In light of the social and economic repercussions caused by the COVID-19 pandemic, Mexico’s growing technology sector promises to be important to economic recovery in 2021. While many businesses were forced to close, in some cases permanently, due to restrictions imposed to curb the virus, others were either well positioned or adept at adapting to the ‘new normal’ in doing business. Here three Mexico tech companies that have fared well and can be expected to continue to grow after the pandemic are considered.
Mexico is the second-largest economy in Latin America and the 15th in the world. With a gross domestic product (GDP-PPP) of $1.9 trillion (all figures in USD) and a Gross National Income (GNI) of $9,430 per capita, the North American nation is home to thousands of international companies in various sectors, many taking advantage of its strategic geographic location between Canada, the United States, and South America.
Furthermore, Mexico is considered a major manufacturing hub in the region and has different seaports that connect with the Pacific and Atlantic oceans and a population of more than 128 million. The country is also a member of the United States Mexico Canada Agreement (USMCA), boosting Mexico’s potential attraction for foreign investors looking to relocate to the country and develop commercial operations in North America.
If you are interested in Doing business in Mexico, learning about the three Mexico tech companies to watch after the COVID-19 pandemic might provide you with valuable insights on how to maximize the chances of success when expanding in the country.
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The impact of the pandemic on Mexican business
Mexico was already dealing with an economic recession when the pandemic struck, which was deepened by the restrictions imposed to prevent the spread of the virus. The sectors most affected during the first months of the pandemic included construction, finance, manufacturing, and transportation. In addition, In April the country’s GDP registered a 19.9 percent drop, in comparison to the same month of 2019. It is estimated that more than a million formal jobs were lost due to the suspension of activities in multiple companies across Mexico, according to data from the Mexican Institute of Social Security (IMSS).
Mexican industrial activity fell 25.1 percent during April and March, and the commerce and services sector contracted 14.4 percent. Likewise, primary industries such as agriculture, livestock, hunting, fishing, and logging fell by 6.4 percent during the same months. According to the National Institute of Statistics and Geography (INEGI), in May alone Mexican exports experienced a reduction of 56.7 percent, with a decrease in oil exports a significant factor.
The manufacturing sector, central to Mexico’s economy, experienced a 30.5 percent contraction during the first months of the year, where the automotive industry was the most affected with a decrease of 81.1 percent in production. Following the same trend, the textile and machinery sectors suffered a contraction equivalent to 74 percent and 35 percent respectively.
Mexican Industries that saw growth during the pandemic
Due to the lockdowns and measures taken by the Mexican government to stop the spread of the virus, purchases made over the internet increased exponentially. According to figures from Blacksip, e-commerce in Mexico reported a growth of 500 percent during the first months of the pandemic, placing Mexico as the second country in Latin America in digital purchases, behind Brazil. The most purchased products through e-commerce platforms include electronic devices, personal accessories, clothing, and footwear.
This focus on the use of digital platforms has generated great growth opportunities for established tech companies in Mexico and startups. The recent growth that Mexican tech startups have experienced not only points to a positive outlook for the future of Mexico’s e-commerce sector, but also consolidates the country as an attractive destination for foreign tech companies.
The food industry also reported growth during the pandemic. According to Bosco de la Vega, president of the National Agricultural Council (CNA), the Mexican agri-food sector is expected to grow 2 percent in 2020. Other industries that recorded growth during the pandemic include the home appliance industry and logistics activities. Additionally, demand for products such as antibacterial gels and masks in Mexico increased by 30 percent.
Three Mexico tech companies to watch in 2021
The following tech companies in Mexico have grown during the pandemic and should be expected to continue on their upward trajectories in 2021:
Konfío is an online financial and loan management platform for companies in Mexico. Founded by Davida Arana and Francisco Padilla, Konfío is one of the Mexican startups that has obtained the most investment capital in recent years, having received more than $143 million from investors that include Japanese commercial titan Softbank. In September 2020, Konfío announced that it reached an agreement with IDB Invest to receive a new credit line of up to $64 million.
Located in Mexico City, Konfío provides various types of loans for small and medium enterprises (SMEs), including invoice financing, microcredits, and commercial lines of credit. It also offers business loans of up to $6 million over 60 months for settlement, credits of up to $2 million for up to 24 months, and “entrepreneur credits” up to $85 million for up to 24 months. Konfío’s catalog of services includes a virtual credit card and life insurance of up to $1.5 million. It also provides a tool to access the credit score and credit history of the business.
Kavak: online marketplace
Kavak is an online platform that offers the purchase, sale, and financing of pre-owned cars in Mexico at competitive prices. While some of the attraction of Kavak is its simple and user-friendly shopping experience, it also offers customers a range of financing options to obtain an automotive loan and a money back guarantee.
Once the purchase is made, the customer is given two options: go for the vehicle or take it home at no additional cost. The customer has a 7-day or 300-kilometer trial. In case of not meeting the customer’s needs, the vehicle can be returned for a full refund. This makes buying with Kavak particularly attractive compared to buying from a traditional car dealer.
This company has been growing at an average of 25 percent month-to-month since it was founded in 2016, and during the pandemic it increased online sales six-fold, experiencing a more than 100 percent increase in sales.
Jüsto is an online supermarket in Mexico that offers home delivery. Jüsto’s unique selling point is that it offers products that come from local producers or suppliers and not from commercial establishments, but at competitive prices. On this platform, Mexicans can find a wide variety of good quality products, while saving significant time compared to that usually spent at the supermarket.
Jüsto was founded by Ricardo Martínez and Ricardo Weder, former president of Cabify. This project has obtained initial financing of $10 million and in April reported more than $23 million in profit and estimated operational growth of 400% since its launch in 2019. With this capital at its disposal, this startup promises to continue to grow and have a disruptive influence on the supermarket industry in Mexico.
Mexico tech company ecosystem in 2021 and beyond
In recent years, Mexico has been considered one of the most productive ecosystems for the founding of startups outside the United States. The country has experienced an increase in startups valued at $1 billion, without them having begun to be listed on any stock market.
With more than 150 financial technology (FinTech) startups, Mexico has become major FinTech hub in Latin America, along with the likes of Argentina, Brazil, Chile, and Colombia. A significant number of these companies focus on payments, remittances, personal financial management, crowdfunding, and loans, among other services.
The country has also seen increasing tech innovation in other key sectors, such as mining, which is only likely to continue.
Biz Latin Hub can support you in doing business in Mexico
At Biz Latin Hub, our team of experienced market entry specialists is equipped to help you enter the Mexican market and take advantage of the country’s growing tech scene. With our full portfolio of corporate legal, accounting, and back-office services, our multilingual team is equipped to deliver excellence and ensure the success of your commercial expansion in the country.
Get in touch with us today today to discuss the assistance that you need.
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