Success tips when doing business in Mexico

Doing business in Mexico:

  1. Although the influence of foreign multinationals cannot be ignored, most indigenous Mexican companies will be hierarchical in structure;
  2. Key business decisions are always made by a small number of individuals at the top of the hierarchy. Entrepreneurs should ensure that they are dealing with the right people;
  3. As not all local Mexico companies are well-versed with international trade, we encourage our Clients to consistently use and sign contracts of service;
  4. Success in business negotiations with Mexican business people comes down to the ability to create effective personal relationships and to present logically-sound business plans;
  5. Agendas are not always used in meetings and if they are produced will not always be strictly followed.

Business etiquette to be aware of:

  1. Initial meetings should be focused mostly on relationship building, with small talk crucial towards building trust with your Mexican business partner;
  2. During business dealings, business persons should make sure that they send people of the appropriate level of seniority to deal with colleagues. Sending a junior colleague to meet a senior manager is considered an insult;
  3. In Mexico, personal relationships are at the heart of business dealings. Entrepreneurs should look to take the time to cultivate strong, long-term relationships with prospective business partners.

Language considerations

  1. The Client should try and learn Italian because English is not commonly used in Italy by all costumers and business partners. Some northern Italian areas speak German, while dialects are still very common in the South and Sicilia;
  2. It is recommended that our Client inquire about the English-language proficiency of a business man/woman beforehand. An interpreter must be arranged to increase efficiency;
  3. Lastly, it is important that the Client communicate with us regarding any problems that they face. Our experts regularly help young businesses succeed in foreign countries.

Interesting facts about Mexico?

  1. The official name for Mexico is the “United Mexican States”;
  2. The national symbol of Mexico is the “golden eagle”
  3. In Mexico, people from the USA are referred to as “North Americans” rather than “Americans”. Mexicans also consider themselves “Americans”;
  4. Mexico is the 3rd highest exporter of honey in the world;
  5. The border between USA and Mexico is the 2nd longest in the world;
  6. Chihuahua dogs are named after a place in Mexico;
  7. Mexico City is the oldest city in North America;
  8. By population, Mexico is ranked 11th in the world. By land mass, it is ranked 14th;
  9. Scorpion stings are 10 times more common than snake bites in Mexico, and just as frequently prove fatal;
  10. Mexico has more Spanish speakers than any other country in the world;
  11. Mexico City produces enough sewage to fill an Olympic swimming pool every minute;
  12. Mexico is the world’s second-biggest producer of horse meat, just behind Chin

Frequently asked questions

  1. Incorporating a company in Mexico as a foreigner is a lengthy process that can take up to 5 months. 

    The first step is to choose the suitable legal entity for your business goals. The main business entities that a foreigner can choose for conducting business in Mexico are the below 5:

    • LLC: suitable for carrying out all kinds of activities and services as they require low initial capital and can be fully foreign-owned;
    • Export Processing LLC: local companies under the Maquiladora program that are meant to conduct export-oriented businesses;
    • Joint Stock Corporation: suitable for investors seeking to raise funds and list their company on the Mexico Stock Exchange (BMV or the BIVA);
    • Representative Office: for companies that solely wish to engage in non-commercial activities such as marketing and research;
    • Branch Office: for businesses that want a direct subsidiary of the mother company and to be able to prepare joint financial statements.

    Once you confirm the preferred legal entity and the corporate structure including the resident legal representative, the main steps to set up a company in Mexico as a foreigner are as follows:

    1. Secure an approval for the formation of your business in Mexico from the Foreign Investment Commission of Mexico. This procedure can take up to two months to complete;
    2. Register the investment of your foreign company with the Mexican National Registrar of Foreign Investments;
    3. Decide a unique name for your Mexican entity and file a request with the Secretariat of the Ministry of Foreign Affairs to register the same;
    4. Prepare the i) company’s constitution and capital structure, confirm ii) the share and value of shares, iii) the registered business address and iv) the company secretary;
    5. Prepare the following company documents i) notarised passport copy of nominee resident legal representative, ii) copy of commercial office space registration certificate and iii) copy of lease agreement;
    6. Submit the above company incorporation documents along with the notarised documents and submit it with the Business Registrar of the city of incorporation;
    7. Within 1 month of submitting the above documents, if no issues with the filling of forms, the company would be legally incorporated. However, in certain cases it can take up to 3 months.

    During the registration process you will have to also prepare a business plan and understand whether your business activity requires a specific operational license in Mexico or whether it requires to be registered with the Mexican Social Security if you need to hire staff.

