Veronica Medina
Founder and CEO
Business Hub Consultants
vmedina@businesshubconsultants.com

 

LATAM FDI: Hello. Welcome to another episode of the LATAM FDI podcast. In these recordings, we speak to experts in business and economic issues throughout Latin America. Today we have Veronica Medina with us. We feel very fortunate to speak with her. She’s the founder and CEO of Business Hub Consultants. She’s located in Santiago, Chile. And I’ll just let her introduce herself and her company to you, and then we’ll have a discussion about doing business in Chile.

Veronica Medina: So, hello, everyone. Thank you so much for having me here with you today. I’m back in Santiago after doing a full month of traveling to see our clients. We hadn’t seen some of them in four years due to the coronavirus pandemic. As I said, I am the founder and CEO of Business Hub Consultants. We are a consulting firm based out of Santiago, Chile. We also have offices in Lima, Peru, covering mainly Spanish-speaking South American countries. I would say about 85% of our work is helping foreign companies that are interested in doing business in Chile and other countries in the region. We do a large proportion of work with American companies. We help them do business in South America by connecting them to service distributors and end clients. We help them in several ways. What are their strategies for doing business in our countries? We help them with regulations and do all of the research and assistance that companies require to do business in this exciting environment in South America. We think we could be a good conduit, specifically after the pandemic for the United States and bringing its logistics and suppliers closer to home.

LATAM FDI: Well, it’s interesting that you have activities throughout the region, but today we will focus on doing business in Chile. Maybe you could tell our listeners about the investment trend that’s been occurring during the past year in Chile. How have things been there?

Veronica Medina: Yes, we just had some reports from our Central Bank with very positive results. I don’t know if some of us were quite surprised by our good results, but, for example, the FDI inflow up to February of 2023 was higher by close to 50% than in the same period last year. And also, FDI in the full year of 2022 increased by 31% to close to $21 billion over the previous year. Additionally, that figure is 50% above the average for the last five years. So, I think very good results have been achieved.  This is evidence that doing business in Chile is still very attractive in terms of bringing investment into the country. We currently have about 500 investment projects in Chile in the pipeline in different stages of development. The top three sectors are energy and global technology services. The third is mining and mining suppliers. And the top investors in Chile are actually the USA, which solidifies the trade and investment relationship that we’ve had with the USA for decades. China follows this, and then in third place is Canada. So, we’re very excited by those results. Doing business in Chile is still an attractive option for investors.

LATAM FDI: That sounds very positive. It seems to me that there was some trepidation with respect to political changes that have occurred in Chile recently. But given what you just said, it seems like we can assume that there’s still a lot of confidence in the country’s economy and doing business in Chile.

Veronica Medina: Absolutely. We’ve also just got in numbers for import-export trade. Those numbers are also breaking records. So, again, we’re coming out of the coronavirus pandemic, and as you say, rightly. I don’t want to dismiss Chile’s political challenges over the past years; your listeners might be up to speed. We just had our referendum this Sunday regarding the new constitution that will be written. We had to go vote for the constituents that would be writing that constitution. And I must say that yesterday, Monday, May 8, 2023, the stock exchange opened positively by 2%. So, the market seemed to be reacting quite favorably to an issue that is obviously important to many businesspeople. Experts have mentioned that our rewriting of the constitution might cause investment projects to be put on standby. Right, because you’re rewriting the Constitution. But I also think that with the results on Sunday and obviously with some of the numbers I’ve just given, thankfully, it seems that we’re proving all of those things wrong.

LATAM FDI: It’s great to hear that. You mentioned a few minutes ago in passing some of the economic sectors that stand out for doing business in Chile. If people are looking at the country in terms of potential investment, what should they look at in the short term, and also, what should they look at in the long term?

Veronica Medina: Yeah, well, I think, as I mentioned, the top investment portfolio where the projects are, is in the energy sector. The tech services sector here has grown not just in terms of investment, but we’re also looking at a kind of commerce. Right. It’s not just the investment. So, companies are looking to sell their products or their technologies in the market. We are seeing these trends in energy, in tech, and in mining. Just a few weeks ago, here in Santiago, we had Expo Min, which is one of the largest trade shows in LATAM for mining. It was really the first one that had been done since the end of the coronavirus pandemic. And we had a lot of international pavilions. American companies were represented well in the US pavilion at that show. I would tend to say that those are the industries that will continue to be a focus. Agtech as well. If you’re looking for investment in Chile, Agtech is also key. But regarding the development future, we have great potential because of our lithium reserves for use in electric vehicles. The government has very strong environmental and climate change regulations and is net zero. I think all those industries related also to clean technologies as such will continue to grow.

LATAM FDI: The market appears to be active in these particular industries. What advice would you offer investors looking at doing business in Chile, and what can you as a company do to help them?

Veronica Medina: Yeah, well, I think obviously you have to do due diligence. You can’t go into a market blind and must assess the risk in your particular industry.  You must also be connected with someone local on the ground, right? Someone with the networks in the industry or industries you’re trying to engage in doing business in Chile. Even though Chile is a very open economy, it is important to remember that we have the most free trade agreement signed in the world. And as we mentioned before, the relationship with the United States and with American-made products and technology is very well known here in Chile.  I still think that they are highly regarded. We, as a company, always tell our clients that they should have somebody on the ground when considering doing business in Chile. And that’s where we can help with those connections. Getting you connected to the right people in the right industry, in the right position within, whether it’s large companies, SMEs, or even at a government level. We’re here to also help you with doing due diligence in the market and looking at the opportunities for you. Is Chile the right place for you to be, right?

LATAM FDI: Considering juridical factors and concerns, how does Chilean legislation favor investors?

Veronica Medina: I mean, Chile has, again, with what I mentioned regarding the openness of its economy for decades now. We welcome investors, and foreign investors are treated just the same as local investors in the country. Investment is pretty much permitted in all sectors of the economy. There are some tax benefits in certain regions of the country if the investment is done in those zones. There are some tax incentives if you are doing high-tech projects or R and D, and obviously, kind of the economic zones in the north and in the south of the country that also have very good favorable regulations and tax incentives for companies to go into those special trading zones aimed at doing business at Chile.

LATAM FDI: Speaking of incentives, can you give some specifics?

Veronica Medina: For example, if you’re doing R and D in your company, you can get tax credits for 30% of the R and D investment that your organization is doing. So again, Chile is a highly technological-based society. We are actually ranked number one in LATAM for innovation. So, there are tax incentives for anything that has to do with R and D, with technology development. Also, working with Corfo, the Chilean economic development agency, there might be some subsidies for companies to tap into there.

LATAM FDI: Well, given all of the information that you’ve shared with us now, my experience has been that when individuals listen to these podcasts, the information that the speaker has offered obviously leads to other questions. That being the case, and you being the go-to person for South America and doing business in Chile, how can people contact you to get more information that they may need to proceed with their business plans?

Veronica Medina: Well, absolutely. We have our website, which actually has some great also insights into doing business in Chile. We have country fact sheets there. We have industry fact sheets as well for the region. And the website is businesshubconsultants.com. My email is vmedina@businesshubconsultants.com. And obviously, through you, Steve, people can get in touch with me through you since now we are also working together and trying to promote this great region.

LATAM FDI: Well, thank you very much. Another thing we’ll put up on our transcript portion on our website of this particular conversation is your LinkedIn page, a link to that if that’s okay.

