MJM CONSULTING SOLUTIONS MEXICO

Country Analysis
Report: Mexico
Presented to

Guvenli International, Inc.

Prepared by MJM Consulting Solutions

Matthew Raming, Michaela Reidell, and Jacob Reis

30 November 2018

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MJM CONSULTING SOLUTIONS MEXICO

Table of Contents
Executive Summary 3
Introduction 5
General Country Information 6
Government, Legal System, Labor Unions, and Political Risk 8
Mexico's Economy 12
International Trade 14
Foreign Direct Investment 17
Miscellaneous Statistics/Information 20
Local Currency & Exchange Rates 22
Trade Policies 23
Foreign Direct Investment Policies 26
Five Year Forecast 27
Conclusion/Recommendations 28

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 MJM CONSULTING SOLUTIONS MEXICO

Executive Summary
MJM Consulting Solution conducted research regarding the country analysis of Mexico for

Guvenli International, Inc. Below is a summary of the findings.

The beginning of the report is general information of the country. Some of the topics that were

included are country background, population, age distribution, and quality of life. The findings

were that Mexico is highly populated with a low median age, there is poor healthcare and quality

of life, and it has a struggling economy.

Next, Mexico’s government, legal system, labor unions and political risk is analyzed. The

research shows that the country tends to have a lot of problems with labor policies and unions

because of corruption. Also, there are problems within the country diminished market value and

ineffective reform. The country is also facing more instability with electing a new president.

International issues include border disputes with the U.S. and the negotiation of changing

NAFTA.

The country’s economy was briefly mentioned before, but further research was conducted. The

economy isn’t doing well due to a $22.1 billion ($US) deficit and inflation rates rising to 6%. The

Mexican currency (peso) has struggled heavily against the dollar and has changed from an

exchange rate of 12.8 (pesos/US$) to 19.2 (pesos/US$). Also, not helping the economy is

46.2% of the Mexican population sits at or below the poverty line.

Overall trade for the country is 78.15% of GDP. The greatest imports and exports consist of

primarily capital goods with consumer goods right behind it. This is indicative of Mexico’s

production focused economy and demonstrates the benefits of the country’s lower

labor/production costs.

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 MJM CONSULTING SOLUTIONS MEXICO

Due to the proximity and NAFTA, the primary export market is mostly the US. Also, Mexico and

the US continue to increase investing in FDI in each other’s countries. To improve the economy

with FDI, Mexico offers incentives to be enticed to invest in economically underdeveloped areas

in the southern states of Mexico.

Some statistics show that the development of Mexico seems to be improving in some ways.

Infrastructure is ranked 71st in the world and ease of doing business is ranked 54th in the world.

There is a decent Human Development ranking of 74th in the world. Also, economic freedom is

63rd in the world (although journalistic freedom is 147th and is one of the deadliest countries for

media in the western hemisphere). More downfalls are that the country is highly corrupt, and the

corporate tax rate is 30%.

Mexico is doing well regarding free trade agreements. In fact, it has more than any other country

(12 free trade agreements with 46 countries). Mexico doesn’t really have any trade barriers.

There are some requirements of licenses on sensitive items like guns, medical equipment, etc.

Regarding our firm’s recommendation, we at MJM Consulting Solutions believe that entering the

Mexican market at this stage could prove to be a highly risky venture that one would do best to

avoid. There is a high degree of uncertainty surrounding trade and the political sphere which

should be concerning to any potential investor. While Mexico has various protections for foreign

investors, rampant corruption and broken policy could prove challenging when attempting to

conduct business. It will become clearer in the coming years what the impact of current events

will have, and it will be then that the Mexican environment may present itself as more favorable

to invest in.

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 MJM CONSULTING SOLUTIONS MEXICO

Introduction
The purpose of this document is to assess the international business and domestic conditions of

Mexico for Guvenli International, Inc. Our client is looking to invest in Mexico for the first time—

whether it be foreign direct investment or exporting. Throughout the report there is information

on the overall business environment, government policies, and country conditions. The

information provided will aid MJM Consulting Solutions’ decision on whether our client should

conduct business with Mexico. This report will conclude with an overall synopsis and potential

forecast for the country. We will then present our professional recommendation surrounding any

potential investments that the involved party may be interested in.

