Doing Business in Mexico

Doing business in Mexico can be quite complex if you’re not familiar with the processes. Every country has its own nuances and complexities when it comes to operating a business and Mexico is certainly no different. Even though the U.S. and Mexico share a border, they operate very differently when it comes to business.

“It should not be assumed that geographical proximity implies cultural similarity, as the two countries have very different ways of approaching the business environment,” says Leopoldo Lopez, Managing Director, Scarbrough Mexico.

From cost to actual business practices, there are plenty of differences between the neighboring countries. Mexico has a large and capable workforce, but they earn considerably less than their American counterparts on average. Even real estate is cheaper in Mexico, making it a desirable location for plenty of companies around the world. Whether it is a foreign company looking to offshore or nearshore like we just covered or a local company, these financial benefits cannot be overlooked. Any business looking to take advantage of these benefits should be prepared for the different business and trading landscape in Mexico.

In Mexico, the incorporation of a business depends on the type of operation the business hopes to run and the legal structure that business chooses to operate under. This choice will boil down to the overall needs of the business and how investors hope to limit their liability and manage capital contributions.

For a foreign investor, choosing a Mexican subsidiary is a common option. The three most common types of subsidiaries are: Public Limited Company, Limited Liability Company, or Variable Capital Company. Each type comes with its own structural differences and distribution of capital.

Once that decision has been made, the company begins the registration and incorporation process. This process for a new business requires a permit from the Ministry of Economy, a notarized articles of incorporation and registration with the SAT and the Public Registry of Commerce.

From there, a company must register in the Federal Taxpayers Registry. In Mexico, a company must choose their type of regime which will dictate the amount and types of taxes they must pay.

Once the business has been established and begins operating, then the Mexican customs process comes into play. There are plenty of similarities between Mexican and U.S. customs, but some of the processes differ from one another. Regardless of country, having a Licensed Customs Broker tends to be beneficial. They can handle each step of the way on either side of the border. Brokers are responsible for understanding all the processes and regulations for each country, which can change often.

One chief difference between Mexico and the U.S. is the liability for goods and paperwork. In the U.S., the customs broker is responsible for the paperwork and declaration of goods to Customs & Border Protection, but liability still ultimately falls to the importer if anything happens to go wrong. However, in Mexico, the customs broker also takes liability for everything, so it is imperative they understand the intricacies of the import process.

This helps explain why the process at the border tends to have one other major difference. When a cargo arrives in Mexico, the customs broker physically checks the merchandise at the U.S. facility to ensure it matches what's stated on the paperwork before crossing into Mexico. Once checks are complete, the cargo then proceeds to the U.S. and Mexican Customs Booths for further inspection before proceeding into Mexico.

Outside of the legal and procedural differences, there are also plenty of social and cultural differences that come with doing business in Mexico. Relationships are important to business, and schedules and regulations tend to be a little more flexible. Understanding the similarities and differences is crucial before considering moving or opening operations in Mexico.