Veronica Medina: Perfect. Okay, absolutely. Anyway, you can reach out to me. I know I’m based in Chile. I’m also Chilean by birth. But I must say it’s a great country to do business in. We continue to have the highest GDP per capita in the region. We’re the number one country for ease of doing business in the region. You were talking about clean tech and energy. We’re the number one country and renewable energy investment in LATAM. And number two in the world. So, I think there are really some exciting things here, such as lithium and green hydrogen. There’s a lot to be done here in Chile now.

LATAM FDI: Well, thank you for joining me. This has been a very interesting conversation. I’m sure that the listeners will find it to be interesting as well.

Veronica Medina: Perfect. Thank you so much. Thank you, everyone, for listening.

 

Andrew Crawford
Trade Commissioner US Southwest & Mexico – Commercial Director
Promotora del Comercio Exterior de Costa Rica (PROCOMER)
acrawford@procomer.com

LATAM FDI: Welcome to another episode of the Latin FDI podcasts. In these recordings, we speak to experts from Latin America on issues that have to do with business in the region, foreign trade, manufacturing, and other pertinent things. Today we have Andrew Crawford with us. Andrew is the Trade Commissioner in Houston for Costa Rica. He represents an organization that is called Procomer. I’ll let him introduce himself, explain what his organization does, and expand on the subject of doing business in Costa Rica. Andrew, welcome.

Andrew Crawford: Thank you for having. It is a great pleasure for me to join this conversation. As you said, my name is Andrew Crawford. Currently,  I am a director of the trade promotion agency of Costa Rica named Procomer. I’ve been doing this for a while, but now I’ve been doing it for the US. Southwest and Mexico for the last two years. I am based out of Houston, Texas, and have over 20 years of experience in different areas of trade development, including industrial engineering, supply chain project management, trading services, and logistics in general. I love this, and I feel great about representing and talking about doing business in Costa Rica around the world and promoting our country’s capabilities and capacities.

LATAM FDI: Costa Rica is very popular amongst people for the tourism aspect of its economy. I was at a conference lately, and they asked the audience how many people have been to Costa Rica, and three-quarters of the people raised their hands. So, we know that it’s a lovely place. But what people may need to learn is that Costa Rica has significant export industries. Some of those are in manufacturing. Some are primary products. Can you give us an overview of what Costa Rica exports worldwide?

Andrew Crawford: Yes, that’s a great question. Regarding Costa Rica as a business destination, we are a hidden diamond. Many people do not relate to our country as an advanced manufacturing destination when they consider doing business in Costa Rica. When they come over, sit down with Procomer, and have constructive conversations, their whole view of Costa Rica changes. So, they moved from the concept of tourism and leisure to an industrially advanced manufacturing country where they could do business. And it is accurate to say that 30% of our GDP is related to non-tourism exports. Our main exports at this very moment are medical devices and medical instruments. All of this didn’t happen overnight. It has taken a few years, and I will explain it further and more clearly during our conversation. Also, our main exports go to the United States. 42% of our exports go to the United States, then the European Union and Central America respectively.

We are currently exporting more than 4200 products to more than 150 countries. That reflects the level of maturity our export basket is having right now. And going back into tourism, let’s say, a narrative you mentioned when you started your question. Yes, we receive millions of tourists yearly, and tourism represents 5% of the GDP, but Costa Rican manufactured exports represent 35% of the GDP. So, there’s a dramatic difference between the composition of the tourism GDP and the composition of manufactured exports GDP. Regarding the changing aspect of doing business in Costa Rica, everything started back in 1987. If I go back to manufacturing, this is when Baxter decided to open up a facility in the country. Everybody asked Baxter’s management, why are you going down there? Why is it that you decided to get into a location that is related to tourism? Well, they started to discover that there was an opportunity to develop advanced manufacturing out of the country and that doing business in Costa Rica was a good option. That’s how everything started. And I can give you more details by the time we keep moving forward with the conversation.

I can mention companies like Baxter, Boston Scientific, Edwards, Cooper, Hologic, Phillips, Smith and Nephew, Coloplast, IQ Medical, Abbott, Terumo, Heraeus, and Cardinal Health. And the last two will mention that Bayer and DDS Lab are building new Costa Rica facilities. That explains how deep things are getting into the country. And this is the level of maturity of the company we see in there is connected to the policies we bring to the table. So even though the concept has become more relevant during the last few months, Costa Rica has always been a friend-sharing destination for the United States. So, we know what an eco-friendly vision is. Our nature and sustainability may be Costa Rica’s best-known assets, but sustainable productivity has made the country a thriving destination for foreign direct investments. Mentioning these types of companies, which we are discussing and putting on the table right now, is related to our talent pool. Doing business in Costa Rica is attractive because the country decided in the late 1940s to abolish the army and invest in talent. This is what these companies find in Costa Rica.

So,  an educated workforce, a bilingual workforce,  a great cultural connection with the United States in general, and a commitment to sustainability are our selling points as a stable democracy. But suppose you put it into the conversation that investments starting at $150,000 include incentives such as no income tax for several years and no taxes on assets to be paid off. In that case, that makes doing business in Costa Rica very attractive. For your project, there are no fees, taxes, or withholdings in repatriating your income once this facility produces financials in black numbers like that, along with the perks I mentioned in the first part of my explanation. It brings a perfect combination of perks for companies to say yes. Moving forward with Costa Rica as allied to do business here in Latin America makes a lot of sense.

LATAM FDI: One of the things I’ve been seeing from the business that I do in Costa Rica is that Costa Rica, as well as much of Latin America, is benefiting from the near-shoring phenomenon occurring during the COVID crisis as it has accelerated. So, as a result, companies saw that bringing supply chains from places like Asia closer to home would be a better strategic decision. Do you see that playing out with companies that are considering doing business in Costa Rica?

Andrew Crawford: Our demand for exploring and analyzing the feasibility of Costa Rica becoming a site for greenfield operations has grown by 40% from year to year, starting in 2020. So, dealing with a more significant number of imbalances in the world in terms of financial markets, cybersecurity concerns, supply chain constraints, limitations in the protection of IP, and the rule of law in some areas of the world. So, it gives an excellent opportunity to Costa Rica, where we can solidify our friend-shoring advantage and ensure policies and capabilities based on our proven history. We are already the home of more than 380 high-tech companies and 40 Fortune 500 companies. Thirty of the world’s top med tech companies are also doing business in Costa Rica. And the numbers are still growing. I can only disclose more upcoming projects once they start digging and installing the brick-and-mortar, but things look positive. So, Costa Rica has emerged as a leading global destination for investment for companies in the life science sector. And we have become a benchmark as an exporter in this area of the world. And that motivates our policymakers to keep improving and striving for better services in allocating more capabilities in favor of these investments to make it more interesting for companies that are considering doing business in Costa Rica.

LATAM FDI: Now, we talked about the medical device industry in Costa Rica. It would be interesting for the listeners if you could give an overview of the products manufactured in Costa Rica.

Andrew Crawford: Yes, and let me just put that in another context. Costa Rica is currently the second largest exporter of medical devices in Latin America. Only Mexico is ahead. But we have to add context here. Mexico is 135,000,000 people. We are just 5.2 million citizens. This country acts like a boutique regarding medical devices, and we must keep improving. But we are doing something well if we say that a small country with only 5.2 million attracts many projects and companies interested in doing business in Costa Rica. We have a lot of specialties in the industry. We can name cardiology. We can do medical aesthetics. We can produce for dentistry, neurology, orthopedics, ophthalmology, and gastroenterology. And a lot is happening in some other industries that are making their feasibility process for bringing more categories into the market segment. So that is a great thing to say. And on the other hand, it’s not just inviting the company and getting them interested in doing business in Costa Rica. We have created an ecosystem in this industry where an outstanding level of linkages also participates in the market.