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 MJM CONSULTING SOLUTIONS MEXICO

General Country Information

The United States of Mexico (Mexico) is distribution, and few advancement

located on the continent of North America, opportunities for the local populace.

bordered to the north by the United States Powerful drug trafficking organizations have

of America and Guatemala to the south. also contributed to tens of thousands of

Mexico is the 15th largest country in the drug-related homicides since 2007.

world, with a land mass of 1,942,945 sq. km Population Statistics

and 9,330 km of coastline. The country is
Mexico is ranked 103rd in the world on
also ranked the 11th most populated
population growth with a rate projected at
country with a population of 125.9 million
1.12%. The dominant religion in Mexico is
people (July 2018 est.). The country’s
Roman Catholic with 82.7% of the
capital, Mexico City, is situated near the
population identifying with the
southern border.
denomination. The remaining 17.3% is split
Country Background between a variety of other denominations,

Conquered and colonized by the Spain in as illustrated below:

the early 16th century, the country achieved  Pentecostal: 1.6%

independence early in the 19th century.  Jehovah’s Witness: 1.4%

Mexico has been in an economic crisis  Other Evangelical Churches: 5%

since the 2006 global market crash and it  Other: 1.9%

has struggled with various ongoing social  None: 4.7%

and economic concerns. A few of these  Unspecified: 2.7%

issues include low real wages, high

unemployment, inequitable income

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MJM CONSULTING SOLUTIONS MEXICO

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 MJM CONSULTING SOLUTIONS
With a Median Age of 28.3, Mexico ranks
130th compared to the rest of the world.
The following graph further breaks down the
population distribution.
0-14 years: 26.93% (male 17,155,689/female 16,390,913)
15-24 years: 17.54% (male 11,065,927/female 10,778,382)
25-54 years: 40.81% (male 24,550,848/female 26,282,836)
55-64 years: 7.64% (male 4,362,868/female 5,160,514)
65 years and over: 7.09% (male 3,949,823/female
4,876,995) (2017 est.)
Mexico currently sits at 125th on the world
rankings for Infant Mortality with an
estimated rate of 11.6/1000 live births (2017
est.). Maternal Mortality is estimated at
Central Inteligence Agency. (2018). Mexico. Retrieved from The World Factbook:
https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html
8
MEXICO
38/100,000 live births (2015 est.) which
ranks Mexico at 107th in the world. Life
expectancy is estimated at just over 76
years (2017 est.) which ranks Mexico at
90th in the world overall.
Summary
Since 2006, Mexico has struggled to
improve its economy and quality of life for
its more than 125 million citizens. Poor
healthcare and is a major contributor to the
relatively low median age for a developing
country of its scale. Mexico’s high infant and
maternal mortality rate can also be
attributed to this fact. These statistics would
stand to improve from an improved
economy and government intervention in
the healthcare sector.
References
 MJM CONSULTING SOLUTIONS MEXICO

Government, Legal System, Labor

Unions, and Political Risk

Government and Legal Mexican Workers and Peasants (CROC) is

another reputable labor organization. It was

System of Mexico
formed in the 1950s and it represents

Mexico was founded on September 16th, various types of workers all over Mexico,

1810. Mexico is a Federal Presidential including artisans, professionals, and

Republic with a civil law legal system. producers

Although this country has a civil law system,

Unions are popular among workers in
it is influenced by the U.S. constitutional
urbans areas. According to TEMCA, 90% of
system (Central Intelligence Agency. 2018).
Mexican production workers in industrial
Labor Unions
enterprises, that employ at least 25

In Mexico, there are labor unions that are employees, are unionized. Also, it is stated

involved with Mexico’s Institutional that nearly 50% of the country’s workforce is

Revolutionary Party (PRI) as well as employed in the “off the books” economy or

independent organizations. The Congress is unemployed.

