Doing Business with Mexico: A Guide for Canadian Exporters ...

Doing business with

Mexico

A guide for canadian exporters and investors

eDc | Doing business with Mexico2

This Guide is a compilation of publicly available information. It is not intended to

provide specific advice and should not be relied on as such. This Guide is intended as

an overview only. No action or decision should be taken without detailed independent

research and professional advice concerning the specific subject matter of such action

or decision. While EDC has made reasonable commercial efforts to ensure that the

information contained in this Guide was accurate as of Winter 2011, EDC does not

represent or warrant the accurateness, timeliness or completeness of the information

contained in the Guide. This Guide or any part of it may become obsolete at any

time. It is the user’s responsibility to verify any information contained in this Guide

before relying on such information. EDC is not liable in any manner whatsoever for

any loss or damage caused by or resulting from any inaccuracies, errors or omissions

in the information contained in this Guide. This Guide does not constitute legal or tax

advice. For legal or tax advice, please consult a qualified professional.

About the guiDe

Doing Business with Mexico is designed to help Canadian companies learn about the

Mexican marketplace and how they can do business there. If you’ve never operated

outside Canada but believe your company could do well in Mexico, this guide will

help you decide how – or even whether – you should proceed. If you’re already doing

business abroad, but haven’t yet ventured into Mexico, it will help you find your way

into this promising marketplace.

The Mexican market is enormously varied and extremely competitive, and its

unfamiliarity can make it intimidating. Nevertheless, plenty of Canadian businesses,

of all sizes and in many sectors, have discovered that it is a place where they

can prosper.

Doing business with

Mexico

A guide for canadian exporters and investors


CONTENTS

5 Finances and Taxation .................................. 26 5.1 the financial system .................................................. 27 5.2 trade and investment financing ................................. 27 5.3 Paying taxes............................................................... 27 5.4 getting paid............................................................... 28

6 The Legal Perspective ................................... 30 6.1 Dispute settlement..................................................... 31 6.2 intellectual property protection ................................. 31 6.3 corruption ................................................................. 31

7 Delivering to Mexico .................................... 32 7.1 using customs brokers ............................................... 33 7.2 using freight forwarders ............................................ 33 7.3 nAFtA and Mexico’s import regimes ......................... 34 7.4 non-tariff barriers ...................................................... 34 7.5 Documentation .......................................................... 35 7.6 Labelling and marking ............................................... 36

8 Solutions from EDC ........................................ 37 8.1 Accounts Receivable insurance .................................. 38 8.2 surety bonding insurance .......................................... 38 8.3 Foreign buyer Financing............................................. 38 8.4 Political Risk insurance .............................................. 39

9 Appendix A – Key Contacts ....................... 40 eDc head office ........................................................ 40 eDc in Mexico ........................................................... 40 canadian trade commissioner service in Mexico ...... 41

1 Understanding the Mexican Market ...... 4 1.1 the canada–Mexico trade relationship ....................... 5 1.2 Mexico’s economic environment ................................. 6 1.3 Resources for canadian exporters and investors ......... 7 1.4 tips for doing business in Mexico ................................ 8

2 Opportunities for Canadian Exporters .... 10 2.1 Aerospace .................................................................. 11 2.2 Agriculture ................................................................. 11 2.3 Automotive ............................................................... 12 2.4 energy ....................................................................... 13 2.5 environmental technologies ...................................... 13 2.6 information and communications technologies ......... 13 2.7 infrastructure ............................................................. 14 2.8 Light manufacturing .................................................. 14 2.9 Medical devices ......................................................... 14 2.10 Mining ....................................................................... 15 2.11 oil and gas ................................................................ 16 2.12 selling to the government ......................................... 17

3 Opportunities for Canadian Investors ..... 18 3.1 Mexico’s investment climate ..................................... 19 3.2 investment incentives ................................................ 19 3.3 Foreign trade zones ................................................... 20 3.4 Labour ....................................................................... 20 3.5 corporate social responsibility ................................... 20 3.6 social unrest .............................................................. 21

