Market Spotlight: Mexico
Mexico is ranked 60th (of 190) on the World Bank’s Ease of Doing Business Assessment, ranking only behind the United States, Canada, and Chile in the western hemisphere. Mexico is one of the easiest countries in Latin America to start a business. Depending on the size of your business, it may happen in one day! Mexico scored a 90 in ease of getting credit; 11th in the world. A major downside of doing business in Mexico is that more than 50% of profits are paid in taxes.
Mexico has very low proficiency in English, with the EF English Proficiency Index ranking Mexico 92 of 112 countries and 19 of 20 in Latin America. While official stats say 12% of the population speaks English, only roughly 4% of the population speak it fluently. The most fluent speakers are In major cities of commerce. When doing business in Mexico, be prepared to work through an interpreter and offer your products or services in both Spanish and English, where possible.
One of the main reasons foreign manufacturers continue to expand to Mexico is for the low labor and operation costs. Although Mexico’s minimum wage has been steadily rising, with a 23% increase in 2021, the country still boasts very competitive labor costs. Compared to China, manufacturing labor costs per hour are around 35% less. Mexico also has higher rates of productivity, as compared to other countries, with work weeks consist of 48 hours rather than the typical 40 hours or less.
Mexico has a Political Stability and Absence of Violence/Terrorism rating of 18, according to Trade Economics. Political Stability and Absence of Violence/Terrorism measures perceptions of the likelihood of political instability and/or politically-motivated violence, including terrorism. A rating of 18 indicates a low likelihood of these occurrences. That said, illegal drug trafficking groups operate across the country and may present challenges to doing business, but has limited impact on political stability.
Mexico is an intriguing place to do business because it is a strong, large domestic market with a GDP of 1.17 USD trillion, making it the 15th largest economy in the world. Although the Mexican economy contracted 8.5% in 2020 amid the pandemic, there are signs of recovery. In 2021, the Mexican economy expanded by 5% and is expected to grow by an additional 3.3% in 2022, which would offset the contraction in 2020. Also, the unemployment rate is slightly lower from 4.7% in February 2021 to 3.7% in February 2022.
