Country study: comparative analysis and regional characteristics

¶ … country of Mexico provides a wonderful opportunity for an enterprising entrepreneur to establish himself in the North American market. Mexico is considered to be the gateway to doing business in Latin America and North America and it has, in recent years, demonstrated an economic ascension. The government of Mexico has made a furtive effort to modernize the overall economic climate and toward this end has updated the country's infrastructure and encouraged the creation of start-up businesses. In this regard, Mexico has attempted to expand in both the service and industrial sectors and has enjoyed a respectable 5.5% growth in gross domestic product (GDP) in the past year.

Presently, Mexico is ranked as the 13th largest economy in the world and, as such, presents itself as a good investment possibility for those considering stable business opportunities. With a national population of 113 million people and an urban population of 86 million, Mexico presents a large market for companies seeking to market a variety of products.

Mexico enjoys a free market economy and is an active participant in the North American Free Trade Agreement (NAFTA) which has allowed it to increase its imports to the United States and Canada significantly over the past decade and a half. Mexico has also increased its share of imports to other areas of the world including Europe, Japan, China, and India.

The GDP of Mexico in calendar year 2010 was 1.567 trillion dollars which resulted in a per capita GDP of $13,900. In the past few years the Government has attempted to modernize the employment structure within the country by passing legislation that brought badly needed reforms to workers' pensions and the nation's fiscal program. Such reforms served to bring Mexico in line with such programs existing in the United States and Western Europe.

The major industries in Mexico can be divided into three sectors: service, agriculture, and industry. At the present time, the service sector enjoys the greatest percentage of overall business comprising over 64% of the Mexican economy while just over 31% is dedicated toward industry and only 4% of the GDP realized through agriculture.

Agriculturally, Mexico is capable of producing a wide range of products but corn production remains its most popular product as Mexico is the world's fourth largest corn producer. In the industrial sector, Mexico is heavily involved in the automobile industry with most of the major automobile companies operating plants in various locations throughout the country. The service sector of the economy is extremely well diversified but tourism, because of Mexico's climate and long coastlines, remains a significant factor.

II. Culture

Culturally, Mexico enjoys a long and rich history. Its population has been shaped by a long tradition of immigration and the mixing of indigenous civilizations (DeMente). The result has been the development of a culture that is unique among the world and, therefore, anyone planning to engage in business in Mexico must be careful to educate himself in the complex Mexican heritage.

Business inside Mexico tends to be conducted in a relaxed, informal manner. The Mexican people are non-confrontational and attempt to maintain a certain measure of harmony at all times. Business relationships are developed slowly and a strong feeling of trust must be established. Toward this end, patience is a key to business success (Stephens).

Because of the strong influence of family in the life of most Mexicans, it is not unusual that a great number of Mexican businesses are family owned and that within the context of the business operation that a great number of the employees of the business will also be family members. This family influence extends to the political arena as well where nepotism is frequently found.

As indicated earlier, patience is an essential element of doing business inside Mexico. There is often not a sense of urgency when it comes to performing tasks in Mexico. Everything seems to progress at a slower pace in Mexico and one should expect that matters will take longer to become finalized. There is no sense of urgency when conducting affairs in Mexico.

III. Risks

Despite the fact that the Mexican economy appears to be enjoying solid growth and is ranked among the world's largest, it should be remembered that this is a relatively new development. Throughout most of its history Mexico has suffered as an impoverished nation both economically and politically. It has only been within the past decade that Mexico has begun to establish itself on the world stage. Beginning in 2000, Mexico began the process of true democratization of its national government and the result has been an increased emphasis on manufacturing output, increased exportation of its products, and an enlightened use of the country's numerous natural resources (Gilbreth). This change in national politics has resulted in a much improved standard of living throughout Mexico and the growth of the middle class. The business climate inside Mexico is much improved and this trend should continue, however, the country is only a few years removed from being a totalitarian regime.

The illegal drug business remains a serious problem for the Mexican Government. It is a high priority for the Government as substantial portion of the national budget and military manpower is dedicated toward Mexico's war on drugs. This war often affects the operation of business within Mexico and must be considered (Gonzalez).

The taxing structure within Mexico is highly transitory (Stewart). The system is in a continual state of flux and anyone contemplating doing business in Mexico should be careful to be diligent and avail themselves of a qualified tax accountant well-versed in Mexican tax laws. The national government has identified tax reform as a priority and there is every hope that the tax laws will be stabilized in the near future.

Banking inside Mexico is much different than in most developed nations. Paying by mail is virtually unknown, electronic payments and deposits are beginning to become more popular but there remains large spread suspicion among many Mexican businessmen, and these suspicions spread into other areas of the banking process (Nelson). This generalized suspicion requires that anyone doing business in Mexico develop a strong, personal relationship with a banker so as to expedite the entire banking process between the business and the bank.

IV. Potential Rewards

For North American companies wanting to do business with Mexico the advantages are considerable. Although competition from China and India remains intense, as long as the Mexican peso remains relatively stable, the faster delivery times and lower transportation costs make importing goods from Mexico an attractive option. As an exporting market, the growing Mexican middle class provides a ready source of business. Products such as cell phones, electronic devices, and appliances have a ready market in Mexico and Mexico's proximity translates into a faster turnaround on sales and distribution. Because of its proximity to the United States, for instance, Mexico offers a wonderful opportunity for companies seeking to test new products.