Listen to a Market Audio Brief about Mexico
Introduction
Mexico, a key neighbor and partner of the United States, presents tremendous opportunities for American firms looking to make sales abroad. Whether your company has an active international business development program or is looking to make its first overseas sale, Mexico is a great place to do business. With the new government of President Felipe Calderón, a long history of close commercial ties to the United States, and major plans for infrastructure development in 2007-2012, the time is right to focus your business goals on the expanding Mexican market. The U.S. Commercial Service in Mexico, through its broad and deep contacts in Mexican industry and government, is uniquely positioned to help your American firm find partners, financing, and close the deal.
Covering almost 1.2 million square miles, Mexico is one of the largest countries in Latin America. With a population of approximately 107 million, a GDP per capita of US$ 7,450 and an import market of over $222 billion, Mexico represents an extremely attractive market for U.S. products and services. Mexico’s most important cities are: Mexico City, Monterrey, Guadalajara and Tijuana, where the U.S. Commercial Service maintains offices to help American firms enter the Mexican market.
 | Mexico City is one of the largest cities in the hemisphere and the world. Not only is this city of 20 million people the seat of government, the capital is also Mexico’s financial center, a manufacturing and distribution powerhouse and is centrally located in a major industrial area that includes Toluca, Puebla and Queretaro. |
| Guadalajara - Mexico’s second largest city and “Silicon Valley” is the de facto capital of western Mexico. In this region, multinational manufacturers share the limelight with small and medium sized family-owned business. From electronics to agribusiness, commercial opportunities abound for U.S. suppliers. Guadalajara, the capital of the State of Jalisco is best known as the home to tequila, mariachi music and traditional Mexican culture. |
| Monterrey - located in northern state of Nuevo Leon, Monterrey is home to Mexico’s 10 largest conglomerates. Strategically situated on the principal industrial corridor connecting the U.S. with Mexico’s interior, Monterrey is a key distribution center in addition to being a manufacturing heavyweight that includes major industries such as glass, steel, autos and cement. Monterrey is also known for its “North American” culture and openness to business. |
| Tijuana - this thriving border city is the largest metropolis in Baja California and the fastest growing city in North America. It is one of the centers of maquila (export) manufacturing and is a leading producer of televisions, computer monitors, laptops, electronics and plastics. |
Since the implementation of NAFTA, Mexican imports from the U.S. have increased exponentially, from US$41.6 billion in 1993 to over US$ 120 billion in 2005. Through November 2006, U.S. exports to Mexico were US$124.1 billion, up over 12.7 percent over the same period in 2005. 2006 is expected to set new records for U.S.-Mexican trade. Although China just surpassed Mexico as the second largest trading partner of the U.S., U.S.-Mexico bilateral trade has more than tripled since the implementation of NAFTA: from US$81.5 billion in 1993 to US$290.5 billion in 2005 (which represents an increase of 256%). 69% of Mexico’s bilateral trade is with the United States.
The United States and Mexico do over US$ 33 million worth of business together every hour of every day of the year.