Procomer leads a program in which we provide aftercare to international companies to facilitate the growth of the supply chain. We have developed projects where a multinational, for example, only source one part from Costa Rica upon arrival. Some outsource hundreds or even thousands of parts and components to local suppliers. So, with this in mind, that means that we work not only on identifying potential companies to come down to Costa Rica, but we also worry about the other part of the story, which is fostering capacities, standards, and certifications on those contract manufacturers so they can better deal with the demands and needs of these OEMs that are engaged in doing business in Costa Rica.

LATAM FDI: Another exciting development I’ve noticed recently is that Costa Rica is developing another advanced industry, aerospace. What’s going on in your country in that sector?

Andrew Crawford: Yes, that’s an exciting topic that has been happening. First, it is good to know that a former NASA astronaut is a Costa Rican guy. His name is Franklin Chang. He’s developing an engine out of plasma, the fourth state of matter. And he’s basically at a stage where he has received sufficient funds to ensure the plasma runs correctly for many hours. And this engine reduces the cost of launching rockets and artifacts into space in an amazing way. So, we might see the Ad Astra project, the name of this engine, being heard of in much more vocal and different avenues pretty soon regarding what’s been going on with this plasma. With this engine, Chang is seeking to take care of debris around the orbits of the earth, which is the mission he’s planning. This can be done since it’s a very cost-efficient engine. It’s going to be pretty cheap to go out there to the orbits of the world and start picking up debris from satellites and other types of materials that are orbiting the Earth.

So that’s one thing. The other thing is the aerospace companies that are doing business in Costa Rica. This is a cluster of a group of companies, 30 plus companies with technological capabilities that complement each other to enable the development of aerospace solutions. So, we collaborate with them to centralize the needs and opportunities we tackle in international markets. And their focus is on critical and noncritical electromechanical systems, the development and testing of software embedded to the high standards in terms of the industry. In addition, we experienced the incorporation of a great deal of our MRO with Boeing. Our MRO is a US Federal Aviation Administration and a European Aviation Agency-certified maintenance and repair and overhaul facility in our airport. And these guys have been doing a great conversion of Boeings for many years, as Boeing has received an increasing number of conversions from commercial 737 800 to 737 800 converted freighters. So, this MRO is doing a great job in the area. So, we’re doing electromechanical, we’re doing software, we’re doing MRO, we’re doing stuff in the space that pretty much says how we’re doing, Steven, which is an interesting world that people may not know that it’s been taking place in Costa Rica as well.

LATAM FDI: Beyond aerospace and medical devices, what other opportunities exist for advanced manufacturers that are interested in doing business in Costa Rica?

Andrew Crawford: Well, you know that everything is on a concept of sustainability right now. So particularly parts and components that hold any IP. And that may require certain levels of hardware and equipment that can impact the future of energy consumption in our daily lives is becoming an excellent opportunity to be hardwired manufacturing in Costa Rica. We must remember that Costa Rica produces 99% of its energy from alternative or clean energies. So, there is already a country brand and thus a great image a foreign company can use as an endorsement in their projects and operations that they can say we produce sustainable products in advanced manufacturing in Costa Rica. This country produces 99% of its energy from alternative or clean energy. Broadcast manufacturing is a growing industry because of the growth of the entertainment world and everything. We already have experience in this industry. So, there’s an opportunity to keep growing in the area.

IoT AI needs machines and devices, where the electronics and the houses of those devices can be manufactured by companies doing business in Costa Rica. Those are some of the ideas that I can tell you and things that we’ve seen according to the capabilities of our talent and what we’ve seen in terms of experiences that we can extract from what we are already doing. Those are additions that we could have soon.

LATAM FDI: Well, can you tell me and our listening audience how people can contact you and your agency to discuss further hooking up with a contract manufacturer or starting a new project there? And also, do you have any upcoming events that people could attend?

Andrew Crawford: Sure, I’m totally and completely available on my mobile. It’s a Texas phone. The number is 832-940-8587. As I said, 832-940-8587. My email is acrawford@procomer.com. Please bear in mind to the audience that in our role as a government agency, our services are entirely free of any charges. We don’t charge anything for our services. We work as great facilitators as public policymakers. We are time savers for those seeking the right contract manufacturers in Costa Rica or who would like to understand better how to settle down and make a greenfield investment in Costa Rica. We usually ask the US company to fill out a profile form under a band model B-A-N-T which is the buying. They understand who is the buyer, the buyer, what authority this person will have during the process, what specific needs this person has, and the timeline to put a project in place.

After we gather this information and do an internal assessment, we jump into the capabilities we have with our companies to analyze the data and narrow down the potential contract manufacturers that can connect adequately with the specific need of doing business in Costa Rica. We suggest different avenues to get connected. It can be as simple as an email connection. We can set up a remote call between the parties. We organize the remote call so we can do introductions properly. We can suggest site visits on both ends. Either the Costa Rican company with great potential to come by and understand what the needs in the facility in the United States are that have to be tackled down in Costa Rica or vice versa. Have the US company go to a facility in Costa Rica as well. That can take place at any time of the year. And in the meantime, we can offer sourcing events. There’s a sourcing event that we do every year. It’s our annual event known as BTM Buyers Trade Mission. This event will be held in the last week of September 2023. The interesting thing here is that we cover accommodation for up to four nights.

Additionally, we cover meals. We cover facility tours during the first two days of the event. So, we schedule many site tours for companies according to their needs in the United States. And then the very last day, the third day, we do like a one-on-one business agenda, so it’s also adding up companies that you might not visit the site tours but might be interested in having conversations about doing business in Costa Rica. Too. So, we add up a third day in our National Convention Center to have one-on-one meetings with companies you didn’t meet during the first two days. And in the same spot, there will be some other chapters of different things going on during that week because it’s a pretty busy week, and we account for 400 buyers from about 50 countries every year that visit our buyer’s trade mission. Last year, our Advanced Manufacturing tour chapter was a great success, mainly with companies from Canada and the US. Mexico and Europe. They were focused on visiting facilities and learning more about how they’re doing things, companies are doing things, and how Procomer supports these companies to scale up in terms of capabilities.

LATAM FDI: That sounds like an incredible opportunity for companies interested in doing business in Costa Rica. And thank you. We thank you for speaking with us today and providing good contact information so that people who want to take advantage of Procomer services can contact you directly. So, thank you for that, Andrew.

Andrew Crawford: We appreciate it. There are a significant number of incentives that we have available for people to establish a greenfield operation in Costa Rica. It’s just a matter of giving me a call or sending me an email, and we can further discuss how Costa Rica has become an excellent platform for doing business oriented to the United States and with a great group of incentives together to make it profitable and feasible in the long run.

LATAM FDI: Well, thanks again, and have a great day. Listeners to this podcast can also contact LATAM FDI for further information about doing business in Costa Rica.

 

 

Silvia Cochón
Promotion and Investment Manager
Free Zone Council of the Dominican Republic
s.cochon@cnzfe.gob.do

 

LATAM FDI: Hello. Welcome to another episode of the LATAM FDI podcast. Joining us today is Silvia Cochón. Silvia is the lead for the promotion department in the National Council of the Dominican Republic for Free zones. Today we will discuss manufacturing in the Dominican Republic with her. Hello Sylvia, welcome to the podcast. Can you introduce yourself and tell us a little bit about your organization, please?

