Doing Business In Mexico

uk trade and investment logo ima logo
/media/59938/mexico_map_crop.jpg
 

Researching the Market

Mexico map
Click on map to enlarge image

Why Mexico?

Mexico is a country of huge potential which has demonstrated predictable, stable economic growth. It is a dynamic market and analysts predict that its economy will be the world´s seventh largest by 2050.

It covers an area about the same size as the whole of Western Europe and occupies a strategic global position, being the natural bridge between Latin America to the south and the United States and Canada to the north. Mexico is the largest trading nation in Latin America and one of the world's top 15. As the economy has grown so has the demand for imports. UK exports of sophisticated goods and services have grown due to that demand.

Mexico was the first Latin American country to become a member of the Organisation for Economic Co-operation and Development (OECD) and is also a founding member of the World Trade Organization (WTO).

Mexico has free trade agreements with more countries than any other in the world - 12 agreements with 44 countries. Mexico is expected to continue expanding its network of agreements to diversify its export markets and to attract foreign enterprises to invest and reap the benefits of joint production in a strategic location.


Free Trade Agreements

EU-Mexico Free Trade Agreement

The EU-Mexico Free Trade Agreement has led to the elimination of all tariffs on EU-origin industrial goods. With no import duties, UK exporters can now compete on equal terms with exporters from the USA and Canada who also enjoy preferential access to the Mexican market. The agreement came into effect in July 2000 and is one of the most comprehensive foreign policy instruments ever signed by Mexico. It is known as the "Global Agreement" and has three main streams: political dialogue, co-operation, and commercial liberalisation.

The liberalisation programme for Mexican products was concluded on 1 January 2003, while the one for European products being exported to Mexico was concluded on 1 January 2007. The Global Agreement also promotes the agricultural sectors and establishes a legal framework for the liberalisation of trade in services, foreign direct investment promotion, the protection of intellectual property rights, government purchases and the resolution of disputes.

Mexico - a gateway to the USA (NAFTA)

Although there is no EU free trade agreement with the USA, British companies can take advantage of Mexico's Free Trade Agreement with the USA and Canada (North American Free Trade Agreement, or NAFTA). By establishing themselves in Mexico, British companies can use Mexico as a low-cost manufacturing base with direct, duty-free access to the largest consumer market in the world, the United States.

Signature of free trade agreements

1994 - Mexico-USA and Canada (NAFTA)

1995 - G3 between Mexico, Venezuela and Colombia (Venezuela has since withdrawn from the treaty)

1995 - Mexico-Costa Rica

1995 - Mexico-Bolivia

1998 - Mexico-Nicaragua

1999 - Mexico-Chile

2000 - Mexico-Israel

2000 - Mexico-European Union

2001 - Mexico-Norway, Switzerland, Iceland and Liechtenstein

2001 - Mexico-El Salvador, Guatemala and Honduras

2004 - Mexico-Uruguay Economic Partnership Agreement

2005 - Mexico-Japan


Economic Situation

Mexico's economy is the world's eleventh largest: larger than Canada's and Australia's, and just behind Italy's (World Bank´s gross domestic product (GDP) ranking, purchasing power parity (PPP) based).

At the beginning of 2011, the real economy (indicators related to production) was continuing to perform reasonably well, buoyed by robust internal demand. Due to the existence of a competent, independent central bank, inflation is both low and stable while interest rates are at a historically low level. Foreign direct investment into Mexico has been booming in recent years (US$19.8 billion in 2010), due to solid macroeconomic fundamentals and the benefits of NAFTA.

Many large original equipment manufacturers (OEMs) are choosing Mexico as a base, which has created significant supply chain opportunities for smaller companies, particularly in the industrial zones located near the USA. This, complemented by a well-educated workforce, has meant that Mexico is now moving up the value chain - away from the traditional maquiladoras (assembly plants) and textile industries into engineering, IT, research and development, and the creative industries. In recent years the maquiladoras have focused on more sophisticated manufacturing operations, in line with the modernisation of the Mexican economy.


