MARKET GUIDES
Mexico Guide: How to Grow Your Company into the Mexican Market
April 18, 2024
If you are thinking of expanding your business into Latin America, Mexico could be worth exploring.
Mexico is an important player in the Latin American region and has several factors going for it in terms of free trade, political stability, and technology adoption, among other factors. Understanding these can be key to your localization strategy in this region.
Let us run you through the various aspects, benefits, and secrets to success in doing business in Mexico.
Market overview: What you need to know about Mexico
Mexico is the second most populous country in Latin America with a population of 128 million as of 2022, 80% of which live in urban areas.
Mexico City is the capital and is both the economic and political hub of the country. A significant proportion of the country’s population is concentrated in and around this city.
Mexico is ripe with cultural centers and activities and tourism is a booming industry. Other key industries are, manufacturing, commerce, mining, agriculture, and services.
Digital adoption in Mexico: GDP and demographics
Mexico is a USD 1.41 trillion economy making it the 2nd largest economy in Latin America and 16th largest in the world.
Ninety percent of Mexico’s population uses the web daily, most via desktop devices. As of 2022, approximately 75% of the population had access to mobile internet which is expected to exceed 90% by 2029.
When it comes to social media, Facebook and WhatsApp reach 93% of the Mexican population. TikTok, among other platforms, is catching up and currently reaches around 73.6% of the audience.
There is also an important development in Mexico’s e-commerce space. Mexico is globally positioned among the top 5 countries when it comes to e-commerce growth rate, which was 23% in 2022. About 80% of the online Mexican shoppers purchased from international retailers the same year.
What languages are spoken in Mexico?
The national language of Mexico is Spanish and is used by the majority of the population. Although the indigenous communities of Mexico communicate in their local language, 80% of them can speak Spanish.
Mexico is the world’s largest Spanish-speaking country. However, despite several similarities, there are notable differences between the Spanish spoken here and that in Spain and other Spanish-speaking countries.
From a localization and translation perspective, Mexican Spanish is the go-to language. English is the next most spoken language and is used by business communities and populations in the cities.
5 compelling benefits to doing business in Mexico
There are several advantages to doing business in Mexico, including the efforts put in by the government to make it a business-friendly destination. Here are 5 key benefits:
1. Low-cost, skilled labor
Mexico has a low-cost, highly productive, and skilled labor force which makes it an excellent place for expanding your business.
Both factory and non-factory wages in Mexico are lower than that in China and the labor force is also much younger.
2. Efficient transport and connectivity
The government of Mexico has been committed to developing the country’s transport and connectivity infrastructure. In 2018, the government announced Construction and Modernization Programme 2018-2024 which set aside USD 20 billion for infrastructure projects.
Following this, several other rounds of such projects have been announced which focus on railways, airports, highways, telecommunications, and energy, among others.
3. Tax competitiveness
Due to trade agreements with several countries, there is zero percent duty on 90% of goods imported into Mexico.
The corporate tax rate is 30% and is applied to the business’s worldwide income. Plus, capital gain is treated as normal income. Recent tax reforms provide 30% credit to companies for R&D initiatives.
4. IT transformation and technology adoption
Latin America is moving toward a significant IT transformation and Mexico is leading this change. Mexico’s Internet of Things (IoT) market is on its way to hitting the USD 6.5 billion mark by 2027.
Its AI market is expected to exceed USD 700 million by 2027; a 70% CAGR growth. Mexico is also adopting machine learning, cloud computing, and cybersecurity with equal vigor.
5. Nearshoring hub
Mexico is now opening up as a feasible nearshoring hub as well. So, if North America is an important target market for your business, then near-shoring to Mexico can be particularly beneficial.
There are over 430 industrial parks across several states in Mexico as of 2024. The country is also focusing heavily on deepening its capabilities in manufacturing and related ecosystems.
Compliance and regulations in Mexico you should know about
Mexico is one the most open economies in the world and is among the top 10 nations that attract the most FDI (Foreign Direct Investments). It has signed foreign trade agreements with 50 countries that focus on cross-border commercial and investment interactions. United States is its largest trading partner.
This arrangement supports global businesses looking to enter Mexico by providing tax incentives, reducing trade barriers, and offering liberal foreign investment opportunities.
There are, however, certain sectors that have an FDI cap of 49% and there are also certain sectors that are reserved for Mexicans and Mexican companies such as domestic tourism, overland freight and certain other professional and technical services.
What is the political climate like in Mexico?
Mexico is a politically stable nation and is a federal democratic republic. It elects its President, who is the chief executive, for a six-year term. While the President cannot be re-elected, new legislation was introduced in 2021 that allows re-election of Congressmen and Senators.
Each of the 32 states in Mexico has its own legislature and judicial systems. The elected governors of each state serve a term of six years. Mexico City also elects a metropolitan mayor.
The 5 keys to successful sales in Mexico
There are a few things to keep in mind while selling your products and services, or building a distribution network in Mexico. Here are 5 key things to consider:
1. Utilize social media marketing
In addition to 93% of Mexicans accessing social media, this audience is also open to online buying. 43% of e-commerce buyers purchase through Facebook and WhatsApp.
Taking advantage of this reach through social media marketing and paid online advertising is likely to help with brand visibility and growth.
2. Adopt industry-specific advertising
Mexico is also big on trade shows and traditional advertising such as print media, TV and radio. In addition to digital marketing, it is vital to utilize alternative industry-specific advertising and marketing solutions to reach your target audience.
3. Consider geographic segmentation for distribution
If your business needs to build sales and distribution channels, a good way to approach this is by segmenting Mexico into smaller territories. Appoint distributers and agents that can access these territories accordingly to facilitate better penetration.
4. Learn about the business customs
In Mexico, asking questions about your personal background is an important step toward building trust at business meetings. You are expected to do the same before leading into any business-related discussions.
It is important to be aware of the customary hours for breakfast and lunch and schedule meetings accordingly. Meetings over meals can be long and are likely to continue well after the plates are cleared.
Seniority is important in Mexican business interactions and it is important to know and acknowledge the authority in the room.
5. Make provisions for local language support
It is important to have online and offline marketing materials in Mexican Spanish wherever possible. Even at meetings, if you come from a non-Spanish background, communicating in Spanish is seen as a gesture of goodwill.
Mexican buyers also expect after sales support and maintenance programs for their purchases.
Where to get further help on moving into Mexico
Are you interested in entering the Mexican market?
With over 30 years of experience in designing localization strategies for global companies, our team of experts can help you localize your global content into Mexican Spanish.
Get in touch today to learn how our products and services can help you with this transition.