Silvia Cochón: Hello and thank you for inviting me. My name is Silvia Cochón. As you said, I have been heading the promotion department at the National Free Zones Council of the Dominican Republic for the last 15 years. This has been a long time, but it has been a very good time. So the National Free Zone Council is a government institution composed of members of the public and private sectors to promote manufacturing in the Dominican Republic in our free zones. We promote and develop the free zone companies and industrial parks that operate in our country.

LATAM FDI: I’d like to ask you a few questions today. The first has to do with a trend that has been increasing in popularity over the last few years due to things like disruptions in global supply chains. Nearshoring has become a trend. More specifically, we’re seeing companies moving from places that are in the Far East, closer to home, and closer to their customers. Has nearshoring affected manufacturing in the Dominican Republic? Has there been an influx in companies as a result of this trend?

Silvia Cochón: It has been good, the trend, as the saying goes, is that the only constant right now is change. The world is living in a time of many challenges. Especially since the Covid-19 pandemic, many companies have had to reinvent themselves and find new ways of doing things. And for us, for many countries, the pandemic has revealed trends that have impacted our manufacturing companies. Our free zone regime is made up mostly of multinational companies that are manufacturing in the Dominican Republic that produce goods and services for international markets. For an important time, they went through a difficult period in the supply chain issues as well as many other countries in the world. In recent years we have witnessed increased investment of those companies in automation and new technologies. Companies have seen the need to reduce their risk in the supply chain and expand the supply of resources to improve flexibility. This has resulted in growth in the operations of many of the companies that are manufacturing in the Dominican Republic, both in the development of previously imported components and in the manufacture of new product lines. Since Covid, we have seen companies expanding, especially in sectors like medical devices and electronics, expanding their operations, bringing more processes home in house to their plants.

We have also seen a growth in the interest of companies to bring their operations closer to the US market, as you mentioned. Additionally, we have been approached not only by companies located in China but also like by Japan, Korea, and Turkey. This includes India and Sri Lanka. These are countries that our country has not been close to in terms of commercial relations.

 

 

LATAM FDI: We see a greater interest among global manufacturers in manufacturing and the Dominican Republic. What specific benefits does the DR offer to global companies?

Silvia Cochón: The Dominican Republic has become it is a regional hub right now for the manufacture of goods and services, including logistic solutions. One of the most powerful tools that the country has used to attract those investments in manufacturing in the Dominican Republic has been its free zone regime. It’s a regime that we started in 1969. So for over 53 years, we have been attracting foreign companies to operate in our country. The regime allows companies that allocate most of their production to international markets to enjoy special tax and customs incentives, including 100% exemption from most local taxes, such as income tax, value-added tax on goods and services, and import taxes on machinery and raw materials. Everything that the company imports for its production operations or services are free of taxes. In addition to those economic incentives, the country has been very safe, very stable in terms of political stability, and has one of the most solid investment climates in the region. We have been among the countries that have grown the most economically in the last five or six years. Also, we have preferential access to markets through the free trade agreements that we have signed with our main trading partners, including the United States and the European Union.

Of course,  in terms of our geographical location, we are very close to the east coast of the United States. The quality of the transport infrastructure and maritime and air connectivity, and perhaps, most importantly, the availability of human resources have made us one of the most attractive countries for the manufacturers of goods in the region. Many companies are currently exploring the option of manufacturing in the Dominican Republic.

LATAM FDI: We had a few moments to chat  before we started today, and one of the things that I found surprising that you mentioned during that time was the number of industrial parks and free zones that foreign direct investors have to choose from if they wish to begin manufacturing in the Dominican Republic. Could you tell us a little bit about the variety of places where companies can set up their operations?

Silvia Cochón: As of today, we have 84 industrial parks operating in 28 of the 32 provinces on the island. So, throughout the island, you find industrial parks.  In those facilities we have 784 companies operating. Those companies can be foreign companies, they just have to register here, or the companies can form a Dominican company or register as an offshore entity. So you have three ways to operate.

LATAM FDI: In the country beyond the tax exemptions that you mentioned in the free zone and beyond the special customs treatments that companies enjoy when they’re manufacturing in the Dominican Republic. What other reasons are the principal reasons that executives in manufacturing have given to you as their motivation for relocating or expanding in your country?

Silvia Cochón: If I have to choose, maybe five. I will say that proximity to the US market is number one. We have very close connectivity. We are very well connected both by air and by sea, and not only to the US but to the entire world. The legal framework and the incentives provided by our free zone law is also important. Additionally, there is the availability of labor, human resources, and of course, the competitive cost structure that we offer to companies manufacturing in the Dominican Republic.

LATAM FDI: In addition to proximity to the US and a wide offering of industrial parks, can you tell me what benefits specifically are enjoyed by the Dominican Republic as a result of their being a part of the DR-CAFTA agreement?

Silvia Cochón: The benefits, yes. We used to have a free trade agreement, a one-way agreement with the US. In the past through the Caribbean Basin Initiative. But now with the DR-CAFTA, which is bilateral with the US and Central American nations, we can also import from the on a duty-free basis. Well, but if you are in the free zone, everything that goes into the free zone is tax-free for operations. We have very clear rules and norms to enter free of duty to the US. That’s one of the main reasons that companies, foreign companies, in the last years have come to establish manufacturing in the Dominican Republic. They’ve come with the purpose to enter free into the US. Market. So,  the DR-CAFTA the basis for that.

LATAM FDI: And to say what the DR-CAFTA means. It’s the Dominican Republic-Central American Free Trade Agreement. This is something I’m curious about. Has that agreement had any effect on the trade between the Dominican Republic and the countries in Central America? Is there any activity that has been increased as a result of that agreement?

Silvia Cochón: Yes, but not as much as there could be. We should be having more integration.

LATAM FDI: So, it’s a secondary benefit, obviously.

Silvia Cochón: We have some companies, especially companies that are located in both regions, like in the Dominican Republic, and maybe they have another operation in one of the countries in Central America, you see a lot of goods coming back and forth.  With Central America, we have other free trade agreements besides the DR-CAFTA. So sometimes companies use other agreements. Now it depends.

LATAM FDI: In the case of your office, if I hypothetically have a company and I’m looking to begin manufacturing in the Dominican Republic, as an industrialist, what kind of services can your office provide to help me to bring my project to fruition?

Silvia Cochón: We work as a one-stop shop since the beginning. We assist foreign investors. Either we find them and go after them, or they come to us. We help them in the analysis process when they are establishing their operation and later when they’re operating. We help them all through the process. Since they are looking for information, until they apply and start their operation, we’re going to be next to them to provide them assistance in their efforts to begin manufacturing in the DR.

LATAM FDI: I think that in a short period of time today, we’ve covered a lot of information. The people that listen to our podcasts inevitably have further questions that are a little bit more detailed than the ones that perhaps you and I have had the opportunity to go over.  If somebody wants to get in contact with you with further questions. How would they do that? Do you have a website?

Silvia Cochón: Yes, you can go to www.drfreezones.com, it’s a web page. We are also under DR Free Zones on LinkedIn and Instagram. Or you can contact us directly by email or WhatsApp.

LATAM FDI: Okay. In the transcript part, we’ll include your email address. And just out of curiosity, do you have a LinkedIn profile?  We at LATAM FDI will also be happy to direct potential customers to you, as well.

Silvia Cochón: Yes, I do.