Mexico by the Numbers (or Mexico at a Glance)
Population: |
107,449,525 (July 2006 est.) | ||
Population growth rate: |
1.16% (2006 est.) | ||
Age structure: |
0-14 years: 30.6% (male 16,770,957/female 16,086,172) | ||
Net migration rate: |
| ||
Religions: |
Nominally Roman Catholic 89%, Protestant 6%, other 5% | ||
Languages: |
Spanish, various Mayan, Nahuatl, and other regional indigenous languages | ||
Government type: |
federal republic | ||
Area: |
total: 1,972,550 sq km (slightly less than three times the size of Texas ) | ||
Elevation extremes: |
lowest point: Laguna Salada -10 m | ||
Natural resources: |
Petroleum, silver, copper, gold, lead, zinc, natural gas, timber | ||
Environment - current issues: |
Scarcity of hazardous waste disposal facilities; rural to urban migration; natural fresh water resources scarce and polluted in north, inaccessible and poor quality in center and extreme southeast; raw sewage and industrial effluents polluting rivers in urban areas; deforestation; widespread erosion; desertification; deteriorating agricultural lands; serious air and water pollution in the national capital and urban centers along US-Mexico border; land subsidence in Valley of Mexico caused by groundwater depletion. Note: the Mexican government considers the lack of clean water and deforestation to be national security issues . |
Best Prospect Industries
With the overwhelming amount of trade between the United States and Mexico, there are abundant market opportunities for U.S. firms in Mexico in virtually all industry sectors. Some of the leading sectors for U.S. exporters are:
| Airports & Aviation - The development of the airports in Mexico has been a priority for Mexico’s Federal Government. From 2003 to 2005, total demand for imported equipment and services increased by 9.8 percent and U.S. exports grew 9.7 percent. Click here for more information on this industry sector. |
| Automotive Manufacturing Industry - Mexico’s auto parts industry is intimately related to the U.S. automotive industry. There are approximately one thousand auto parts manufacturers in Mexico and about 70% of them are subsidiaries of foreign corporations, mainly from the United States. Fifty eight percent of the automobiles sold in Mexico are imported, of which, 75% come from the United Sates. Increased Mexican production of new models is now also increasing U.S. exports for auto parts. Click here for more information on this industry sector. |
| Building & Construction Materials - Mexico’s building and construction industry represented a US$6.5 billion dollar market in 2005. Imports from the U.S. totaled US$1.9 billion, which represented a 70% of market share. This market has grown by 4.5 percent per year during the last three years, and is expected to finish at around 5 percent in 2006, reaching US$6.82 billion. Click here for more information on this industry sector. |
| Education and Training - Mexico is the seventh-leading place of origin for students to the United States, and is one of only three non-Asian countries among the top ten senders. Over the last several years, education has played an increasingly important role in Mexico’s development. The United States remains the main destination for Mexican students looking for an undergraduate and graduate education. Click here for more information on this industry sector. |
| Energy Industry - The Energy Sector, which includes Oil, Gas and Electric Power Systems, continues to be a priority for Mexico’s Federal Government. The sector includes the sub-sectors of Oil and Gas (OGM) and Electric Power Systems (ELP) equipment and services. The total market size for both sub-sectors in 2005 was calculated to be US$9.6 billion. The market is expected to grow at an average of five percent annually from 2005 to 2007. The demand for imported equipment and services has increased by an average of five percent annually from 2005 to 2006. U.S. exports to Mexico have also grown at an average of 5.5 percent during the same period. Click here for more information on this industry sector. |
| Environmental Technologies - The Mexican environmental market has been growing at an annual average of six percent during 2004 - 2006 and it is expected to grow at an average of 10 percent annually from 2006 to 2008. This sector includes the sub-sectors of Pollution Control Equipment (POL) and water resources (WRE) equipment and services. The total market at the end of 2005 was estimated to be US$ 5.5 billion. Click here for more information on this industry sector. |
| Franchising - The overall franchise sector keeps growing and continues to exceed annual growth expectations. In Mexico there are currently a total of 780 franchises registered in more than 70 different sectors, proving that the franchise business is an important source of job creation, self-employment and wealth creation. Mexico is the 8th leading nation worldwide in franchise development. Over 25% of the franchises in Mexico are of U.S. origin. Click here for more information on this industry sector. |
| Hotels and Restaurants in Mexico - The restaurant industry in Mexico represents over two percent of the nation’s overall Gross Domestic Product and generates more than 800,000 jobs. It is one of the main industries for the economic, social and tourism development of Mexico. Last year, the industry reported annual sales of about US$14 billion. The hotel industry has grown significantly. By early 2007, forecasts predict a growth of over three and half percent for hotels and nearly two and half percent in hotel rooms. Click here for more information on this industry sector. |
