Mexico Investment Portal

15 05 2007

Aaron Burda and I have begun work on a very interesting (and hopefully useful) project.  Providing information and online links, in English, for foreign investors and businesses wishing to examine, analyze and evaluate Mexico for business operations.

The Mexico Investment Information Project (link)

We are a Creative Commons licensed project (i.e. not for profit) whose mission is to provide the best online resource to foreign businesses looking to invest in Mexico. Currently online is a very rough “mock up” of a website that we are planning to build over the next several months.

If you would like to participate in the project and feel you have some valuable expertise to contribute please apply for a userid.

Project History
The Investment Portal is a combination of two projects. Lee Iwan’s Business South of the Border Blog and Aaron Burda’s UC Davis Graduate School of Management Mexico Research Project. Both Lee and Aaron were convinced that the quality of the information available on the Internet about doing Business in Mexico could be substantially improved.

Project Future
We hope to organize the existing Internet English language resources about doing business in Mexico and add to it through having select volunteers write succinct articles on relevant business topics.

If you are a Banker, Lawyer, Accountant, Environmental Expert, HR Manager, Logistics Manager or other qualified and experienced individual with business expertise about Mexico and would like to provide information, advice, or website links to this project, don’t hesitate to contact us.

Related Information

Mexico Investment Portal

Understand Mexico Blog 

Business South of the Border 





Questions – Answers, Doing business in Mexico

14 11 2006

Have any questions about how to do business in Mexico?

Any specific problems or dilemmas related to doing business in Mexico?

Questions about the business culture in Mexico or Mexican culture in general?

Would you like to know more about a specific theme related to Mexican business?

Need references or information about organizations, people or associations in Mexico?

Send your questions to me at   lee.iwan  at  gmail.com
or post a comment here.

Related Links

How to do business in Mexico

Official government websites of the 32 Mexican States 

The definitive dialing guide for calling Mexico

Shorten your learning curve about Mexico

Business South of the Border





Maquiladoras in Mexico

28 09 2006

An Internet search for the definition of the terms maquila and maquiladora will turn up quite a variety of ideas and interpretations.

The maquiladoras have created quite an emotional and political reaction on both sides of the US and Mexico border. They have been accused of stealing jobs from the US, promoting sub-standard working conditions, lowering wages, exploiting workers, and not contributing to the Mexican economy.

Despite the controversy, the maquiladoras are growing and thriving in Mexico. They offer attractive benefits to organizations that are seeking competitive production and assembly costs, skilled labor and Mexico’s proximity to the US market. Recently many transnational organizations that moved manufacturing operations to China in the 1990’s have moved back to Mexico due to cost and logistic advantages.

Maquila and Maquiladoras – definitions and activities

  • The term maquila comes from the Spanish term that refers to the portion paid (in grain, flour or oil) to a miller for milling a farmer’s grain.
  • Maquiladoras are legal entities under Mexican law, with special tax privileges, they provide service, assembly or manufacturing operations.
  • Maquiladoras are able to import raw materials or semi-processed materials from foreign countries, in order to service, process or assemble them in Mexico, and then export the finished product back to that country. These activities take place without the collection or payment of import, export or V.A.T. (value added tax) taxes.
  • The maquiladora program was created by Mexico in order for foreign organizations to take advantage of low labor costs in Mexico (primarily the USA), and to provide employment to Mexican workers in Mexico. Initially the maquila operations were located close to the US border. Currently maquila operations can be found throughout Mexico.
  • Maquiladoras can be 100% foreign owned, 100% Mexican owned, or a joint venture between Mexican nationals and foreign investors.
  • Maquiladoras are also known as twin plants, in-bond industries, export assembly plants and offshoring.
  • The maquiladoras in Mexico suffered from a crisis of plant closings in the 1990’s and early 2000’s as many companies moved operations to China. Since 2004, Mexico has seen a resurgence of the maquiladoras.

  • Check with your attorneys and accountants in Mexico about the specific benefits of the maquila program. As of September 2006, there were important legal changes (simplification and consolidation of government compliance and monitoring programs) that will affect current and future maquiladoras.

