How to Do Business in Mexico

How to Do Business in Mexico

One of the best ways to grow your business is to join the global marketplace. While going international sounds like a big step, our neighbors to the north and south offer an easy way to source new products without going overseas. Mexico offers a uniquely secure landing area for US small businesses, especially in terms of tax breaks and lack of fees.

 

With the 13th largest exporting economy in the world, and its close cultural, geographic, and economic ties with the United States and Canada, Mexico is a natural market for many small businesses to expand to.

 

Beneficial international trade agreements have made it cheaper and easier to do business in Mexico, as there are no tariffs on qualifying goods imported or exported between the three nations.

 

Beneficial international trade agreements have made it cheaper and easier to do business in Mexico, as there are no tariffs on qualifying goods imported or exported between the three nations.

 

The Mexican government also provides various incentives for foreign investments, including several tax and administrative reliefs such as reduced customs fees and faster declaring imports and exports. Specifically, the IMMEX, ALTEX, and ECEX programs offer fee-reduction and tax breaks. But those are only the major ones. There are smaller and more specific programs on offer for other industries.

 

Introduction to Mexico

Mexico is both the largest importer and exporter in Latin America, conducting more international trade than all regional countries combined. It’s also the second largest economy in Latin America, behind only Brazil. Mexico’s largest trading partners are continental, with the US and Canada at the helm, while China rounds out the top three.

 

However, it was not always this way. Until about 25 years ago, the Mexican economy was largely insular, opening only under the government headed by Carlos Salinas (1988–1994). He and his constituents adopted an open economic stance which helped to establish such international trade agreements as NAFTA. Since then, Mexico has steadily risen into what the World Bank identifies as a “middle-income country.” The future looks bright for the Latin American powerhouse, with many analysts expecting it to become the world’s 5th or 7th largest economy by 2050. Considering this steady growth, it’s unsurprising that many small business ventures are looking to Mexico as an opportunity to expand into the international market.

 

Major Cities

 

Major Cities Mexico
 

The capital: Mexico City

When traveling to Mexico, there are key cities that provide elevated investment and networking opportunities. Being the country’s capital and its most populated metropolis, Mexico City offers an array of investment and networking opportunities, with many companies and organizations’ corporate offices headquartered there.

 

Northern States

Thanks to NAFTA, Northern states including Nuevo Leon, Chihuahua, and Baja California have experienced economic expansion due largely to their US proximity. These locales, while not necessarily tourist friendly, offer unique investment opportunities, especially for US based small businesses looking for a home in the Mexican economy.

 

Other areas to consider are Mexico’s majorly populated cities, such as Guadalajara, Puebla, and Juarez in the Central and Northern regions respectively.

 

Currency

The official trading currency of Mexico is the peso which, unlike other global currencies, is and has remained stable for many years. In fact, it’s illegal to trade in Mexico in any other currency, including the US and Canadian dollars. Though negotiations may take place in the context of other currencies, transactions must be conducted using the peso, making exchange vital in business deals.

 

Language

Mexico’s official language is Spanish, so English-speaking investors may want to consider reducing the communication barriers. Only 12.6% of the Mexican population is English speaking, with many of those living in major cities. Due to English’s linguistic relationship to Spanish and the prevalence of the language in North American culture, using on-the-fly translation programs such as Google Translate or Siri could be very useful. However, when conducting business, especially considering the sociability customs in Mexico, it is recommended to find an interpreter to assist in negotiations.

 

The US embassy and consulate in Mexico has compiled, among other resources, a list of expert translators on both sides of the border to ease communications and reduce misunderstandings.