of Labor (CT) oversees prominent union

According to the article from the National
organizations that represent 85% of union
American Congress on Latin America, there
workers. The Confederation of Mexican
have been issues with preventing strikes,
Workers (CTM) is the best know labor union
artificially keeping wages down, and firing
and largest in Mexico. The CTM is
workers involved with the PRI for stating
comprised of roughly 11,000 labor unions.
their union rights. All of this has been done
The Revolutionary Confederation of

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 MJM CONSULTING SOLUTIONS MEXICO

to potentially appeal to foreign investors. To Violence has been witnessed in other

combat the prohibition of workers’ rights, a situations as well. According to the National

labor organization called the Mexican Abortion Federation, in 2016 there was

Employers Association (COPARMEX) was picketing and threats surrounding clinics

formed to reduce government interference that dealt with abortions. In April of 2018,

with the workplace and to decrease the there was a one-day strike at a Mexico plant

employer’s ability to use employees for Goodyear. Overall, the research

however they want in the workplace indicates that Mexico is plagued by

(NACLA. 2014). instability regarding its workers’ rights.

In 2013, there were steps taken by

Political Risk

President Enrique Peña Nieto to meet with Domestic Political Issues

the International Labor Organization (ILO)
in Mexico
and to review labor laws. Towards the end

of the article, Mr. Alexander and LaBotz Currently, Mexico is going through a rough

pointed out that it is unlikely to see any time of diminished market value and

major changes to the labor policies. attempted reform that has been ineffective

thus far. Pena Nieto, the country’s current

Along with issues regarding labor policies,
president, lost to López Obrador in the 2018
there was an article reporting violence
election due to anti-establishment sentiment
related to disagreements with teachers in
by the Mexican people. Corruption,
2016. According to the article, on
violence, and a diminished economy are the
September 26, 2014 six people were killed,
leading issues in the political sphere.
25 were wounded, and 43 students were
Mexico’s International
kidnapped from the Ayotzinapa Rural

Normal School [ CITATION Dan16 \l 1033 ]. Political Issues

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 MJM CONSULTING SOLUTIONS MEXICO

The country is embroiled in trade and risk [ CITATION PRS18 \l 1033 ]. It also has

border disputes with the United States. The a country risk score of 3 based on officially

United States government seeks to supported export credits [1-7 scale]. [This

renegotiate the North American Free Trade assessment is based on the OECD’s

Agreement to balance trade issues between country risk classification system

itself, Canada, and Mexico. Border security (Appendix)].

and illegal immigration are also a hot topic

According to Marsh Country Risk Index and
between the two nations.
Political Risk Index, Mexico is 50-59 out of
Summary 100. Overall, in the short-term political risk

Mexico is considered a fairly-stable country in Mexico is relatively low with a score of 2

but does not have the same stability and out of 7. The long-term score is moderately

structure that other world nations use to low with a score of 3/7. (The Global

combat risk. Mexico averages 79 in North Economy. 2017)

America and Central America for political References

Alexander, R., & LaBotz, D. (2014). Mexico's Labor Reform: A Worker's Defeat - For Now.

Retrieved from NACLA: https://nacla.org/article/mexico%E2%80%99s-labor-reform-

workers%E2%80%99-defeat%25E2%2580%2594-now

Central Inteligence Agency. (2018). Mexico. Retrieved from The World Factbook:

https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html

Credendo Group. (2017). Political rick, long-term - country rankings. Retrieved from

TheGlobalEconomy:

https://www.theglobaleconomy.com/rankings/political_risk_long_term/

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 MJM CONSULTING SOLUTIONS MEXICO

Credendo Group. (2017). Political risk, short-term - country rankings. Retrieved from

TheGlobalEconomy:

https://www.theglobaleconomy.com/rankings/political_risk_short_term/

Grajeda, J. (n.d.). A look at labor unions in Mexico. Retrieved from Tecma University:

https://www.tecma.com/labor-unions-in-mexico/

LaBotz, D. (2016, August 10). The Long Struggle of Mexican Teachers. Retrieved from Jacobin:

https://www.jacobinmag.com/2016/08/mexico-teacher-union-strikes-oaxaca/

Marsh. (2017). Political Risk Map 2017.