Related Links

Why you should pay attention to free trade treaties

Industrial and business parks in Mexico


Official government websites of the 32 Mexican states

Maquila and Maquiladoras in Mexico





Why you should pay attention to free trade treaties

27 09 2006

Globalization, transnational companies, global sourcing and outsourcing, free trade, do any of these terms sound familiar?

Obtaining products and raw materials for the lowest price possible is a fundamental concept in business. Today organizations are looking for manufacturers and locations worldwide where they can find lower costs of production in order to remain competitive.

Combine the factors of: quality control, low cost production, logistics costs, and the time involved to get the product to market from the factory, and you understand the challenge of doing business and sourcing products in today’s global economy.

To truly determine the final cost of the product, all these factors must be calculated. This will determine which country offers the best competitive advantage. Make sure you are analyzing any existing free trade agreements when you are seeking suppliers globally.

Free trade treaties between countries have a significant impact upon the final cost of goods. These free trade agreements eliminate the tariffs and taxes on imported and exported goods between the countries involved, depending upon their concentration or percentage of “local” or national raw materials (including labor), as specified in the free trade agreement.

Free trade agreements between countries are of great importance and value only if are exclusive and not accepted by all trading countries. The more free trade is embraced by the international community (through treaties or elimination of import and export tariffs) the less impact the current free trade agreements have in determining competitive advantages for a single country.

Here is a simple example of how the NAFTA (North American Free Trade Agreement) free trade treaty between Mexico and the USA, would favor the US supplier over a Chinese supplier.

Example of free trade agreeement competitive advantage:

US supplier to Mexico. If I want to purchase paint made by a US paint manufacturer and have it shipped to my warehouse in Mexico, my total cost to bring the goods to my warehouse in Mexico would be the cost of the paint, plus freight and customs clearing costs. There is no import tariff on this product due to the NAFTA free trade treaty. It would take 4 – 6 days to arrive in my warehouse in Mexico once the product has been shipped from the USA.

US paint $ 20.00 + Freight $ 4.00 + Customs $ 1.00 = $ 25.00 total cost of the US product in my warehouse in Mexico

Chinese supplier to Mexico. If I purchase the same product, from the same transnational company, but it is manufactured in China. Transportation time is 40 days from date product is shipped from China.

Chinese paint $14.00 + Freight $ 8.00 + Customs $ 1.00 + Import tariff (13% of CIF value) $ 2.86 = USD $ 25.86, total cost of the Chinese product in my warehouse in Mexico.

In this example the final cost of the product is $ .86 lower from the US supplier as compared to the Chinese supplier, despite a lower initial product cost. Factor in the financial cost and time required to move the product from the factory to my warehouse, and the lowest final cost in this case would clearly come from purchasing product from the US supplier.

Mexico’s aggressive free trade strategy

Since the 1990’s Mexico has bet heavily on international free trade agreements as a method to improve their competitive advantage and increase their manufacturing base and attract foreign investment.

Mexico has signed 11 existing free trade treaties and 2 complementary economic agreements with 42 countries. It is the only country in the world to have standing free trade agreements with North American and the European community.
The free trade agreements have greatly increased international competition (imports) in Mexico (good for the consumer).

Free trade agreements have allowed Mexican exports to increase and reach destinations and markets that were closed before due to tariffs and costs. There has been increased foreign investment from countries that desired to use Mexico’s free trade competitive advantage for international manufacturing and export projects.

The Mexican manufacturers and suppliers of the national Mexican market were given a “sink or swim” option. Virtually overnight (many of the treaties were phased in over a period of 3 – 10 years), their previous protected market was filled with imported goods (more competition, lower cost, higher quality).

Those that have survived the “invasion”, have had to improve their efficiency, quality and costs. Making them much more competitive in todays global economy.

Britannica’s Definition of free trade:

“Policy in which a government does not discriminate against imports or interfere with exports. A free-trade policy does not necessarily imply that the government abandons all control and taxation of imports and exports, but rather that it refrains from actions specifically designed to hinder international trade, such as tariff barriers, currency restrictions, and import quotas. The theoretical case for free trade is based on Adam Smith’s argument that the division of labour among countries leads to specialization, greater efficiency, and higher aggregate production. The way to foster such a division of labour, Smith believed, is to allow nations to make and sell whatever products can compete successfully in an international market.”