When you are thinking of registering a company in Mexico, you need to take into consideration the local governmental costs, the Public Notary costs and if you will be able to do the paperwork yourself or you will want to hire a professional instead.

The government cost of starting a business in Mexico amounts to approximately US$1,153. The official fees that are to be paid for starting a business in Mexico are:

Government serviceFee (US$)
Company registration with the Public Registry of Commerce820
Registration with the National Business Information Registry, depending on the company’s purpose or activities33
Tax registration with Servicio de Administracion Tributaria300
Total:1,153

CLA Consultants Group’s total costs for a typical LLC registration amounts to US$17,050, including the project management fees covering the 5 months of the engagement period.

  1. Mexico is home to a range of companies that cater to the needs of the large and rapidly increasing consumers market. The following industries are the most prefer ones whilst starting a business in Mexico. These industries have a greater demand than the others because they are promoted and supported by the Mexican government:

     

    1. Research and development companies: they are entitled to a 30% tax credit for qualified R&D expenses;
    2. Movie and theatre production companies: a limited credit is provided to such companies through an immediate tax credit capped at 10% of the total income tax of the prior year;

    Further, the Mexican Government has also implemented the following programs for businesses in Mexico:

    1. Companies in the Special Economic Zones (ZEE): a range of incentives including i) VAT exemption for certain goods, ii) income tax reduction for first 10 years along with provision of iii) modern infrastructural facilities, iv) foreign trade facilities and v) preferential financing are provided to companies incorporated in the ZEE;
    2. Companies under Maquila program: manufacturing companies are given the following incentives under this program i) exemption from customs duties, ii) entitlement to purchase or lease land anywhere in Mexico other than within 100km strip along the border. These companies can also engage in assembly, processing and packaging of any product without restrictions;
    3. Companies under Shelter operations: foreign manufacturing and assembly operations operating under this program are shielded from any liabilities associated with doing business in Mexico but are still entitled to i) government tax and customs duty waiver, ii) low setup costs and iii) exemption from Mexican government annual reporting requirement.
  1. Mexico enjoys the reputation of having a strong manufacturing, mining, commerce, entertainment and services industry. Further, businesses that aim to expand into Mexico would also enjoy the following benefits:
    1. The nation’s proximity to the USA provides the Mexican companies with a large market for exporting its services and products, especially in manufacturing. Further, the nation also receives a substantial revenue due to the influx of a large number of tourists from the USA;
    2. Mexico is the 10th leading nation in the world for export of crude oil. As a result, it is an excellent location for oil producing and exporting companies;
    3. Mexico has removed several non-tariff barriers and reduced the import duties on exports. Therefore, manufacturing and export companies are significantly increasing in this nation;
    4. The country has abundant young and skilled labours that can be hired at affordable rates;
    5. Mexico enjoys a broad range of free-trade agreements network with reputable jurisdictions such as the North America, EU and Japan which represents strategic investment opportunities.

It is relatively safe to do business in Mexico, especially if you deal with a local partner that knows and understands the market and the public. However, foreign investors are likely to face a few challenges while conducting business in Mexico, such as:

    1. The country has rampant corruption and has been ranked as the 135th least corrupt country in the Corruption Perceptions Index 2017;
    2. Mexico has a weak legal system. Courts are known to be inefficient and there is governmental interference in the taken decisions. This leads to unjust decisions for business dealings at times.

Although several Mexico corporate banking options will be available for our Clients, CLA Consultants recommends internationally renowned banks such as HSBC and CitiBank. It takes approximately 7 weeks to obtain approval for a corporate bank account.

Yes. Corporate banking in Mexico provides our Clients several services including i) internet banking and telephone banking ii) checking accounts iii) savings accounts iv) debit and credit cards v) fixed term deposits and vi) wealth management.

There is a 50% probability the banks will request a bank signatory to travel for a one hour bank interview. CLA Consultants will try its best to negotiate with the bank for a travel exemption.

For opening a corporate bank account in Mexico, our Clients will have to submit some due diligence documents to CLA Consultants. Most banks in Mexico ask for the following documents i) certificate of incorporation from the Public Register of Commerce ii) copies of ID of company owners and officers and iii) proof of address.

CLA Consultants will assist our Clients in this regard.Mexico banks are willing to provide finance to a resident company if the following conditions are meti) good business-plan ii) availability of collateral assets iii) experience of business owners iv) last 3 years audited financial statements v) realistic feasibility study and vi) project strength and weaknesses analysis (SWOT).

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CLA Group has the solution to help you grow.

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For more info on company registration, please contact our expert directly:

Mr. Petar Chakarov
Senior Manager, Sales & Business Development
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