Doing Business in Mexico

CleverName Incorporated, an information provider headquartered in North Carolina, recently experienced tremendous growth and is looking to expand into Mexico. CleverName Inc. approached the local Chamber of Commerce for information on doing business in Mexico, and asked for general information on the country, business protocol, as well as information on the political, economic and legal climate. The following is a response to this information request.

Mexico - Background Information

Map Source: The Economist Intelligence Unit, 2004.

Flag Description: three equal vertical bands of green (hoist side), white, and red; the coat of arms (an eagle perched on a cactus with a snake in its beak) is centered in the white band

Source: CIA World Factbook, 2004

Capitol: Mexico City

Climate: Varies by altitude.

Tropical southern region and coastal lowlands: hot and wet, avg. temp 65F

Highlands of the central plateau: temperate

Northern and western regions: temperate

Population: 101,965,000 (2002)

Language: Spanish (90%)

Indigenous languages (8%)

Religion: Christianity (90% Roman Catholic)

Education: Free State education

- 6 years primary ed. (beginning at age 6)

- 3 years secondary (at age 12)

Government: Federal Republic with 31 states

Economy:

ß GDP increased avg. rate 2.9% from 1990-2002

ß Nominal GDP (2003 est.): $615 billion. (7,4 trillion pesos, 2004 Q2).

ß Per capita GDP (2003 est.): $5,945.

ß Annual real GDP growth 2003 (1.3%); 2002 (0.9%); 2001 (-0.3%); 2000 (6.6%)1999 (3.7%).

ß Avg. real GDP growth (1999-2003): 2.1%.

The above GDP figures are taken directly from the State Department website at http://www.state.gov/r/pa/ei/bgn/35749.htm

Agriculture:

- 4% of GDP

- 18.9% of employed work force

- Staple food crops: maize, wheat, sorghum, barley, rice, beans, and potatoes

- Staple cash crops: coffee, cotton, sugar cane, fruit and vegetables (tomatoes the highest)

- Note: after NAFTA, agriculture was hurt by the removal of import tariffs

Industry:

- 26.1% of GDP

- 25.9% of employed work force

Manufacturing:

- 20.4% of GDP

- 18.9% of employed work force

- Primary manufactured products: metals and machinery, food, beverages, tobacco, and chemicals

Services:

- 69.9% of GDP

- 55.6% of employed work force

- Tourism is the primary source

Trade:

Principle exports (2002):

- electric and electronic products

- parts for road vehicles

- industrial machinery

- 89.1% of exports to the US

Principle imports:

- electric and electronic products

- industrial machinery

- transportation equipment

Trade agreements:

- Inter-American Development Bank

- Latin American Integration Association

- Asia-Pacific Economic Cooperation Group (APEC)

- Organization for Economic Cooperation and Development (OECD)

- North Atlantic Free Trade Agreement (NAFTA)

- Reached a trade agreement with Japan mid-2004

Source: The Europa World Year Book. (2004). (45th ed.). London: Europa Publications Limited.

Online Resources

The CIA World Factbook

http://www.cia.gov/cia/publications/factbook/

Portals to the World: Resources Selected by Library of Congress Subject

Experts

http://www.loc.gov/rr/international/hispanic/mexico/mexico.html

The World Factbook 2003

http://www.loc.gov/rr/international/hispanic/mexico/mexico.html

U.S. Department of State Country Info

http://www.state.gov/p/wha/ci/mx/

Culture, Etiquette and Business Protocol

Overview

While Mexicans share a common language with Spain and other Central and South American countries, Mexico claims many cultural and social customs of its own. Mexicans are warm, expressive, and highly value family and tradition.

Official Business Holidays

2005

January 1 AÒo Nuevo - New Year's Day

February 5 DÌa de la ConstituciÛn - Anniversary of the Mexican Constitution

March 21 DÌa de Nacimiento de Benito Ju·rez - Birthday of Benito Juarez

March 24 Holy Thursday

March 25 Good Friday

May 1 DÌa del Trabajo - Labor Day

May 5 Cinco de Mayo - Celebration of Mexico's victory over the French army at Puebla in 1862

September 16 DÌa de la Independencia - Independence Day

November 2 DÌa de los Muertos – Day of the Dead (All Soulsπ Day)

November 20 DÌa de la RevoluciÛn - Revolution Day - Anniversary of the Mexican Revolution of 1910

December 25 DÌa de Navidad - Christmas Day

In addition to the official holidays, there are some unofficial holidays that are observed by most businesses in Mexico. These include Motherπs Day (DÌa de la Madre -May 10), and Virgin of Guadalupe Day, Mexicoπs Patron Saint (DÌa de la Virgen de Guadalupe - December 12). Furthermore, many business contacts may be unavailable during the Christmas holiday season, which in Mexico begins around December 16 and extends to January 6, the Day of the Epiphany (DÌa de los Reyes Magos / Three Kings' Day). This holds true as well for the two weeks around Easter during Semana Santa (Holy Week - March/April).

Business Protocol

Education, title and family background provide social status are important. Be sure to address people by their title, and avoid using first names until a relationship is established.
Dress and grooming are considered status symbols.
Topics of common small talk include children, family and soccer.
Giving is not customary in social situations, but the gesture is appreciated. If you send flowers, yellow and purple should be avoided as they connote death.
Entertainment is important in doing business, but business is not typically discussed. The purpose of entertainment is to build a good business relationship.
Many Mexicans have hyphenated last names. (i.e. Garcia-Rodriguez). The first name (Garcia) is the fatherπs name and the second name (Rodriguez) is the motherπs name. It is most common to address a person by both names, but if a name is shortened, it should be the fatherπs name that is used.

