Mexico

With the aim of turning the country into a competitive destination for investment, business development and productivity, the Government is carrying out various regulatory and investment initiatives. This has served to gain the trust of both national and foreign investors, who see it as an attractive and safe destination to make their investments or relocate their businesses.

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MEXICO PROFILE

Description of the country's economic outlook

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In this current scenario, Mexico has positioned itself among the 15 largest economies in the world and the second in Latin America. According to the projections of the International Monetary Fund (IMF), a growth of 2.5% in its GDP is expected for the coming year.

The North American nation has an approximate area of 2 million km2, which places it as the 5th largest in the American continent and 14th internationally. Additionally, thanks to its geostrategic location, it becomes an important bridge between North America and Latin America. It is also a primary connection point between the Atlantic and the Asia-Pacific region through its coastline.

The nation also shares a 3,142 km border with the United States, through which, according to data from the Ministry of Foreign Affairs, about one million people, 230,000 vehicles and 70,000 cargo trucks circulate daily. through the 56 border crossings established between the two nations. The entity highlights that 24% of Mexican GDP is generated in this border area.

Another of the country's attractions is the great potential of its market, which is recognized among the most important in the world and where, according to the estimates obtained by the National Institute of Statistics and Geography (INEGI), it is made up of a population of more than of 126 million inhabitants, of which 62% belongs to the economically active population. For its part, the National Population Council (CONAPO), highlights the youth of its inhabitants, where 43% are between 25 and 29 years old and the economically active population is between 15 and 65 years old.

Traditionally, the Mexican government has established relationships with multilateral organizations to establish a network of agreements on economic, investment and trade issues, among which are the G20, OECD, WTO and APEC. Along these same lines and with the aim of promoting and protecting both foreign investment in the country and that of Mexican citizens abroad, it has established 29 Agreements for the Reciprocal Protection of Investments (APPRI).

With the aim of turning the country into a competitive destination for investment, business development and productivity, the Government is carrying out various regulatory and investment initiatives. This has served to gain the trust of both national and foreign investors, who see it as an attractive and safe destination to make their investments or relocate their businesses.

In this way, the Mexican Government's commitment to foreign investment is ratified, which is an engine for the development and strengthening of its economy. Thus, in the report prepared by the United Nations Conference on Trade and Development (UNCTAD), on Investment in the World, Mexico was ranked fifteenth as the largest recipient of Foreign Direct Investment (FDI).

MEXICO PROFILE

Why invest in Mexico

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Strategic geographic location  

With a land area of 1,967,000 km2, Mexico is among the 20 largest countries in the world. Geographically, this nation is located between the Atlantic Ocean and the Pacific Ocean, strategically connecting North America with Central and South America. Due to this connection and its two important access zones to the country by the Pacific Ocean to the West and the Gulf of Mexico to the East, the nation becomes an ideal center for production and international trade throughout the world. In fact, ships from Asia and Oceania arrive through these areas, in addition to facilitating trade relations with Europe and Africa.

With the aim of promoting trade with the rest of the world, Mexico has sought to establish agreements with several economies and international organizations, for example, it was the first country in Latin America to be part of the Asia-Pacific Economic Cooperation Mechanism (APEC). Also, among its latest agreements are the signing of the North American Free Trade Agreement (NAFTA), also known as North American Free Trade Agreement (NAFTA), with which companies benefited from good tariff conditions and reduced inventory, shipping and transportation costs. It should be noted that a shipment by truck can reach any point in the United States within 24 hours.

Qualified workforce with competitive costs

Currently, labor costs and geographic location are Mexico's competitive advantages on the international scene, since it manages competitive and attractive values for businessmen, which encourages investments in the machinery manufacturing, automotive, aerospace, electrical and electronics, among others.

After the critical scenario that was experienced globally due to the health crisis, many business organizations decided to transfer their manufacturing production to developing countries thanks to the good cost-benefit they obtain. Here, Mexico was one of the preferred scenarios for investors and businessmen given its cheaper salary base and its proximity to the main consumer market in the world, the United States.

Currently, the Mexican Government has initiated a campaign to promote its country as a strategic point for the relocation of its operations, since according to estimates made by its Ministry of Economy, production costs including labor, logistics and overhead have a lower value of up to 25%. In fact, the price of direct labor can reach a decrease between 75% and 85% compared to US prices.

To this we must add that the Mexican labor force has an economically active population of 54 million people, with an average age range of 26 years and where 30.7% are fit for work. The Government expects that by 2030 this figure will reach 62 million workers. Additionally, the nation has more than 745,000 students training in the areas of engineering and technology in its university centers. Around 115,000 engineers graduate annually, the highest figure in Latin America and the United States.

Robust network of commercial agreements

Mexico has an extensive network of free trade agreements in the world, which allows it preferential access to 44 countries and more than one billion consumers, which represents 62.6% of world GDP.

According to the Undersecretary of Foreign Trade of Mexico, the treaties help your nation both to promote the internationalization of Mexican products, as well as the entry of multiple valuable goods and services that contribute to improving the quality of life of the population.

