Financial Opportunities of Doing Business in Mexico: Positive, Yet Demanding
Mexico provides promising investment and business opportunities to foreign companies wishing to extend their reach. However, the path to success, as with any venture or endeavor, is not as glamorous as you think. Doing business in Mexico is realistically grueling, inevitably challenging, and financially draining. It takes a great amount of local knowledge and perseverance to make it all the way to the top.
This land of opportunity has been regarded for its notoriety on several occasions. To counter these notions, the Mexican government has improved its infrastructure and reformed its economic policies. Such move paid off, as Mexico becomes more attractive to investors. A recent PricewaterhouseCoopers report projected Mexico as the 7th largest economy in the world by 2050.
Mexico Business Advantages
One of the biggest advantages you get when doing business in Mexico is the fact that you can benefit from the nation’s trade policies. Mexico has a strategic geographical location. By opening its borders, the country connects North and South American consumer economies effectively. In addition, its currency is weaker compared to other nations, and its labor costs compete with China. Overall, these factors make Mexico a formidable force to beat.
Most Mexican consumers are accustomed to many foreign brands and products. Thus, such adaptability and familiarity smoothen the process of launching and expanding new businesses in Mexico.
This nation also enables company entrants to get first-mover advantages. If your business has commenced doing business in Mexico’s emerging economy beforehand, then you can dominate the market easily. Depending on how unique the platform is, you may even lead the industry with your brand. Once you’ve established a name and reputation for your business, gaining partnerships will almost be a walk in the park.
Challenges Of Doing Business in Mexico
Ideally, doing business in Mexico should not be as hard compared to other countries. However, it’s not necessarily as easy as stealing candy from a baby either. Certain challenges are inevitable, but they turn out to be valuable lessons you will encounter along the way. It’s much satisfying to overcome these trials as they strengthen your resolve and enhance your knowledge overall.
Starting a Business
Starting up a business in Mexico is generally more manageable today than it was decades ago. Nevertheless, complexities will still put you in a bind especially if you don’t have the right connections. Legal terms can be tricky and complicated to comprehend. The language and the way they are interpreted adds to the intricacy as well. There are several procedures which can help you in navigating these matters. Hiring local experts is one of them.
Mexican Business Culture
In Mexico, a usual business culture meeting starts off slowly. The higher-ups decide and execute business plans only at the end of each assembly. In addition, there’s a huge disparity between the executive level and the lower levels of the company. There may be instances when a single owner makes all the business decisions instead of a team or the board of directors. As you can see. these traditions are not out of the ordinary, so you can easily adapt.
Mexico has a well-developed financial sector which promotes getting credit for a better financial standing. While the process itself is relatively complicated compared to most developed nations in the world, progress is still possible. There will always be a room for improvement, but this might take quite a long time.
Paying taxes is typically a laborious process in Mexico. It takes approximately 337 hours of business time annually. For instance, a corporate income tax of 30 percent alone takes 155 hours to complete. VAT filing and social security contributions may also take longer than usual to accomplish. Unfortunately, the issue lies deep within the government. Until they fix this problem, you need to practice patience. Currently, the automation process is slow, but it’s starting to improve thanks to modern technology.
Wherever you are in the world, the process of registering property will always be an arduous one. In Mexico, it takes a lengthy 74 days, compared to the 26-day norm for OECD countries. Dealing with the Public Registry of Property of the Federal District can be most demanding. The same applies for attaining a Certificate of Good Standing with the water service and Zoning Certificate of the property.
Trading Across Borders
Perfect opportunities don’t come cheap. It’s true that Free Trade Agreements provide lucrative trading deals with foreign nations. In reality, though, it’s not really that free, due to miscellaneous fees. In fact, these charges with trading across borders in Mexico are often costly. For example, the cost of importing is around $1,450 per container while exporting costs $1,780. These rates are far higher than average in South America and the Caribbean. Moving containers is also an issue because of time constraints. On average, it takes 12 days to import and export goods from one location to another.
Enforcing Contracts and Resolving Insolvency
Like everything mentioned in this article, these processes’ main problem is also time. It takes 415 days and 38 procedures to implement a contract, making it an intricately lengthy task. Meanwhile, the procedures for resolving liquidation are more modernized, although quite sluggish. It takes 1.8 years compared to 3.1 for the rest of South America and the Caribbean.
Doing Business in Mexico: Surpassing Trials
Now that you know the challenges you’re facing, it’s essential to gain local knowledge of the investment environment. You will also need good information on the legal, accounting and taxation side of things. This information will be your fundamental foundation when doing business in Mexico. If you’d like to learn more about Mexican business opportunities, contact Biz Latin Hub and we’ll take care of you. We guarantee to guide you in every step of the way, from starting up to branching out!