Mexico: An Ideal Destination to Open a Subsidiary

  • By Susan Burns
  • 05 May, 2016

Mexico is internationally renowned for many things: mariachi music, its beautiful beaches, historic ruins, soccer, tequila, and exquisite food that makes your taste buds explode.

But our southern brother is also widely recognized for the important role it plays in our economy . Ranked as the 11th largest economy in the world, and with 77% of the population located in urban areas, Mexico is full of soaring opportunities waiting for you.


Mexico has a modern infrastructure, which is vital to any industry. It has 74 airports, 11 of which are international; 116 ports, modern highways, and railways. In all major cities, buildings are architectural art pieces worth admiring. You can find the highest quality services, and have access to high speed internet, reliable mobile services, and other utilities with ease.

Mexico has a growing middle class, which is currently developing and getting stronger. Currently, almost 50% of Mexican households belong to the middle class, and it’s grown 60% in the last 15 years (source:  http://mexiconewsdaily.com/news/mexicos-middle-class-47-of-households/ ).

During Peña Nieto’s presidency, Mexico has signed partnerships and alliances with many countries, including Peru, Colombia, and Chile. These agreements, added to the NAFTA, signed in 1994 have made of Mexico one of the most important commercial destinations for industries such as agribusiness, technology, franchising, housing and construction, automotive, transportation, education, environmental and energy sectors.

The government has reinforced the economy and created measures to favor competitiveness, all of which creates a favorable environment for foreign companies to consider opening a subsidiary in Mexico.

Another aspect the Mexican government has improved is safety. It continues to make an important effort to eradicate organized crime. Although there are definite "danger zones" to avoid, Mexico is not the “dangerous” country depicted in 90’s movies, but only one who’s actually been in the country, and done business in it, may truly understand how far this somewhat common perception is from reality.

The business culture is open to U.S. goods and services. Mexican businesspeople, in general, are well-educated, and most of them are bilingual. More than 115,000 engineers graduate every year in Mexico, surpassing Canada, Brazil, Germany, and the UK.

Labor cost is very competitive in Mexico. Compared to China, famous for its low-cost, Mexican wages are 20% higher. Still, it’s significantly more cost-effective because of its closeness to the United States, which lowers transportation costs significantly.

Last but not least, Mexico is a country full of natural resources. It’s the world’s second largest producer of silver, and one of the most important producers of copper in the world. The country favors activities related to renewable energy and biotechnology. Not to mention all the tourist destinations, archeological sites, breathtaking beaches, and exuberant mountains that make this country an ideal option for new hotels and other touristic projects.

Although the government could rethink and modernize some of the current rules and regulations, Mexico is a very attractive option for burgeoning businesses that want to either lower their manufacturing costs by moving the whole operation to Mexico, or take advantage of all the benefits this wonderful country offers by opening a subsidiary in cities like Queretaro, Puebla, Toluca, Monterrey, and Guadalajara, among many others.

If you’re looking to expand your business by opening a subsidiary , you should consider Mexico as the ideal destination for your future plans.

Talk to a seasoned and  knowledgeable business advisor  about your expansion plans to Mexico, to guide you through the process and show you the way to financial success.

Let this colorful country embrace you! Oh, and, might I recommend the mole de olla and tacos al pastor?...


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The Trans-Pacific Partnership (TPP) is the largest regional trade agreement in history, between the United States and 11 other Pacific Rim countries. Following in the footsteps of the North American Free Trade Agreement (NAFTA) between the US, Mexico, and Canada, the TPP expands upon this to establish new rules for global trade by eliminating 18,000 tariffs, promoting an open internet, disciplining state-owned enterprises, and establishing environmental and worker protection. Its aim is to increase Made-In-America exports, grow the US economy, support higher-paying US jobs, and strengthen the middle class.

 

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The TPP is a piece of legislation I have been closely following, and recently had the opportunity to moderate a panel entitled, "The Impact of TPP on NAFTA: Opportunity for Strengthening Ties -- Or Recipe for Disaster." Panel members included Aristeo Lopez of the Mexican Embassy, Laura Sierra of Alston & Bird, Nicholas Guzman of Drinker, Biddle & Reath, and Greg Kanargelidis of Blake, Cassels & Graydon.

 

The American Bar Association Section of International sponsored this event with the intention of presenting US, Mexican, and Canadian standpoints on the TPP and the impact of its passage on NAFTA. What followed was a thoughtful and informative discussion, and although the topic is highly complex, I thought I'd share some highlights with you.

 

Ms. Sierra explained some of the political context surrounding the TPP, including that the US has historically been pro-trade, and this is the first time since 1992 that trade has been a significant issue in presidential election year politics. US FTAs are modeled after NAFTA. The agreement eliminates a significant number of tariffs that would be beneficial to US businesses, but there are dissenting voices. Some of the concerns include employment issues, the manipulation of currencies by various countries, and opposition in specific industries such as auto, segments of agriculture and pharmaceuticals and biologics whose concerns were not addressed in the agreement. For example, intellectual property protection for biologics is not included in the agreement.

 

Mr. Lopez pointed out the benefits of NAFTA--growth in trade between Mexico and the US, especially--and explained that the TPP is intended to expand upon this growth, with attention to subjects that were treated less comprehensively in NAFTA. Another goal of TPP, in Mr. Lopez' view, is to strengthen Mexico's ties to NAFTA and other FTA partners, allowing Mexican goods to reach new markets.

 

Mr. Kanargelidis noted that the TPP is not intended to replace or override NAFTA, but that the two agreements can co-exist. He pointed out US, Mexican, and Canadian businesses can operate under the clauses of whichever agreement is most favorable to them in a given transaction. For example, the "de minimis" value threshold is 10% under TPP, and only 7% under NAFTA.

 

An audience member posed the question of whether TPP shipments will be exempt from US Merchandise Processing Fees (MPF) like NAFTA shipments are. Mr. Guzman explained that even though TPP does away with "ad valorem" fees, US Customs might find another way to collect MPF that is compliant with the agreement. He also described the TPP's "focused value" methodology for determining goods' origin, which might be more stringent than NAFTA methods.

 

Opponents to the TPP often cite concerns about the Investor-State Dispute Settlement (ISDS) provision, which outlines the mechanism by which agreement disputes can be settled. Mr. Lopez explained that the TPP’s ISDS provisions are more transparent than those found in NAFTA.

 

At the conclusion of the panel, Ms. Sierra suggested that a full renegotiation of the TPP is unlikely, given that the agreement was difficult to reach in the first place, and that several countries have already ratified it. However, we might see some side letters that result in alterations to the text pertaining to certain issues. Panelists agreed that the TPP will pass. It’s a matter of time and final form.

 

The TPP has been negotiated between 12 countries who together form about 40% of GDP, and 1/3 of world trade. The agreement is of an unprecedented scope, and the implications of this agreement are huge. We will soon know if it can pass during the lame-duck session before the election, which is fast approaching!

 

To learn more about the TPP, visit this site . The full text of the agreement can be found here .

 

Sources:

Granville, Kevin. “The Trans-Pacific Partnership, Explained.” The New York Times. 20 August 2016. Web.

 “The Trans-Pacific Partnership.” Office of the United States Trade Representative. Executive Office of the President. 2016. Web.
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