In this way, among the most important agreements of the nation are:

  • Free Trade Agreement United States – Canada – Mexico (T-MEC).
  • Asia-Pacific Economic Cooperation Forum (APEC).
  • Free Trade Agreement between Mexico and the European Union (TLCUEM).
  • North American Free Trade Agreement (only with Central America).
  • Transpacific Economic Cooperation Agreement.

Mexico's main trading partners are the United States, Canada, the United Kingdom, France, Germany, and Japan. Free trade agreements have also been established with the European Union and countries such as Costa Rica, Colombia, Chile, Venezuela, Nicaragua, Bolivia, Norway, Israel, Iceland, Switzerland and Uruguay, among others.

Ideal scenario for foreign investment

According to the Mexican Ministry of Economy, your country captured about 24,831.7 million dollars in Foreign Direct Investment (FDI), in the first nine months of 2021, that is, 5.7% more than the previous year. This shows important signs of recovery according to forecasts from the latest data from the United Nations Conference on Trade and Development (UNCTAD).

For its part, the Mexican Institute for Competitiveness AC (IMCO), emphasizes that FDI has been a vital aspect for the Mexican economy, since with the resources obtained, new jobs are generated, technological innovation is promoted, a greater integration with international trade.

Additionally, the entity also highlights that its country is a strategic point for investors due to its proximity to the United States, the existence of multiple trade and investment agreements, its great wealth in natural resources and the large size of its market. The latter places it as the 14th largest economy in the world and the second in Latin America.

Thanks to the monetary policy managed and implemented by the Bank of Mexico and the Ministry of Finance, the nation has managed to establish a stable and reliable macroeconomic environment that gives both investors and entrepreneurs peace of mind doing business in its territory.

Favorable environment for starting and operating a business

According to the World Bank, Mexico stands out among the best economies in Latin America for its ease of doing business, thanks to the continuous improvement of the regulatory framework for local and international entrepreneurs, where through reforms they strengthened their legal institutions.

In fact, opening a new company in Mexico is a very attractive alternative for many investors who see a gateway to the markets of Latin America, the US and Canada, as well as beneficial operating costs.

Growing domestic market

The domestic market in Mexico is made up of approximately 120 million potential consumers who have increased their annual income, as well as the demand for consumer products.

According to the declarations of Rogelio Ramírez Secretary of the Treasury, during his speech at the National Meeting of Advisory Councils of Nafin Bancomext, Mexico is undergoing an interesting process of economic recovery, where the engine of this process is the internal market that represents around 70% of the national economy, to which is also added the boost of the export sector.

Likewise, the official highlighted that this year domestic consumption in the country increased 3.4% in real terms, reaching 96.5%, its level before the pandemic. He also emphasized that the export sector grew 22.2% annually at the end of the third quarter.

Government commitment to infrastructure transformation

Although Mexico has evolved and become a major global production center, due in large part to its world-class infrastructure facilities, the Government is still in a constant process of maturing. This nation, which ranks 65th in the world in terms of infrastructure quality, has 76 airports, 63 border crossings, 68 seaports and cabotage, 27,000 km of railways and 378,000 km of land routes.

This is how the Mexican Government, through its Secretariat of Communications and Transportation (SCT), undertook a determined plan to update investments in road and border infrastructure projects and a strategy to connect the new Felipe Ángeles airport to its surroundings.

In this way, the agency highlights that with the program "The Strategy for Wellbeing Roads 2021-2023", which is part of the Multi-year Highway Program, it seeks to promote the construction and modernization of highways and rural roads in the nation, which which will require an investment of 50 billion Mexican pesos.

This initiative currently has 26 road infrastructure works scheduled for some 38bn pesos (US$1.9bn), which will be financed by the government. Among the modernization works is the construction of 638.3 kilometers of federal highways and 237.4 kilometers of rural and feeder roads, represented in 11 projects.

Additionally, other infrastructure works will be incorporated, such as the connection of the Dos Bocas refinery to the Roberto Ayala railway station, located in Tabasco, which required a budget addition.

Mexico's ambitious infrastructure development plans continue to create new links for international trade, transforming the economy and fostering the growth of important sectors for the country's economic future such as education, transportation and agriculture.

Main taxes

Below you can find some of the main taxes in Mexico, if you want to know in detail the country's tax information you can download our Global Taxes App.

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30%

Corporate taxes

10%

Tax on capital gains and dividends

25%

Tax on inheritance or donations

3%

Employment Tax

35%

Personal taxes

30%

Income from economic activity and Active Income

Sectors of interest and market opportunities

These are the sectors that offer the most investment opportunities in the country and that have the support of the government for their development.

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Metalworking industry

While figures from the National Institute of Statistics and Geography (INEGI) show that the metal-mechanic industry, machine tools and technology for manufacturing have a 17.6% share of the Mexican Gross Gross Income (GDP), the data obtained from registered imports by the Internet Tariff Information System (SIAVI), show that annually the country receives approximately 7,000 metalworking production equipment, which is constantly being updated in technology, innovation and sophistication.

