Mexico is open for business

Published by Andrew Griggs on 14 January 2022

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Why is Mexico an interesting place for doing business?

Mexico is an important destination for investment and commerce and it’s expected to increase in the future, in part because of its special geographical location, close to the most important economy in the world, the United States, having the advantage of delivering goods “just in time” and also being a service hub, and having salaries that are comparatively low to developed countries.

For example, the hourly salary in Mexico is on average 2.28 USD while in the US it is 20.9 USD; Mexico has well educated and trained people in various sectors, like automotive, programming, financial services, etc.

Being located in the heart of America, Mexico is also well-integrated with Latin America, sharing language, history and culture; for this reason, it is a good place to lead businesses to all the Spanish speakers of the region that currently have more than 450 million people.

Mexico is a big country, it has almost 2 million square meters, which makes it the 14th biggest country in the world and coincidentally it is also the 14th biggest economy.

It is the 10th most populated country in the world, with a total population of 130 million people, of which 78 million (62%) is economically active. The country is very young, contrasted with other developed economies, the average age is 29 years old and the demography process is very positive for the future, because the economically active population is bigger than the dependent one and it is expected to be in this way at least two more decades.

Why do so many multinational companies think about Mexico?

In the 80’s Mexico started a process of economic and commercial openness that permitted diversified exportations, from raw materials to manufactured goods and complex services.

Mexico is the 11th largest exporter in the world and the 12th importer. It is totally integrated into the productive chains of the United States and Canada through a free trade agreement. The country exports almost the same amount than all the rest of the countries of Latin America put together, mainly manufacturers of medium and high technology and services.

Additionally, the country has another 11 free trade agreements that give the opportunity to export to 49 different countries, including the biggest economies in the world covering more than 1 billion people that makes about 60% of the gross domestic product of the world.

Mexico has a good legal framework for protecting investments. At the moment it has signed 32 agreements of promotion and protection of investments with 32 countries and 9 agreements with limited scope in the Latin American Association for Integration. It is also a member of the Transpacific Partnership (TTP).

Tax considerations

Mexico has signed 61 agreements for avoiding double taxation with the main economies of the world, including most of the European countries, China, India and the United States.

This framework permits investors not to pay income tax in Mexico for a lot of different kinds of revenues or having a credit in their home countries when the tax is paid.

Francisco Bracamonte is a Partner of Kreston BSG Mexico, a member firm of Kreston Global, an international advisory and accountancy network, for which Kreston Reeves is also a member. Find out more here.

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