Okay. We’ll put a link to both of those pages on the transcript portion of our website for this podcast. I want to thank you today for joining me and I want to wish you all the luck in the world with regard to helping the Dominican Republic to further its economic development through manufacturing there.

Silvia Cochón: My pleasure and hope to see you soon. Thank you.

 

 

Investment in Honduras

 

LATAM FDI: Hello, welcome to another episode of the LATAM FDI podcast. Today we are fortunate to have Yusuf Amdani as our guest. Yusuf speaks to us on the subject of investment in Honduras from San Pedro Sula in Honduras. How are you today, Yusuf?

Guest Speaker:
Yusuf Amdani
Chairman
GK Group

Yusuf Amdani: I’m very fine. Good speaking with you.

LATAM FDI: Same here. Could you introduce yourself, tell us a little bit about your background, and tell us about the GK Group and its activities to promote investment in Honduras and throughout the region?

Yusuf Amdani: Thank you very much. My name is Yusuf Amdani. I’m the chairman of GK Global. We are basically active in five segments of different industries, starting with textile, which we are in the third generation. We are vertically integrated and based in the entire region here in Central America, the Caribbean, and southern Mexico. We specialize in real estate, industrial and commercial as well as technology, lifestyle, and agriculture businesses. We are in nine countries and two continents mostly. But our big core businesses are both in real estate as well as in the textile industry.

LATAM FDI: You have a couple of very nice modern facilities.  First, I’m thinking of the Green Valley Industrial Park. Could you explain what’s going on there?

Yusuf Amdani: Green Valley is, you know, the largest industrial development in this region. Actually is the only industrial park in Western Hemisphere which does not use any public services. That means we produce our own water; we produce our own energy, we provide steam-chilled air, and we treat our wastewater. We are also ISO 14,001 certified for environmental management. Last year, we also got the certification from TRUE for waste management. We are actually the only industrial hub or development with this certification in the region.

Currently, we have two major clusters there that have made investments in Honduras. One is for the automotive wire harnesses. We have the largest cable and wire and cable manufacturer for automotive as one of our customers. Then we have Lear and Aptiv. They are the Tier 1 automotive suppliers. Then we have a smaller company making the tape and other accessories as their investment in Honduras. The largest cluster in Central America for wire harnesses is based in our facilities in Green Valley. Then we have a textile cluster. We have Delta Apparel, a stockholder, in the park and their large facilities there. We have GK’s textile facilities there, as well as we have three other textile plants.

In summary, we have five textile facilities that operate in Green Valley and some light industries.

LATAM FDI: Thank you for that synopsis of what you have happening at your facilities in Honduras. I have a few more questions I’d like to ask you. The first one concerns the Biden administration and the promotion of investment in Honduras in the Northern Triangle countries to address the issue of mass migration. Have you seen any visible results of these efforts?  Has there been investment in Honduras?

Yusuf Amdani: I think yes. The current US administration has taken this positive effort to actually create opportunities at the ground level within the countries in the Northern Triangle. We at GK Global have been doing this for 30 years. I always feel that people need to have the opportunity where they are from or where they live in the town or city; they have to migrate. The easiest migratory choice is to go to the US. That’s where there are opportunities. So, the current administration’s efforts since last year have been worthwhile.  They have gotten a commitment from several large US companies for different segments in different areas in which to invest in Honduras and the rest of the region. A few of them already have projects on the way, but it’s a process that will take some time. But in the end, it will definitely create some impact by providing more jobs in the Northern Triangle, which should mitigate the migration.

LATAM FDI: The next question I have has to do with the fact that your country changed its president in January. At the beginning of 2023, Xiomara Castro assumed the country’s top office. Has any discernible change in the environment for investment in Honduras due to changes to the government?

Yusuf Amdani: No, I think, as you probably know, she won landslide margins, and then we had a change in the party which was in the power for the last twelve years. This is a change of a party and, of course, a different ideology. They are still settling down, but in practice, there are no major changes to Honduras’s investment environment.  This is even though last year was especially challenging for the textile sector.  This is a big sector in the entire Northern triangle. Recently, the market has been soft, but still, we see several investments gearing up in all these three countries.

LATAM FDI: For people that are thinking of investing in Central America, what can companies expect in terms of benefits if they look towards investment in Honduras?

Yusuf Amdani: Because we have operations in Mexico, we have operations in some other countries, Honduras, and all three Central American countries. Honduras has a free zone law that allows companies to establish without any long paperwork or legal drama. Secondly, they are 100% exempt from any kind of tax, which means importing raw materials for export or your income tax. It’s all under one because, in any place, the custom facilities are right there, whether you build your own free zone or your lease or operate in an existing free zone. There is only one document required for entry and one for the exit. So, there’s no further customs or other paperwork to be done at the port or the airport. This makes it very easy to establish and operate, and as well as definitely there’s a tax benefit as to your 100% exemption for your income tax. So many companies, especially the US and other countries, try to manufacture and keep their profits in Honduras so that they can use the same for their expansions and don’t have to go back and pay taxes for them.  Such benefits definitely affect your overall cost of manufacturing. So, I think those are really the key benefits when the decision is made to invest in Honduras. Beyond this, of course, we have the largest port in Central America, which is Puerto Cortez. Then we have connectivity with the US, which is one flight from Atlanta, Miami, Houston, and most of the cities we can be connected. So direct flights are coming to San Pedro Sula because all the industries are located in the northern part of the country. So, I think there’s connectivity. There is shipping from Miami or to Houston. It’s only a day and a half transit time. So even if you can ship on a boat so in two days, the vessels are there logistic-wise as well as connectivity by air. Not having any tax liabilities and easy to operate, you don’t have to go through many local government permits, permissions, and certifications. So that makes it very easy. So, when an investor comes in, they can basically start their operation by leasing a building.  Then the park operator or company that manages the park provides all the support. Your leasing contract entitles you to start that process.

LATAM FDI: You mentioned a little about the kind of companies located in the Green Valley advanced manufacturing hub, and you mentioned a bit about the infrastructure. If a company wants to do business with you at the Green Valley facility, for instance, can they lease space, build to suit, and purchase land? What are the options for investors in your facility to invest in Honduras?

Yusuf Amdani: We have a unique business model that, of course, you can lease the building, or we can build to suit, or you can buy the land. We can design and build any of the options available, but we are not a typical industrial park per se. Definitely, real estate is a component that we offer. So, first of all, we not only design your building, but we also design all your infrastructure, which means your electrical installation, mechanical installation, HVAC, and any specialized installation you may require due to the equipment you may be using. So first of all, we provide completely fitted buildings, so it’s ready for you to send the equipment and start installing it. If you need assistance with the talent pool or labor force, we provide a prescreening database of employees. So whatever number of employees you need, you provide the details, and then our HR department provides you with the number of people you may need for interviews. Currently, we usually run from 84% to 87% of hiring rates at the park. This means if we are providing 100 employees for them to interview and hire, the previously mentioned percentage of interviewees get offered positions.

We also provide all the security, both external and internal. We provide maintenance, energy, water, and wastewater treatment. Basically, everything which is not your core business as a client we take care of it. So you can only focus on what is your core business. You don’t have to worry about sending down the ex-pats, their housing, schools for their kids, or anything you need to set up your company. For any governmental permits, logistics, or anything you need to operate and manage your business, we provide that as a package. When you come to Green Valley, you will bring your technology and equipment, and then we will help set it up and run it. Then even if you need specialized training, we also look for university or tech company partners who come and train in a particular area. Currently, we are working with Colin College and Aptiv, one of our guests at the park, to create the most advanced tech camp at the Green Valley Industrial Park in the different disciplines.

