Nov 12

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Mexico – Business Growth Strong Despite Narco Headlines

Despite the daily flow of news headlines about declining security and increasing battles between the Mexican police and drug cartels, Mexico has not fallen off of the business and international credibility radar screen.  In fact, the World Bank, in its “Doing Business 2011” report, ranked Mexico 35th out of 183 economies (moving up 6 places from last year) and 1st out of 32 countries in Latin America and the Caribbean – well ahead of the region’s largest economy, Brazil. 

The World Bank index covers 9 stages in the life of a business: starting a business, construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.  Mexico made vast improvements in starting a business by launching an on-line one-stop-shop (tuempresa.gob.mx) for initiating business registration as well as dealing with construction permits by streamlining processes related to zoning and utilities.  On the tax side however, it made things a little more difficult by raising corporate income tax rates and the rate on cash deposits.

In addition, Mexico is set to host a number of important international meetings in the next two years.  In only a few weeks, Cancun will play host to the annual United Nations Climate Change Conference (November 29 – December 10) where delegates from nearly 200 countries and another 5,000 – 10,000 participants will discuss a possible new global climate agreement and climate change financing for the developing world.       

In June 2011, the Mexico City National Chambers of Commerce (CANACO) takes center stage when they host the 7th Annual World Chambers Congress which brings together Chambers of Commerce and business organizations from all over the world providing opportunities to interact with companies in leading sectors such as energy, agriculture, trade, and services.  This is the first time the event is being held in Latin America.

In 2011, Mexico will also be setting the stage for its 2012 Chairmanship of the G-20.  The G-20 is made up of the finance ministers and central bank governors of 19 countries plus the European Union representing economies comprising 85% of global GNP, 80% of world trade, and two-thirds of the world population.  Since the 2008 financial and economic crisis, the G-20 is playing an increasingly influential role in strengthening international financial cooperation and regulations.

While all these meetings may be good for Mexico’s image and tourism industry, what does it mean for business?  Beyond the ‘perception factor’, important things to consider when doing business with Mexico are:

  • There are no tariffs on U.S. exports to Mexico.
  • Mexico is the U.S.’s 2nd largest trading partner.  In fact, trade is growing faster with Mexico than with China.
  • Business is done on the basis of close working relationships, so frequent trips and finding a local agent or distributor is usually necessary.
  • Remember that Mexico is a large and diverse country – be careful of trying to use a ‘one-size-fits-all’ approach.
  • Note the potential business opportunities arising out of Mexico’s 2007 National Infrastructure Plan which includes over 300 projects in the power, energy, airport, ports, and environmental sectors, among others.
  • Be conservative when extending credit to potential business partners and alert to payment delays – a due diligence process is important before entering into new business relationships.
  • Regarding security – yes, be prudent and take precautions where necessary; but it would be a mistake to avoid Mexico due to reports of escalating narco-related violence.

And, as with all international business ventures – be patient.  Mexico is not only open for business; it is positioning itself to be a leading regional player and an influential global economy.

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