Moore, M. (2018, May 17). Workers stage one-day strike at Mexico plant. Retrieved from

Rubber & Plastic News:

https://www.rubbernews.com/article/20180517/NEWS/180519945/workers-stage-one-

day-strike-at-mexico-plant

National Abortion Federation. (2016). 2016 Violence and Disruption Statistics. Retrieved from

Prochoice: https://prochoice.org/wp-content/uploads/2016-NAF-Violence-and-Disruption-

Statistics.pdf

PRS Group. (2018). Regional Political Risk Index. Retrieved from

https://www.prsgroup.com/regional-political-risk-index-3/

The Organization for Economic Co-operation and Development. (2017, December 21). Country

Risk Classification. Retrieved from OECD: http://www.oecd.org/trade/xcred/crc.htm

The Organization for Economic Co-operation and Development. (2018, October 26). Country

Risk Classifications of the Participants to the Arrangement on Officially Supported

Export Credits. Retrieved from http://www.oecd.org/trade/xcred/cre-crc-current-rev1-

english.pdf

(1) The country risk classifications are

Apendix meant to reflect country risk. Under

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MJM CONSULTING SOLUTIONS MEXICO

the Participants’ system, country risk

encompasses transfer and

convertibility risk

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 MJM CONSULTING SOLUTIONS MEXICO

Mexico’s Economy

Mexico’s Type of The country’s exchange rate is $1.15 Trillion

while the countries GDP growth rate sits at

Economic System
2% and ranks 152nd in the world. The per

Mexico operates within a mixed economic capita GDP sits at $19,900 and ranks 91st in

system. The government controls a the world.

monopoly on the oil production and

Unemployment & Poverty
healthcare sector, while the rest of the
Mexico’s overall unemployment rate went
economy is a free market with government
from 3.9% in 2016 to 3.6% in 2017. The
regulation in various industries to break up
overall youth unemployment rate sits at
monopolies and increase stability.
6.9% which ranks 137th in the world. Nearly

Amount of economic activity as accounted 46.2% of the Mexican population sits at or

for by the government: below the poverty line. The country’s Gini

Index Score (measures the inequality in the

Government Economic Activity
4% distribution of family income in a country) is

evaluated at 48.2 and ranks 24th in the

32%
world.

64%
Economic Performance

Services Industry Mexico is running a Deficit of $22.1 billion.

Agriculture
The deficit, as a percent of GDP, is -1.9%

GDP Information which is 89th in the world. Mexico’s public

Mexico has a Purchasing Power Parity of debt, as a percent of GDP, was 56.8% in

$2.458 Trillion which ranks 17th globally. 2016 and 54.2% in 2017. This puts Mexico

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 MJM CONSULTING SOLUTIONS MEXICO

at 89th in the world for GDP debt Mexico’s economy performance is not that

percentage. Inflation rates were evaluated good due to the unemployment rate and

at 2,8% in 2016 and rose to 6% in 2017. GDP, they both are shown as not good in

Mexico is rated 188th in the world comparison to the rest of the world.

surrounding inflation rates. References

Summary

Central Inteligence Agency. (2018). Mexico. Retrieved from The World Factbook:

https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html

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 MJM CONSULTING SOLUTIONS MEXICO

US Trade with Mexico (Millions)

US Exports US Impots
350000
300000
250000
200000
US $

150000
100000
50000
0
200 200 200 200 200 200 200 200 200 200 201 201 201 201 201 201 201 201
0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7

year

International Trade
Data provided by https://relatedparty.ftd.census.gov/

Mexico has a GDP of $1,045,998 million with a trade balance of -$19,150 million. Overall trade

for the country is 78.15% of GDP. Mexico’s world growth is -4.43% and overall country growth is

at -0.79%. Mexico’s current exports total $373,833 million (US$) and current imports total

$387,064 million (US$) which leads to a running deficit of $13,181 million (US$).

