Sometimes, the best opportunities are closest at hand.
For U.S. small- to mid-sized businesses seeking to expand to new markets, there is a world of opportunity just across the border in Mexico. The second largest export market for U.S. goods, Mexico has a growing middle class that has an appetite for American products. In fact, trade between the U.S. and Mexico totals $850 million every day.
Mexico’s close proximity to the U.S. means it can be a cost-effective market to enter, which is critical for businesses new to exporting in today’s tougher economic environment. But even though Mexico is just next door, U.S. businesses would make a mistake to underestimate it. As you’ll hear from the experts in this guide, doing business in Mexico—like any market—offers its own unique challenges and opportunities. To succeed, companies must take the time to do their homework and cultivate business relationships in Mexico. Time invested upfront yields results that are well worth it.
We hope this guide inspires you to start your export journey south of the border.
President, UPS International
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Note: underemployment may be as high as 25 percent (2009)
In Mexico, understanding the culture and developing relationships are imperative to being successful in business. Here are a few universal dos and don’ts to know before you go.
Meet and Greet
Dress for Success
Outside the Office
Ann Bacher is the Senior Commercial Officer with the U.S. Commercial Service in Mexico City. The office focuses on facilitating U.S. exports to Mexico.
Why should U.S. companies consider doing business in Mexico—especially in light of negative news from U.S. media?
Mexico remains the second largest export market for the United States, just behind Canada. More than $150 billion of U.S. goods were exported to Mexico last year—a great deal of which came from U.S. small businesses. With more than 110 million people, Mexico also has a growing consumer class open to buying U.S. products. As a result of the North American Free Trade Agreement (NAFTA), bilateral trade between Mexico and the U.S. has tripled. So, there’s tremendous opportunity in Mexico. Some sectors where we’re seeing tremendous progress includes environmental equipment, alternate energy, energy efficiency, agriculture, services, technologies that make manufacturing more efficient, tourism, and safety and security equipment.
The media, however, focuses on the issues surrounding the drug cartel activities in Mexico. With a State Dept. travel warning in place for border cities, you need to be aware of those cities along the border that may pose some danger should you want to travel there. You should know that cities such as Guadalajara and Mexico City, to name a few, have not experienced the same level of violence that the northern border cities have. The Commercial Service in Mexico is ready to answer your questions and provide you details to ensure you are making sound travel decisions based on facts.
Has the U.S. Commercial Services seen a slowdown in requests about Mexico in the wake of the economic slowdown?
So far, we haven’t seen a decrease in requests, although Mexico certainly was affected by the slowdown, as were other markets. 2010 growth is expected to be a healthy 4.5%. Since NAFTA, our economies have become so intertwined. In this environment, it is important for U.S. companies to price their goods appropriately for Mexico.
What is the biggest mistake you see U.S. businesses make when they go to Mexico?
They don’t do their research up front. Businesses may think that because Mexico is so close or they took some Spanish in college, they don’t have to prepare as diligently as they would if they were going to India or China. But this isn’t the case. Even though Mexico is just next door, and we share a free trade agreement, it is a different market with its own sets of challenges and opportunities. U.S. companies need to take regular precautions to check the creditworthiness of partners and know who they’re doing business with—just as they would in any other market.
What are the best cities for U.S. small-to-mid-sized companies to target when pursuing trade opportunities in Mexico?
The largest business cities are Guadalajara, which is a center for agro-industry; Tijuana, which is largely a manufacturing city and an export center; Monterrey, the industrial capital; and, Mexico City, a manufacturing center in its own rite and of course the center of government. There are different reasons why businesses would be in these cities, so it’s important to do some research first.
What do U.S. companies need to know about selling to Mexican consumers?
Society here is more divided—the poor sector is much poorer than in the U.S., so you have to know who you’re selling to and price accordingly. Products that are at the lower end in the U.S. may have more trouble selling in Mexico because the target market may not be able to afford it. When it comes to selling to upper-middle class consumers, quality and uniqueness are key.
What cultural missteps should U.S. businesses be wary of?
Personal relationships are important. Mexicans like to socialize and get to know those with whom they are doing business. They will invite you to meals. Take the opportunity to ask about them and their families – time invested up front will pay off later on. It’s also very important that you speak some Spanish. Many Mexicans speak English. if you don’t speak Spanish, you will need an interpreter.
What is the most important advice you would offer U.S. companies considering Mexico?
Don’t underestimate the market. It’s a relatively easy market to penetrate, but it does require some background and homework. Take advantage of the U.S. Commercial Service resources to help connect your company to the right people. We offer a gold key service, where an interpreter meets you the moment you arrive, so you don’t waste any time. For more information, connect with your local export office or log on to www.buyusa.gov/mx.
Most important, do not be put off by bad news reported in the U.S. media. The opportunities in Mexico are too great to miss out on our second largest export market!
Gabriel Aparicio, UPS’s country manager for Mexico, offers some logistics advice to help U.S. companies spread their wings to Mexico.
Is it difficult for U.S. businesses to ship to Mexico?
