Doing Business in Mexico vs. China: Strategic

Doing Business in Mexico vs. China: Strategic

By: Juan Carlos Briseno   |     January 22, 2017
Preparing for a Downturn

 

Well, things have shifted in the past weeks, haven’t they?  And even more so for Mexico and the topic at hand:  Trade and Investment Awareness. 

It is no secret that for many years now Mexico has been heavily investing in boosting global awareness regarding welcoming investments to our country and it has definitely paid off.  In the past 2 years Mexico has seen more than USD$18 Billion announced as Automakers decided to open up new assembly plants in Mexico.  Yet today, just weeks after the US election, we begin to see that global awareness about Mexico is sky rocketing once more in a very different way.  The current conversation within the ranks of world CEO’s that track Mexico isn’t whether, from a pure economic and financial point of view, it makes sense to invest in Mexico but what are the possible risks of doing so.  The current conversation has to do with US backlash if you choose to do so. Our view is that trade issues with China have a far greater risk than any that may exist with Mexico.  Every boardroom should be focused on making Doing business in Mexico vs. China a part of their strategic discussions.

At this time I think is critical to truly understand what is at stake:  Total Mexican exports to the US have, on average, 40% US content.  More than 6 million US-citizen jobs depend on NAFTA.  And yet, through tweets and specific actions, awareness about Mexico is shifting towards “If you invest there instead of here you’ll suffer on your way back”.  Surprisingly enough, I can share that our days here at ProMexico are busier than ever. 

Here’s why:  Yes, there are the Fords and the GM’s and for some strange reason the non-US companies like Toyota that are currently being blasted by President Trump, even threatened.  This situation is putting Mexico on the radar (awareness again).  We might say not for the right reasons but here is the second part of the puzzle:  There are huge numbers of US and US-based non-US companies that don’t show up on the radar like the big Fortune 500 companies.  Many of them, for the past years, have been following the steps of the  Fortune 500’s steps to improve their P&L’s through cost reduction and proximity (meaning many of them currently sourcing out from Asian countries and choosing to now open up their own operations in Mexico).  These companies are not currently and will not be targeted by the US, at least not in the near future.  First, because these companies and their investments are not big enough;  Second, creating new tax adjustment for all of them means having to change US trade law which requires congressional approval.  Yes, the Congress is mainly Republican, but not mainly “Trumpist”.  

This is why global awareness regarding trading and investing in Mexico is rising even more and with it I would argue that this is in fact perfect timing to invest.  Every dollar buys more land, equipment, facilities and any other asset you wish to purchase in Mexico.  Mexico is now far more competitive than China and provides significant opportunities to reduce lead times and working capital.  Also, this increased awareness has created an authentic and significant increase of US-based companies investing in offering services with offices in Mexico, ranging from energy investments’ consultants, legal, customs, immigration, software development, etc.

We are in interesting times and and 2017 may have many surprises in store, which begins with a huge increase in global awareness about how, when and why to invest in Mexico.  The math adds up for doing business in Mexico, the finances say yes, the opportunities are there.  This increase in awareness will only boost investments from many non-Fortune 500 companies, regardless of the current backlash they are going through.  Given the changing landscape it is important to partner with ProMexico and Group50 to understand the opportunities and risks associated with making a move to Mexico.

 


 

You can read more on our Mexico Series here.

 

About the author: Commissioner Juan Carlos Briseño, prior to accepting the Los Angeles Trade Commissioner position, worked for 10 years at DHL Supply Chain Management in Mexico, where he created and managed the Project Management Office.  While at DHL he got the PMP Certification offered by the Project Management Institute (PMI).  Also worked with Dr. Deepak Chopra at the Chopra Center for Wellbeing, where he launched the initiative “Chopra en Español” in Carlsbad, California. For the past 3 years he has acted as ProMexico’s Trade & Investment Commissioner in Los Angeles, enabling foreign direct investment initiatives find a clear path to arrive to Mexico, as well as promoting exports. You can reach Juan Carlos Briseno Merino at 213-382-3179  Ext. 222 or drop him a line at juancarlos.briseno@promexico.gob.mx

About Group5o:  Jorge Silva is the Global Initiatives Practice Lead for Group50®Consulting. He has over 25 years of global experience in companies ranging from start-ups to Fortune 100 in multiple industries.  He brings a unique view of how the globalization of business is best done, measured, and improved.  Jorge is a multi-national sales, marketing and business development expert whose core competency is designing and executing creative growth strategies.  He is fluent in Spanish and English and has lived and worked in the US, Spain, Singapore and the Philippines.  You can reach Group50 at 909-949-9083 or drop us a line at info@group50.com

This entry was posted in Global Initiatives, Mexico, on January 22, 2017
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