Exports and Imports of Product Groups

Mexico Exports Worth (US$) Product Share

Capital goods $183,998 million 49.21%

Consumer goods $111,213 million 29.75%

Material $38,185 million 10.21%

Intermediate goods $35,550 million 9.51%

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 MJM CONSULTING SOLUTIONS MEXICO

Product Share
Mexico Imports Worth (US$)
%
Capital goods $180,853 million 46.72%

Consumer goods $103,904 million 26.84%

Intermediate goods $72,138 million 18.64%

Raw materials $17,443 million 4.51%

Mexico’s greatest imports and exports consist of primarily capital goods with consumer goods

right behind it. This is indicative of Mexico’s production focused economy and demonstrates the

benefits of the country’s lower labor/production costs.

International Trading Partners

Mexico Exports Worth (US$) Partner Share %

US $302,942 million 81.03 %

Canada $10,427 million 2.79 %

China $5,407 million 1.45%

Germany $3,949 million 1.06%

Japan $3,771 million 1.01%

Partner
Mexico Imports Worth (US$)
Share %
US $179,985 million 46.50%

China $69,521 million 17.96%

Japan $17,751 million 4.59%

Germany $13,878 million 3.59%

Korea, Rep. $13,612 million 3.52%

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 MJM CONSULTING SOLUTIONS MEXICO

The primary export market of Mexico consists almost entirely of the US. This is due to the two

countries’ close-proximity to each other and the economic freedom offered by NAFTA. Mexico is

not nearly as reliant on the US for imports as Mexico facilitates a fair amount of trade with

China.

References

United States Census Bureau. (2018). NAICS Related Party Database. Retrieved from

https://relatedparty.ftd.census.gov/

World Bank Group. (2017). Mexico Trade Summary 2016 Data. Retrieved from World Integrated

Trade Solutions:

https://wits.worldbank.org/CountryProfile/en/Country/MEX/Year/2016/Summary

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 MJM CONSULTING SOLUTIONS MEXICO

Foreign Direct Investment

U.S. FDI in Mexico

Mexico Balance of Payments and Direct Investment Position Data

U.S. Direct Investment Abroad, U.S. Direct Investment Position Abroad on a Historical-Cost Basis

201
Years 2000 2005 2011 2012 2013 2014 2015 2016 2017
0
FDI US
$ 39,3 73,6 85,7 85,5 104,3 86,4 94,4 101, 100,7 109,
(Millio 52 87 51 99 88 33 82 326 34 671
ns)
Data provided by https://www.bea.gov/data/economic-accounts/international

Graph is from https://www.bea.gov/data/economic-accounts/international

The chart and graph show that the U.S. is increasingly investing in Mexico each year. In 2013,

there was a decrease by since then it has gradually increased each year. Please note that the

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 MJM CONSULTING SOLUTIONS MEXICO

values are a cumulative historical book value of U.S. FDI not much is invested overall. Overall,

the data show that the U.S. invests hundreds of millions of U.S. dollars in Mexico each year.

Mexico’s FDI in the U.S

Balance of Payments and Direct Investment Position Data of Mexico’s FDI in the U.S.

200 201 201

Years 2005 2010 2011 2013 2014 2015 2016
0 2 7
FDI in
7,46 3,59 10,97 12,50 12,7 15,86 15,1 15,2 17,2 18,0
US $
2 5 0 0 51 9 98 62 09 11
(Millions)
Data provided from https://www.bea.gov/data/economic-accounts/international

Data is from https://www.bea.gov/data/economic-accounts/international

The table and graph show that from 2000-2005 there was a decrease in Mexico FDI in the U.S.

After 2005, Mexico has continually increased the amount that is invested in small increments.

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 MJM CONSULTING SOLUTIONS MEXICO

FDI in Mexico Overall

According to the Central intelligence Agency World Factbook on Mexico, Mexico had an

estimated $544.8 billion of stock of direct foreign investment at home in 2017. In 2016, Mexico

has an estimated $473.5 billion of stock of direct foreign investment at home. The numbers

show that there has been an increase in cumulative FDI made in Mexico.