The biggest difficulty today is importing into Mexico. Everything that comes into the country must be inspected and checked against its invoice to make sure that what shippers say is in the package is what’s really there. Because of this, most goods coming into Mexico cannot be delivered in less than 48 hours.
Importing goods that originate outside of the U.S. can be particularly challenging. For example, if a toy is made in India and repackaged in the U.S., it will be subject to the tariffs and taxes associated with products coming from India. If only part of that toy was built in India, there is an agreement between countries and manufacturers that establishes an origin country, based on what percent of the product was built where.
All imports from countries other than the U.S. must be declared. Working with a reliable shipper can streamline this process, giving businesses economical and efficient supply chains.
What other shipping procedures do U.S. businesses need to know?
Shipping labels and invoices must be in Spanish. It’s imperative that what’s on the label matches what’s in the box precisely. For example, say you send two baseball caps and two shirts in one box, and at the last minute, decide to add a calculator. If you forget to add that to your shipping invoice, or don’t translate it into Spanish, your shipment will be delayed. For companies that don’t have access to Spanish interpreters, UPS can help translate English labels.
What is UPS doing to help its customers navigate shipping hurdles in Mexico?
UPS is the No. 1 carrier in Mexico. We can deliver to every address in the country, and know the rules of engagement after 20 years of doing business there. We are a certified importer of record, which means we have the authority to pre-clear packages worth up to $300. For these goods, we can offer same-day delivery, and for any customer that doesn’t have a registered importer of record into Mexico, we can help them work through a broker to clear packages. Recently, we launched a standard ground service between the U.S. and Mexico, giving businesses a cost-effective ground shipping service for less time-sensitive goods between the U.S. and Mexico.
How should U.S. businesses choose a shipping partner?
Make sure you work with registered importers of record – those who are licensed by the government – and make sure they understand the import process.
What advice would you offer U.S. businesses seeking to set up shop in Mexico?
This is a market of more than 110 million people, which is a big opportunity. A lot of Mexican popular culture is based on the U.S.—so we are big consumers of anything that is made in the U.S.A. Mexico’s economy is stable, and offers businesses plenty of opportunities to grow. Located in the middle of America, Mexico has great connectivity with South America, Europe and Asia. So working with Mexico gives your business the opportunity to springboard to other markets.
Like many developed and emerging markets, Mexico was affected by the global financial crisis – in fact, it triggered Mexico’s worst recession since 1932. Yet according to the Financial Times, the economy grew 5.1 percent in the first half of 2010, and the Mexican government is predicting 3.8 percent gross domestic product growth in 2011.
Mexico’s manufacturing sector is a bright spot on the country’s economic horizon. The more than 40 trade agreements Mexico signed with other countries has made the nation a cost-effective location for importing materials and exporting finished products. This has made Mexico – and Guadalajara, a key industrial center – an especially attractive hub for foreign manufacturers.
Guadalajara is known as “Mexico’s Silicon Valley.” And for good reason. The city is home to many computer and telecommunications hardware manufacturing facilities. Companies such as Kodak, Intel, Jabil, Flextronics and GE have established operations in Guadalajara.
A large workforce has lured many multinationals. With more than four million residents, Guadalajara is Mexico’s second-most populous city. It is the leading business center within Mexico’s Jalisco state. The U.S. Commercial Service notes that Jalisco’s commercial sector accounts for a large percentage of Mexico’s total gross national product; it is exceeded only by the Federal District and the State of Mexico (which together cover the metropolitan Mexico City area).
Big business isn’t the only one who can benefit from establishing ties in Guadalajara. Small businesses should consider opportunities in the city for the following reasons:
American companies doing business in Mexico should know that family plays a critical role in Mexican culture. With one of the lowest divorce rates in the world – less than one divorce per 1,000 people – marriage and family are among Mexico’s most important institutions. As a result, Mexicans rarely work on weekends, and business is rarely discussed over dinner because evenings are reserved for family.
Family is an important safety net in Mexican culture. Therefore, the extended family is just as important as the nuclear family because it provides a sense of stability. Children regularly live with their parents until they are married. It is not uncommon to find three or four generations of family residing in the same household or sharing a meal. Loyalty within the family is also absolute.
Traditionally, Mexican culture established roles and rules to guide family life. The home has been the domain for the women as mothers and wives, while the workplace has been more male-dominated. Until marriage, girls typically have been kept under strict family surveillance, and men demonstrate machismo, a strong sense of masculine pride. As outside influences continue to shape Mexican culture, roles and practices are changing. Women are moving into the workforce and couples are marrying later in life, starting to forgo religion as the basis for marriage.
Mexicans frequently arrange family activities and celebrate holidays together. Día de los Muertos, the Day of the Dead, is considered one of the most important religious holidays in Mexico. The holiday is of particular importance to Mexican families because it is the day when the souls of the dead return to visit with their living relatives. To welcome their relatives back, families set up altars, decorated with candles, flowers, photographs and paper skeletons, in their homes. Families serve ofrendas (offerings) of the deceased’s favorite food, drinks and toys.