LATAM FDI: With respect to other activities in the facility, obviously, there is manufacturing, but are there any back-office operations? Do you have facilities for companies that do those sorts of things?

Yusuf Amdani: We have an LTE Smart City, which is actually located in the city. As you know,  the people who work in BPO operations are mostly students with high school or university degrees. So, we actually have Altia Smart City, both in San Pedro Sula and Tegucigalpa. In fact, Altia Smart City is considered among the 1% of the best infrastructure in the world to host companies that have made the decision to invest in Honduras. We are currently hosting five of the 10 largest BPO operations in the world as our tenants in LPs Smart City, plus we have some software development companies. We also have boot camps for different disciplines, from cloud services to data science to cyber security. Companies may be interested in finding talent because universities do not offer skill sets for those disciplines. So we have started to set up our own boot camps using one of the best training companies in the world to provide this education and those skill sets to the people so that companies can come to invest in Honduras. In Altia, we also provide a very similar type of package service, not just the space but also the furniture and the computer installations, electricity, and internet, as well

We also provide human resources. We provide security, we provide logistics; we provide everything for them. Again, in this case, they bring their software or some of their management personnel, and then they can operate. Currently, we have over 13,000 people working in the tech industry out of LPs Smart City, and we are growing. We didn’t have any space. We were about to start our fourth tower, and then COVID came, so we didn’t do it then, but we started last year. It will be completed later this year. So, we continue to expand and build. So yes, there is an opportunity for any tech services companies, whether they’re first-year BPOs or high-end cyber security companies.

LATAM FDI: According to your website. I was looking it over, and it seems to me that, having reviewed it, you place a high priority on sustainability. Can you tell us how you’re achieving that?

Yusuf Amdani: Yes, in Green Valley, for example, as I mentioned to you, we are the only industrial development in the region which has ISO 14,001 certification for environmental management. Because from the get-go, when we started in 2004, our park design was by a master plan. Two design groups did it out of Canada based on sustainability. So that we have like more than we probably have less than 50% utilization of actual land. We have so many green areas; we plant three trees per person that work in Green Valley park right now. Forty percent of our energy is solar. We just put in 15 MW last year, and currently, we are building another 15-megawatt capacity. And even in our thermal, we do cogeneration. We are using steam and chill air through the waste heat. So, we do heat recovery, and so even on thermal, our emissions are very low, and we are working very hard to be carbon neutral by 2030. As I mentioned, we are also TRUE-certified for waste management and zero waste.

So, we have energy-efficient buildings. We use only LED lighting. We also have solar in all our buildings because it’s a low percentage. Only about 16% of our energy consumed is coming from renewable resources right now. But we continue to build the parking structures with solar on top. So that will double our solar production in the park. It would be best if you took care of the people; the facility and environment are very important to protect. So, we have specific strategic plans that we are continuing year-to-year. We just in fact, in November 2022, we released our first sustainability report based on a global reporting initiative in UN Agenda 2030. And with that, you will see all the different activities we carry across our organization based on sustainability that we factor into our operations when we invest in Honduras.

LATAM FDI: One of the things that we’ll do in the transcript of this podcast is to include a link to that document so people can get detailed information about it.

Yusuf Amdani: Thank you.

LATAM FDI: A lot of the listeners that we have, after hearing a brief discussion with our visitors in these LATAM FDI podcasts, have questions beyond those that were addressed during the podcast. Suppose anybody who is listening has a question for you or wants information on the Green Valley Industrial Park or the Altia Tech City. How would they contact you with their questions regarding how to invest in Honduras?

Yusuf Amdani: We have a corporate info site.  The address is www.gkglobal.com, or they can also connect through directly through the websites of www.greenvalleyhub.com or www.altsmartcity.com.

LATAM FDI: As I said, we’ll make information available about you, and your company will include a link to your LinkedIn page. If people want to contact you that way as well.

Yusuf Amdani: Great. Like any other required information, we will be happy to provide it to your listeners anytime.

LATAM FDI: Thank you very much for joining me today. I wish you the best of luck for the remainder of the year and far into the future.

Yusuf Amdani: Thank you so much. Always great speaking to you after such a long time, but great to see you.

LATAM FDI: Same here. Have a great day.

 

 

LATAMFDI: Hello. Welcome to the first of a series of podcast episodes that we’ll be recording for the LATAM FDI website. What we’re going to try to do in these conversations is to make the listeners aware of individuals with whom they can invest in Latin America. We’ll be doing episodes that pertain to foreign direct investment opportunities in the entire region.

Guest Speaker:
Jason Wolfe
CEO
Novalink

Today. We have Jason Wolf with us. He’s the president of a company called Novalink in Mexico. We will be discussing the issue of choosing a manufacturing partner in Mexico.  Hello Jason, please introduce yourself and give us a synopsis of what your company does.?

Jason Wolfe: Yeah, sure. Absolutely.

Thank you, Steven. My name is Jason Wolf. I’m the president and CEO of Novalink. Novalink is a company that was founded in early 1989 as a manufacturing partner in Mexico for our clients. The idea behind Novalink was, or still is today, that many companies need to get to Mexico that would like to be in the country to reap the benefits of manufacturing there. We’ll talk a little bit about many of those benefits in a minute. But Novalink’s idea is that companies are looking to place a product line or move their facility completely into Mexico but need more resources or the desire to come to Mexico and start something on their own.

Novalink is a manufacturing partner in Mexico that is probably categorized as a shelter manufacturing company. Again, I’ll explain how we differ from a typical standard shelter manufacturing operator in Mexico. Currently, we have two locations. Our headquarters and principal location is in Matamoros, Mexico. We have 400,000 manufacturing space and depending on the seasonality, just around 2,000 employees.

Additionally, We have a secondary location in Saltillo, Mexico, where we have 78,000 square feet of industrial space and roughly 200 employees at this point. And then on the US side, we have a 70,000 square foot distribution center where we do warehouse and distribution services for many of our clientele.

LATAM FDI: You mentioned that you would tell us a little about the different shelter company models operational within Mexico’s maquiladora industry. Could you expand on that?

Jason Wolfe: Sure. So, when somebody’s looking to find a manufacturing partner in Mexico, there are basically three concepts. One is you can come to Mexico and look for a contract manufacturer in the maquiladora industry. And my definition of a contract manufacturer is, say, take wire harnesses. You have a Mexico company operating as a maquiladora under the IMMEX program, but their focus is on wire harnesses. You can go to them and give them your drawings and explain your production needs. They know how to go out and acquire the inventory. They have the engineering and design on staff to be able to build your harness for you, and you can look at them as a contractor whom you place your order with.

The second option is a standalone operation. Most people are familiar with this option.  It includes large operations such as General Motors, Aptiva, Delphi, and companies like Boeing and so forth. They come to Mexico, put in their own operation, and staff the program with ex-pats from the US to get it up and running. Then maybe they oversee it over the long term and staff it with their own personnel and a Mexican workforce.  When this option is chosen, the companies do not require a manufacturing partner in Mexico. That model is one where the company, whether it’s a US-based company, Chinese or other nationality, is going to need to incorporate in Mexico and therefore be in the Mexican system of paying taxes, doing all their own legal work, having their own IMMEX program, their own importing and exporting and so forth.