4 Establishing Your Presence in Mexico ..... 22 4.1 establishing a business entity .................................... 23 4.2 sales representatives ................................................. 24 4.3 Licensing and transfer of technology ......................... 25 4.4 Franchising ................................................................ 25


1 unDeRstAnDing the MexicAn MARket

until about 20 years ago, Mexico’s economy was insular, protectionist and subject to extensive state control. since then, successive national governments have presided over a far-reaching liberalization of the country’s economic environment that has opened many formerly closed sectors to competition from abroad. As a result, the Mexican market has become much more integrated into the world economy.

this process has been accelerated by Mexico’s numerous free trade agreements (FtAs) with countries around the world, including the north American Free trade Agreement (nAFtA), which it signed in 1994. canada, of course, is also a nAFtA member, and the ever-expanding trade relationship between the two nations has made Mexico one of the key emerging markets for canadian companies in terms of both exports and canadian foreign direct investment (FDi).



1.1 The Canada–Mexico trade relationshipMexico’s substantial population of 111 million makes it a rich source of business opportunities. Reflecting this, bilateral trade between Canada and Mexico has more than quadrupled since the advent of NAFTA, and is projected to reach $30 billion in 2010. The major Mexican sectors for Canadian exporters continue to be oil and gas, motor vehicles and auto parts, agriculture and forestry products, electric and electronics products, general machinery and equipment, information and communications technology (ICT), and mining.

On the purely export side, Statistics Canada’s trade figures indicate that Canada shipped more than $5.2 billion in goods to Mexico in 2008; even in 2009, when the global recession was having severe effects on international trade, Canadian export sales to the country exceeded $3.8 billion.1 These figures do not likely reflect the actual value of Canada’s exports to Mexico, however, since many of these goods are shipped via the United States and are therefore registered as U.S. exports. Mexico’s own trade statistics for 2008 show that it bought nearly $8 billion worth of Canadian goods in 2008, almost $3 billion more than was reported by Statistics Canada.

Even the lower figures mean that Mexico is Canada’s fifth-largest export market, and about 2,400 Canadian companies are now operating on Mexican soil. As for Mexico’s part in the relationship, Canada imported $16.5 billion in Mexican products in 2009, making it Canada’s third-largest supplier of foreign goods.

In the area of FDI, Canada’s total stock of investment in Mexico is estimated at $6 billion, concentrated in the mining, automotive, aerospace, extractive, light manufacturing and banking services sectors.

1 currency figures are in canadian dollars unless otherwise indicated.

eDc in MexicoDuring the past 10 years, eDc has provided more than $20 billion in trade support for canadian companies doing business in Mexico. because of Mexico’s growing economic importance to canada, eDc has customized four of its key services for canadian affiliates in this promising market and is delivering them in partnership with financial institutions and insurers operating in Mexico. For more information, please refer to chapter 8, “solutions from eDc.”

eDc has also established permanent representation in Mexico. For contact information, please refer to Appendix A.



1.2 Mexico’s economic environmentLike most other countries, Mexico suffered economically from the global recession, and the downturn prompted the central government to accelerate the infrastructure projects it was already supporting through its National Infrastructure Program (PNI) and its National Infrastructure Fund (FONADIN). These projects include about 300 initiatives representing more than US$188 billion in investment in energy, environment, transportation, telecommunications, security and tourism. Mexico has also approved a range of reforms to stimulate growth and increase government revenues, and the country’s financial system and economic foundations remain solid.

As Mexico continues its successful recovery from the world downturn, several sectors will offer substantial opportunities for Canadian companies:

› In 2008, according to the Canadian Trade Commissioner Service, Canadian FDI represented 78 percent of the total FDI in the Mexican mining industry, and the sector remains very active in spite of the effects of the global recession.

› There is considerable potential for Canadian companies that specialize in the oil and gas sector. PEMEX, Mexico’s state-owned petroleum company, is struggling to increase both exploration and production.

› While the automotive sector suffered severely in 2009, signs of recovery are beginning to emerge.