Also, Mexico had a stock of direct foreign investment abroad of $243.8 billion in 2017 and

$148.6 billion in 2016. Data provided also shows that Mexico increased the amount of

investment from 2016 to 2017 in foreign direct investment abroad. (Central Intelligence Agency.

2018)

References

Bureau of Economic Analysis. (2018, August 7). International Economic Accounts. Retrieved

from BEA: https://www.bea.gov/data/economic-accounts/international

Central Inteligence Agency. (2018). Mexico. Retrieved from The World Factbook:

https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html

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Miscellaneous Statistics/Information

Human Development Mexico’s journalistic freedom score is 48.91

and is 147th in the world. Mexico has

Index & Freedom
become one of the western hemisphere’s

Mexico’s Human Development Index deadliest countries for the media.

number is .774 which ranks 74th in the

Business & Infrastructure
world. Life expectancy averages 77.3 years.
Mexico’s Infrastructure is rated 2.82/5 and is
The population averages 14.1 years of
ranked 71st in the world. Quality of port
schooling and 94.5% of adults (age 15 and
Infrastructure has been increasing and is
older) are literate.
currently rated 4.3/7. For ease of doing

Mexico’s overall economic freedom score is business, Mexico is ranked 54th in the world.

64.8 and is 63rd in the world. The score The country currently has a corporate tax

increased 1.2 points in the recent year, with rate of 30%. Mexico is currently considered

improvement in trade freedom, investment highly corrupt with an index score of 29/100

freedom, and more. Mexico’s $2 trillion and a world rank of 135.

economy has quadrupled in size from 1994.

References

Reporters Without Borders. (2018). 2018 World Press Freedom Index. Retrieved from RSF:

https://rsf.org/en/ranking

The Heritage Foundation. (2018). Country Rankings. Retrieved from 2018 Index of Economic

Freedom: https://www.heritage.org/index/ranking

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 MJM CONSULTING SOLUTIONS MEXICO

Transparency International. (2018, February 21). Corruption Perception Index 2017. Retrieved

from Transparency International:

https://www.transparency.org/news/feature/corruption_perceptions_index_2017

United Nations Development Programme. (2018). Mexico. Retrieved from Human Development

Reports: http://hdr.undp.org/en/countries/profiles/MEX

World Bank Group. (2018). Economy Ranking. Retrieved from The World Bank:

http://www.doingbusiness.org/en/rankings

World Bank Group. (2018). Global Rankings 2018. Retrieved from The World Bank:

https://lpi.worldbank.org/international/global/2018?sort=asc&order=Infrastructure

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 MJM CONSULTING SOLUTIONS MEXICO

Local Currency & Exchange Rates

X-Axis: Year starting with 2010 | Y-Axis: Number of Pesos to US$
The local currency of Mexico is the Mexican

Pesos ($, MEX$) with an ISO 4217 of MXN. The graph above represents the exchange

The local currency if pegged exclusively to rate between the Mexican Pesos and the

Mexico and no other country. The local US Dollar. With Mexico’s struggling

inflation rate is 6% (2017 est.) with an economy, the peso has struggled heavily

interest rate of 7.25% (2017 est.). Mexico against the dollar and has dropped from an

currently holds an estimated $175.3 billion exchange rate of 12.8 (pesos/US$) to 19.2

(2017 est.) in reserves of foreign gold. (pesos/US$). Due to the amount of

fluctuation present in the currency, the

Mexican Pesos is considered a soft

currency and is not typically used as a

standard in international trade.

