In the escalating arms race for global production dollars, Mexico has the locations, the crews, the infrastructure — but it still lacks one key weapon: competitive incentives.

While international production is beginning to rebound in the wake of the 2023 Hollywood strikes, producers looking to stretch their budgets are turning to countries offering deep rebates, straightforward pipelines, and stable partnerships. That puts Mexico in a complicated position. It’s a country with world-class talent and proximity to Los Angeles — but without the national cash rebate programs that have become standard elsewhere.

Currently, Mexico offers a 16% VAT exemption at the federal level for international productions — helpful, but modest. Only the state of Jalisco offers a cash rebate, at an impressive 40% — but it’s capped at just $5 million per year and limited to companies with a multi-year local presence or a Jalisco-based co-producer.

Compare that to Colombia, which offers up to 40% cash rebates on production services and 20% for logistics. Or Hungary, which has become a European production hub with its 30% rebate and strong infrastructure. Even Canada, long a Hollywood standby, continues to offer a blend of federal and provincial incentives that can exceed 35%, depending on the location and type of production.

“If Mexico wants to remain globally competitive, it’s not enough to rely on proximity to L.A.,” says producer Nicolás Celis (Roma, Emilia Perez), who recently became president of the newly formed Mexican Federation of Film Producers (FMPC). “We need a consistent, scalable national incentive — otherwise productions will keep going elsewhere.”

Celis is not alone. Netflix co-CEO Ted Sarandos’s February announcement of a $1 billion investment in Mexican productions over the next four years was met with enthusiasm — but also underscored the disparity between investment and infrastructure. Netflix is moving ahead with a slate of new projects (Las muertas, No tengo miedo, Love 9 to 5, Los corruptores), but much of that momentum is being fueled by pre-existing partnerships and in-house capabilities, not government support.

“We’re already here,” said Carolina Leconte, VP of Content for Netflix Mexico. “The talent is extraordinary. The stories are endless. But yes — streamlined support would only help us move faster.”

In Jalisco, where the rebate program was introduced in 2023, the results have been immediate. Apple TV+ brought its Acapulco series to Puerto Vallarta. Netflix has filmed The Manny and Snakes and Ladders in the region. Local post house Semillero Estudios partnered with national heavyweight Chemistry to take full advantage of the program. The rule? To claim the rebate, you must be rooted — either already present in Jalisco for three years or working through a local co-producer.

It’s an approach that reflects long-term thinking but limits access for international producers seeking a quick turnaround. Still, state-level efforts like Jalisco’s are moving the needle, and other regions are watching closely.

“The incentive made a huge difference,” said Alejandro Tavares, commissioner of Filma Jalisco. “We’ve had five or six major international projects this year already. That wouldn’t have happened two years ago.”

Meanwhile, countries like Spain, Ireland, and South Africa continue to punch above their weight. Ireland offers a 32% tax credit with high per-project caps. Spain is now offering up to 54% in rebates in some territories. South Africa, a favorite for mid-budget action and adventure films, gives a 35% incentive to foreign shoots — and even more for post-production work.

Mexico has the scale, geography, and labor pool to compete — but without federal-level action, it risks falling behind.

In Mexico City, which accounts for nearly 12% of the city’s GDP through the film industry, film commissioner Guillermo Saldaña says there are talks underway with the Presidency and the Ministry of Economy to establish a national incentive framework.

“We’re in active conversations with the Creative Industries roundtable, Imcine, and the Ministry of Culture,” Saldaña said. “The President knows what this sector means to our economy. The Netflix deal reflects that — but it’s not the finish line. It’s the starting point.”

Until then, Mexico continues to leverage what it does have: locations, crews, and connectivity. Guadalajara is fast becoming a hub for animation, led by Guillermo del Toro’s El Taller del Chucho and a new wave of talent from the University of Guadalajara. CDMX remains a workhorse city for both prestige cinema and streaming. And Acapulco — once a cinematic icon — is being eyed for a revival as part of a new corridor between the capital and the coast.

But the global landscape is changing quickly. Incentives are no longer just nice to have — they are a baseline expectation.

“Without them,” Celis warns, “you’re playing at a disadvantage before you even call action.”