› As mentioned earlier, large infrastructure projects are moving forward and are expected to continue through 2010 and after. Wastewater treatment, energy, ports and airports, environmental technologies and heavy construction are some of the major areas of activity.

› Other sectors of potentially strong demand are aerospace, agri-food, ICT, medical devices and light manufacturing.



1.3 Resources for Canadian exporters and investors 1.3.1 Mexico-specific resources

› ProMexico, an institution of the Mexican government, works to strengthen Mexico’s participation in the international economy. It supports the export activities of Mexico-based companies and helps attract FDI to the country. For ProMexico contacts in Canada, please refer to Appendix A.

› The Canadian Chamber of Commerce in Mexico supports the development of business links between the two countries.

› The NAFTA Office of Mexico in Canada represents Mexico’s Ministry of the Economy and provides a range of statistics, publications and other information about doing business with Mexico.

1.3.2 General resources

› Canada Business is a collaborative network of federal and provincial government services that help Canadian entrepreneurs and exporters build their companies.

› The Canadian Trade Commissioner Service (TCS) provides services to Canadian businesses in Canada and abroad, including market research studies and country-specific reports. The Virtual Trade Commissioner, also available though the TCS, is a personalized, web-based resource that will give you market information and leads specific to your business interests. You can register for the Virtual Trade Commissioner when you visit the TCS web site. Please refer to Appendix A for Trade Commissioner Service contacts in Mexico.

› Canada’s International Market Access Report is an online resource, updated yearly, that describes the federal government’s priorities for improving Canadian access to foreign markets.

› Export Development Canada (EDC) is a Crown corporation that provides financial services and global market expertise to Canadian companies intending to sell their products and services abroad.

› Foreign Affairs and International Trade Canada (DFAIT) provides information about foreign affairs, foreign policy, the Canadian economy, international trade, travel assistance and passport services.

› CanadExport is a free, online DFAIT publication. It provides news about trade opportunities, export programs, trade fairs, business missions and more.

› Industry Canada is an excellent source of information, offering market reports as well as the Trade Data Online research tool.

› The provincial governments of Alberta, Ontario and Quebec all operate trade offices in Mexico City. Their respective web sites can be accessed though the home page of the Canadian Chamber of Commerce in Mexico.

http://www.promexico.gob.mx/

http://www.canchammx.com/

http://www.nafta-mexico.org/

http://www.canadabusiness.ca/

http://www.tradecommissioner.gc.ca/

http://www.international.gc.ca/trade-agreements-accords-commerciaux/cimar-rcami/2009/index.aspx?lang=en

http://www.edc.ca/

http://www.international.gc.ca/

http://www.international.gc.ca/canadexport/index.aspx

http://www.ic.gc.ca/ic_wp-pa.htm

http://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/Home

http://www.canchammx.com/index.html




1.4 Tips for doing business in MexicoAlmost all Canadian companies intending to do business in Mexico will need a local partner. This could be a joint venture partner, a sales representative, a distributor or, if you are investing in Mexico, a suitable legal firm.

As in any foreign market, you should carry out careful due diligence before committing to a sales agreement or other business relationship. Investigate the Mexican company’s creditworthiness, its financial record, the quality of its management, its business history and its reputation in the local and international marketplace. Local legal or consulting firms can help you, and you may be able to obtain assistance from the local Canadian Trade Commissioner Service offices and from EDC.

Here are some additional pointers that you may find useful when doing business in Mexico:

› Spanish is Mexico’s official language. English is widely spoken in business circles, but business meetings are normally conducted in Spanish. If you can’t speak the language at all, your hosts may be willing to conduct meetings in English, but ask beforehand to make sure this is possible. If not, consider hiring an interpreter. Better yet, try to learn some Spanish as your Mexican business develops, since even a rudimentary command of the language will be seen as a sign of sincerity and respect.

› Mexican buyers are both service- and price-sensitive, but in many cases the most important factor in a successful sale is a supplier’s ability to provide reliable after-sales service, maintenance programs and product training and support. Also important are uniform quality control, compliance with international standards and reliable delivery. If your company can meet these criteria, your chances of making a sale will increase considerably.

