The Mexican economy has grown so much over the years that it is now the 13th largest economy in the world. Add to that the various trade deals between Mexico and the United States, and it is no surprise that Mexico has become a very attractive location for Americans to move production to.
However, an important question still needs to be asked – what are the risks of doing business in Mexico?
By understanding these challenges, you will be better equipped to deal with them and achieve success.
Superficial Understanding of International Trade Regulations
The United States is Mexico’s largest trading partner, and over the years a large interconnected web of bureaucracy and laws has formed to support the movement of goods over the border.
Currently, Mexico is considered to be one of the most open economies in the world. This is a good thing, overall, as it presents tons of overseas trading opportunities, especially for Americans. But, on the flip side, this means that there is a long list of confusing international trade laws to navigate for US citizens planning to open a business in Mexico.
Add to that the fact that most legal documents are in Spanish, and we start to see how it can be a bit of a legal minefield for those new to the country.
To avoid any misunderstanding of local trade regulations, it is best to tap the expertise of Mexican legal, tax, and business consultants. Partner with reliable legal representatives as well to help you deal with government-related processes, such as getting permits or passing other security checks.
Tough Bureaucracy and Slow Timelines
One of the risks encountered by Americans when doing business in Mexico is the convoluted red tape, which can slow down the process of getting permits and opening a business. Do not expect things to go quickly; in fact, this process can be painfully slow.
Prepare yourself mentally and be patient. Additionally, factor all the delays into your budget. The only way to speed up the process is through hiring local consultants who are more familiar with how things work.
Corruption is a Significant Problem
As in every country, there is a dark side, and in Mexico this comes in the form of corruption, and bribe solicitation.
For this, local consultants are vital. They can help you navigate through the system and avoid being exploited. It is also ideal to discuss with them the various loopholes that might trip you up and prevent you from starting your business.
It is also important to do your due diligence when hiring Mexican legal and business consultants, especially in Mexican cities with higher crime rates. Ensure that any legal representative you deal with is actually who they say they are, and are in good standing with the government.
Negotiation Breakdown Due to Cultural Differences
One of the most common reasons why business people fail in Mexico is all down to a lack of understanding of Mexican culture and business etiquette.
To make life easier, it’s recommended to learn some Spanish. After all, it’s all about communication. Mexicans love their small talk, even during business meetings. This is their way of getting to know potential business partners and colleagues, and their way of building trustworthy relationships. Learning the language (or even just making an attempt) is also a show of respect for them and their culture. This small gesture will go a long way.
Good etiquette is also important in Mexico. For example, arrive at a business meeting on time, or a few minutes early. Yes, this is basic manners we are describing here but it’s worth mentioning because it’s such a small amount of effort to take for potentially very profitable results.
When it comes to your clothes, Mexico is still far more traditional with their business wear than the USA. It’s therefore recommended to dress professionally when meeting potential business partners for the first time. Pay attention to levels of seniority as well. Senior members of companies will likely feel insulted if they are forced to deal with junior executives during major trade discussions.
To get a better handle on the local business scene, it’s good to know more about Mexico and show your love for the country. This will make conversations flow a lot easier – after all, who doesn’t enjoy sharing their culture with an enthusiastic foreigner?
There are a number of risks when it comes to doing business in Mexico. But almost all of them can be avoided just by practicing a little common sense.
Remember the following three golden rules:
- Be polite and respectful.
- Use local consultants wherever possible.
- Always, always check the credentials of people you’re working with.
If you do this, you maximize your chance of a successful launch in one of the most vibrant countries in the world.