Mexico offers investment and business opportunities that have investors scrambling in to reap the benefits. Although forming a company here is a promising venture, doing business in Mexico can be a complicated task that requires local knowledge and perseverance. Read on to learn why Mexico is considered a great place for your future business plans and the challenges you might face when doing business there.
Mexico has transformed its reputation and has become a land of opportunity. To make itself more attractive to investors, the Mexican government has made improvements to its infrastructure and has made progress in various sectors. A recent PwC report estimated that it would become the 7th largest economy in the world by 2050, behind the strong Latin American competitor Brazil and neighbor US.
Doing Business – Mexico Business Advantages
One of the biggest advantages Mexico has are its trade policies. By opening its borders, Mexico has become a strong manufacturing base, with a strong connection to consumer economies in North and South America. This, a weakened peso, and a stable low price of labour compared to its manufacturing adversary China, makes Mexico a force to be reckoned with.
Although Mexico is a promising country to do business in, there are still many challenges to overcome when doing business in the country. Because of this, we have listed the top 8 challenges you might have to deal with when conducting business in Mexico.
7 Challenges When Doing Business in Mexico
Starting a Business
Starting a business in Mexico, although more manageable today, can be a complex process if one does not have the right connections and does not know the process well. Although it has become easier (the World Bank and International Finance Corporation (IFC) improved Mexico’s rank by 38 places this year) still it can be tricky and complicated. There are several procedures which can be delicate to navigate for firms unfamiliar with the Mexican business environment.
In Mexico’s typical business culture meetings start off slowly, and business decisions are not made until the end. There is a large gap between the executive level and the various levels of the rest of the company. For example, business decisions are likely to be made by one person rather than a team or board of directors.
Mexico’s well developed financial sector puts it in good standing in terms of getting credit. However, progress can be made, and it is still relatively difficult compared to most developed nations in the world.
Paying taxes is a time consuming process in Mexico, taking some 337 hours of business time per year. Corporate income tax at a rate of 30 per cent takes 155 hours alone to complete, and VAT filing and social security contributions take longer than usual to process.
Registering property is a long and arduous task, taking 74 days in total compared to the 26-day norm for OECD countries. Dealing with the Public Registry of Property of the Federal District can be particularly time consuming, and obtaining a certificate of good standing with the water service and the Zoning Certificate of the property can also take some time.
Trading Across Borders
There is a high cost associated with trading across borders in Mexico, far higher than the average in South America and the Caribbean. This is due to how lucrative the trading business is due to the free trade agreements. The cost of importing is around $1,450 per container and exporting costs $1,780. It also takes quite a long time to move containers, 12 days when importing and exporting on average.
Enforcing Contracts and Resolving Insolvency
It takes 415 days to enforce a contract, and there are 38 procedures involved in doing so, making it a complex task. Resolving insolvency, on the other hand, is more streamlined, taking only 1.8 years compared to 3.1 in the rest of South America and the Caribbean.
Having local knowledge of the investment environment and good information on the legal, accounting and taxation framework can therefore be an asset for anyone choosing to do business in Mexico. If you would like to learn more about how to do business in Mexico or other Mexican business opportunities, please contact Alex at here.