Mexico offers incentives to lure investors to Tehuantepec trade project

June 6, 2023

Mexican authorities have announced tax breaks designed to attract investors for a project to convert the Isthmus of Tehuantepec into a hub for global trade in the southeast region of the country.

The tax incentives are being offered for companies to create investments in 10 industrial-logistics parks the government wants to establish along the isthmus, which represents the shortest distance in the country between the Gulf of Mexico and the Pacific Ocean.

The rail corridor and logistics parks will connect Mexico’s Pacific coast port of Salina Cruz with the Gulf coast shipping hub of Coatzacoalcos.

“To stimulate the relocation of companies and attract investment to the southeast of the country, the Mexico government has announced a series of tax benefits for companies that decide to invest in one of the 10 [logistics parks] located in the isthmus corridor,” Mexico’s finance ministry said Monday in a news release.

Companies that invest in one or more of the business parks along the corridor will not have to pay income taxes during their first three years in operation. The following three years, companies will only have to pay half of the normal income tax, with an opportunity to get an income tax discount of up to 90% if they meet certain employment goals.

The incentives include accelerated depreciation of investments during the first six years of operation, which benefits companies by lowering the taxable amount on their annual income, as well as saving them money on taxes.

Business conducted in the isthmus corridor will also be exempt from value-added tax (VAT), and companies can claim back VAT from purchases made outside the zone for four years, the finance ministry said.

The incentives will be available to companies that operate in manufacturing industries such as automotive, semiconductor chips, medical devices and industrial machinery, along with firms in sectors such as information technology, petrochemicals, pharmaceuticals and energy.

The Mexican government will begin accepting tender bids for six of the 10 industrial-logistics parks over the next several weeks.

The 10 industrial-logistics parks are planned to be built along the 192-mile rail line that the government is restoring between the Port of Salina Cruz and the Port of Coatzacoalcos. Both ports are undergoing modernization projects to create major container and import/export facilities on each coast.

The incentives for the Tehuantepec project “are intended to promote economic development in one of the most disadvantaged regions of the country, the southeast,” Mexico’s finance ministry said.