Doing Business in Mexico

An Expert's View about Business Environment in Mexico

Posted on: 30 Jun 2012

Mexico is the United States’ 3rd largest trade partner and 2nd largest export market for U.S. products.

Doing Business in Mexico May 2012 Market Overview The North American Free Trade Agreement (NAFTA), which was enacted in 1994 and created a free trade zone for Mexico, Canada, and the United States, is the most important feature in rd the U.S.-Mexico bilateral commercial relationship. Mexico is the United States’ 3 largest nd trade partner and 2 largest export market for U.S. products. U.S-Mexico bilateral trade increased from $88 billion in 1993, the year prior to the implementation of NAFTA, to $460 billion in 2011, an increase of 423 percent. Mexico is the most populated Spanish speaking country in the world and has 112 million people with 78% living in urban areas. 10% of the population is considered wealthy class and about 45% in poverty earning less than USD $10 per day. The remaining 45% of the population is considered middle class. Mexico has a very young population with a median age of 27. It offers a large market with a GDP of approximately USD $1.1 trillion. Per capita income is USD $15,100. With a shared Western and Hispanic culture U.S. producers find it easier to market and sell their services and products in Mexico. There is a large installed base of manufacturing in a wide range of sectors. Mexico is a stable democracy. Mexico has bounced back strongly from 2009’s worldwide recession. In 2011, Mexico-United States bilateral trade increased by 17 percent from 2010 levels and Mexico’s GDP increased by 3.9 percent. Back to top Market Challenges • Mexico’s size and diversity are often under appreciated by U.S. exporters. It can be difficult to find a single distributor or agent to cover this vast market. • The Mexican legal system differs in many significant ways from the U.S. system. U.S. firms should consult with competent legal counsel before entering into any business agreements with Mexican partners. • The banking system in Mexico has shown signs of growth after years of stagnation, but interest rates remain relatively high. In particular, small and medium-sized enterprises (SMEs) find it difficult to obtain financing at reasonable rates despite Mexican Government efforts to increase capital for SMEs. U.S. companies need to conduct thorough due diligence before entering into business with a Mexican firm, and Do ss 2 ing Busine in Mexico 2012 should be conservative in extending credit and alert to payment delays. As one element in a prudent due diligence process, the U.S. Commercial Service offices in Mexico can conduct background checks on potential Mexican partners. U.S. companies should assist Mexican buyers explore financing options, including Export-Import Bank programs. • Mexican customs regulations, product standards and labor laws may present pitfalls for U.S. companies. U.S. Embassy commercial, agricultural and labor attachés are available to counsel firms with respect to regulations that affect their particular export product or business interest. • Mexico will elect a new President on July 1, 2012. Sales to the Mexican federal government will likely slow down in mid 2012 as a period of transition between administrations begins. • Violence among transnational criminal organizations has created insecurity in parts of Mexico, particularly in some border areas. Prior to traveling to Mexico it is strongly recommended to review the Department of State’s travel guidance related to Mexico: http://travel.state.gov/travel/cis_pa_tw/cis/cis_970.html, http://travel.state.gov/travel/cis_pa_tw/tw/tw_5665.html Back to top Market Opportunities • Abundant market opportunities for U.S. firms exist in Mexico; trade totals more than $1 billion a day between the two countries. • Mexico’s geographic proximity to the United States has propelled the maquiladora industry near the U.S.-Mexico border and currently gives U.S. businesses an alternative to Asia-based manufacturing and opportunities to sell into the supply chain. • Some of Mexico’s most promising sectors include: agribusiness; auto parts & services; education services; energy; environmental; franchising; housing & construction; packaging equipment; plastics and resins; security & safety equipment and services; technology sectors; transportation infrastructure equipment and services; travel & tourism services and the agricultural sector. • A complete list of the top prospects in Mexico is provided in Chapter Four. However, given the size of the Mexican market, there are numerous other promising prospects, including food processing equipment, architectural and engineering services and more. If an industry is not explicitly mentioned as a “best prospect,” it does not necessarily mean that there are not ample opportunities in the Mexican market. Back to top Do ng s 3 i Busines in Mexico 2012 Market Entry Strategies • To do business in Mexico it is key to develop and maintain close relationships with clients and partners. Mexicans prefer direct communication such as telephone calls or face-to- face meetings. However, e-mail is widely used. • Mexican companies are extremely price conscious, seek financing options, tend to desire exclusive agreements, and value outstanding service and flexibility. • U.S. firms wishing to export to Mexico will find a variety of market entry strategies. Many factors help determine the best strategy, such as the product/service, logistics & customs, distribution, marketing, direct or indirect sales, exporting experience, and language proficiency, among others. • The U.S. Commercial Service can assess market potential of products and service, provide advice on export strategies, and facilitate business agreements with potential clients and/or partners through our three offices in Mexico: Mexico City, Guadalajara, and Monterrey. Back to top For More Information Please contact Stephen Alley, Deputy Senior Commercial Officer at the U.S. Commercial Service in Mexico at Steve.Alley@trade.gov or (11-52-55) 5140-2600. You can also visit our website at http://www.export.gov/mexico. The U.S. Commercial Service — Your Global Business Partner With its network of offices across the United States and in more than 70 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://www.export.gov/eac. Disclaimer: The information provided in this report is intended to be of assistance to U.S. exporters. While we make every effort to ensure its accuracy, neither the United States government nor any of its employees make any representation as to the accuracy or completeness of information in this or any other United States government document. Readers are advised to independently verify any information prior to reliance thereon. The information provided in this report does not constitute legal advice. The Commercial Service reference to or inclusion of material by a non-U.S. Government entity in this document is for informational purposes only and does not constitute an endorsement by the Commercial Service of the entity, its materials, or its products or services International copyright, U.S. Department of Commerce, 2012. All rights reserved outside of the United States.
Posted: 30 June 2012

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