The third option, or third main option if you will, is what many refer to as the shelter program. Under the shelter program, a US company, for instance, partners with a shelter company. Most of the time, shelter companies already have the infrastructure in Mexico to set that company up. Now, most standard shelter manufacturers will incorporate that US company in Mexico, put them in a facility, help them do all the importing and exporting, set up the maquila program for that company, help them staff it, and so on forth. In the ongoing process, the shelter company would handle what many would refer to as administrative functions. So, the HR, the importing and exporting oversight, the customs oversight, the accounting, the legal matters, and so forth. But the US company is still responsible for coming down and manufacturing and overseeing and managing the production aspect of the operation.

So again, that’s a pretty black and white explanation of the three models. Now we’ll look at Novalink to give you a little bit more information on how there are some other options to choose from within the shelter manufacturing industry.

Novalink decided that there were companies that did not have the resources or the desire to come down and oversee the production management of the operation. These are companies that are looking for a manufacturing partner in Mexico. Under this scenario, we have clients that may have 20-25 operators here with us. They may take up 2,500 to 3,000 square feet of industrial space. We produce a product for them on an ongoing and consistent basis. The unique aspect of Novalink is that our clients are not incorporated in Mexico. They don’t have a Mexican entity, therefore, they don’t have any legal ties to Mexico for things like accounting. There’s no permanent establishment risk and so forth. Novalink acquires all of the permits under our maquiladora license. We hire all the employees under our corporations in Mexico. Our clients typically provide us with all the equipment and raw materials and the know-how of building their products. They’ll come down to Mexico and they’ll teach us how to do their production.  This includes everything related to manufacturing the specified item, as well as maintaining the quality aspects of their production. They also show us how to run the communication aspect of the relationship, whether they want us to run Epicor, Oracle, SAP, or however they want us to communicate with them.

All of that is the initial training of it. But then they go home, take their resources, and focus on their business, and we oversee operations as their manufacturing partner in Mexico.

LATAM FDI: You mentioned a term that is important to illuminate. You spoke of IMMEX in Mexico a couple of times. Could you give the listeners a brief explanation of what that term means?

Jason Wolf: Sure.

The IMMEX program in Mexico is all balled up within what many people understand to be the maquiladora industry. It started in the 80s with an agreement between the United States and Mexico of a US company being able to come to Mexico, set up, and qualify for a different taxation structure. There are a lot of rules and regulations related to this arrangement that we don’t need to get into in this discussion necessarily. But from a general standpoint, I operate within Mexico. I have a US company. I also have a Mexican maquiladora and am permitted to operate within Mexico and not pay import duties or taxes on the raw materials and equipment I bring into the country.  This is with the understanding that it is all here on a temporary basis.

There are many rules placed on me that when I import, let’s say, a million feet of wire to build wire harnesses, and I have a checks and balance system that I report to the Mexican government that shows that I’m importing those million feet of wire. And through the consumption of the bill of materials of the finished product and the exportation of those finished products, I demonstrate to them that I am exporting it all back out of Mexico.  The Mexican government permits me to do that without paying any import taxes on that wire. So that’s a general explanation of it. And again, many programs come along with the maquiladora and the IMMEX program. As you know, it was modified from NAFTA to the USMCA as the primary trading agreement between the United States, Mexico, and Canada.

In conclusion, there are many benefits and a lot of rules and regulations that go along with it. But that’s, in general, what the IMMEX program is.

LATAM FDI: Thanks for that explanation. Given what you mentioned regarding the models in the maquiladora industry, based on that explanation that you provided to listeners, what type of manufacturing partner in Mexico would you recommend that they consider working with?

Jason Wolfe: Well, so much thought needs to go into making this decision, right? So again, not to pick on them or single them out in any way. But suppose you look at somebody like General Motors. In that case, or Fruit of the Loom, or companies like these that are large fortune 500 companies, lots of times Fortune 100 companies that have the wherewithal not only in labor resources, managerial resources, but cash right to come down and set up their own operations. They do not need to find a manufacturing partner in Mexico. Many times, these are some of your larger maquiladoras in Mexico. Volkswagen has got a big operation. Ford has got a big operation in Mexico, actually building finished vehicles. So, when you look at something like that, the scale and scope of the program oftentimes would, by definition, dictate that they’re going to come down and put in their own operation.

Now for everybody else, that may require a smaller operation. Or, again, they don’t want to commit the resources to Mexico to come down and manage it, or they do not want to have their own legal entity in Mexico. In this case, a contract manufacturer or somebody like Novalink will benefit them in the process of finding a manufacturing partner in Mexico.

Another variable comes into play when you look at something like getting started in Mexico. Right? So, Novalink has a few customers. And keep in mind that we’ve been doing this for 30-plus years. We’ve been a part of the natural evolution of manufacturing in Mexico. Fruit of the Loom was one of my clients in the early 90s. And to use them as an example, they wanted to get into Mexico. All their cut and sew was being done in the United States, and they wanted to get into Mexico, but they needed to learn about the country. Because of this, they started with Nova Link. We started off with about 25 operators and were sewing their products for them. That taught them about Mexico and how things function in the maquiladora industry. Through our services, they were able to test the waters. We grew that operation to about 450 operators. At that point, and I want to say, Steven, we had been manufacturing for them for probably four or five years; they decided that it was time for them to start to explore Mexico on their own and start to set up some of their own manufacturing operations.

So, the neat thing about a company like Nova Link is, again, is that we are not committing you to a 50,000-square-foot building. We are not committing you to your own legal entity in Mexico. We will get the program going if you want to start with Novalink with 25-30 operators. That operation may grow to 300 to 500 operators, consuming 30,000 -40,000 square feet. At that point, you may run a cost model and decide to establish your own operation. Now, suppose you decide to move out of your relationship as a manufacturing partner in Mexico with Novalink. In that case, I will cease using them as my steppingstone to operate in Mexico. Those are all the possibilities and benefits that come along with choosing a company like Novalink to be your partner. It opens up many more variations and opportunities for you as you grow in Mexico without that full-on upfront commitment of going out, getting your own building, incorporating, and so forth.

LATAM FDI: What I’m hearing here is that your company has to offer a model that enables a manufacturer that perhaps has had no international experience; they don’t have to go through the learning curve of doing business, all the intricacies of doing business in Mexico. They can use your organization and your knowledge to immediately benefit from being in Mexico without having to experience that learning curve. Novalink can be their manufacturing partner in Mexico.

Jason Wolfe: That’s exactly right. For example, we brought over a company that we met three months ago today. It’s actually a Canadian outfit. And they’ve been doing cut and sew up in Canada. They are starting to need help with the cost of that labor and mathematically how that affects the product they have, as well as the availability of labor and finding people willing to take up the trade of cut and sew. And so, we are starting them off today, and they will start with 15 operators that will quickly grow to 25. And as their business grows, we’ll be able to grow with them.

It’s a very easy way to start and get your feet wet in Mexico. And if the size of your operation is only going to be 25 operators, then a company like Novalink is an excellent partner because that’s what we’ve built our business off of. Again, the neat thing about us is that we are not pigeonholed into being a wire harness provider or a textile manufacturer. We’ve been in quite a few industries, including automotive, aviation, the medical space, and consumer goods.  Additionally, as a manufacturing partner in Mexico, we’ve built airport shuttle vans, football helmets, and even bagged potpourri.

LATAM FDI: That is quite a diversity of activities you’ve been involved in as a manufacturing partner in Mexico. Given that and what you’ve said, what resources should someone consider that should be dedicated to Mexico?

