The International Monetary Fund has predicted that in 2014, Mexico will become the tenth largest economy in the world.²

There are many advantages to doing business with Mexico. It has the second largest economy in Latin America, it covers an area about the same size as the whole of Western Europe, and it has the potential to be used as a bridge to Central and Southern America, as well as North America.

Mexico is a member of a number of international business organisations, such as the OECD, and is a founding member of the World Trade Organisation. It is a competitive place to do business, having 12 free trade agreements covering 44 countries – more than any other country. One trade agreement that is particularly useful for UK business is the Global Agreement signed in July 2000 which allows EU products “preferential access” to Mexico by working towards cooperation, continuing political dialogue and commercial liberalisation.³

The North American Free Trade Agreement (NAFTA) is a trade agreement between Mexico, Canada and the US. It can therefore be utilised by British companies as a low-cost manufacturing base with direct, duty-free access to the United States and Canada, creating a real opportunity to operate in two continents.

Many large UK businesses have already taken advantage of the favourable business conditions within Mexico, such as HSBC, GlaxoSmithKline, and AstraZeneca. In 2011, UK trade with Mexico was worth US $12.2 billion.

Business Etiquette
TIME: Although foreign businesspeople are expected to be on time, your Mexican counterparts may keep you waiting. Up to half an hour after an agreed meeting time is still seen as being punctual in a Mexican context. It is important not to show irritation if this happens, and also to bear in mind that meetings can be rescheduled at short notice. An appointment should be sought at least two weeks in advance. It is also important to confirm the week before, and when you arrive in Mexico.

NEGOTIATION: The negotiation process may be long, and a decision probably won’t be quick. Patience is key if you’re looking to do business in Mexico, where deadlines are seen as being fluid rather than absolute. Including a lawyer in your negotiating team may cause offence. If you bring business cards, have one side printed in Spanish and present this side to the person as you’re handing it to them.
It is normal to meet with the top executives of a company, and then move on to deal with their less senior colleagues to deal with the details. This is usual business practice and is a sign that business is progressing well.

When pitching, it will be more effective if you personalise an idea. You’re working to convince the person how your business or product will benefit their country, their community, family and them personally. The family is seen as the central unit in Mexican social structure rather than the individual.
Rank and hierarchy are important in business, and it is seen as disrespectful to operate outside of this. You need to use professional titles when greeting someone. If they don’t have titles you should call them Señor (Mr), Señora (Mrs) or Señorita (Miss) – followed by their surname. It is important not to use a first name until invited to do so. Women do not usually shake hands when they meet each other in a social situation; instead they pat each other on the right forearm or shoulder. Men shake hands initially. When they know someone a bit better, they might progress to hugging and back slapping.
Verbal promises may not be honoured: make sure you get agreements in writing, and prepare to be persistent. You may need to follow up emails and phone calls. If you give up, it may be assumed that you weren’t serious in the first place.

Challenges
While improving, Mexico is still a country with many social problems. There is a great deal of regional variance, with some regions – notably Colima, followed by Aguascalientes and Guanajuato – being rated by the World Bank Group as being profoundly easier to do business in than other states. While the regulatory business environment is approaching the average level for OECD economies on average, there is a great disparity between individual Mexican states. The World Bank regards Mexico’s financial sector as ‘sound’, but not fully developed.⁴

One of the difficult aspects to doing business in Mexico is that Mexicans typically like to get to know prospective business partners before signing a contract. This can be expensive as, in general, face to face meetings are preferred over email, telephone and video conferencing. It can take many meetings to reach an agreement, so these costs need to be factored in when considering expanding into the Mexican market.

Another challenge is language. Although widely spoken, there are still many who don’t speak English. There are as many as one hundred Native American languages still being spoken in Mexico, but around 80% of the population also speak Spanish.5 It is a good idea to have all written materials available in English and in Spanish. Having a basic knowledge of Spanish will help you to make a good impression, and it is best to hire an interpreter if nobody in your delegation speaks the language. In Mexico it is a legal requirement that all products are labelled in Spanish, so this is an added expense if you are exporting products.

Strong sectors
In the last 20 years, the Mexican economy has shifted increasingly in the direction of manufacturing.6 It is the largest sector of the economy, closely followed by the retail and real estate industries. The largest sectors for import are metalwork machines, agricultural machinery, electrical equipment, aircraft and aircraft parts.⁷
A strong performer in the Mexican economy is the automobile industry, which recently overtook close rival Brazil when it comes to production. Mexico exports 83% of its automobile production, mostly to North America.⁸ As a result, car parts for assembly and repair parts for motor vehicles are also widely imported from overseas.⁹
There are a number of opportunities in improving infrastructure and facilities. The country is lacking in hazardous waste disposal facilities and natural freshwater resources. Deforestation is also of large concern to the Mexican Government, which regards it as a national security issue alongside the population’s lack of clean water.¹⁰

Mexico is the number one recipient of FDI in the aerospace sector, and is the third largest exporter in the world. The industry has grown 20% per annum in the last seven years. There is real potential for British businesses to profit in this sector, as most experts anticipate that the industry will continue to perform well. It is expected that investment projects worth around US$7 billion will become available over the next five years. There are opportunities for high-tech products including forging, casting, heat treatments, development of composites and sheet metal handling amongst others.

By 2017, investment in the Mexican healthcare industry is expected to reach US$70.4 billion. This presents opportunities for UK companies that are involved in the production or distribution of over the counter drugs, generic and patented drugs, and healthcare equipment.

In December 2013, the Mexican government approved measures to modernise the energy sector, opening up the oil and gas industry to private and foreign investment. The UK has a great deal of expertise in subsea technology, and as approximately half of Mexico’s oil reserves lie in deep water, this presents an excellent opportunity for businesses in these sectors. In addition, there are also opportunities for companies offering environmentally stable energy sources, as Mexico wants to have more than a third of its energy coming from clean sources by 2024.

The retail sector is also strong, and there is a great deal of investment in improving a variety of different types of infrastructure within the country.

Visa requirements
A business visa is required to travel to Mexico for work. In order to get one, you will need to produce a copy of a bank statement and business references such as a letter from your current employer and a letter of invitation from the firm that you’re looking to do business with. Current information on business visa requirements can be obtained from the Mexican Embassy in London.

Mexico is a diverse market, with opportunities available for companies that can overcome regulatory and language challenges. If you are prepared to be patient, and approach Mexico in a methodical but determined way, it can prove an excellent base for your company in the Americas.

¹⁾ World Bank Group Doing Business in Mexico 2014 http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Subnational-Reports/DB14-Mexico-Overview.pdf

²⁾ https://www.gov.uk/government/publications/exporting-to-mexico/exporting-to-mexico

³⁾ https://www.gov.uk/government/publications/exporting-to-mexico/exporting-to-mexico

⁴⁾ http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Subnational-Reports/DB14-Mexico-Overview.pdf

⁵⁾ http://www.kwintessential.co.uk/resources/global-etiquette/mexico-country-profile.html

⁶⁾ CIA World Factbook https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html

⁷⁾ CIA World Factbook https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html

⁸⁾ http://online.wsj.com/articles/mexicos-auto-industry-overtakes-brazils-1407362733

⁹⁾ CIA World Factbook https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html

¹⁰⁾ CIA World Factbook https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html