Starting a business in Mexico has long been a popular choice among investors seeking to enter Latin America, thanks to a business-friendly environment and the country’s proximity to the major market of the United States. While the COVID-19 pandemic has seen investor confidence take a knock on a global scale, it is still a good time to start a business in Mexico, with four great reasons discussed below.
After Brazil, Mexico is Latin America’s second-largest economy and has seen considerable growth in gross domestic product (GDP) in recent years to reach $1.27 trillion in 2019 (all figures in USD). Gross national income (GNI), which is a key marker of overall prosperity, has also seen a corresponding rise to reach $9,430 per capita that same year.
Mexico is known as a regional trade hub, being the 17th-largest exporter in the word, and is a participant in multiple free trade agreements, providing local businesses preferential access to key markets around the world.
Among Mexico’s major export products are petroleum oil, computers, vehicles, and fresh produce, with the United States accounting for 76% of Mexican export goods, while Canada, China, Germany, and Japan are also key trade partners.
If you are looking to expand your business into Latin America, read on to understand some of the best reasons to start a business in Mexico. Or go ahead and contact us now to discuss how we can be of assistance.
4 reasons to start a business in Mexico
1. A recent history of strong growth
Mexico has seen considerable growth over recent decades, with GDP increasing almost six-fold between 1989 and 2019. That growth has been met with a rise in foreign direct investment (FDI) into the country, which hit a historic high in 2013 when it reached $3.985 billion. While the inflows of $2.313 billion witnessed in 2019 were more modest, they still place the country as one of the top destinations for investment in the region.
Expectations regarding Mexico’s future growth and prospects as an investment destination saw it named as one of the four “MINT” countries in 2011, along with Indonesia, Nigeria, and Turkey. While Mexico’s economy has taken a serious knock from the COVID-19 pandemic, it is expected to bounce back to pre-pandemic levels by early 2022, giving investors good reason to bet on the country as an ideal destination for investment.
2. Foreign capital-friendly investment norms
The Mexican government generally works hard to promote foreign investment into the country and among the major draws to entering the market is the fact that you can start a business in Mexico with just foreign capital. That means that you will not have to go through costly or drawn-out transfers of assets in order to make an initial investment.
Moreover, since 2012 the country has had no minimum capital limits for company formation, meaning that you can expand into the country with little by way of initial investment, keeping your tax and other financial obligations low until you are ready to take your commercial activities to the next level.
3. Access to key markets
One of the major draws to Mexico for investors is access to the massive United States market — both in terms of it being geographically adjacent, as well as offering preferential access to Mexican companies thanks to its participation in the United States-Mexico-Canada Agreement (USMCA). However, the access to key markets that companies based in Mexico enjoy goes much further than that.
While Mexico has an FTA in place with the European Union, all of the countries in Central America other than Belize, and Japan, its participation in the Pacific Alliance also offers preferential access to Chile, Colombia, and Peru — three of the most important economies from the region. Moreover, with the organization apparently seeking to expand beyond the region, and the likes of Canada, Singapore, and Australia mentioned as potential future members, foreign executives will have even more reasons to start a business in Mexico.
4. A wide range of opportunities to start a business in Mexico
While being a popular destination for investment, foreign investors can still encounter a number of strong business opportunities in Mexico. Below three of them are highlighted:
Fintech: Financial technology (fintech) is a rapidly growing sector in much of Latin America, with Mexico no exception. Much of the country’s tech industry is based around the city of Guadalajara, which has been branded the Silicon Valley of Mexico.
Given the significant increase in prosperity in the country in recent years, an increasing number of people are joining the conventional financial and banking system, while internet penetration has spiked over recent years. That provides a growing market for fintech companies, who can count on a large and growing population of IT and tech professionals available at highly competitive rates.
Medical cannabis: With a bill for legalizing cannabis production for medical and recreational use partially passed in March 2021, the future of the cannabis industry in Mexico looks very bright and represents a great opportunity for investors looking to start a business in Mexico.
Already cannabis can be produced for industrial purposes under certain conditions, however with attitudes in the country changing and growing support for marijuana legalization, the recent bill points to a more deregulated and highly lucrative future for cannabis production in the country.
With an ideal climate and available arable land for large-scale production, the medical cannabis market, as well as that for recreational marijuana, can be expected to see exponential growth in the near future, giving foreign investors serious cause to consider entering the sector.
E-commerce: With the growth of internet uptake and participation in the financial system in mind, Mexico offers major prospects in the e-commerce space. While the pandemic saw the sector grow 32% in 2020, to reach revenues of $19 billion, that followed years of growth for the sector, which still has a lot more growing to do.
Moreover, given the country’s proximity to the United States, which represents a massive market for e-commerce, companies based in Mexico have significant opportunity to grow.
Biz Latin Hub can help with company formation in Mexico
At Biz Latin Hub, our multilingual team of company formation experts can provide the support you need to start a business in Mexico. With our full suite of back-office support services, including legal, accounting, and recruitment assistance, we can be your single point of contact for establishing a legal entity and doing business in Mexico, or any of the 15 other countries around Latin America and the Caribbean where we are present.
Reach out to us now to discuss how we can support you in achieving your business goals.
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