References

Antweiler, P. W. (2018). Pacific Exchange Rate Service. Retrieved from University of British

Columbia - Saunder School of Business: http://fx.sauder.ubc.ca/plot.html

Central Inteligence Agency. (2018). Mexico. Retrieved from The World Factbook:

https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html

Zilla, R. (2010). Global Financing - Hard and Soft Currency. Retrieved from Ezine Articles:

http://ezinearticles.com/?Global-Financing---Hard-and-Soft-Currency&id=5522683

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 MJM CONSULTING SOLUTIONS MEXICO

Trade Policies
Mexico has been a member of the World member of the Pacific Alliance, a trade bloc

Trade Organization since January 1, 1995. formed by Mexico, Chile, Colombia, and

Mexico is also involved in many free trade Peru in 2011.” (2)

agreements: the Asia-Pacific Economic Tariffs & Imports

Cooperation (APEC), the G-20, and the
Simple
Organization for Economic Cooperation and averag Agricul Non-
e MFN tural Agricultu
Total
Development (OECD). Mexico is also a Applie Produc ral
d ts Products
member of the North American Free Trade (2017)
6.9% 13.5% 5.8%
Agreement (NAFTA) with the U.S. and Data is collected from

https://www.wto.org/english/res_e/booksp_e/tariff_profiles18_e.pdf (pg. 117)

Canada. (1)
Under NAFTA, Mexico has very few trade
There is a lot going on with Mexico when it
barriers for U.S. exports. Unfortunately, the
comes to trade. According to the article from
Mexico’s tariffs increase with steel and
export.gov, “… Mexico has more free trade
aluminum. To counteract the tariffs put onto
agreements (FTAs) than any other country
Mexico, the general importation tax to steel
in the world—12 FTAs with 46 countries—
products has increased. (3)
including NAFTA and FTAs with the

European Union, European Free Trade There are some barriers and restrictions

Area, Japan, Israel, and ten countries in that require an import license/authorization:

Latin America. Mexico is a party to the guns, leather and fur products, medical

Comprehensive and Progressive related products and equipment, products

Agreement for Trans-Pacific Partnership, from endangered species, and toxic or

which, once ratified by each country, will link hazardous products (export.gov. 2018)*.

11 Asia-Pacific economies. Mexico is also a Mexico trade barriers (3) Overall, Mexico

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 MJM CONSULTING SOLUTIONS MEXICO

appears to be a pro-trade country because References

of the many agreements and lack of trade

restrictions.

International Trade Administration. (2018, October 10). Mexico - Trade Agreements. Retrieved

from Mexico Country Commercial Guide: https://www.export.gov/article?id=Mexico-

Trade-Agreements

International Trade Administration. (2018, October 10). Mexico - Trade Barriers. Retrieved from

Mexico Country Commercial Guide: https://www.export.gov/article?id=Mexico-Trade-

Barriers

USTR. (2018). United States-Mexico-Canada Agreement. Retrieved from Office of the United

States Trade Representative: https://ustr.gov/trade-agreements/free-trade-

agreements/united-states-mexico-canada-agreement

World Trade Organization. (2017). Mexico Policy Review: Mexico. Retrieved from

https://www.wto.org/english/tratop_e/tpr_e/s352_e.pdf

World Trade Organization. (2018). World Tariff Profiles 2018. Retrieved from

https://www.wto.org/english/res_e/booksp_e/tariff_profiles18_e.pdf

aluminum tariffs and Mexico’s

Apprendix retaliatory tariffs).” . [ CITATION

Int18 \l 1033 ]
(1) NAFTA creates an agreement with
(2) This information on Mexico trade
these countries and guarantees that,
policies comes from U.S. Embassies
“there are no tariffs for qualifying
abroad. [ CITATION Int181 \l 1033 ]
goods and services traded among
(3) Please note that the U.S., Canada,
the three countries (aside from
and Mexico and remaking
selected tariffs in connection with the
arrangements to enact a new
2018 U.S. imposition of steel and

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MJM CONSULTING SOLUTIONS MEXICO

agreement the United States- proof of sanitary import for medical

Mexico-Canada Agreement products and equipment,

(USMCA), which hasn’t been put in pharmaceuticals, etc. The

effect yet, but will be in effect after Secretariat of Environment and

the completion of TPA procedures, Natural Resources (SEMARNAT)

including a congressional vote. requires authorizations for products

(Office of the United State Trade from endangered species. Toxic and

Representative. 2018) hazardous products need an import

(4) Certain sensitive products require an authorization as well. Used Vehicles

import license. The Secretariat of have a list of requirements from a

National Defense (SEDENA) decree that was issued in April 2015.