Taking The Strategic Approach


Mexico is a very competitive
market and it is important to
take a medium- to long-term
view.

As with any new market, it is essential to research and plan your strategy for Mexico. Mexico is a very competitive market and it is important to take a medium- to long-term view. Doing business in Mexico can seem daunting for those new to the market, but taking a strategic approach is the key to making the process manageable.

If, after your initial background research, Mexico is part of your strategic plan for overseas development, then you are ready to start the next phase: market research. In many sectors, Mexico is already a well-developed market. You may find that your competitors are already there and that competition is fierce.

As in any new market you will need to use your competitive advantages to the full, and it is important to know which ones will be the most effective in Mexico. You will need to research the market to identify the level of demand for your product and to decide whether you should address the market as a whole or via specific niches.

When considering Mexico as an export market, the following points are important:

• Leave your preconceptions at home.

• Keep hold of your business sense as tightly as you would anywhere else.

• Do your homework on the market and on potential partners.

• Be patient, as some things may take longer to set up than you think (especially if they involve bureaucracy). Allow for this in your preparations.

• Take a long-term approach, but don't stick rigidly to your plans. Things often change rapidly and unexpectedly in Mexico.

• Obtain good quality independent legal and professional advice, particularly concerning intellectual property.

• Do your research on local business culture.

• Consult UK Trade & Investment teams in Mexico and the UK who can provide help in researching the Mexican market.

Once you have confirmed that there is a market for your product in Mexico you may want to use the information you have gathered as a basis for developing a formal Mexico strategy. This strategy should address questions such as the form of market entry (setting up a subsidiary, distributor or agency agreement, or joint venture), identification of customers, potential partners, geographical locations, sales structure, product delivery and payment channels, and after-sales setup.


How UK Trade & Investment Can Help

World business Guide

In England, UK Trade & Investment provides support for UK companies through a network of international trade teams covering all English regions. UK Trade & Investment services are also available to companies in Scotland, Wales and Northern Ireland. As well as providing general help and advice on all aspects of exporting, the trade teams run a range of road shows, seminars and other events on Mexico and other markets. To find your nearest international trade adviser, call +44 (0)20 7215 8000 or enter your postcode in the local trade team finder at: www.ukti.gov.uk

There are also dedicated UK Trade & Investment teams in Mexico that can help British companies to do business in Mexico. Where you feel that you need assistance, UK Trade & Investment is able to provide in-depth professional advice services at heavily subsidised rates. They can do much of this work without you needing to be in Mexico, therefore reducing the cost of your market research. UK Trade & Investment can provide a variety of services prior to you visiting Mexico:

Market overview: Sector information and statistics.

Market analysis: Market information, specific to your product or service: analysis of competitors, the marketing environment, opportunities, prospects and evaluation of market entry strategies.

Initial list of potential business contacts: Tailored list of named individuals and verified contact details, with brief pen pictures; and generic market contacts such as local chambers.

List of potential business partners: List of named individuals and their contact details; detailed pen pictures; sectoral and market contacts, such as local chambers and industry associations; mailing of brochures; visiting local contacts; and passing on expressions of interest.

General local market introductions: Introductions to other local market contacts, decision-makers and opinion-formers, such as local chambers of commerce, UK and national trade associations, importers' associations etc.

Additional in-depth assessment of selected potential business partners: Typically this would include information on premises, for example warehousing facilities, distribution and transport networks, partnerships or relationships with other businesses, local reputation, banker's details and signposting to local credit agencies.

Pre-visit support Counselling/mentoring by staff:

One-to-one advice by email, telephone, fax or video conferencing.

In-market support

You can also take advantage of UK Trade & Investment's services when the time is right to visit. The following are examples.

Face-to-face, pre-visit briefing and post-visit debriefing, including some post-visit follow-up support.

Appointment-making with selected contacts and potential business partners: Assistance with making visit appointments with target contacts shortlisted by the client from a list of potential business partners identified by UK Trade & Investment, and/or in response to expressions of interest.

