Business Opportunities in Mexico - San Luis Potosi

San Luis Potosi has been one of Mexico’s bright spots over the past three years. Although it is a small market, it is home to some of the largest and fastest growing manufacturing companies in the country. San Luis Potosi is centrally located along the NAFTA Highway mid-way between Mexico City and the border and has good access to the major ocean ports on both coasts. The city has abundant industrial land and a dedicated, although slightly under skilled, labor pool. Recent growth has made San Luis an institutional real estate market and its small size does not prohibit it from being considered a tier 1 market in Mexico.

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KEY INDUSTRIES

Automotive

Steel

Metal and mechanical industry

Textiles

Beverage production

Aggressive government support and assistance

Good logistics location in central Mexico - modern highway network

Large tracts of land available in industrial zone

Growing manufacturing base

Support operations are limited – main suppliers come from U.S., Mexico City or Monterrey. Density of companies located in the industrial zone.

San Luis Potosi has a population of 743,710 people, which represents 36% of the total state population. The annual growth rate is 2.48%, above the national average of 1.8%. It is interesting to note that 75% of Mexico’s population resides within a 300 mile radius of the city. (Note: Annual Growth Rate for the 1990-2000 period) (Source: Secretariat of Economic Development and State Government estimates)

San Luis Potosi, capital of the State with the same name, is located in the geographical center of Mexico. San Luis Potosi borders Tamaulipas and Nuevo Leon to the north, Veracruz to the East, Hidalgo, Queretaro, and Guanajuato to the south and Zacatecas the west.

San Luis Potosi is one of Mexico’s key transportation hubs, sitting equal distances from Monterrey, Guadalajara and Mexico City. It is also located between the two coasts, with good access to the international ports of Manzanillo and Tampico on the Pacific and Atlantic Ocean respectively. The city’s main industrial area sits directly on the NAFTA highway only 7 1/2 hours away from Laredo and 5 hours away from Mexico City.

San Luis Potosi is located at an altitude of 6,102 feet above sea level. The city enjoys a warm & generally dry weather. Because of its altitude, the climate is spring-like all year. Temperatures range from 98° F to 56° F in the summer and 80° F to 34° F in winter. Average relative humidity is 35%.

San Luis Potosi's location along the main transportation corridor of Mexico has produced increased industry diversification and strong economic growth. Its industrial activity originally developed in the mining and agricultural sectors with recent emphasis in commerce and trade. The leading manufacturing activities include the automotive, metal and mechanical industries, food processing, and textiles. While the state of San Luis Potosi is large, most of the commercial and manufacturing industry is located in the capital city.

Two major industrial parks serve San Luis Potosi: Tres Naciones and Millennium. They are both located in the larger industrial zone sitting on the NAFTA highway leading southeast towards Queretaro and Mexico City. Both parks have good infrastructure and available land, although Tres Naciones is the larger of the two. These industrial parks have ample electricity, water, drainage systems, natural gas and fiber optic telecommunication services. The centralization of manufacturing operations in the industrial zone of San Luis Potosi is seen as a negative for many companies investigating the area due to perceived turnover issues. While this might be true, the concentration also makes it easier for employee transportation and accessibility to utilities.

A current survey of industrial parks with a variety of site options reveals the following average prices in U.S. dollars per sq. ft. for Class “A” construction.

San Luis Potosi benefits from a central location, located between central Mexico and the U.S. border. To the north, the city connects with Saltillo, Coahuila and Monterrey via Federal Highway 57. To the East, it links with Ciudad Valles and Tampico via Federal Highway 10 while Federal Highway 57 provides access to southern cities like Queretaro and Mexico City, and to western destinations like Guadalajara.

Given its central location, San Luis has access to the three main NAFTA corridors. The Pacific corridor communicates with the entire geographic band formed by the Rocky Mountain range and the Pacific coast.

The central western corridor includes the largest concentration of maquiladoras and the 2nd largest trade volumes of all the North American corridors, connecting to Chihuahua, El Paso, Denver, Las Vegas and Edmonton.

The eastern corridor which passes through the largest North American cities and the industrial basins of the central eastern region, as well as through the Great Plains in the U.S. and through the Canadian Prairies.

The city has excellent access to the U.S. East and Gulf coasts via ship transport through Tampico and Altamira on the Gulf of Mexico. The railway service also links to the Mexican ports of both the Atlantic and Pacific Ocean. Regular service is provided to Miami, New Orleans and Houston from Altamira. A modern inter-modal container port (under construction) will contribute to strengthening the transportation network.

The San Luis Potosi airport offers scheduled domestic and international flights and freight service provided through Aerocalifornia, Aerolitoral, Aeromar and Mexicana to several Mexican and US destinations.

A fully staffed customs office is located in the city of San Luis Potosi. Trucks can clear customs here and avoid delays at the U.S. border. Some of the services offered at the San Luis Potosi customs office include:

-Definite imports and exports

-Temporary imports and exports

-Fiscal deposit, for storing of merchandise in authorized general deposit storages under customs authority control

-The transit of merchandise

-Quality System ISO 9000

-Merchandise dispatching

The government offers incentives in relation to payroll taxes, training programs, and assistance in the procedures for meeting requirements at three levels of government (federal, state, and municipal).

Additional incentives can be negotiated, depending on the location of the new project, type of manufacturing activity, and the creation of jobs. The incentives subject to negotiation include: infrastructure works, fees with the State Public Registry, and construction permits.

-Total exemption of the Tax on Pay-Roll for up to 4 years.

-Exemption on the payments of the inscription rights in the Public Property Registry of 25% to 60% for industrial companies.

-Training scholarships through the State Employment Service.

-50% exemption off the Real-estate Tax and the Official Land Register services' rights.

-50% exemption off the Landlord Transaction Tax on Real-estate.

-50% exemption off the municipal public lighting services' rights.

-Assistance in paperwork and 50% exemption off the payment for the municipal right of recollection, treatment and final disposal of domestic solid waste.

The city of San Luis Potosi has limited manufacturing support services. A company ordering a truck can expect to receive it in San Luis Potosi by the following day. Railway transportation may be the choice when production schedules allow for longer transportation time.

The city has an inter-modal port allowing for double-stacking logistics

There are three main unions: C.T.M., C.R.O.C., and C.R.O.M. in San Luis Potosi. Unions in the city are flexible and cooperative with management and help recruit new employees. When companies start operations in San Luis, they meet with union representatives and make an agreement. This process helps in protecting both management and labor.

The state government assists with the process of establishing businesses in San Luis Potosi by offering state land at competitive prices, providing on-going support and streamlining the license and permitting processing.