Doing Business in Mexico: 2015 Country Commercial Guide for U.S
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Doing Business in Mexico: 2015 Country Commercial Guide for U.S. Companies INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2015. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES. • Chapter 1: Doing Business In Mexico • Chapter 2: Political and Economic Environment • Chapter 3: Selling U.S. Products and Services • Chapter 4: Leading Sectors for U.S. Export and Investment • Chapter 5: Trade Regulations, Customs and Standards • Chapter 6: Investment Climate • Chapter 7: Trade and Project Financing • Chapter 8: Business Travel • Chapter 9: Contacts, Market Research and Trade Events • Chapter 10: Guide to Our Services Return to table of contents Chapter 1: Doing Business in Mexico • Market Overview • Market Challenges • Market Opportunities • Market Entry Strategy Market Overview Return to top Top Five Reasons Why U.S. Companies Should Consider Exporting to Mexico: • Location, location, location – it is literally right next door, and has well-developed supply chains. • NAFTA has eliminated most tariffs, reduced paperwork for exporting to Mexico and increased demand for U.S. goods and services. • Mexico continues to experience strong economic growth. • Recent economic reforms have liberalized key sectors such as energy and telecommunications. • Close cultural, social and economic ties make Mexico a natural market to consider for first-time and expanding exporters. The North American Free Trade Agreement (NAFTA), which was enacted in 1994 and created a free trade zone for Mexico, Canada, and the United States, is the most important feature in the U.S.-Mexico bilateral commercial relationship. Mexico is the United States’ third largest trading partner and second largest export market for U.S. products. U.S-Mexico bilateral trade in goods increased from $88 billion in 1993, the year prior to the implementation of NAFTA, to $535 billion in 2014, an increase of 508 percent, or 9.8 percent per year. Negotiations are now underway for the Trans-Pacific Partnership (TPP), with U.S. and Mexican participation. The two countries seek to boost economic growth by increasing exports in a region that includes some of the world’s most robust economies and that represents more than 40 percent of global trade. The TPP presents an opportunity to go beyond NAFTA. With the recent passage of Trade Promotion Authority by the U.S. Congress, President Obama hopes to complete TPP this year. In May 2013, President Obama and Mexican President Peña Nieto announced the High Level Economic Dialogue (HLED), which was launched by Vice President Biden and his Mexican counterparts on September 20, 2013 in Mexico City. The HLED involves several government agencies from the United States and Mexico that are working together to promote competitiveness and connectivity; foster economic growth, productivity, and innovation; and partner for regional and global leadership. Within the framework of the HLED, our governments are working in conjunction with the private sector to identify and reduce barriers to trade 2 between our two countries and to increase opportunities for both U.S. and Mexican companies in our two markets. To learn more about the HLED visit www.trade.gov/hled. To further HLED efforts to promote entrepreneurship, stimulate innovation, and encourage the development of human capital to meet the needs of the 21st Century economy, Presidents Obama and Peña Nieto also announced a Bilateral Forum on Higher Education, Innovation, and Research (FOBESII), which was officially launched in May 2014. Through the Bilateral Forum, both governments are seeking to expand student, scholar, and teacher exchanges; increase joint research in areas of mutual interest; and share best practices in higher education and innovation. In 2013, the two Presidents also announced the creation of the Mexico-United States Entrepreneurship and Innovation Council (MUSEIC). The Council is composed of seven subcommittees, providing a legal framework for programs that encourage innovative entrepreneurship, promote women’s entrepreneurship, exchange best practices on technology commercialization, and engage entrepreneurs among the Latin American diaspora residing in the United States, supporting entrepreneurs of small and medium-sized businesses, developing regional innovation clusters, and sharing best practices on financing high-impact entrepreneurship. Mexico, a stable democracy, is the most populated Spanish speaking country in the world. Its population of over 120 million people is 79 percent urban. Ten percent of the population is considered wealthy and about 45 percent live in poverty earning less than $10 per day. The remaining 45 percent of the population is considered middle class. Mexico