Related Links

Mexico and international free trade agreements





World Bank report – Doing Business in Mexico

23 09 2006

The World Bank has an on-line report available entitled “Doing Business in Mexico“. The study was published in December of 2005.

“Cosponsored by COFEMER, USAID, and the World Bank Group, Doing Business in Mexico is the first state-level report of the Doing Business series in Latin America. This report investigates the scope and manner of regulations that enhance business activity and those that constrain it.

The report covers the following thirteen Mexican cities and four areas of regulation: Starting a business, Registering property, obtaining credit and enforcing a contract.”

“When compared, Mexico City and the 12 other cities differ dramatically on the four indicators the report measures. “

The cities and regulations analyzed include: Aguascalientes, Celaya, Ciudad Juarez, Guadalajara, Monterrey, Veracruz, Merida, San Luis Potosi, Torreon, Mexico City, Tlalnepantla, Puebla, and Queretaro.

Of special note is the following comment. “The report concludes that reform is sorely needed. Much of the opportunity for improvement is in local administrative procedures, which can be changed by a governor or a mayor.”

This is very important. A governor or local mayor can make an important difference on the ease of setting up and doing business in Mexico. Seek out those states and cities with pro-active leadership. Find those areas that are investing heavily in infrastructure or have a dynamic policy focused on foreign investment and economic development.

Related Links

Doing Business in Mexico – World Bank

Doing Business in Mexico (PDF)

Press Release (PDF)





Mexico and international free trade treaties

19 09 2006

Mexico has signed 11 international free trade treaties and 2 complimentary economic agreements since 1993.

Mexico is the only country in the world with active free-trade treaties that cover North American and the entire European Community.

These free trade agreements have made Mexico highly competitive in terms of manufacturing for export to world markets, for the importation of raw materials for manufacturing and for the import of consumer goods for sale in Mexico.

The free trade agreements currently in place include:

  • TLCAN – Includes Mexico, USA and Canada – Initiated January 1, 1994 (NAFTA in English)
  • TLC-G3 – Includes Mexico, Colombia and Venezuela – Initiated January 1, 1995
  • TLC Mexico-Costa Rica – Includes Mexico and Costa Rica – Initiated January 1, 1995
  • TLC Mexico – Bolivia – Includes Mexico and Bolivia – Initiated January 1, 1995
  • TLC Mexico – Nicaragua – Includes Mexico and Nicaragua – Initiated July 1, 1998
  • TLC Mexico – Chile – Includes Mexico and Chile – Initiated August 1, 1999
  • TLCUEM – Includes Mexico and the European Union (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Holland, Ireland, Italy, Luxembourg, Portugal, Spain, Sweden, United Kingdom, Cypress, Czech Republic, Estonia, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia) – Initiated July 1, 2000.
  • TLC Mexico – Israel – Includes Mexico and Israel – Initiated July 1, 2000
  • TLC Mexico – TN – Includes Mexico, El Salvador, Guatemala and Honduras – Initiated on March 15, 2001 with El Salvador and Guatemala and June 1, 2001 with Honduras
  • TLC Mexico – AELC – Includes Mexico, Iceland, Norway, Liechtenstein and Switzerland – Initiated July 1, 2001
  • TLC Mexico – Uruguay – Includes Mexico and Uruguay – Initiated in July 15, 2004
  • AAE Mexico – Japan – Includes Mexico and Japan – Initiated April 1, 2005

In addition there are Complementary Economic Agreements (ACE’s) in place with Brazil and Argentina.

Related Links 

Why you should pay attention to free trade treaties 





First impressions, what can you do to change yours?

15 07 2006

First impressions do matter.

Seth Godin writes about his recent experience with a receptionist (Link), and has some observations on how this first contact could be made memorable, interesting and important.

I had two immediate thoughts after reading the piece. The first related to the Japanese custom of placing greeters at the front door of the department store….what message are they providing to customers by this action?
Second thought, what happens when everyone has a greeter, and the experience is no longer “special” but accepted as normal business procedure? You would notice if it was not there, and you would notice if it evolved and changed into something different.

Today everyone has a receptionist, it’s part of the normal business procedure, and as Seth points out, it is considered a necessary but usually low paying, low creativity position.

What could you do to change the receptionist and the first impression of your business into something special, different or unusual for the customer to remember?

Why aren’t you doing it?