Jason Wolfe: So anytime you do an international operation, bringing this back to exaggerate the point, let’s talk about a US company that has not done any manufacturing abroad. Again, suppose they partner in Mexico with somebody like Novalink. In that case, the resources they will need to commit to the program will be something they will be able to communicate with us and provide us with. They will tell us what the manufacturing schedule is going to be. They will need to provide us with certificates of origin for all the raw materials and someone who will continue to do all the material ordering and acquisition. And then, after that, it’s basically communicating with the Mexican operation. We’ll dedicate somebody as a project lead for that particular customer. And those individuals will communicate on a daily basis to talk about quality production efficiencies, ramping up production capabilities, and so forth. Suppose one of your listeners wants to do a contract manufacturing relationship again. In that case, they’ll need to designate somebody as the lead on that project who can communicate directly with the contract manufacturer. And if they decide to do something on their own, then the resource commitment will be much deeper than if they use a company like Novalink to be their manufacturing partner in Mexico.

In this case, somebody will need to spend more time in Mexico, possibly relocate there to be able to be in the factory dealing with the day-to-day on-site issues that arise with the operation.

LATAM FDI: What’s the manufacturing background that companies who are seeking to get involved in this type of relationship should look out for?

Jason Wolfe: One of the things we’re seeing today is that many companies migrated overseas. And when I say overseas, I’m talking principally about countries like China and India. Places that were a lot farther away from home. Right? When that happened, Steven, many of these companies basically gave up their manufacturing capabilities. They’re buying products from someone in China. And so, what we’re seeing today is companies returning that have to recreate that manufacturing capability. Novalink, being that we’ve been in manufacturing for decades, can help them. My father, who started the business, Bill Wolf,  came from a long history of being in the manufacturing industry with General Motors initially and Trico Technologies after that. The rest of us that are currently running the operation are my brother, Brad Wolf, who is the Senior VP of Administrative Operations, and Louise Muskies, who is the Senior VP of Manufacturing Operations. We have 30-plus years of manufacturing experience with Novalink, so we can help these companies recreate that capability. Your question leads to another: How do you choose a manufacturing partner in Mexico? If you’re going it alone and doing a standalone, you will need help with legal, accounting, import-export, etc. You’re likely to hire a Mexican national to be your general manager, and so forth.

If you’re going with a contract manufacturer to be your manufacturing partner in Mexico, you obviously want to ensure that that company has the right background. If they’re a contract manufacturer, you would assume they have a background in whatever product or category you need them to manufacture. Or if you’re picking to take the route of a shelter company in Mexico, what you really want to focus on is what’s their manufacturing background. Because you’re selecting a partner here, right? It’s like you’re selecting a financial partner or a private equity company to get into business with you. What are you looking for? Are you looking for somebody that can help you? Because they have experience in the industry. Are you looking for a private equity partner to give you cash and let you go and do it on your own? And the same thing applies to the shelter manufacturer. Are you looking for a company that is really good at administrative roles? Then there are shelters out there that are really good at that. What are you looking for? A manufacturing partner in Mexico that is a manufacturing-minded experiential group that can understand what manufacturing is all about.

Will you be able to teach them how to do your processes and then walk away from it? Will you go back home and let them oversee the manufacturing? We’re really good at it if you’re looking for somebody to be your legal representative in Mexico. But this is not Novalink’s competency. I’m not going to do all your legal work for you. We will be your manufacturing partner in Mexico that oversees the manufacturing side of the business.

LATAM FDI: You’ve brought up something very interesting. There’s been much talk over the last couple of years about nearshoring and people bringing back manufacturing from, particularly, China. And we find that most of those companies have done what it is that you say. They basically source the product from the Chinese. They don’t get involved in manufacturing. So companies looking for that kind of relationship with somebody nearshore would look towards working with a manufacturing partner in Mexico like Novalink. Is that correct?

Jason Wolfe: To some degree, yes. Now, if you take somebody, for example, to use a silly example, mugs. If somebody wants to order and buy mugs or order and buy ball caps, Novalink is not your partner. We’re not in the ball cap manufacturing business. Now, if you make ball caps or you’ve been in a relationship with somebody, again, to use the example of China, where you’re ordering ball caps from them on a very consistent basis, and you want to leverage all of the value propositions of having an operation in Mexico. Nova Link would say, okay, we’re going to set up a ball cap manufacturing line or project program for you. With you. Right. So that would mean between the two companies Novalink and Company X. We will need to acquire all the inputs to be able to do that, which is going to be the sewing equipment, the embroidery equipment, the cutting equipment, and so forth. And then we’re going to set that up. And that project will be dedicated to you, my client, company X, and we’re going to make, I don’t know, 1000 ball caps a day, 1000 ball caps a week.

We’re going to set it up to meet the production needs that you have. So that’s where a company like Novalink comes in, where these companies will come back and say, okay, I want to find the same model I have in China. I want to order ball caps. From somebody that’s going to be more of an, I need to find a ball cap contract manufacturer in Mexico that is currently making ball caps. And the ability to do that in Mexico right now is much more limited than it is in China. China has spent the past arguably 30 years developing that supply chain in China. And to give them credit, and all your listeners already know this, they got very good at they have put in a supply chain model in China where if you want to make a ball cap out of wire mesh, they probably got somebody over there that will figure out how to do it and get it done. So, Mexico is developing that supply chain and has been doing so over probably the past ten to 15 years as companies are really looking to, I don’t want to say deglobalize because I don’t know that deglobalization is much of a reality, but deglobalize as much as possible and nearshore as much as possible. In this case, they will seek a manufacturing partner in Mexico.

So, coming back, finding injection molding, finding PC boards, finding painting and metal fab and so forth here in Mexico, Mexico is doing yeoman’s job of things like textile production, being able to provide fabrics out of Mexico. And frankly, I hope that the US will realize and see the opportunity in a lot of those much more capital-intensive operations like injection molding, fabrics, plastics, metals, and so forth that would make much sense to do in the US. And then do all the assembly and kind of secondary production, if you will, leveraging our manufacturing partner here in Mexico.

LATAM FDI: Jason, in a short period of time, we’ve covered a pretty good amount of ground. We find that listeners of our podcast inevitably have more questions and want to go deeper into the subject matter in some cases. That being said, how would somebody contact you to be able to email you or whatever communications mode you prefer? How could they get in contact with you to be able to have you expand on this topic further for them?

Jason Wolfe: Sure, and thank you for that opportunity, Steven. One, they certainly can reach out to you and contact me via you (stevecolantuoni@latamfdi.com). The other is my direct line here in Mexico is 956-986-6727. I also have a personal email which is jwolfe@novalinkmx.com. And then we also have a website which is novalinkmx.com. On the site, we have a contact form to fill out, which would put your listeners in direct communication with one of Novalink’s business development VPs.

LATAMFDI: Thanks for that. The listener can also keep in mind that the written transcript on this website that recorded this conversation will have that information. And if it’s okay with you, Jason, if you have a LinkedIn page, we’d like to put a link to your LinkedIn page so that people could contact you that way.

Jason Wolfe: Okay, that will be fine.

LATAM FDI: Well, I want to thank you for joining us today. It’s been very instructive. We wish you good luck in 2023 and beyond. We hope that more companies will do business with Novalink as their manufacturing partner in Mexico.

Jason Wolfe: Well, I do appreciate the opportunity, Steven, and best of luck to you as well. And I look forward to talking to you again and continuing our relationship.