 

Holidays

Mexico observes a number of statutory holidays that may affect business and should be considered when scheduling meetings and other activities. Though some are not considered official holidays, their notoriety and prevalence in certain communities may cause them to conflict with operations:

 

HolidayDateObservance
Año Nuevo, New Years DayJanuary 1 Nationwide
Año Nuevo, New Years HolidayJanuary 2 if Año Nuevo falls on a SundayNationwide
Día de la Constitución; Constitution DayFirst Monday of FebruaryNationwide
Natalicio de Benito Juárez; Benito Juárez's BirthdayThird Monday of MarchNationwide
Maundy Thursday*Thursday before Easter SundayNationwide
Good Friday*
Friday before Easter SundayNationwide
Día del Trabajo; Labour DayMay 1Nationwide
Cinco de Mayo; The Fifth of May.May 5Puebla only
Día de la Independencia; Independence DaySeptember 16Nationwide
Día de Las Carreras; Day of the Races.October 12Not an official holiday
Día de Los Muertos; Day of the Dead.November 2Not an official holiday
Día de La Revolución; Revolution DayThird Monday of November:Nationwide
Día de la Virgen de Guadalupe; Day of the Virgin of GuadalupeDecember 12Nationwide
Navidad; Christmas DayDecember 25Nationwide

*Businesses may recognize the span between Palm Sunday and Easter Sunday and may even offer vacation time depending on their religious affiliation.

 

Communication from the US

If you need to contact a supplier within the country, Mexico’s phone code is +52, which must be added to the beginning of any phone number or area code. For example, the US and Canada use +1.

 

Traveling to Mexico

 

Visas and Permits

No visa is necessary for initial travel to Mexico. However, if you intend to stay for up to and exceeding 180 days, a Tourist Visa is required. It is recommended that you apply four weeks in advance of your visit to give the application time to process.

 

If you’re flying to Mexico, you are required to complete and bring a tourist card, the price of which is included in your flight costs. This card will be provided to you before landing and should be kept on your person at all times during your stay.

 

If driving and traveling beyond the “Free or Border Zone,” a Vehicle Import Permit is required to travel to and through Mexico. The fee for this permit is $44USD and is only available through the Mexico Federal Agency, Banjercito.

 

Using a Cell Phone in Mexico

If you’re traveling to Mexico for a meeting or to visit a factory, you may need to input a new SIM card into your cell phone, or acquire a new phone altogether for it to work properly and avoid roaming charges.

 

There are many websites that sell SIM cards with specific plans and limits, each with their own price range. TelCel is the most popular of these options. Amazon is able to mail TelCel cards within two business days for as little as $20USD.

 

Many travel agencies and resorts may also provide a “rent a cell phone” service, where you pay a fee and are provided a phone loaded with a SIM and a specific plan, sent to you for use during your stay. Though more expensive, this option avoids the risk of incompatibility between your current cell phone and the new SIM card, and the plans are temporary. There may also be data loaded onto the phones or SIM cards, so internet will be available. If not, especially in well-populated areas, there are many places to tap into public WiFi and hotspots, especially considering the custom of meeting at local coffee shops to conduct business, where free WiFi is often provided.

 

Major trade shows/events

Trade shows and other major business events are a great way to expose your business to local companies and organizations, network, and promote yourself. Particularly in Mexico, strong, persistent involvement in trade shows is viewed as key to business successes. Though it may seem daunting to participate in large events such as these alongside major companies, these events are a great way to get your foot in the door.

 

Mexico offers tons of these events per year that come in all shapes and sizes, varying in focus and industry from fashion design to imports and exports. When attending a trade show in Mexico, be sure to:

 

  1. Be picky. There are many different types and focuses of tradeshows across Mexico. While they can all provide great networking opportunities, you’ll have the most success sticking to the ones that are closely related to your industry.
  2. Stand out. Mexican businesspeople are all about dressing to impress. When attending or setting up at a tradeshow, don’t be shy. Make you and your booth (if presenting) as extravagant as possible. Let future partners be the moths to your flame.
  3. Follow-up. You’re going to meet a ton of people at a tradeshow and, unfortunately, you’ll be hard-pressed to remember everyone. A good tip is to focus on a few, relatively important people, and follow-up on your conversation to spark a potential partnership or business deal.

