Mexico is the most populous Spanish speaking country in the world. Seventy-nine percent of its 123 million inhabitants live in urban areas. Ten percent of the population is considered wealthy and about 46 percent live in poverty. The remaining 44 percent of the population is considered middle class. Mexico has a very young population with a median age of 28.
Mexico’s USD 1.1 trillion annual GDP makes it the second largest economy in Latin America and the 15thlargest economy in the world. Mexico has a large, diversified economy, and its increasing prosperity is linked to its deepening trade and investment relations with the United States over the past two decades.
Today, Mexico is our third largest trading partner (after Canada and China) and second largest export market. Two-way trade in goods and services totaled almost USD 1.6 billion daily in 2016, and this trade directly and indirectly supports millions of U.S. jobs. U.S. exports of services to Mexico were USD 31.1 billion for 2016, for a total of USD 262 billion in U.S. sales to Mexico. Mexico is the first or second largest export destination for 28 U.S. states. Mexico is the third largest agricultural export market for the United States, taking USD 18.7 billion in U.S. agricultural products, including corn, soybeans, dairy, pork, beef, fish, and forestry products in 2016. Mexico brings in nearly four-fifths of its total food imports from the United States.
Although Mexico’s GDP growth has slowed in the past few years, the growth rate has exceeded expectations. The International Monetary Fund recently revised its estimated real GDP growth from 1.7 percent to 1.9 percent in 2017, with growth strongly tied to the U.S. economy and world oil prices. In 2013 and 2014, Mexico passed sweeping reforms in the energy, telecom, labor, financial, and education sectors. These reforms should enable Mexico to increase its global competitiveness. The energy and telecom reforms particularly offer a multitude of new opportunities for U.S. firms.
Mexican companies, government agencies, and entire industries are deeply familiar with and receptive to U.S. products and services. U.S. producers often find it straightforward to market and sell their services and products in Mexico. Mexico’s most promising sectors include: agriculture; agribusiness; auto parts and services; aerospace; education services; energy; environmental technology; franchising; housing and construction; packaging equipment; plastics and resins; security and safety equipment and services; information technology; transportation infrastructure equipment and services; and travel and tourism services.
Successful market entry into Mexico is not entirely different from establishing sales channels in the United States. In general, your strategy should be based on establishing an agent, representative, or authorized distributor for your products and services in Mexico or opening a representative office. Given the size of the market, your strategy should consider specific regional territories.
Mexican buyers are generally price sensitive, and government buyers have strict rules for favoring lowest-price offers, so establishing an effective pricing structure is key. Legal counsel, protection of intellectual property, sales, shipping, and after sales support all need to be elements of your strategy. We address all these topics in more detail in other chapters of this guide.
MISCELLANEOUS INVESTMENT FACTS
Given Mexico’s large, diversified market, most U.S. products can be sold successfully.
Mexico continues to experience stable economic growth.
Recent economic reforms have liberalized key sectors such as energy and telecommunications, creating market opportunities.
Close cultural, social, and economic ties make Mexico a natural market to consider for first-time and expanding exporters.
Treaties & Agreements
The North American Free Trade Agreement (NAFTA), which came into force in January 1994, created a free trade zone for Mexico, Canada, and the United States. As a result of NAFTA, there are no tariffs for qualifying goods and services traded between the three countries. In this timeframe, U.S. goods exports to Mexico and Canada grew from USD 142 billion in 1993 to USD 496.9 billion in 2016.
Mexico is a member of the World Trade Organization (WTO), the Asia-Pacific Economic Cooperation (APEC), the G-20, and the Organization for Economic Cooperation and Development (OECD). Mexico has more free trade agreements (FTAs) than any other country in the world – 12 FTAs covering 46 countries – which include the European Union, European Free Trade Area, Japan, the Pacific Alliance, Israel, and ten countries in Latin America. For U.S. exporters, this means that the Mexican market is one of the most open and competitive in the world.