Pros And Cons Of Doing Business In Mexico — Should You Go?
By: Madison Betlem
Tags: Business, Mexico, Spanish, Pros And Cons

ACCESS TO CUSTOMERS

Everyone knows about NAFTA, but Mexico also has a number of import-export treaties with countries around the world. So when investors set up factories in Mexico, they are often not just eyeing customers in the USA. They are looking to take advantage of free trade agreements to export their products across the globe.

Further, Mexico’s 120 million consumers make it a promising local market for a variety of industries.

Mexico’s 120 million consumers make it a promising local market for a variety of industries.

“There is an enormous number of consumers,” said Felipe Dominguez Pulido of Moore Orozco Medina. “People in Mexico have money and they’re willing to spend it on American goods and services… there are more than 100 million Mexicans consuming goods and services, so there’s no company abroad that doesn’t have a market in Mexico.”

For example, he said, Kia vehicles were initially only imported, but they sold far above company predictions, so Kia started manufacturing in Mexico to reach the market more effectively.

There are a wide variety of business opportunities in Mexico. According to Export.gov, the most promising industries for export to Mexico include agribusiness, airport and ground support equipment, automobile parts and supplies, education and training services, franchising, housing and construction, packaging equipment, plastics, security and safety equipment, technology, transportation and infrastructure equipment.

STRONG MANUFACTURING AND BUSINESS ENVIRONMENT

As mentioned above, both the proximity of Mexico to the United States and the trade agreements in place make importing goods from Mexico promising for many companies. But what’s more, Mexico has a strong manufacturing proficiency.

A factory does not exist in a vacuum. It requires skillful workers to do production and technicians to repair equipment. It requires vendors nearby that can confer with you on your needs and provide materials just in time. It also requires road, rail, and seaport infrastructure as well as utilities.

So setting up manufacturing requires not just a building and workers. It requires an entire manufacturing ecosystem. Fortunately, in Mexico the skills and the infrastructure are already in place, which make the country great for many types of manufacturing.

According to the US Department of Commerce (PPT), various regions have different manufacturing competencies. For example:

Guadalajara: “Mexico’s Silicon Valley” produces electronics, industrial process controls, food processing equipment, etc and is home to the largest expo center in Latin America. International companies include Oracle, HP, Intel, and IBM.

Monterrey: Home to over 1,800 foreign companies including Mattel, Coca-Cola, and Whirlpool, Monterrey is responsible for 11% of Mexico’s manufacturing. Industries include automotive, appliances, packaging, construction materials, and biotechnology.

Tijuana: With a manufacturing workforce of more than 160,000 employees, Tijuana can get it done. Main industries include medical, electronics, plastics, and automotive. International companies include Toyota, Samsung, and Kyocera

Mexico City: A manufacturing hub centrally located by major manufacturing centers such as Toluca, Puebla, and Queretaro.

Besides the manufacturing proficiency and infrastructure of Mexico, there are also many other advantages for businesses such as special tax policies. The financial and business laws in Mexico are well-established and well-documented.

Also legal compliance can be done over the Internet rather than in person or by snail mail, which greatly increases efficiency.

Although the legal environment of Mexico may be unfamiliar to U.S. businesspeople, fortunately there are a good selection of Mexican tax and business consulting agencies across Mexico and the United States to help you take advantage of government policies and to stay out of trouble.

LEGAL PROTECTION FOR IP

In many countries intellectual property rights have very little protection. Starting production in those places is almost a guarantee of losing your intellectual property. However, Mexico has strong legal protections for intellectual property rights, said Pulido, which can help protect your company’s patents.

The Cons

Not everything in Mexico is sunshine and . . . resorts. There are also some drawbacks or challenges of doing business in Mexico. Here are a few things to watch out for.

AVOID THE BAD GUYS

In every country you need to be careful about who you work with in order to avoid being cheated. But in Mexico there’s a further reason to be careful. It’s vital for your company’s legal representative to maintain a good record with the government, and having shady connections can hurt that record, Pulido said.

So, if you are doing business with a supplier that is connected to a gang network, your reputation with the authorities could be affected. That just adds another reason to why, as in every country, you should be careful about who you work with.

CRIME

The names of Latin American drug lords such as Joaquín “El Chapo” Guzmán have become household names. That leads many people to consider crime as one of the greatest risks of doing business in Mexico.

True, in Juarez and other border cities, drug dealers and smugglers contribute to crime in the city.

However, Payán says that factories typically have security inside and outside the plant, and they screen anyone who enters. Also, visiting personnel have the option of traveling with security if necessary.

But as is the case in America, he says, it all depends on where you travel. Some places are quite safe whereas others are more dangerous.

“We work in Juarez, and we don’t have guards,” he said. “We travel anywhere we want in the city. That’s the same for people traveling here from El Paso.”

“It’s safer now but, of course, you have to be careful with what you do,” he said. “Just like in Chicago there are places you shouldn’t go because the areas are not safe. It’s the same here.”

Ironically and sadly, the day after we spoke with Payán, the mass shooting occurred in El Paso right north of the border. That just goes to show that safety risks can be anywhere, and people should always be aware of dangers.