 

With these tips in mind, here are a few of the major trade shows and events:

 

WhatWhere
WhenWhat about
International Furniture ExpoGuadalajaraFebruary 14 – 17 2018Home & Office
Sapica


LeonMarch 13 – 16 2018Fashion & Beauty
Paace AutomechanikaMexico CityMarch 14 – 16 2018, once a yearIndustrial Products
Expo Antad & Alimentaria
GuadalajaraMarch 6 – 8 2018, once a yearBusiness Services
Expo ManufacturaMonterreyFebruary 6 – 8 2018Industrial Products
Tecnomultimedia Infocomm MexicoMexico CityAugust 15 – 17 2018Electronics & Electrical
Expo Capital Humano; Human Capital Services ConferenceMexico CityOnce YearlyHuman Resources
Expo Finanzas; Financial Services ExpoMexico CityOnce YearlyFinance
Expo Transporte; Motor Transport ExpoGuadalajaraEvery Two YearsTransportation
IM IntermodaGuadalajaraTwice a YearFashion & Beauty
E-Show Mexico DFMexico CityOnce YearlyEcommerce, Online Services
Expo Tecnologia, IT & Telecom; International IT and Telecoms Industry ExpoMexico CityOnce YearlyIT, Telecommunications

Business Culture

As business etiquette varies between nations and cultures, so does business culture. Expectations differ when conducting business in the US and in Mexico, and being aware of them can make or break a negotiation.

 

Business negotiations in Mexico don’t take place at the office. In fact, because of the emphasis on sociability and small talk, meetings are conducted over food or coffee. Breakfast is the most common, with 10 a.m. to 1 p.m. being considered the most productive time of the day. However, these times are never concrete, and punctuality is not a top-priority. Time is much more flexible in Mexico than in the US, and it’s not unusual for meetings to start late and end late. But you should be on time. Your supplier can be late, but you shouldn’t.

 

The topic of a meeting can be just as flexible as the time it starts. If an agenda is created, it’s not uncommon for conversation to diverge from the plan. In fact, business meetings are considered opportunities for ideas to flow freely, but disagreeing outright with those who rank above you is not recommended. It’s also not rare or rude for small meetings to take place simultaneously, or for colleagues and partners to interrupt a speaker mid-sentence to address an issue or present an idea. A result of this format is that meetings often move slowly. Patience is key when conducting business in Mexico.

 

At the end of the meeting, offer to pick up the tab. Though you will likely never have to follow through, the gesture will aid in establishing and developing personal relationships, a vital component of successfully doing business in Mexico.

 

Business Communication

Mexican businesspeople prefer face-to-face methods of communication, as they find it critical in determining a potential partner’s character, level of trust, and compatibility. In fact, business in Mexico is virtually never conducted over the phone or email.

 

Though English is prevalent worldwide, it is important to make sure ahead of time whether or not a translator will be necessary. Of course, it is a great advantage to speak fluent Spanish, or to have a colleague who does. However, this is not always possible, so make sure to find a translator to ensure fluent communication and reduce misunderstandings.

 

Body Language

When speaking with Mexican suppliers, be aware of differences in tone, word choice, and what may come off as aggressive behavior. Emotive speech and gestures are common and not suppressed during conversations, leading interactions to seem heated. This is not the case, however, as these outpourings of emotion are considered positive and imply engagement, emphasis, and enthusiasm.

 

Along with this perceived “forward” communication style, Mexican body language differs from that of other North Americans. Touching of the shoulder, hugs, kisses on the cheek, and other methods of reducing distance are common. Personal space is generally closer than it is for Americans, as Mexicans are comfortable with an arm’s length or less. Eye contact and smiling are also vital. Failing to do so may be viewed as inattentiveness, untrustworthiness, and a general distancing.

