2023: Doing Business In Mexico
Doing Business In Mexico
1. What is the current business climate in your jurisdiction including major political, economic and/or legal activities on the horizon in your country that could have a big impact on businesses?
Mexico is an open economy guaranteeing access to international markets through a network of free trade agreements, with limited restrictions to trade. The country possesses a strategic geographical location, competitive costs to service global markets, as well as a highly-skilled, young workforce.
Mexico has a very interesting demographic bonus on its own, and the international treaties to which it is a party give access to 1,350 million potential consumers. The nearshoring and friendshoring phenomena have a huge beneficial impact for the Mexican economy. México has had important macroeconomic stability, which is expected to continue, a good consumption rate, and real growth in its minimum salary, which results in an important consumption power. Mexico has reached a historic level of manufacturing exports, which during 2023 are expected to exceed the manufacturing exports of China to the United States. Mexico is greater and more diversified than the rest of Latin America with respect to its exports.
Mexico has established legal, accounting, and regulatory systems consistent with international norms and has improved nine places since 2017 in the Transparency International Corruption Perception Index.
2. From what countries do you see the most inbound investment? What about outbound?
The nearshoring phenomenon has attracted more foreign direct investment in Mexico, rising 48% during the first quarter of 2023 (compared to last year's foreign direct investment during the same period).
During the last year, most of Mexico's inbound investment came from the USA, Canada, Spain, Argentina, the UK, and Germany.
Mexico does not restrict domestic investors from investing abroad and the Ministry of Economy and the Ministry of Foreign Affairs supervise the promotion of Mexican outbound investment; however, there is more foreign investment inbound than outbound.
3. In what industries/sectors are you seeing the most opportunity for foreign investment?
Pursuant to official figures, the industries with more foreign investment are manufacturing (i.e., export-oriented production and assembly plants), transportation, mass media information, and financial and insurance services.
It is interesting to note that Mexico's main exports are mostly in the same industries as its main imports: machinery, automobiles, electrical equipment, minerals, oil and gas.
4. What advantages and pitfalls should others know about doing business in your country?
Mexico offers competitive labor and operational costs (hence, the manufacturing sector being the biggest for foreign investment), access to major markets (being the USA's second-largest trading partner in goods and services), and legal certainty for foreign investors (as it has entered into 14 Free Trade Agreements, 30 Reciprocal Investment Promotion and Protection Agreements and 9 Trade Agreements).
Furthermore, the Mexican government grants tax deductions, technology, innovation, and workforce development funding as incentives for certain investments. Regarding federal foreign trade incentives, the IMMEX Program allows manufacturing sector companies to temporarily import goods without paying general import tax and value added tax.
In addition to the foregoing, derived from the nearshoring phenomenon, Mexico has become the hottest market in the region in terms of advanced facilities, production, and skilled professionals. Industrial parks in Mexico grant investors in the manufacturing, automobile, logistics, and transport industries great advantages as opposed to other countries. An important example is the investment announced by Tesla earlier this year (which includes the building of a new electric vehicle factory, with an investment of five billion dollars).
On the downside of investing in Mexico, unfortunately, in recent years, navigating licensing and permit requirements can be a complex endeavor, requiring meticulous attention to regulations and bureaucratic procedures. Furthermore, as in any investment, an understanding of the applicable Mexican laws (mainly regarding customs regulations, product standards, and labor laws), is recommended prior to beginning operations.
5. What is one cultural fact or custom about your country that others should know when doing business there?
One of the main factors to consider while doing business in Mexico would be the language. Although many people in Mexico are bilingual in Spanish and English, interactions for negotiations (particularly with authorities) will most likely need to be carried-out in Spanish. Therefore, having a local contact to assist in navigating either in negotiations with potential local companies to invest in, or regarding requirements for licenses, permits, and approvals for a new company to be incorporated, is considered to be a pre-requisite for doing business in Mexico.
Our Firm
1. What distinguishes your firm from others in your market?
Santamarina y Steta is a full-service firm with the capacity to offer legal services in more than 30 practice areas and industries, ensuring reliable, multidisciplinary, integrated, and comprehensive approaches.
We help national and international clients pave their way within the country. Through an efficient network of local and international contacts, Santamarina y Steta represents local and foreign clients in all types of transactions. Our team of experts identifies the work style and philosophies of investors and professionals worldwide to personalize our efforts and offer unique business solutions.
Santamarina y Steta has a long-standing tradition of rendering high quality legal services in Mexico, particularly supporting its clients to expand their operations into Mexican territory or abroad. Having offices in three of the main cities of Mexico has not only given us a better overall knowledge of the Mexican market, but also a better understanding of the industries' growth within the three main regions of our country.
2. What are four words that describe the culture of your firm?
Innovation, Fluid Communication, Collaboration, Perspective.
3. How does your firm participate in Corporate Social Responsibility (CSR) and/or Environmental, Social and Governance (ESG) initiatives?
We launched a campaign with five actions on sustainability, including limiting the use of disposable material, recycling and saving paper, and internal training on sustainability, promoting the S+S Business Card to reduce the use of printed business cards, the hybrid-flexible work model to avoid the use of polluting transportation, the collection of plastic caps and lids, and responsible recycling and waste sorting along our different offices.
We have a strategic alliance with the Bank of Plastic Caps and Lids to support foundations that pay for cancer treatments. Further, we are recognized by the Vance Center as a Leading Lights 2022 firm. We have an institutional donation program to the Bosque de Chapultepec Trust, Reintegra (a fund dedicated to reintegrating individuals who were in prison) and the Mexican Red Cross.
Santamarina y Steta has become a reference by participating in ESG forums, such as the ACI's Summits, the First National Forum on ESG, webinars, courses and articles with the ICC, Lexology and Latin Lawyer, among others.
4. Are there any new and exciting initiatives, practice areas or industry focuses in your firm?
The continuous development of new technologies, products, and services will continue revolutionizing how companies do business. To provide comprehensive advice, Santamarina y Steta has created new task forces combining our vast experience in corporate matters and mergers and acquisitions, and enhancing them with our TMT, financial, labor, tax, and intellectual property practices.
We also created a specific task force with the experience and resources to assist our clients in reorganization proceedings with comprehensive teams of experts depending on the specific characteristics and needs of each client. Each project is led by experts in restructuring and other areas involved in each process, including bankruptcy, strategic litigation, tax, securities, labor, governmental lobbying, mergers, divestitures, downsizing, and cost reduction strategies.
Finally, we have implemented a nearshoring task force to identify and deliver integral legal advice to transnational companies wanting to relocate their services and production chain to Mexico. Being a full-service firm, our experts can provide a complete market outlook and identify the administrative, regulatory, and transactional requirements multiple sectors and industries need.
Authors
Jorge León Orantes B. and Cesar Cruz A.