Expanding a business internationally is a potentially very rewarding, but equally as risky move that requires careful consideration of various aspects including the regulatory landscape and market dynamics.
Many countries in the world are currently competing to attract foreign investment, but Mexico stands out as one of the most attractive options that offers a strategic gateway to different markets and a significant opportunity for growth.
Like with any other country, expanding internationally in Mexico comes with a set of challenges that each company needs to overcome to be able to enjoy the numerous benefits of doing business in this wonderful country.
In this article we will take a look at some of the benefits, as well as various challenges that come with expanding internationally in Mexico, so read on if you want to find out more!
Benefits of Expanding to Mexico
Strategic geographical location: Mexico is located in Central America and serves as a bridge connecting North and South America. Moreover, Mexico is nestled between the Atlantic and Pacific Oceans and the country can utilize its many ports to trade with various markets
Its position allows it quick and cheap access to the markets of the United States, Canada, and South America. This prime location is one of the most important factors and one without which all other benefits on this list would lose importance.
Market potential: Mexico is the 10th most populous country in the world with a population of almost 130 million people and a growing middle class, so the country itself represents an attractive market that’s full of opportunities for investors across a plethora of industries.
Be it consumer goods, electronics, or cars, Mexico’s burgeoning middle class has a lot of spending potential that businesses can tap in easily from within the country.
Trade agreements: Mexico is a signee and beneficiary of multiple beneficial trade agreements, like the United States-Mexico-Canada Agreement(USMCA), which gives them preferential access to many markets. These agreements reduce tariffs and duty and come with an array of other beneficial aspects that serve to streamline trade processes for international businesses that are eager to use any advantage to beat their competition.
Cost efficiency: Mexico generally has very low costs of production that don’t come at a cost of lower quality of products or services.
Mexican industrial facilities and parks are modern and equipped with all the latest technology. When you consider the price of labor and utilities and favorable tax and other government incentives, it becomes obvious why this country attracts so much investment.
Challenges of Expanding to Mexico
Cultural differences: Cultural nuances and intricacies play a role in business dealings. Understanding and adapting to the new language, cultural norms, and business etiquette will ensure that you will establish and foster fruitful relationships with your colleagues, partners, local suppliers, customers, and employees alike.
Regulatory complexity: Mexico’s legal and regulatory landscape can be robust and bureaucratic and may pose challenges to new businesses in terms of licenses, permits, and other legal requirements. This is time-consuming and requires a lot of planning and legal consultation, so many businesses rely on shelter service providers to handle these issues and ensure compliance.
Infrastructure constraints: Mexico has a modern infrastructure, especially in its urban and industrial centers, but connectivity and logistical support are still lacking in some, more rural, parts of the county. That’s why choosing the right location for each business is crucial, and things like transportation networks, utilities, and access to skilled labor must be taken into account.
Security concerns: Although Mexico has made huge leaps in improving the security in the country and its image, there are still regions in the country where there are increased concerns about organized crime, gang activity, and social unrest.
The majority of the country, especially its industrial zones, is safe and far from these dangers, but this is another aspect that investors need to consider.
Conclusion
Expanding internationally in Mexico comes with many benefits and some challenges. With a bit of strategic planning, consultation with professionals, and diligent preparation, these challenges can be overcome, as is clearly proven by numerous investors who have expanded to Mexico and never looked back!
