More and more UK business owners are turning their attention to the Mexican export market as they look for new overseas opportunities, and it’s not surprising why. With the world’s 15th largest economy and a population of over 120m, the opportunities it presents are vast.
Why businesses consider exporting to Mexico
Exporting should be a key consideration in any business’ growth strategy. At Santander, we have found that businesses that export are more resilient than those which remain solely in one market, and also tend to grow faster. Despite market uncertainty following the UK’s decision to leave the EU in June, now is a good time for businesses to start or increase export activity – the pound has fallen meaning that UK exports are now cheaper for overseas importers.
Why Mexico in particular
Mexico has a population roughly the size of Western Europe, so the sheer number of consumers is an obvious attraction. It is also a stable market with a solid banking industry and a strong democracy. In terms of trade, Mexico has more Free Trade Agreements than any other country – eleven agreements covering 44 countries which gives potential access to 60 per cent of the World’s GDP. It is also a member of NAFTA, which means free trade with the US, and is a founding member of the Pacific Alliance along with Chile, Colombia and Peru. Another key point to note is that since the start of Pena Nieto’s election, Congress has approved important structural and macroeconomic reforms that will boost Mexico’s growth in the coming years. For example, these include the most significant energy reforms to occur in decades. Cutting edge technology will be available to the hydrocarbon industry, enabling Mexico to tap into its deep water deposits. The government has also introduced fiscal reforms in order to counter any negative impacts to the economy due to the global fall in oil prices.
Energy is clearly an area of opportunity for UK businesses looking at the Mexican export market – but what are the other attractive industries?There are several sectors of opportunity for UK businesses in Mexico, but a key one that I would note is the automotive sector. Mexico is the world’s seventh largest producer of light vehicles and the sector accounts for six per cent of GDP. With strong forecasted growth in the manufacturing sector (investment is expected to exceed $17bn by 2020) there are various opportunities for UK businesses looking to sell into global supply chains.
Mexican export market challenges
There are challenges when entering any new market, but with the right preparation and support both here in the UK and on the ground in Mexico, these can be overcome. Business culture in Mexico is something to be aware of before you start trading as business relationships with clients and distributors tend to be more personal than those in the UK. This can mean that it takes time to build relationships with business partners and so businesses need to be prepared that the results may not come instantaneously.
Language is another challenge; whilst English is commonly recognised as a language for business, it pays to take an interpreter to meetings if necessary. And it’s not just the meetings, products needs to be labelled in Spanish too. This is where local contacts are invaluable as they will ensure that any translations, be that packaging or legal contracts, are done correctly and in line with local regulation. Mexico’s standards agency, the Norma Oficial Mexicana, set regulations to which products must adhere before they can go on sale, so again local knowledge is key to ensuring your products are fit for sale.
It is also crucial to note that there are certain activities that are restricted to government, and other areas that are reserved exclusively for Mexican citizens and forbid participation from foreign investment. There are also certain activities that need to be authorised by the Mexican Ministry of Economics before any foreign investment can be approved.
While it’s clear that local knowledge is vital for any business wanting to start trading with the Mexican export market, company owners also have to know who to go to and find it? There is a lot of support available in the UK for businesses wanting to trade with Mexico from both the public and private sectors. The Department for International Trade and UK Export Finance both offer support for UK businesses and there are various chambers such as the British Chamber of Commerce in Mexico and the Mexico Chamber of Commerce in the UK. Santander can support businesses here in the UK and as the third largest bank in Mexico, as we are ideally placed to support on the ground. Our global connectivity and deep local presence in the market, mean we can connect businesses to the right partners in Mexico and support their business from both sides of the Atlantic.
Santander is organising seminars, roundtables and virtual trade missions around the UK to highlight some of the key areas of opportunities in Mexico and to connect UK companies to potential new business partners and third party support. Santander UK also has a Trade Mission to Mexico scheduled for early 2017 which will introduce UK exporters to Mexico’s main importers and distributors for their sector thanks to connections with Santander Mexico and the Department for International Trade.
If you would like to find out more about the Mexican export market, please visit the Santander’s International hub.
Have a look at our other Santander new export country articles
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