Assistance with arranging local transport, guides, interpreters or other local support: Advice and costings or estimates only. Charges are the client's responsibility and costs will be paid direct to the service providers. Assistance with the organisation of promotional events: Promotional support during your visit to the market, including the use of official premises for example conference room, embassy or British Ambassador's residence) as appropriate and subject to availability and local charges.

Assistance with marketing and public relations: Preparation of a pre-visit press release and distribution to the general and specialist press, social media, local websites and local contacts; assistance with arranging interviews and press conferences; suggestion of appropriate marketing outlets; and assistance with preparation of promotional leaflets, where appropriate.

Follow-up monitoring of opportunities/leads: Alerting clients to relevant local opportunities, projects or tenders of which staff become aware, for a period following a visit.

The cost of UK Trade & Investment services depends on the time invested in research or spent undertaking these activities.

In addition to this support, which is offered through our Overseas Market Introduction Service (OMIS), the following fully funded or subsidised services are available from UK Trade & Investment;

Information and opportunities:

• Export Marketing Research Scheme - this service provides companies with market research to assist in the development of a marketing strategy.

• Business Opportunities - free internet-based service matching UK companies with international opportunities identified by trade and investment teams overseas.

High Value Opportunities (HVO) programme - this is a new approach to identifying, prioritising and supporting businesses to access large-scale overseas procurement opportunities. Through our global network, UK Trade & Investment is able to provide UK businesses with an intensive level of support to access these opportunities, which are worth billions of pounds and range from major infrastructure, manufacturing and engineering, through to big supply or value chain opportunities.

Through the programme, UKTI will:

• identify projects offering the most value to the UK;

• support UK businesses in developing and implementing strategies to win contracts in and around HVOs;

• through building relationships with opportunity providers, collect information on forthcoming and current HVOs globally;

• bring together expertise from across our network, alongside private sector business specialists;

• build strong relationships with key UK businesses able to deliver against these opportunities, facilitating the development of partnerships/consortia where appropriate.

Participation in the programme is open to businesses of all sizes. Lead contracts will often be won by larger companies, but there will also be huge supply chain opportunities for smaller companies.

Making it happen:

• Visiting the market - taking part in overseas events such as trade shows or missions is an effective way for you to test markets, attract customers, appoint agents or distributors and make sales. UK Trade & Investment helps companies to attend trade shows worldwide and take part in trade missions to overseas markets.

• If your company is small or medium sized and Mexico is a new market for you, then you may be eligible for financial support to visit Mexico under UK Trade & Investment's Market Visit Support scheme.

• Export Communications Review - assessment of your company's export communications followed by practical recommendations for improvement.

Your International Trade Adviser will be able to provide you with further information on UK Trade & Investment services.

Private Sector Assistance

In addition to the services of UK Trade & Investment, a wide variety of non-subsidised private sector advice is available for companies wishing to do business in Mexico. This ranges from the business services provided by the big international legal and professional services firms to specific services provided by specialist operators. Companies such as KPMG, PwC and HSBC provide reports on the Mexican economy.

The range of services available from the private sector includes company structuring advice, translation and interpreting, website design, partner selection, due diligence, legal services, advice on intellectual property rights and outsourcing. Some consultancies also offer more in-depth assistance on developing a strategy for Mexico and operational management.

The importance of good quality, independent legal advice, as in any foreign market, cannot be emphasised enough. It is essential to take this into consideration at the early stages of doing business in Mexico. Always seek good quality, independent legal advice before starting or signing anything that could have legal implications for your company, such as contracts or representation agreements.

Specialist legal advice on intellectual property rights is also recommended and there are a number of specialist patent agents' firms available. Legal advice can be expensive, but it is money well spent. It is far better to ensure that your interests in Mexico are fully protected than to leave yourself vulnerable to untoward consequences - which can be even more expensive to sort out!

UKTI sector region image

Source - UKTI

 

Strategic Partners