Challenges of Doing Business in Mexico and How to Overcome Them

Although executives might face multiple challenges when doing business in Mexico, the country is positioned as one of the best destinations for foreign investment in Latin America. Mexico’s strategic geographical location serves as a connection with the United States, Canada, Central and South America. Likewise, the country has different seaports that connect with the Pacific and Atlantic oceans; not to mention the size of the market and its population.

Furthermore, the United States Mexico Canada Agreement (USMCA) gives an additional boost to Mexico’s potential attraction for foreign investment, offering greater benefits, facilities for doing business, and certainty for companies incorporating in the country.

However, expanding in the country can present a series of challenges that require a certain degree of knowledge of legal, accounting and fiscal aspects. Learn about the challenges of doing business in Mexico and how to overcome them.

Starting a business in Mexico

Doing business in Mexico without knowing the right people and without having clear steps to follow can lead to a maze of endless predicaments.

Man using his tablet to search information about challenges of doing business in Mexico.
Although Mexico is a great destination for foreign investment, it can be challenging to expand in the country.

While it is true that in recent years the Mexican authorities have sought ways to simplify legal and tax processes, bureaucracy is very common in the country and it can often hinder or delay the process of establishing a company. Thus, it is important to seek professional support when starting a business in the country. The following are some of the challenges executives might face in the early stages of starting a business in Mexico:

Getting credit and loans: Obtaining credit when doing business in Mexico can be more complicated than one would expect. Likewise, interest rates may not be very competitive. Therefore, you must conduct a thorough investigation to identify the financial institution that offers the best credit conditions. 

Taxes: In Mexico, you must file both monthly and annual tax returns. This process demands a considerable amount of time, in addition to knowing how to navigate the tax authority’s digital platform. Likewise, in the case of having employees, you must make social security withholdings and monthly payroll payments. In this case, it is recommended to hire local staff through a Professional Employer Organization (PEO).

Registering a Property: This process must be carried out before the Public Registry of Property and it can take between 2 and 3 months, so you must be patient. Additionally, the process of registering a property when doing business Mexico varies depending on the specific geographic area where the property is located.

Enforcing contracts and resolving insolvency: Legal proceedings in Mexico are mainly characterized by being complicated and time-consuming. Requesting something in the wrong instance may represent a delay of at least 3 months. A court case can take a minimum of 1 year to resolve. Therefore, the ideal is always to reach an agreement if a conflict arises.

Immigration Permits

Woman at home using her computer to search information about challenges of doing business in Mexico.
The process of obtaining a business visa in Mexico can take up to 4 months.

Recently, obtaining a temporary resident visa to carry out business activities in Mexico has become a long and bureaucratic process. It takes up to 4 months to obtain the registration that allows a company to hire foreign employees and once this permit is obtained, the process for the employee to obtain the temporary resident card can take another 4 months. 

Although this process is complicated in most countries of the region, in Mexico the degree of difficulty is increasing. Furthermore, the criteria regarding requirements are constantly being modified. If are considering doing business in Mexico, you must be attentive to any new publication issued by the Migration’s national institute.

Relationship with Employees

Mexican law can be considered protective of employees. During a lawsuit, the employer will always have the burden of proof, which means that he must keep detailed records of his dealings with the employees. This makes it particularly important to choose carefully who to work with and to have thoughtfully designed labour contracts.

Language

Anyone would think that Mexico, being a neighbouring country to the United States, would have to be familiar with the English language. However, the reality is different, a large part of Mexicans do not even have a basic grasp of the English language. It will be very common to find people who claim to speak English, but the moment they are asked a question in this language, they won’t be able to answer. This can add to the various challenges when doing business in Mexico.

Overcome the challenges of doing business in Mexico with the support of an expert

In order to overcome the challenges of doing business in Mexico, you must seek the support of a local expert who knows how to deal with these challenges. Find a trusted legal representative to guide you through the required documentation. Your legal partner must have an in-depth understanding of Mexican law to assist you with the key steps to start a business in Mexico.

At Biz Latin Hub, our team of experienced local lawyers and accountants have vast experience helping businesses with company formation, legal representation and hiring services. For more information about how we can help, contact us now and get started with your own personalized strategy for doing business in Mexico.

Infographic: Biz Latin Hub Services.

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