This article will give you an update on current Mexican economic performance, provide an account of the key considerations that should be taken into account and explain the process of incorporating a company in Mexico. Read on and find out more.
Investment Opportunities in Mexico
Mexico is undoubtedly one of the most exciting investment opportunities in Latin America and is currently enjoying a particularly positive economic period. Unemployment is currently at its lowest point in a decade, at only 3.2% of the economically active population, whilst there is a sense of political optimism following the election of the liberal President Andrés Manuel López Obrador (AMLO) on July 1st.
Mexico provides 2/3 of Latin American exports and has expanded its trade deals in recent years, including the recently signed CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership). It is an international leader in mineral, beer and oil production, in addition to an impressive and established network of trading partners. Mexico is also emerging as a leading contributor to the service sector. Furthermore, it has been highlighted that the Mexican economy is currently stable and non-volatile in its performance. OECD described the labour market as ‘buoyant’ in a piece that elaborates on the positive status of the economy. The long-term optimism for the Mexican economy is mirrored by the fact that by 2050, the country is projected to be the 7th largest global economy.
Key Considerations – Doing Business in Mexico
Despite exhibiting such positive trends, there remain a few complications that must be explained before you jump into establishing your business! Forbes highlights the aforementioned resilience of the economy but suggests that Mexico’s performance in the global market is largely influenced by macroeconomic variables in the United States. Given the fact that nearly 80% of exports are with the US, the heavy tariffs recently imposed on steel and aluminium trade and the continued uncertainty regarding the future of NAFTA (North American Fair Trade Agreement), means that there is a real fear Mexico will suffer as a result of worsened relations with their northern neighbours.
Furthermore, possibly as a result of the disastrous earthquakes that struck Mexico City in September 2017, short-term economic growth is expected to be lower than anticipated. The IMF expects growth in 2018 to only reach 1.9%, although this is projected to hit 2.7% in 2019. This immediate negative impact on the economy may be a sticking point for any investors hoping to incorporate their business in Mexico.
Steps to Incorporate a Company in Mexico
1. Power of Attorney (POA): The first step in incorporating a new business in Mexico is to draft and sign a Power of Attorney. This is a document that authorises another party to represent an individual or company in business and commercial affairs. A POA or ‘Poder’ is a useful tool that can allow the investor to form a company without being physically present in Mexico during the company incorporation process.
2. Choose the type of legal structure for your business needs: This is broadly split into two categories: LLC (Limited Liability Corporation) or a Stock Corporation. An LLC (Sociedad de Responsabilidad Limitada, S.R.L) will help provide insulation to you as an investor and will mean you are not personally liable for the debts or funds of your company. A Stock Corporation (Sociedad Anonima) differs in that shareholders are only responsible for their own contributions and assets.
3. Choose your shareholders: There must be at least two (2) shareholders in your company and they can be a natural or legal person (an individual or a company). You must inform the authorities how much of the company each shareholder will be responsible for, as well as sharing basic information about each individual: Name, Date of Birth, Nationality etc
4. Register your company: It is now necessary to register the company in the Public Registry of Commerce and the National Registry of Foreign Investment.
5. Apply for Tax ID Number: In order to obtain your Tax ID number (RFC), you must simply register with the Ministry of Finance and Credit (Secretaría de Hacienda y Crédito Público). This will take you 1 to 3 days.
6. Open your bank account: Finally, before business can begin to boom for you and your colleagues, you need to open a corporate bank account.
Need More Information on Incorporating a Company in Mexico?
Despite a complicated political and trading relationship with the United States, and the slight fall in projected economic growth for 2018, Mexico remains a major player in the international market and is still considered one of the most attractive places to start a business in Latin America.
Should you have any questions or concerns regarding the steps to take in order to incorporate a company in Mexico, or any queries regarding the market, we’ll be delighted to assist you. Our team can provide you with tailored market entry and back-office services to make settling into the Mexican market a stress-free process. Don’t hesitate to contact our CEO, Craig at [email protected] to see how we can support you and your business in Mexico.
Learn more about the company formation process in Mexico with the following video!