requires an authorization to import

guns, arms, munitions, explosives,

and defense equipment, as well as

special military vehicles. The

Secretariat of Agriculture, Livestock,

Rural Development Fisheries and

Food (SAGARPA) requires a special

import permit for some leather and

fur as well as fresh/chilled and

frozen meat. The Secretariat of

Health (SSA), through its Federal

Commission for the Protection

Against Sanitary Risks (COFEPRIS),

requires an authorization based on

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Foreign Direct Investment Policies

Government Incentives for most common types are Limited Liability

Stock Corporations and Limited Liability

FDI
Companies. The assembly plant industry is

Special Economic Zones were created to also a popular sector that FDI goes into.

attract investment to the economically Mexico also has Privatization Programs in

underdeveloped areas in the southern the real estate sector, the airport sector and

states of Mexico. Companies setting up in some refineries.

the Special Economic Zones will receive

Foreign investors have a right to a
various incentives, trade facilities, duty free
compensation if they are victims of
customs benefits, and an easier regulatory
expropriation for public means.
process.
Expropriations are governed by international
Restrictions &
law and require fair market value

Expropriation compensation.

There are no FDI barriers of restrictions in

References

Mexico. All types of FDI are allowed, the

Santander. (2018). Mexico: Foreign Investment. Retrieved from Trade Portal:

https://en.portal.santandertrade.com/establish-overseas/mexico/foreign-investment?

accepter_cookies=oui

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Five Year Forecast

Current Business Future Business

Environment of Mexico Environment Predictions

Mexico is currently in a state of uncertainty. We believe that Mexico will grow at a rate

The economy has been struggling with high similar to what it is currently growing at for

inflation and interest rates. The currency the next five years. Mexico currently has a

has also been experiencing depreciation 2% GDP growth rate and it has been steady

against the US dollar. With a poor economy, for the past few years and we see no

income levels are low, and the quality of life reason for any drastic change from that

isn’t great. rate. This does not look too good because

Mexico’s current economic environment

Recently, Mexico elected a new President
does not look like it is in the best shape
which leaves room for the unknown for the
currently because of a high percent of
future. More risks the country faces are
people below the poverty line and a low
corruption and unstable labor policies that
growth rate, especially when compared to
causes strikes and violence.
the rest of the world.

Mexico’s GDP is highly based on trade and

investment. The US is Mexico main

importer. The US and Mexico also support

each other with a pattern of increasing FDI

investments in each other’s country.

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Conclusions/Recommendations

Conclusion

There is much uncertainty surrounding Mexico and how it’s economy may perform in the coming

years. A new radical president and renegotiations of the North Atlantic Free-Trade Agreement

do raise some questions around policy and how this can affect the business environment.

Corruption still looks to remain a large problem facing the nation and does not seem likely to

change anytime soon unless the new president brings with him sweeping reform. The country

still excels in low labor and manufacturing costs which may be enticing to manufacturers.

However, it will be important to keep an eye on the environment surrounding working conditions

as companies are under increased scrutiny by the public in recent years.

Recommendations

We at MJM Consulting Solutions believe that entering the Mexican market at this stage could

prove to be a highly risky venture that one would do best to avoid at this time. With the

uncertainty of new leadership, trade negotiations, and a slow economy, it would be best to hold

potential investments until there is more guaranteed stability. Manufacturing and labor are still a

viable option for outsourcing in the country but changing labor unions and policies could prove

difficult. The Special Economic Zones create by the country have the potential to be solid

investment opportunities granted the rest of the economy can stabilize. The final consensus is

that the country is a good potential environment for manufacturing-based investments but other

investments (primarily those surrounding consumer goods and services) should be avoided or

considered carefully. The country shows promise, but the best approach is patience.

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