has a very young population with a median age of 27. It offers a large market with a GDP of approximately $1.26 trillion with a 2014 estimated per capita income of $17,900 (World Bank figures show $10,300 without purchasing parity). With a shared Western and Hispanic culture, U.S. producers may find it straightforward to market and sell their services and products in Mexico. There is a large installed base of manufacturing in a wide range of sectors. Mexico’s GDP growth slowed from a strong average of 4.3 percent between 2010 and 2012 to 1.1 percent in 2013, and improved slightly to 2.1 percent in 2014. The World Bank estimates GDP growth to strengthen from 2.9 percent in 2015 to 3.5 percent in 2017, with growth overall strongly tied the U.S. economy and world oil prices. In 2013 and 2014, Mexico passed sweeping reforms in the energy, telecom, labor, financial, and education sectors. All of these are positioning Mexico to increase its competitiveness. The energy and telecom reforms offer a multitude of new opportunities for U.S. firms. Market Challenges Return to top Mexico’s size and diversity are often under-appreciated by U.S. exporters. It can be difficult to find a single distributor or agent to cover this vast market. Also, the Mexican legal system differs in fundamental ways from the U.S. system, so U.S. firms should consult with competent legal counsel before entering into any business agreements with Mexican partners. The banking system in Mexico has shown signs of growth after years of stagnation, but interest rates remain relatively high. In particular, small and medium-sized enterprises (SMEs) find it difficult 3 to obtain financing at reasonable rates despite Mexican Government efforts to increase capital for SMEs. U.S. companies need to conduct thorough due diligence before entering into business with a Mexican firm, and should be conservative in extending credit and alert to payment delays. As one element in a prudent due diligence process, the U.S. Commercial Service offices in Mexico can conduct background checks on potential Mexican partners. U.S. companies should assist Mexican buyers explore financing options, including Export-Import Bank programs. Mexican customs regulations, product standards and labor laws may present pitfalls for U.S. companies. U.S. Embassy commercial, agricultural, intellectual property rights, standards, and labor officers are available to counsel firms with respect to regulations that affect their particular export product or business interest. Continued violence involving criminal organizations has created insecurity in some parts of Mexico, including in some border areas. For more detailed information it is strongly recommended that prior to travel to Mexico, you consult the Department of State’s Travel Warning web site (http://travel.state.gov/travel/cis_pa_tw/tw/tw_5815.html) and country specific information (http://travel.state.gov/travel/cis_pa_tw/cis/cis_970.html) on Mexico. Market Opportunities Return to top Abundant market opportunities for U.S. firms exist in Mexico; $580 billion in trade in goods and services crosses the U.S.-Mexico border every year – almost $1.6 billion every day between the two countries. Mexico’s current administration came into office in December 2012 for a six year term. In April 2014, President Peña Nieto announced a consolidated National Infrastructure Plan. The plan focuses on major sectors: transportation, water, energy, health, urban development, communications, and tourism with an anticipated total investment of $586 billion through 2018. As these projects develop, opportunities to participate in major projects, sub- contracts, and sales to the federal government will grow. Mexico’s geographic proximity to the United States has propelled the ‘maquiladora’ industry near the U.S.-Mexico border. This phenomenon and other global economic factors are providing U.S. businesses with increasing alternatives to Asia-based manufacturing and opportunities to sell into regional supply chains. Labor rates are competitive with China and a robust logistics network allows rapid transport of goods to U.S. consumers. Some of Mexico’s most promising sectors include: agriculture; agribusiness; auto parts & services; education services; energy; environmental technology; franchising; housing & construction; packaging equipment; plastics and resins; security & safety equipment and services; information technology sectors; transportation infrastructure equipment and services; and travel & tourism services. A complete list of the top prospects in Mexico is provided in Chapter Four. However, given the size of the Mexican market, there are numerous other promising prospects, including food processing equipment, architectural and engineering 4 services and more. If an industry is not explicitly mentioned