Mexico's special economic zones

Companies will pay no income tax for ten years, while being exempt from value-added tax, among other benefits, if they invest in productive operations in any of five Special Economic Zones in Mexico.

Special rules will be announced later this year for an SEZ in Salinas Cruz, in the state of Oaxaca, and in Puerto Progreso, Yucatan.

The Salinas Cruz project will include energy projects, and the potential development of a dry canal in the Isthmus of Tehuantepec, which would connect the Caribbean Sea and the Pacific Ocean with a 300-kilometer rail connection.

Puerto Progreso is expected to concentrate on investments in information technologies.

Meanwhile, various benefits are available as of last month in the SEZs of Puerto Chiapas; Lázaro Cárdenas, in Michoacán state; and in Coatzacoalcos in the state of Veracruz.

As far as income tax is concerned, SEZ investors will have an exoneration of 100% for ten years, and 50% for the next five years.

SEZ companies will pay no value-added tax on goods and services used in production processes.

Additional benefits include credits for worker training, and for contributions to Social Security.

Mexico hopes that the incentives will bring productive investment and jobs to areas of the country, which currently have high levels of unemployment.

Mexico has received commitments for SEZ investments valued at $1 billion from companies which include Kimberly Clark, General Electric and Fedex, according to government sources.

India's Arcelor Mittal last week announced a $1 billion investment in a steel mlll in Chiapas.