Guides

Doing Business in Mexico

With a fast-growing economy and forward-looking political leadership, Mexico has much to offer prospective investors and business owners.

Though the country has been saddled with a reputation for corruption and violence, Mexico has recently started to transcend such perceptions. The country's push to liberalize its trade policies helped build a strong, global manufacturing base—a base with powerful connections to massive neighboring consumer markets in North and South America. Mexico's ascendance shares some similarities with that of another economic growth leader—China. Much like that nation, Mexico has fast-growing, low-cost manufacturing capabilities. Yet Mexico's labor costs have remained stable for the last decade, while China's costs have quintupled.

Despite these positive developments, new business owners and investors may encounter significant hurdles when starting a new venture in Mexico. The country's legal and financial systems often confuse international firms, so it's important to have useful contacts on the ground who are well-versed in Mexican culture and government.

The benefits of doing business in Mexico

Mexico once had a reputation as a difficult place to start a new business, due in part to the complexity of the process. That perception has gradually changed, thanks to effective action from the country's political and business leaders. Mexico now ranks a very competitive 36th in the world for ease of starting a business, according to data gathered by the World Bank and International Finance Corporation (IFC). That's a jump of an impressive 38 places in a single year.

Though significant strides have been made in this area, there are still tricky procedures to master. For example, registering with the Mexican Social Security Institute (IMSS) may prove difficult for some new business owners and investors to navigate.

Mexico has made considerable strides in upgrading its infrastructure, in an effort to make the country more appealing for outside investment. The Mexican transportation, energy and telecommunications sectors have become globally competitive, thanks in part to government efforts.

These investments have paid off for Mexico, which is now ranked as the world's 13th largest economy, and the 11th largest in terms of purchasing power. A recent report by PwC projected Mexico could become the world's seventh-largest economy as early as 2050.

The country's well-established financial sector is also a positive when it comes to securing credit, though this process is still more difficult than in most developed nations.

The challenges of doing business in Mexico

While Mexico has much to offer new businesses, it also presents an array of challenges to address. First, it takes roughly 69 days to secure construction permits in Mexico. That's about average for Organization for Economic Cooperation and Development (OECD) nations, though it is much more efficient than in most Latin American or Caribbean nations. Sewer and water connections may take up to 30 days to connect, and securing a single zoning permit outlining specific land use and feasibility is often an arduous task.

Mexico is one of the more difficult places in the world to secure electricity, ranking 130th according to the World Bank and IFC. The process is bureaucratic in the extreme, with firms required to submit applications and obtain federal certificates and inspections before a contractor may commence work.

The country also ranks low in terms of ease of registering property. That process takes, on average, 74 days—far higher than the OECD average of just 26 days. New businesses must secure a certificate of good standing with the water service, acquire zoning approval and deal with the Public Registry of Property of the Federal District. These steps are frequently time-consuming and difficult to navigate.

Mexico also has a mixed record with regard to investor protection, although passage of the North American Free Trade Act helped the country improve significantly in this area.

Though Mexico requires a mere six tax payments annually, completing this process is quite laborious. It takes, on average, 337 hours of company time to satisfy tax requirements. The nation's 30-percent corporate tax rate takes around 155 hours to complete alone, while VAT and Social Security taxes also require serious time.

Finally, cost of cross-border trading is high, compared to South America or the Caribbean. Importing a container is roughly $1,450, while exporting is about $1,780. The process is also drawn out, taking 12 days on average.

Conclusion

The challenges of operating in a new country are often daunting—regulations are constantly evolving and no business landscape remains static. Without a solid grasp of the issues at hand, businesses are exposed to tax penalties, and even the prospect of civil or criminal litigation.

If you are considering entering the Mexican market, it is critical to have an experienced partner with a global footprint. CT has a worldwide network of offices and partners who will make sure your local needs are met, accurately and on time.

CT can help you get set up, provide a single point of contact and provide you with customized solutions for all your needs. We know that one-size does not fit all. From incorporation to dissolution, major mergers and acquisitions, registered agent services and all the day-to-day compliance needs in between, we’ll make sure you have the right support tailored for your global needs.

We offer a full suite of international products and services for our customers, including:

Global Transactional Services
Global Managed Services
Global Business Expansion Guides

CT has helped businesses and law firms expertly manage compliance issues for 120 years. To learn more about how we can help you better manage your global compliance needs, contact a CT representative at 844-318-1457 (toll-free US).

Request a Custom Quote

Have a specific question about a product? A CT Specialist will follow up with a custom quote along with a comprehensive assessment of your needs.