› Business relationships in Canada and the United States tend to be rather impersonal, but the same is not true in Mexico. Like their counterparts in other Latin American cultures, Mexicans do business on the basis of trusted personal relationships, and these must usually be established before any business can be carried out. Business decisions may often be based more on the Mexican participant’s degree of comfort with the relationship than on purely objective criteria.

› Mexicans tend to conduct business in a non-confrontational way, which often means that they will not overtly disagree with you. Instead, they may suggest discussing the matter at another time, or will find some other way to avoid an explicitly negative response. As a rule, this does not reflect a devious business strategy on their part, but rather a desire to keep the relationship cordial. You should use the same indirect approach when it is called for, as this will help strengthen the relationship.

checking your buyer through eDcwith eDc’s EXPORT Check, you can quickly obtain vital information on many Mexican companies. For a modest fee, an eDc opinion Report will provide key credit and financial information about the firm and an opinion as to whether it is insurable. A D&b business information Report, also available for a fee, will furnish detailed corporate information including company history, credit and financial information, and any legal issues involving the firm.

https://www.edc.ca/english/creditinformation.htm



› Mexico’s business culture is more formal than that of Canada or the United States. Hierarchy, status, and demonstrations of respect for senior members of a group are highly important. The handshake is an accepted business greeting, although business partners of longer standing may use a friendly embrace. First names are used only among family and friends, so remember to use appropriate titles and honorifics in business situations.

› In most Mexican cities, working hours are generally 9:00 a.m. to 5:00 p.m., from Monday to Friday, but may extend until 7:00 p.m. A lot of business is conducted over breakfast and lunch. Expect to take up to two hours to eat, and if you are the seller or set up the meeting, pick up the bill. Mexicans rarely conduct business on weekends.

› Don’t be impatient. Business negotiations in Mexico often include bartering and will go more slowly than they would in Canada – possibly much more slowly.

› Confirm all meetings via telephone the day of the meeting, or the previous afternoon if it’s for the next day’s breakfast.

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2 oPPoRtunities FoR cAnADiAn exPoRteRs

eDc maintains close relationships with numerous strategic partners in Mexico. these international strategic Accounts (isAs) are extremely important to eDc, since they can facilitate canadian exports to specific buyers in several Mexican industries.

in Mexico, eDc’s isAs include, among others:

› telmex (information and communications technology)

› scotiabank inverlat: financing

› Metalsa and nemak: automotive

› Peñoles: mining

› Petroleos Mexicanos (PeMex): oil and gas

› Mabe: light manufacturing

› ternium hylsa: extractive

› comision Federal de electricidad (cFe): power



2.1 AerospaceThe Mexican government has identified aerospace as a priority sector for development, and many North American aerospace firms have established their secondary-components supply chains in the country because of its low operating costs, high levels of education, well-developed aerospace infrastructure and hospitable regulatory framework. In addition, Mexico has acquired vast experience in the auto and the electric/electronics industries, and this expertise is contributing substantially to the aerospace sector’s success.

In 2010, more than 190 aerospace-related companies were operating in Mexico, three times as many as there were in 2005. The industry employs about 30,000 people overall and the sector has been growing rapidly, with annual FDI rising from $200 million in 2001 to $1.1 billion in 2009.

The major aerospace subsectors and their market share are:

› Manufacturing and assembly: 79.7 per cent. Mexico is a natural manufacturing hub for the aerospace industry.

› Engineering services and R&D: 10.4 per cent. Mexico’s R&D centres are world class.

› Maintenance, repair and overhaul (MRO): 10 per cent. Mexico offers major development opportunities in the growing MRO subsector.

The country’s air fleet is the second largest in Latin America, with about 7,800 registered aircraft. This can make the MRO subsector an attractive one for Canadian firms specializing in this area, since it needs a large range of services including turbines and engines, auxiliary power units, electric and electronic systems, landing gear, dynamic components, propellers, corrosion protection, interior refurnishing and non-destructive testing.

