Top states for business in Mexico – World Bank Report 2007

17 11 2006

I highly recommend that you download and read the Doing Business in Mexico 2007 report, released on November 15, 2006.

For anyone currently doing business in Mexico, or thinking about doing business in Mexico, this is a must read.

The World Bank Group has announced that “Doing business became easier in many Mexican states in 2005-2006, according to the new Doing Business in Mexico 2007 report, released today in Mexico City. The report finds that some states compare well with the best of the world, while others need much reform to become globally competitive.” – November 15, 2006

Quick results of the top ten Mexican states based upon the factors of; starting a business, registering property, obtaining credit, and enforcing a contract include:

  1. Aguascalientes, Aguascalientes (Easiest)
  2. Guanajuato, Celaya
  3. Nuevo Leon, Monterrey
  4. Sonora, Hermosillo
  5. Campeche, Campeche
  6. Zacatecas, Zacatecas
  7. Queretaro, Queretaro
  8. Michoacan, Morelia
  9. Sinaloa, Culiacan
  10. Mexico City (Most difficult)

A full listing of all the 31 Mexican states is available in the report.

Excerpt from the report: “If you were to open a new business in Mexico City, the start-up procedures would take 27 days on average, 8 days fewer than in Shanghai. If you decided to open a business in Guanajuato or Aguascalientes, you would have to wait 12 days—only one day longer than your competitor in Amsterdam. But if you needed to take a customer to court for a simple debt default in Guanajuato, resolving the dispute would take 304 days—far longer than the 217 days it takes in Dublin,1 but significantly shorter than in Baja California Sur where it takes 581 days. These examples illustrate two patterns. First, some Mexican states compare well with the best in the world. Second, many states need much reform to become globally competitive.”

Related Links

Press release on Doing Business in Mexico 2007 (PDF, 75KB)

Doing Business in Mexico 2007 (PDF, 1.26MB)

World Bank Report – Doing Business in Mexico 2005





Sourcing and supply chain strategy – Mexico

16 11 2006

Purchasing from Mexico and Mexican suppliers?

Don Gringo at Catemaco News and Commentary brought these items to our attention.

Sourcing in Mexico gets easier.  The article points out that doing business with Mexico is easier than in the past.

  • The proximity of Mexico to the US markets impacts communication, logistics, costs and time factors.
  • Mexico has a history of dealing with the US, and are familiar with competitive manufacturing techniques.
  • Relationships are critical to success.
  • Beware of stereotypes.
  • Take the time to find the “right” partner.
  • Do’s and don’ts for doing business in Mexico

Does your supply chain strategy include Mexico?  It should.  Al Brown president of SupplyMex writes that Mexico offers:

  • Logistics infrastructure, highways, rail and port system that has been improved over the past 10 years.
  • Free trade agreements with 42 countries.
  • Global production and quality standards.
  • Stable political and economic environment.
  • Skilled workforce.

Thanks Don.
Related Links

Purchasing.com

Why you should pay attention to free-trade treaties 

Maquiladoras in Mexico

Industrial and Business Parks in Mexico





Foreign direct investment in Guanajuato, Mexico

6 11 2006

The State of Guanajuato, Mexico has over 572 companies with foreign capital registered and located in the state.

The following information has been translated from an article dated November 6, 2006, published in the newspaper Correo, by Vicente Ruiz, Link.

49% of these foreign companies in Guanajuato are involved in manufacturing, and 29% are commercial operations which together represent an investment greater than 1,000,000,000 (one billion US dollars).

Due to changes in laws regarding foreign investment in Mexico (in 1993, 1995, 2001), 90% of all economic activities in Mexico are completely open to foreign participation and investment.

Mexico’s growing national economy, free trade agreements with 32 countries and geographic location provide great economic and logistics advantages to companies opening operations in Mexico.

In Guanajuato, 50% of all the foreign companies are located in the city of Leon (281), followed by Irapuato (71) Celaya (52), San Miguel Allende (31), Silao (26), San Francisco del Rincon (25), Guanajuato (19) and the rest (67) throughout the state.

Guanajuato occupies the first position for foreign investment of the all the Mexican states in the North-Central region.

Principal industries in Guanajuato that received direct foreign investment include:

  • The automotive industry received US $ 874.2 million
  • Processed food industry (concentrates, preserved products) received US $ 99.1 million
  • Manufacture of paper, cellulose and derivatives received US $ 18.9 million
  • Commerce of non-agricultural items received US $ 17.3 million
  • Chemical manufacturing received US $ 15.9 million
  • Clothing manufacturing received US $ 7.5 million
  • Textile manufacturing received US $ 5.2 million
  • Plastics manufacturing received US $ 5.4 million
  • Food products received US $ 4.8 million

Who has invested in the State of Guanajuato, Mexico:

Country…. Investment (Millions of US dollars)…… %

United States of America……..1’ 009, 214.00………..92.7

Holland………………23, 277.90………….2.1

Spain………………….18, 234.00………….1.7

Germany……………14, 267.30………….1.3

Denmark……………..4, 913.90………….0.5

Taiwan…………………4, 426.00………….0.4

Others………………..14, 549.60………….1.3

Total: USD $ 1’ 088, 882.70 (Millions)

Related Links

Aumenta inversion extrañjera en el Estado de Guanajuato: SE (Spanish)

Secretaria del Economia de Mexico (English)

State of Guanajuato webpage (English-Spanish)

Correo (Spanish)





The definitive guide on how to dial to Mexico

4 11 2006

Starting today, November 4, 2006 there are changes on how to dial to cellular phones in Mexico.

The program called “El que llama paga”, which means “whoever calls, pays for the call”, allows you to call any cellular phone in Mexico and the recipient of the call does not have to pay. Previously the cost of the call was shared between both parties.

If calling Mexico from out of the country (International long distance):

  • To a fixed landline phone: the exit code of the country (in the USA – “011”) + 52 + area code + telephone number
  • To a Mexican cellular phone: the exit code of the country (in the USA – “011”) + 52 + 1 + area code + telephone number

If in Mexico, calling from a fixed landline phone to a Mexican cellular phone

  • To a cellular phone in the same city: 044 + area code + telephone number
  • To a cellular phone in another city: 045 + area code + telephone number
  • To a Nextel of the same city: telephone number
  • To a Nextel of another city: 01 + area code + telephone number
  • From a fixed landline that is NOT Telmex to a cellular phone of another city:  01 + area code + telephone number

If in Mexico, dialing from a cellular phone

  • To a fixed landline in the same city: telephone number
  • To a fixed landline in another city: 01 + area code + telephone number
  • To a cellular telephone in the same city: area code + telephone number
  • To a cellular telephone in another city: 045 + area code + telephone number
  • To a NEXTEL: telephone number
  • To a NEXTEL in another city: 01 + area code + telephone number

Related Links

How to call Mexico from the USA

Changes for dialing long distance to cellular phones 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