 

Business Etiquette: Dos and Don’ts

To help develop relationships and ease negotiations, we have prepared a quick list of dos and don’ts when conducting international business in Mexico. Keep these tips in mind when considering how to conduct yourself in a meeting, as every culture and nation differs in its customs and expectations :

 

  • Respect titles. Avoid using first names unless invited to do so. This is a universally applicable tip. However, because of Mexican conversational customs, it is important to keep in mind when negotiations become increasingly friendly. Better to be safe than sorry.
  • Learn basic Spanish terms. Though it may take some time and you may have an interpreter present, knowing even a few words shows a genuine interest in your supplier, their culture, and your commitment to the partnership.
  • Don’t refuse anything offered. Business meetings will often take place over coffee or meals. Refusal can be viewed as disrespectful, and a sign of untrustworthiness.
  • Appearances matter. Seemingly another universal tip, Mexican business people put lots of stock into how you look. When in doubt, overdress. Bring out your best suit and jewelry. Dress up or be put down.
  • Be polite. Good manners are highly valued by the Mexican people, and is linked to treating others with respect.
  • Make a genuine effort to learn about Mexican culture. Don’t go in blind. Fill your arsenal with cultural references, current events, and other facts that show a sincere interest in the country.

 

 

Keeping these tips in mind will put you ahead of competitors when working with potential suppliers.

 

Business Negotiations

Awareness of Mexican business etiquette, culture, and conversational style will give you a significant advantage when dealing with suppliers and partners. But when it gets down to brass tacks, depending on your negotiating tactics, you might still come up short. Here are a few things to know when putting your cards on the table.

 

Don’t be too forward

Getting straight to the point before small talk is frowned upon. It can be viewed as rude, and ultimately instills feelings of dishonesty and a lack of genuine interest in the deal. Be sure to extend social pleasantries as long as the supplier does. Don’t make them feel rushed or unvalued.

 

Find a local “in”

Related to cultural awareness is knowing someone in the region. Not only will this help later when performing logistical tasks, getting responses, and following up on a meeting, it once again shows interest in the country. But more than that, it shows interest in the specific area where you’re doing business. Trying to find a local contact or business partner beforehand can also help in the negotiating process by providing information about the supplier. You can even invite them to the table so they can offer insight and personal connections previously unavailable.

 

Sometimes, yes means no

Mexican businesspeople do not like to say no, even when presented with an unpopular opinion or prospect. Therefore, it’s important to be hyper aware of body language and other non-verbal cues to avoid miscommunications. This is also why face-to-face meetings are preferred. Though you may occasionally encounter someone in a densely populated area (Mexico City, for example) that will refuse an offer outright, be prepared to read between the lines.

 

Small talk

It is vital to ace the small talk before business. It can make the difference between landing a deal and being left out in the cold (or the heat in this case). As a quick reminder: ask about family, recent events, big national or local news stories, weather, and don’t be shy, you can reveal these things about yourself as well.

 

Regulations and Permits

Mexico’s trade policies are regulated by the federal government. NAFTA has eased the import and export process between the US and Mexico. Mexico also isn’t subject to any special US export control regulations, as it’s designated a Category I country by the Federal Government, the least restrictive class in terms of international trade. However, products qualifying as North American imports and exports must use the NAFTA Certificate of Origin to receive preferential treatment.

 

There are, however, exceptions that affect the overall pricing of US exports. To simplify this process, NAFTA’s website has created a “What’s my Tariff” tool that allows suppliers to easily sort through payments or requirements on their imports and exports.

 

When exporting and importing goods and services between the US and Mexico, the Mexican government requires the completion of a basic documentation form, the “pedimento de importación or exportación,” or “Import and Export Petition.” This document is required when moving products through customs into or out of Mexico, and contains information regarding proper labeling, quantity, description, etc.

 

The Mexican government also requires that exporters to the country have an “importer of record,” meaning that the exporter has a company or person responsible for the incoming product, who must be registered as an importer. For US companies, international trade in Mexico requires much less documentation than other countries thanks to the trade agreement. There are customs requirements such as labeling, but none of these are specific to Mexico and are common among all countries importing into the US, such as ensuring that your imports meet the requirements of specific US agencies (e.g. the FDA).

 

Beware

Beware Corruption

Like other nations, there are dangers and issues to watch out for, especially for small businesses. Though Mexico isn’t particularly known for any specific scams, there are nation-wide issues regarding trade and tourism that could pose challenges to the prospective small business importer or exporter.

