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Farmington Industries

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Farmington Industries
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Farmington Industries is a small, publicly traded U.S.-based corporation, which produces programmable control instruments. With high interests in Mexico, the company has expanded to four Mexican-related businesses, which are listed below along with their specific function:

• The Maquiladora Assembly Facility – This facility is used to assemble imported U.S.-manufactured components into final products for sale mainly in the U.S. Seeing as the majority of sales occur in the U.S., this facility generates its revenues in USD.
• Farmington (Antilles) N.V. – This facility is an offshore “shell corporation” by which the U.S. parent exports U.S.-manufactured products to Mexico and other countries. When dealing with key customers, the exporters do accept pesos, but exports are regularly billed in USD. As a result, they have receivables in both USD and Mexican pesos, which can be seen as both an opportunity and a threat in relation to the devaluation of the peso.
• Farmington de Mexico – This facility is a 100% Mexican-owned subsidiary that focuses on locally manufactured products to domestic companies. Seeing as the company’s market share is substantial, their primary practice is to transfer a large percentage of its profits to the parent’s U.S. bank accounts. Sales transactions are made with Mexican pesos, which are then exchanged for USD, before being transferred to U.S. bank accounts.
• Exportaciones (Farmington) S.A. – This facility is located in Veracruz, a port city on Mexico’s east cost, and manufactures products for export to Latin America. Built at the same times as the Farmington de Mexico facility, payables are in USD, and much like the other facility, Exportaciones repays a large percentage of its earnings to U.S. bank accounts.

The devaluation of the peso should lead to a positive effect on the company’s

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