There are also numerous opportunities on the manufacturing side. Some of the products and services needed are aerospace-grade materials such as alloys of aluminum, titanium and steel; complex machining, turning and milling; specialized chemical processing and coatings; engineering plastics and thermosets; castings and forgings; sheet metal and seamless tubing; printed circuit board assemblies and wiring harnesses; and composites and fibres.

Some of the major aerospace companies operating in Mexico, as of 2010, were Bombardier, Goodrich Aerostructures, GKN Aerospace, Honeywell Aerospace, Gulfstream, Eaton Aerospace, Zodiac, Rockwell Collins, Lockheed Martin, Cobham Defence Electronic Systems, Aero Design, Cubicorp, and Pratt & Whitney. The major industry association is the Mexican Federation of the Aerospace Industry (FEMIA).

2.2 AgricultureMexico is Canada’s fourth-largest agricultural export market, with sales exceeding $1.2 billion in 2009. In terms of value, the main Canadian agriculture and agri-food products exported to Mexico in 2009 were bulk products (60 per cent), intermediate products (10 per cent) and consumer products (30 per cent).

The growing middle class and its increasing demand for high quality, value-added products point to major Mexican opportunities for Canadian agri-food businesses, while the proliferation of modern supermarkets is transforming the Mexican food market. These changes are pushing Mexican importers to look outside the country for products that will meet new and expanding consumer demands.

http://www.femia.com.mx/


› At the consumer level, there are opportunities for sales of processed foods, ready-to-eat products, meat and processed meats, food ingredients, snack foods, private-label products, frozen and prepared foods, and health and wellness products.

› At the food processor level, there is a ready market for ingredients such as wheat- and oat-based products, pulses, barley, oilseed oils, soy concentrates, organic and sugar-free ingredients, baking and multigrain mixes, frozen blueberries and wild rice.

› In the hotel and restaurant market, there is an appetite for high-quality Canadian food and beverage products such as fruits and vegetables, pork, beef, lamb, deli-style meats, sauces, condiments and spices, ready-made meals, frozen French fries, specialty grains, canned goods, alcoholic beverages, carbonated beverages, and bottled water and juices.

› In the livestock industry, Mexican farmers are aware of the quality and competitive advantages of Canadian beef and dairy cattle.

› Mexico’s forestry, pulp and paper sector is facing major challenges, but the situation is expected to turn around by the end of 2010. As the situation improves, there will be clear opportunities for Canadian companies, not only for direct sales but also in terms of investments, joint ventures and technology transfers.

› Mexico’s greenhouse industry has been very dynamic and this trend is expected to continue.

For a list of major Mexican food processors and importers, prepared by Agriculture and Agri-Food Canada (AAFC), refer to this Market Brief.

2.3 Automotive Mexico’s automotive industry is vital to its economy and the country enjoys the advantages of low-cost, skilled labour and a strategic location. As the sector recovers from the downturn of 2009, it is likely that more Canadian parts and equipment companies will establish Mexican manufacturing centres. Several important Canadian firms are already operating there, including Magna International, ABC Group, Woodbridge, MartinRea and Linamar.

Primary opportunities lie in the sale of stamping dies; plastic injection moulds; dies for cutting, punching and threading; forging dies; welding tools; and die casting tools. Of these, the products with the highest added value are stamping and cutting dies and injection moulds. Other good sales possibilities include foam injection and extrusion moulds.

In general, Mexican companies lack engineering and design infrastructure, having basic equipment but no prototyping, calibration, or measuring laboratories. Also, while maintenance of common equipment is good, maintenance of more advanced devices tends to be poor because of lack of qualified workers. Helping to correct these deficiencies may open up opportunities for Canadian companies.

