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2. Expanding a Business

Why Expand to Mexico?

In the past, business companies may have found it difficult expanding a business in Mexico, but the country does not deserve the reputation it has somehow earned. The world is changing and the United Mexican States (this is the official name of the country) has been through substantial improvements.

Mexico is the eleventh more populous country in the world: it is home to 111 million people. It has reached a level of political maturity and economic stability that makes it a more attractive place to do business than other developing countries. In the old days, with de facto one-party state, the economic fragility turned every problem into a crisis. Today the same country ranks in the best top 3 emerging markets in which to do business. Mexico is a country of huge potential that has demonstrated predictable, stable economic growth. It is a dynamic market and analysts predict that its economy will be larger than the UKs by 2040.

The country is huge: it covers roughly the same area as the UK, Germany, France, Benelux, Switzerland, Spain and Portugal put together. It is bordered on the north by the United States, on the south and west by Pacific Ocean, on the south by Guatemala, Belize and the Caribbean Sea, and on the east by the Gulf of Mexico. It occupies a strategic global position, being the natural bridge between Latin America to the south and the United States and Canada to the north.

The main industrial sectors are the automotive industry, whose standards of quality are internationally recognized, cement production, the alcohol beverage industries and high-tech industrial production. Mexico is also the sixth largest oil producer in the world and the eighteenth in gas production. Tourism is a huge industry, with the popular beach resorts and the ancient Mesoamerican ruins.

Energy, transportation and communications are well-developed and still profitable sectors for who is interested in starting a business in Mexico.

Mexico is the largest trading nation in Latin America and one of the worlds top 15. GDP grows steadily and the country has high levels of foreign direct investment. This has been driven by Mexico's competitive production costs, and its membership of the North American Free Trade Agreement (NAFTA). As the economy has grown so has the demand for imports.

Attractions for UK business

With its strategic location in-between the United States and Latin America, Mexico has the potential to act as a springboard into the region as well as being an attractive proposition in its own right. UK exports of sophisticated goods and services have grown due to the increasing demand.

Moreover, both the Mexican government and businesses desire to reduce dependency on trade with US. The European market, with UK at the top of the list, is their first available alternative.

Mexico is an attractive proposition for UK companies wishing to set potential, still mean that Mexico is an option that should be seriously considered, not just for the straightforward assembly carried out by the maquiladoras (see financing a business section), but also as a base for a more sophisticated manufacturing operation. The success of the industry lies in the favourable labour market in Mexico, with its relatively low wage rates compared to those in industrialised nations, coupled with Mexico's proximity to the USA.

Business opportunities

There are many opportunities for setting up a business in Mexico, and in a wide range of sector. According to the UK Trade and Investment agency the fastest growing sector in the country is the

• aerospace industry (engine, components, engineering design for military and civil application, machining parts, environmental solutions, maintanance, repair services)

Other interesting sectors in which expanding a business in Mexico can be profitable are:

• Automotive (raw material, components and high tech components, after market)

• Consumer goods (high-end furniture and interior design, designer fashion merchandise, apparel, shoes and accessories)

• Creative and media (consultancy on branding and marketing, TV content production, cinematographic industry consulting and production financing)

• Education (software teaching, English language training course and material, ICT education technologies, didactic materials, vocational training on engineering, distance learning)

• Environment (waste management and recycling, water and air pollution control, contaminated land remediation, consultancy)

• Food and drink (sweet and confectionary, dairy including refrigeration, packaging and advertising, beer, calcium rich and energy specific products, organic food)

• Healthcare (biomedical products, medical equipment, pharmaceuticals, hospital management, consultancy, medical informatics, primary healthcare and paramedics)

• Infrastructures (consulting engineers, security consultants, facilities managers)

• Mining and steel (mineral exploration, machinery, new technology, feasibility studies, know-how)

• Oil & gas (equipment and service, deepwater technologies, environmental control, training and education)

• Power and renewable energy (plant modernisation and maintenance, metering, solar, wind and mini hydro energy technologies)

• Security (IT infrastructure, voice detection, explosive detection, CCTV cameras, X-ray, data management software, mobile phone jammers, biometrics, anti-riot equipment, training)

• ICT (wireless , electronic consumption products such as MP3 players, mobile phones, USBs and hard drives, digital cameras, recycling)

• Leisure, Sports and Tourism (hotel and resort investors, hospitality equipment, sports infrastructures, sports apparel, leisure marine)

Once you have decided which sector is right for you, you will need to identify the location in which starting a business in Mexico is the best for you. The biggest commercial centres are Mexico City, Monterrey, Guadalajara, Villahermosa and Tijuana. In each of these cities there is at least one UK Trade and Investment team.

Challenges

It can be a very complex to start up a business in Mexico. There are obvious differences such as culture, language (Spanish is the main language used in business) and currency. Other challenges include the Mexican bureaucracy and a complicated tax regime. Seek expert advise to avoid potentially costly mistakes. One of the biggest challenges is the labor law: ignorance in this area can be very costly.

If you are expanding, licensing or incorporating a business in Mexico, mind that Mexicans do not respond well to impersonal means of communication or of selling. In general Latinos prefer to speak to a human being. Internet sales in general have not done as well in Mexico, not just based on how many people have access to the Internet, but also to cultural preferences. Also, voice-mail systems are often labelled Hispanic unfriendly.

Moreover, remember that Mexicans love to negotiate, usually dont take the first offer, and take their time when making a decision.

Click here to Ask an Expert about Expanding a Business in Mexico