International Trade

Doing Business in Mexico

Since we launched the TransferGo Blog, we’ve posted about the necessity of doing business on a global scale. At one point doing business internationally was difficult, if not impossible, for small and medium size businesses. However, modern technology, especially in the banking and money transfer sectors, has made doing business on an international scale easier than it’s ever been.

In this installment we look at Mexico, a country that offers attractive opportunities for small and medium businesses.

A Brief Overview

Over the past few years Mexico’s image has suffered from headlines concerning the practices and actions of drug cartels, and the political and police corruption that seems to enable the cartels to survive and grow. While there is no denying that cartels do exists and are active in modern Mexico, the country is not a lawless, outlaw nation. In fact, by and large the country is peaceful and safe and the citizens are friendly and helpful. The image of Mexico and its citizens has also suffered from the recent rhetoric of US politicians and anti-immigrant groups, including Donald Trump.

But neither of these things should prevent anyone from looking at business opportunities in Mexico. Anyone who’s travelled within the country will tell you that in Mexico you can find small and medium sized businesses owned and operated by citizens from around the world, from restaurants, bars and art galleries to bookshops, jewellery stores, and bed-and-breakfasts. Mexico also offers a number of attractive import and export opportunities.

Mexico is made up of 32 states. The democratic government consists of a President and a legislative and judicial branch. The currency is the peso. At current exchange rates one Euro is worth 22 pesos. Due to many infrastructure improvements and new regulations Mexico is the world’s 13th largest economy and the 11th largest in terms of purchasing power.

 Doing Business in Mexico

Every culture has its own unique cultural, legal, and social customs and regulations that have an impact on how business is conducted. A basic awareness and understanding of some of them is very beneficial for those looking to do business in Mexico.

  1. Contracts – Many contracts, especially those dealing with real estate, will be in both Spanish and English. If the contract dispute ever goes to court, only the Spanish part of the contract is considered. It is best to hire a lawyer to assist with any contracts. Resolving contract disputes can typically take more than 400 days.
  2. Many tasks take a long time to complete – Water and sewage connections can take a month to complete; obtaining a construction permit averages more than two months. Also expect meetings to start late or be cancelled. Arriving late to a meeting is part of the culture and is not meant as a sign of disrespect or rudeness. Be sure to confirm meetings several times after they have been scheduled, including the day before the meeting. This is not taken as a sign of rudeness.
  3. Paying taxes – If you are filing and paying taxes (VAT, corporate income and social security contributions) expect to spend the equivalent of slightly more than two months of work time a year completing and filing your taxes.
  4. Import/exports costs can be high – Shipping across borders can be expensive. A shipping container costs about $1800 to export.
  5. Business meetings progress slowly – The typical business meeting starts slowly and the main purpose of the meeting is discussed as the meeting comes to an end. Most business decisions are made by one person rather than by a group or committee. Mexicans tend to value personal relationships. Many business consultants state that how the business person feels about a person outweighs credentials, qualifications or company name. Family time is important too, so do not suggest weekend meetings.
  6. Make sure you understand the nuances of the language – Spanish is a wonderfully descriptive language, but that is not what we mean. For example most foreign speakers know that “manana” means “tomorrow”. When used in a business context it frequently means “at some time in the near future”. If a deadline is important for a decision, make sure everyone understands deadline dates.
    “Maybe” or “let me get back to you” generally mean “no.”  Most Mexican businesspeople do not like outright or overt disagreements. By the same token, if you use either of the terms during the meeting, the person you are negotiating with will assume you mean “no”, so pick your words carefully.
  7. Business relationships start rather formally – Even though personal relationships are considered important, initial meetings are rather formal. You should address people by their title, if you know it, or as “Senor” and their surname. Only use their first name if you are invited to do so. If you are meeting with a female businessperson do not extend your hand for a handshake; instead wait for her to extend hers. It is also considered to be rude to maintain prolonged eye contact.
  8. Be up-to-date on current rules – The Mexican government changes every few years. Often projects started by previous administrations are scrapped. This also occurs on a local level. Spend a bit of time researching current rules and regulations. A significant number of foreign citizens own businesses in Mexico and are generally very willing to discuss the nuances of dealing with local businesses and governments.

Mexico is a rapidly growing country that has successfully shed its image of a county rife with corruption. Infrastructure improvements and the growth of high-end manufacturing and technical plants, not to mention the companies that come with them, is well on the way to developing a highly skilled workforce. Mexican citizens seem to have a natural entrepreneurial spirit that also fosters small business development.  Many business analysts see the country as an excellent place for business investment and expansion.

Author: TransferGO

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