Some of the major Mexican automotive associations are:

› National Auto Parts Industry Association (INA)

› Mexican Association of Automobile Distributors (AMDA)

› Mexican Association of Automotive Industries (AMIA)

› National Association of Bus and Cargo Truck Producers (ANPACT)

› National Chamber of Cargo Transports (CANACAR)


http://www.ats-sea.agr.gc.ca/lat/5498000-eng.htm

http://www.ina.com.mx/

http://www.amda.org.mx/

http://www.amia.com.mx/

http://www.anpact.com.mx/

http://www.canacar.com.mx/


2.4 EnergyImports into Mexico of energy-related equipment and services are forecast to increase by 3 per cent during 2010 and continue to expand thereafter. Energy production and energy infrastructure development will be a federal priority until at least the end of 2012, and the state-owned power company CFE has been granted major financial resources for expansion and upgrades. Some of the major power projects planned or underway are the Agua Prieta II Project, the Salamanca Cogeneration Project, the Norte II Combined Cycle Project, and the Valle de Mexico II and III Combined Cycle Project.

Some of the major Mexican energy institutions are:

› Ministry of Energy (SENER)

› Federal Electricity Commission (CFE)

› Energy Regulatory Commission (CRE)

2.5 Environmental technologiesMexico has major environmental problems, especially with supplying clean water to the population in general and in dealing with wastewater and solid waste in its urban areas. Consequently, the pollution control equipment, water resources equipment and waste management sectors are likely to grow rapidly for the next few years. Some of the resources needed are control systems, pumps, valves, filters, solid waste recycling equipment, hazardous waste transportation equipment, medical waste management technologies, and environmental engineering and design services.

Some of the major Mexican environmental organizations are:

› Secretariat for the Environment and Natural Resources (SEMARNAT)

› National Water Commission (CONAGUA)

› National Institute of Ecology (INE)

› Mexican Institute for Water Technology (IMTA)

2.6 Information and communications technologiesMexico has had a fairly low rate of information technology adoption, especially in the small and medium-sized enterprise (SME) part of the market. Only about a third of Mexican SMEs use computers in their businesses, although larger companies in the finance, transport, telecommunication, hotel and insurance sectors are adopting IT technologies at a brisk pace. On the telecommunications side, development has been slowed by several factors, including lack of competition, complex regulations and ineffective connectivity programs. However, there are signs that the wind may have turned and that the market may be opening up to more competition.

› The main IT growth areas during the next few years are likely to be server virtualization, software as a service (SaaS), on-demand products, online services, IT services and IT security infrastructure.

› For the telecommunications industry, the opportunities will be in mobile applications, unified communications, services bundling and 3G data devices driven by broadband Internet technologies.

› In software, the development priorities are likely to be in enterprise resource planning and business intelligence systems. Specialized areas such as animation and new media are also promising.


http://www.energia.gob.mx/

http://www.cfe.gob.mx/

http://www.cre.gob.mx/

http://www.semarnat.gob.mx/

http://www.cna.gob.mx/

http://www.ine.gob.mx/

http://www.imta.gob.mx/


Some of the more important ICT companies in Mexico are:

› América Móvil

› AMX Soluciones Tecnologicas

› Telcel

› Teléfonos de México (Telmex)

› Nextel de México

› Telefónica

› Movistar México

› Axtel

2.7 InfrastructureMexico’s National Infrastructure Program (PNI) has been in place since 2007 and will continue until at least 2012. It represents an investment of about US$188 billion in new and upgraded infrastructure, covering more than 300 projects. Funding is carried out through the National Infrastructure Fund (FONADIN).

The priority project areas are:

› highways, roads and bridges;

› water, irrigation, drainage and sanitation;

› railroads, ports, airports, urban and interurban transport; and

› preservation of the environment and of biodiversity.

2.8 Light manufacturingMexico has become an ideal location for light manufacturing and assembly operations because of the advantages it offers for this type of business. Among these advantages are its strategic geographical location, generous and attractive tax incentives, the quality of its workforce and competitive cost structures.

As a result, this sector involves the largest number of Canadian manufacturers and offers a wide range of possibilities. Many are in the automotive sector, as described earlier, and other opportunity areas include plastic products, packaging and large retail operations.