 

Recently, the US Government has revealed plans to renegotiate NAFTA or do away with the trade agreement entirely. This prospect poses major issues for the US, Mexican, and Canadian economies, as many businesses rely on the lax tariffs and ease to make a profit. Though, as the Canadian Federation of Independent Business and other organizations have pointed out, “the updated [NAFTA] agreement will include a chapter on small and medium-sized businesses,” relieving the anxiety of many North American small business owners. However, there is still much to do, and the Trump administration is still committed to reworking the agreement and the form that this will take is yet unclear. Be aware of the development of these amendments and what impact they could have on Mexico-US imports and exports.

 

An issue that is often highlighted in Mexican international business is corruption. Both business entities and government agencies have been accused of dishonesty and toxicity. Recently, through the release of the Panama papers and the Odebrecht scandal, these worlds have collided to reveal the permeable nature of corruption in Mexico and other Latin American nations.

 

Another related issue is violence. Especially in Northern cities, gang and other forms of violence have risen, with Juarez often being considered one of the deadliest places in the world. When establishing a business in the region, contacting authorities to determine the risk factor of that area is recommended.

 

Mexico is most widely known for its travel scams, however. Tourist websites are flooded with examples of people fooling others into giving them money, overpriced taxis, and dodgy hotel management. For the veteran traveler, these scams are easily avoided. However, first time tourists may find themselves inundated and overwhelmed. The simplest advice is the best: if it looks like a scam, it probably is one. Common sense rules in such situations.

 

Payments

After deciding what, how, and where to export or import in Mexico, financing the endeavor becomes the top priority. Though US small businesses find little-to-no trouble transferring funds domestically, things can get muddy when trying to send or receive payments internationally. Specifically, the financial relationship between Mexico and the US has become increasingly strained.

 

Exchange rates can be particularly difficult to navigate. Though it would seem a cut and dry, one-to-one issue, the US Dollar and Mexican Peso have had their share of complexities. Recently, unstable relations between the two currencies have led Mexican importers to request longer terms of payment to finance their operations. As a result, US small businesses must be aware of the possibility for delayed payments, and the fluidity of exchange.

 

Luckily, Veem takes care of these woes to simplify the transnational payment process. Coupled with this are the fees that come with sending payments abroad. Many banks, including Bank of America, Chase, and Citigroup, charge a wire fee to send any amount of payment outside of the US. Even to our southern neighbor. Veem takes care of this as well. When you make a domestic or international payment through Veem, there are no wire fees. Your money travels directly from you to your recipient with no charge. It’s your money, and it should stay that way.

 

When you make a domestic or international payment through Veem, there are no wire fees. Your money travels directly from you to your recipient with no charge. It’s your money, and it should stay that way.

 
 

Along with US banks, the Mexican banking system has had its share of issues. Though it has recently shown signs of growth, Mexico’s banks have historically experienced years of stagnation. Interest rates remain comparatively high, which is unfortunate for small businesses trying to stake their claim. Though the Mexican government has attempted to rectify this issue, there is still a long way to go, and may affect the ability for Mexican suppliers to receive or send payments. This is another reason why Veem is the best international payments option for small to medium sized businesses. With Veem, your money moves quickly, securely, and free of fees across international borders. Ease importing and exporting, and make meaningful business relationships abroad without worry. With Veem, you can do that.

 

Resources

For required documentation and permits for doing business in and with Mexico, check out these links:

 

NAFTA Certificate of Origin:
https://www.cbp.gov/document/forms/form-434-north-american-free-trade-agreement-nafta-certificate-origin

“What’s My Tariff?” Tool: https://2016.export.gov/FTA/nafta/index.asp

Vehicle Import Permit: https://www.banjercito.com.mx/registroVehiculos/

Import Requirements and Documentation: https://www.export.gov/article?id=Mexico-Import-Requirements-and-Documentation

US Mexico Export Controls: https://www.export.gov/article?id=Mexico-U-S-Export-Controls


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