Aspect	United States	Mexico
Communication Style	∑ Direct and to the point ∑ Like to debate	∑ Indirect ∑ Shun confrontation
Problem Solving	∑ Pragmatic & Practical Approach	∑ Application of abstract ideas is sometimes not a concern
Group Dynamics	∑ Individualism and diversity of opinions valued ∑ Equality regardless of age, gender, etc	∑ Conformity to group opinions ∑ Machismo emphasizes authority over women
Truth	∑ Truth is absolute	∑ Truth is relative
Status	∑ Money	∑ Professional title & position as well as money
Management Style	∑ Delegate responsibility	∑ Concentration of power at the top
Staffing	∑ Nepotism and favoritism not acceptable	∑ Family and friends are seen as trustworthy employees
Deadlines	∑ Punctuality important and schedules are expected to be adhered to ∑ Fast pace ∑ Time is money	∑ Time is relative and fluid ∑ Slow pace ∑ Time is power ∑ Interruptions and delays are to be expected
Contracts	∑ Legalistic and detailed	∑ Dislike detailed contracts; more often, contracts contain lofty principles than concrete details
Negotiation	∑ Task oriented ∑ Win/Lose approach to negotiation ∑ Dislike haggling	∑ Relationship oriented ∑ Win/win approach to negotiation ∑ Enjoy haggling

Source: ≥Business Mexico: A Practical Guide to Understanding Mexican Business Culture≤ by Peggy Kenna and Sondra Lacy

Online Resources

US Commercial Service (International Trade Administration)

http://www.export.gov/comm_svc/

The U.S. Commercial Service helps U.S. business export goods and services to markets worldwide. Each year the Commercial service issues Country Commercial Guides that provide information on the many aspects involved in conducting business with foreign countries. Information includes business protocol and common country practices.

Mexico 2005 Country Commerical Guide- Ch 08: Business Travel [Last updated 2/09/2005]

US State Department

Consular Information Sheet - http://travel.state.gov/travel/cis_pa_tw/cis/cis_970.html

Provides access to consular information sheets about Mexico targeted to US Citizens. Information is updated daily, pertaining to topics including country entry, dual nationality, safety & security, crime & criminal penalties, medical and health facilities, aviation and road safety, tourism and real estate/timeshares, drug & firearm penalties, human smuggling, adoption and embassy/ consular locations.

Mexican Ministry of Tourism (SECTUR) - http://www.sectur.gob.mx

Consulate of Mexican Tourism / Consejo de PromociÛn Turistica

VisitMexico.com provides a wealth of information about the geography, culture and holidays of Mexico.

Magazines

≥Business Mexico≤ from the American Chamber of Commerce - http://www.amcham.com.mx/

Issued four times a year, this publication explores topics that affect the U.S./Mexico business community. Published in English, monthly editions contain cover stories focusing on current affairs, sections on banking & finance, environment, management, and industry, as well as investment summaries, and cultural features.

Books

≥Business Mexico: A Practical Guide to Understanding Mexican Business Culture≤ by Peggy Kenna and Sondra Lacy

≥Doing Business In Mexico: A Practical Guide≤ by Gus Gordon and Thurmon Williams

≥Business in Mexico: Managerial Behavior, Protocol and Etiquette≤ by Candace Bancroft McKinniss and Arthur A. Natella Jr.

Political, Economic & Legal Information

Political

Structure: Presidential with strong Congress. The President (http://envivo.presidencia.gob.mx/?NLang=en) serves one six-year term.

Bicameral legislature:

Senate (http://www.senado.gob.mx/index.php?lng=en) has 128 members who serve six year terms.

Lower house is the Chamber of Deputies (http://www.camaradediputados.gob.mx/) (only in Spanish) has 500 members who serve 3 year terms.

President's political party:

Partido AcciÛn Nacional (PAN) http://www.pan.org.mx/

Major opposition political parties:

Partido Revolucionario Institucional (PRI) http://www.pri.org.mx/Version2004/index.html;

Partido de la RevoluciÛn Democr·tica (PRD) http://www.prd.org.mx/;

Partido Verde Ecologista de MÈxico http://www.pvem.org.mx/(PVEM); Partido del Trabajo http://www.pt.org.mx/;

Convergencia http://www.convergencia.org.mx/

According to Datamonitor, Mexican politics do not have a clear left/right division.

President Fox won the first free and fair election in 2000. Since then, he has been unable to push his structural-economic reform agenda through the legislature because his party, Partido AcciÛn Nacional (PAN), does not have a majority in either house. PAN is falling out of favor. The Partido Revolucionario Instituncional (PRI), which ruled for seventy years before PAN came to power, is gaining popularity. The next elections for President and Congress will occur in July 2006.

Legal: Federal legal system consists of the Supreme Court, appellate courts, 68 district courts.

According to the EIU Commerce Report, the legal system is very slow and bureaucratic, and occasionally corrupt.

Economic

Mexico's economy is heavily influenced by the United States because Mexico exports so many products to the U.S. The U.S. is responsible for approximately 25% of Mexico's GDP.

After NAFTA and messy presidential elections in the mid-nineties, Mexico's economy entered a tailspin. Toward the end of the decade, the economy greatly improved, thanks to many U.S. investments. The economic slowdown of 2001 hit Mexico, but the economy began to rebound in 2002. Because of these ups and downs, the peso has been weak, although the central bank is working to increase the peso's value.

"The Economist Intelligence Unitπs central forecast is for GDP to slow at a measured pace in 2005-06. However, Mexican growth will be among the most vulnerable in the event of a sudden downturn in US demand." (EIU Country Report Mexico March 2005 Updater)

2004 GDP in U.S. dollars: $645.8 billion

Source: Datamonitor Mexico Country Profile, EIU Country Report Mexico

For more information:

U.S. Department of State.