| IT and Telecom in Mexico - 2006 was again a growth year for the whole IT & Telecom industry in Mexico. Continued growth in the sector was triggered by new technologies, applications and regulations. The industry grew over 11% during 2006 with a total estimated value of US$37Bn. Click here for more information on this industry sector. |
| Travel & Tourism Industry in Mexico - The United States is the most important destination for Mexican travelers. In 2005, more than 12.8 million Mexicans traveled to the United States, representing 26% of total foreign arrivals to the country. Mexico is the second source of international travelers to the United States just after Canada. Mexican travelers spent US$8.5 billion, with almost US$7.2 billion (84% of this amount) spent by the 1.6 million air travelers. Click here for more information on this industry sector. |
| Marketing to Manufacturers in Mexico - Since the signing of NAFTA in 1993, Mexico has continued to expand its manufacturing base considerably. Manufacturers continue to be drawn to Mexico, particularly to the northern region and foreign direct investment has continued to flow into Mexico at the rate of an additional US$18 billion per year – most of it directed at manufacturing. Over half of Mexico’s industrial output, or some US$100 billion, was exported to the U.S. last year. At the same time, Mexican manufacturers tend to buy their inputs, their manufacturing equipment, and their services from the U.S., which in 2005 exported over US$60 billion to the manufacturing sector in Mexico. Click here for more information on this industry sector. |
Doing Business in Mexico
Market Overview
| The North American Free Trade Agreement (NAFTA), which was enacted in 1994 and created a free trade zone for Mexico, Canada and the United States, is the most outstanding feature in the U.S.-Mexico bilateral relationship. |
| In 2006, the economy grew by 4.5%, the highest figure since 2000, although the Treasury predicts growth to slow to 3.6% in 2007, due to slowdown in U.S. growth and Mexican industrial production. |
| On December 1, 2006, Mexico inaugurated Felipe Calderon as President. Although President Calderon’s narrow electoral margin has given rise to certain challenges, Calderon inherited a stable, growing economy tightly linked to U.S. economic cycles. With inflation under control, foreign direct investment continuing to grow and relatively stable debt and equity markets, Mexico’s macro-economic picture is a healthier one than in early years of this decade. |
| Mexico’s size and diversity are often under appreciated by U.S. exporters. It can be difficult to find a single distributor or agent to cover this vast market. |
| The Mexican legal system differs in many significant ways from the U.S. system. U.S. firms should consult with competent legal counsel before entering into any business agreements with Mexican partners. The U.S. Commercial Service can provide a list of attorneys with experience in dealing with U.S. corporate clients through the Business Service Provider program. |
| The banking system in Mexico has shown some signs of growth after years of stagnation, but interest rates remain relatively high. In particular, small and medium enterprises (SMEs) find it difficult to obtain financing at reasonable rates despite Mexican Government efforts to increase capital for the SMEs. U.S. companies need to conduct thorough due diligence before entering into business with a Mexican firm, and should be conservative in extending credit and alert to payment delays. As one element in a prudent due diligence process, the U.S. Commercial Service offices in Mexico can conduct background checks on potential Mexican partners. There is a fee for this service. |
| Mexican customs regulations, product standards and labor laws may entail pitfalls for U.S. companies. U.S. Embassy commercial, agricultural and labor attachés are available to counsel firms with respect to regulations that affect their particular export product or business interest. |
| Have patience. Everything takes more time to accomplish in Mexico than what U.S. companies are used to or would like. |
| In Mexico, business is done on the basis of relationships. U.S. exporters will need to travel to Mexico frequently to develop and strengthen relationships in order to do business successfully in Mexico. |
| Financing is the key to closing the deal in Mexico. Be sure to have a trade finance proposal to make to your Mexican buyer, particularly given strong European competition. |
| Mexican companies tend to be extremely price conscious and appreciate outstanding service. Time is essential to cultivate trust to enhance a professional partnership. |
| Several market entry strategies have proven to be effective in Mexico. In general, Mexicans appreciate close working relationships, so working with a locally-based agent, representative or distributor is usually essential. However, market entry strategies can vary by sector and region in Mexico. U.S. Commercial Service staff is available to provide individualized counseling to determine the best market entry strategy for a given U.S. company/product. |
U.S. Exporter Success Stories
During 2006, The Commercial Service in Mexico generated 541 export successes for U.S. companies, valued at over US$ 400 million. Click here to read our clients’ testimonials.
