;
- We are only hours away by flights; many non-stop. One could fly to Mexico in the morning, meet and return in the afternoon to sleep in own bed. China is a long trip.
- From Asia we ship by sea only in container; generally, a 20’ or 40’; from Mexico we ship by truck generally a 53’ truck. A 53’ trailer holds more than a 40‘container. More efficient. From Mexico we can ship by land or sea both Atlantic and Pacific.
Under the current circumstances, Mexico has artificial barriers:
- The Mexican factories pay more for their raw material due to import duties;
- The country has a 16% IVA (Sales Tax) on all goods and services; hence the factories are paying artificially increased costs which remove them from the world market;
- The factories are charging the 16% IVA to their customers; this alone takes them out!
- Since this 16% IVA is present on all levels, each level includes the 16% in their cost. Then each level adds their overhead and profit margin on top of their cost. They then invoice the 16% again to the next level. Hence the 16% is compounded by each level;
- Many countries provide export incentives – Mexico should support its own;
- Not culturally efficient for high production.
Properly managed, these disadvantages should not affect our export program. The tariffs and duties do not apply to goods destined for export.
Mexican Government Support
- Eliminate ALL import duty on raw material destined for export
- Eliminate the excessive 16% IVA for all goods and services provided to the exporting factories ONLY for the goods destined for export. Sales and consumption tax should be charged only for the goods consumed nationally. Once exported, the goods will be subject to local Sales and Consumption tax.
- Eliminate any export duties or tariffs;
- Provide export incentive (i.e., CAT “Certificado de Abono Tributario”); (See Plan Vallejo)
- NOTE: All of these initial duties and taxes that will be eliminated to stimulate domestic production for export purpose, shall be MORE than compensated by the income generated from the product exported;
Note: The mechanism to eliminate the import and export duties and the IVA sales and consumption tax already exists and can be dealt with by our AFABMEX Entity through and under IMMEX and SAT. Therefore, the sole remaining objective to gain from the Mexican Government is to obtain the “CAT” export incentive in addition to their general support. We have teamed up with and become officially sanctioned by “Pro Mexico” (suspended).
By providing gainful employment in Mexico, in turn releases jobs in USA for the citizens of USA. Will tend to stabilize the immigration flow providing “Hemispheric Stability”.
HORIZONTAL EXPANSION and Global Market
Being in operation in the Toy Industry, it is only natural that we expand to most any other industry. The Shoes Industry is a good candidate. The entire state of Guanajuato manufactures shoes for domestic consumption.
It is only a matter of affiliating with a U.S. fashion marketing company and forming the Mexican association to contract the domestic shoe industry to export. Naturally, once in the fashion industry, it leads from shoes to apparel. Furniture, food, on and on.
The same Mexican domestic organization works with the government(s) and logistics etc. Simultaneously, we will expand our market from North America, to Europe, Latin America, Middle East, to the Global Market. (Sing: “High hopes, we’ve got, high hopes…”)