Likewise, the National Chamber of the Iron and Steel Industry (Canacero), emphasizes that Mexico has positioned itself as the 14th steel producer in the world and is a great provider of jobs, where it currently generates about 700,000 direct jobs and indirect.

This important segment is vital for supplying the other links in the production chain with machinery, consumer goods and custom-made metallic tools. This industry ranges from industrial machines to tools that supply parts for the other metal industries.

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Attractive health sector

Given that 20 of the 25 most important and world-renowned pharmaceutical companies have operations in Mexico, it is evident that the health sector is a market with great interest for foreign investors and entrepreneurs due to the improvement of the regulatory framework and the increase in certifications quality.

According to the National Chamber of the Pharmaceutical Industry (Canifarma), this sector plays an important role in the Mexican economy, since it directly impacts 161 branches of national economic activity and has a 1.4% share of the Gross Domestic Product (GDP).

Additionally, the Foreign Direct Investment (FDI) segment generated income for the nation in the order of 193.3 million dollars last year. In terms of job creation, the industry recorded approximately 100,000 direct jobs and nearly half a million indirect ones. This sector is made up of medical devices, the pharmaceutical industry and biotechnologies.

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Robust chemical industry

The segment of the chemical industry is a key point for the economic reactivation of Mexico 2021, in fact, according to information from the National Association of the Chemical Industry (ANIQ), this sector is the supplier of 96% of the different value chains of the Mexican manufacturing industry and has positioned itself as an industrial sector with an outstanding participation in the GDP with 2.1%, that is, an annual consumption of 42 billion dollars.

For the entity, the reduction of dependence on imports is a priority, generating the necessary inputs at home, to turn Mexico into a world manufacturing power. Here it is important to increase the capacity and complexity of the chemical industry, to become an export platform for North America.

In this way, among the initiatives that must be implemented to strengthen this important segment are:

  • Authorize private industries to directly import components such as ethane, propylene and ammonia, relying on Pemex's infrastructure, assuming the inventory position (IP) of storage and transportation costs.

  • Manage the collaboration between private energy companies and Petróleos Mexicanos PEMEX and the IP to guarantee the supply of inputs.

  • Increase the production of natural gas and the availability of ethane through the optimization of the operation and efficiency of cryogenic plants.

The State of Mexico is the entity with the highest percentage of companies dedicated to the activity of the chemical industry, concentrating 20.53% of all industries.

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Premier automotive industry

According to National Institute of Statistics and Geography (INEGI), the automotive sector is vital for the Mexican economy, since it represents 3.8% of the national GDP and 20.5% of the manufacturing GDP. 980,000 direct workers and 3.6 million indirect workers are linked to this sector.

This is how this nation is recognized as one of the main producers and exporters of the automotive industry around the world. In fact, it has managed to position itself as the eighth largest producer of vehicles at the international level and according to international experts it could become the third largest exporter in the world in the near future. Among the products exported by the nation are light automobiles, vehicle parts and accessories, transport vehicles and tractors.

According to the Administrative Registry of the Light Vehicle Automotive Industry, generated by the National Institute of Statistics and Geography, the country's assemblers increased their production and exports in 2021, for example, the production of light vehicles in Mexico was 2,262,767, an increase of 6.4%, compared to the previous year. Regarding exports, 2,014,639 units were shipped abroad, 9.6% more than what was reported the previous year.

This shows how the Mexican automotive industry is one of the most attractive sectors for foreign vehicle assembly companies and luxury brands, due to the quality of its products, highly qualified workforce, its permanent technological updating and, above all, its strategic location. Mexican geographic area that facilitates preferential access to various markets. This is decisive in attracting foreign investment and growth in production destined for the national and foreign markets.

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Potential in innovation and research

There are already several foreign companies interested in taking advantage of Mexican knowledge capital to develop new products. It is estimated that the country has a potential close to 50,000 scientists and technologists, but it is necessary to reach 500,000 to reach the international average.

With the great human talent in qualified specialists, together with competitive costs, stability and a strategic location, a sector focused on innovation has emerged, a segment that in countries such as the United States, France, England and Canada receives an investment of 3%. of their respective GDPs to manage research and development.

Experts on the subject, who have begun to venture into Mexican territory, emphasize that the business sector should strive to increase the percentage of GDP dedicated to this concept, which is currently 0.4%, since what a nation invests in research and innovation will determine your economic progress, your level of competitiveness and GDP per capita.

Our advisors in Mexico

Mexico - Brook & Cano

Brook & Cano

Brook & Cano is a law firm founded on the principle of bringing solutions in the wealth planning world to high net worth individuals. They work with private clients such as entrepreneurs, their families, and their businesses to create and implement solutions and protect their assets. The firm also assists with planning for an orderly and efficient transfer to the next generation and to avoid problems during succession.

Mexico - HICOA

HICOA Hernández Irigoyen Contadores Asociados

Founded in 1969, Hernandez Irigoyen is a Certified Public Accounting firm dedicated to advising national and international companies as well as individuals in the areas of audit, consulting, management, organization, and accounting.