SAIC is selected to install an Integrated Container Information System at the Port of Veracruz
The U.S. Commercial Service in Mexico worked closely with public and private sector partners to support the Port of Veracruz expansion project. In 2002, the Port received a US$ 408,000 grant from the U.S. Trade Development Agency for a project feasibility study to add more throughput capacity to this key maritime facility. As a result of these activities, including sustained support from U.S. Ambassador Tony Garza and his business development team, the port acquired a US$5.8 million Integrated Container Information System (ICIS), a non-intrusive imaging inspection system from Science Applications International Corporation (SAIC). SAIC is located in San Diego, CA and is a leading provider of scientific, engineering, system integration, and technical services and solutions. Click here to read full text.
Meadow Burke Signs Distributor in Mexico
Texas-based Meadow Burke Products recently announced the signing of a new business partner in Mexico. Aided by Commercial Specialist Adrian Orta, Meadow Burke participated in a Gold Key Matching Service to help identify potential Mexican partners. Through the Gold Key, Meadow Burke met face-to-face with 6 potential representatives. After follow-up meetings and further counseling by Commercial Service Mexico City, Meadow Burke felt confident in their selection of a Mexican distributor. Click here to read full text.
Craftech Secures its Contract in Mexico
Anaheim, CA-based Craftech Corporation is a full-service, custom plastic injection molding company that provides a full range of design and engineering services, as well as custom tooling manufacturing. Craftech participated in Tijuana's Border Program in 2005 where they were matched with three manufacturers located in the area. As a result of the collaborative efforts of the U. S. Commercial Service Tijuana and the U. S. Export Assistance Center Newport, Craftech has secured its first annual contract for a minimum of US$1 million. Please read full text and client’s testimonial
Getting Paid By Your Mexican Buyer
Although Mexico is the United States' third largest trading partner, the lack of financial options for small- and medium-sized enterprises is often cited as the primary obstacle for U.S. companies selling to Mexico.
Our latest publication, Getting Paid by Your Mexican Buyer, identifies the main financing and payment mechanisms available to support U.S. exporters selling to Mexico. It is an introduction and the reader is encouraged to use it as a starting point in order to become more familiar with the subject. In many instances, the use of expert help is recommended. To that end, the following mechanisms are examined in the above report:
| Cash In Advance; |
| Confirmed Letter of Credit; |
| Open Account Terms; |
| Open Account Terms with Export Credit Insurance; |
| Documents Against Payment (D/P) & Documents Against Acceptance (D/A); |
| Export Finance by US Commercial Bank (US$ denominated); |
| Import Finance by Mexican Bank (P$ denominated); |
| Lines of Credit Available from Mexican Development Banks. |
To view a condensed presentation click here:
Click here to Find Export Finance Solutions in Mexico.
Upcoming Trade Events in Mexico
Trade Fairs and Missions still offer some of the best opportunities to understand the Mexican market and find potential trade partners. The U.S. Commercial Service supports a number of local trade fairs throughout Mexico.
There is a wealth of opportunity for U.S. companies to participate in trade events in Mexico. Whether through exhibiting at a USA pavillion or by attending the event, Commercial Service specialists can help you make the most of your participation. Click here to access our calendar for 2007.
Special Features
The Security and Prosperity of North America
The Security and Prosperity Partnership of North America (SPP) was launched in March of 2005 as a trilateral effort to increase security and enhance prosperity among the United States, Canada and Mexico through greater cooperation and information sharing.
This trilateral initiative is premised on our security and our economic prosperity being mutually reinforcing. The SPP recognizes that our three great nations are bound by a shared belief in freedom, economic opportunity, and strong democratic institutions.
The SPP provides the framework to ensure that North America is the safest and best place to live and do business. It includes ambitious security and prosperity programs to keep our borders closed to terrorism yet open to trade.
The SPP builds upon, but is separate from, our long-standing trade and economic relationships. It energizes other aspects of our cooperative relations, such as the protection of our environment, our food supply, and our public health.
Looking forward, the leaders of the three partner countries have identified emergency management; influenza pandemics, including avian influenza; energy security; and safe and secure gateways (border security and facilitation) as key priorities for the SPP. The Leaders also announced the creation of the North American Competitiveness Council to fully incorporate the private sector into the SPP process. Click here for more information.
Contact the U.S. Commercial Service Today to Expand Into the Mexican Market
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