Mexico prepares to open its first FTZ

Mexico's first Free Trade Zone (FTZ), to be situated in the city of San Luis Potosi in Central Mexico, is nearing completion. Creation of the FTZ didn't come easily — the country's Finance Secretariat, which runs the General Customs Administration, had to be heavily lobbied, with approval finally coming in 2003.

Until the new FTZ received this governmental okay, Mexican Customs facilities were limited to ports of entry. This installation will be the first one to be implemented at a non-border point.

In fact, San Luis Potosi is far from all borders, being right in the middle of a desert some 700 miles from the Laredo, Tex., border. The new FTZ is also 600 miles from the nearest ports of Tampico and Veracruz on the Gulf of Mexico, and 700 miles from the Pacific port of Manzanillo. Simply put, it will be a land-based hub.

For some time now, San Luis Potosi — formerly a major mining center — has been a favorite distribution point for many companies, particularly those in the auto parts industry. One driver has been the use of the Internet by customers. Because of its location and infrastructure links to the rest of the country, shipments from this old-line colonial city can quickly reach consignees in many places in Mexico.

The new FTZ is a 1,300-acre project. It includes an industrial park under development to house maquiladoras and already-operational silos for dry grain. The major feature, of course, will be its Customs facility. Shipments may be brought to the FTZ by rail from all ports duty free. Duties on products are levied as they leave the Customs facility, not before. This fact should offer great attraction to assembly manufacturers who can build on site.

In terms of siting, the FTZ, which is being developed by Mexican firm Logistik, is adjacent to the main Mexico City-Laredo highway and the NAFTA Rail line. It boasts an oval-shaped railroad spur, which is already being used to bring grain from the U.S.

"Right now we have the infrastructure to receive, store and handle bulk agribusiness products in an area which is almost 100 acres and has capacity for 60,000 tons a month," explains Fernando Villarreal Cantu, general manager for the Logistik Business Group.

The silos are not yet operating at full capacity since the company is still in the early stages of attracting both customers and investors to the project. Villarreal says he is receiving many queries about storing imported products at the FTZ.

"By the same token," notes Villarreal, "actual construction of the industrial park has begun. The first stage of 540 acres is expected to be completed by May, at which time it will be fully operational with water and electricity."

The FTZ already has a 3.5 kilometer-long railroad spur that permits entry of two trains at the same time, which is currently only being used for moving grain. In June, a container terminal is expected to be in operation, with the ability to handle 200,000 TEUs a year.

The crown jewel of the project is the Customs facility, to be operated by the General Customs Administration. As the first of its kind in the country, it will bring Mexico new international business opportunities. Construction will begin next month, with the facility slated to be up and running in July.

The Customs facility will be operationalon a 24/7/365 basis, which Villarrealconsiders as a main attractant for manufacturers and maquiladoras.

"At present, even more than having investors join us, our intent is to have national and international companies set up shop with us to take advantage of our unique logistics platform," he says. "We are looking for service providers that can meet international trading standards."

Surveillance and safety are key components of the facility, says Villarreal. To that end, Logistik will fight any illegal trading practices, thanks in part to its strategic alliance with SGS Mexico, a certification and supervision company operating in 137 countries with 37,000 employees.

Companies already operating within the FTZ include Viviendas y Naves de Monterrey, a construction company specializing in customized building of industrial facilities. Already on-site as well is the customs agency, S. R. Forwarding, which handles imports for retailers Wal-Mart and Sigma Foods, egg producer Bachoco and cold cuts manufacturer Qualtia Foods.

An initial investment of $40 million has been spent for building infrastructure. Logistik estimates that another $40 million will be invested over the next two years.

"As other companies start setting up business at the FTZ," says Villarreal, "we anticipate that investments will increase to $200 million over the next four years."

Mexico's new FTZ has NAFTA Rail service as well as access to the Mexico City-Laredo highway.

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