2.9 Medical devicesMexico’s health care system integrates the public and private sectors. In 2007, according to official figures, 86.8 per cent of the institutions were public, with the remainder being private facilities. Recent growth in the number of public hospitals has been significant, with an increase of 17.3 per cent between 2000 and 2007. During the past decade, the number of private medical facilities has grown by 6.1 per cent, and in the past three years there has been a proliferation of new private-sector hospitals and small clinics.


http://www.americamovil.com/

http://www.amxmexico.com/

http://www.telcel.com/

http://www.telmex.com/mx/

http://www.nextel.com.mx/

http://www.telefonica.com.mx/

http://www.movistar.com.mx/

http://www.axtel.mx/


Owing largely to this expansion, Mexico’s medical equipment market is the second largest in Latin America, and was valued at $2.9 billion in 2006. By 2012, that value is expected to climb to $3.35 billion as new private hospitals and clinics are built and the public system is updated.

There is strong demand for equipment related to the major chronic and degenerative diseases afflicting the population, including diabetes, cardiovascular disorders and cancer. Also needed are anaesthesia equipment, diagnostic equipment, electrocardiographs, electroencephalographs, gamma ray equipment, incubators, surgical lasers, MRI equipment, patient monitors, respiratory therapy apparatus, ultrasound equipment and x-ray units.

Note that medical devices must be granted a sanitary registration with the Federal Commission for the Protection against Sanitary Risk (COFEPRIS) before they can enter Mexico.

Some of the major Mexican hospitals are:

› Hospital San Jose TEC de Monterrey

› Hospital Christus Muguerza

› Centro de Ginecología y Obstetricia de Monterrey

› OCA Hospital

› Hospital Puerta de Hierro

› Medica Sur

› Hospital CIMA Monterrey

Some major Mexican hospital associations are:

› Monterrey Healthcare City (Ciudad de la Salud Monterrey)

› Mexican Association of Hospitals (Asociación Mexicana de Hospitales)

› Private Hospitals Association of Jalisco (Asociación de Hospitales Particulares de Jalisco)

2.10 MiningOf the 260 foreign-owned mining companies in Mexico, 200 are Canadian, most of which are exploration firms. There are 40 Canadian mines in production, some of them quite large, and Canadian companies are expected to be behind five of the seven Mexican mines opening in the next two years. Canadian FDI represents 78 per cent of the FDI in the Mexican mining sector, and our relative share is growing.

Among the key opportunity areas are analytical services, automation equipment, drilling and blasting equipment, compressors, geophysical instrumentation, hydraulics, mineral processing, ore handling, transportation and underground equipment.

Some of the major mining industry players and associations in Mexico are:

› Mexican Mining Association (CAMIMEX)

› GrupoMexico

› Grupo Industrial Peñoles/Fresnillo

› Grupo Carso/Empresas Frisco

› Minera Autlán

› Altos Hornos de México (AHMSA)

› Goldcorp


http://www.cofepris.gob.mx/

http://portal.hsj.com.mx/lwp/wcm/connect/HSJ

http://www.christusmuguerza.com.mx/

http://www.ginequito.com.mx/

http://www.ocahospital.com/

http://www.cmpdh.com/hospital

http://www.medicasur.com.mx/

http://www.cimamonterrey.com

http://www.monterreyciudaddelasalud.com.mx/

http://www.amhospitales.org.mx/

http://www.asociacionhospitales.org/

http://www.camimex.org.mx/

http://www.gmexico.com.mx/

http://www.penoles.com.mx/

http://www.gcarso.com.mx/

http://www.autlan.com.mx/

http://www.ahmsa.com/

http://www.goldcorp.com/



2.11 Oil and gasAll hydrocarbon reserves in Mexico are the property of the state, and Mexico’s entire production is controlled by Petroleos Mexicanos (PEMEX), the state-owned petroleum company. PEMEX covers all subsectors of the industry, including exploration, production, transport, refining and petrochemicals.

PEMEX’s three major suppliers are the U.S. firms of Schlumberger, Halliburton and Weatherford, but there are several others such as Baker Hughes / BJ Services, Grupo R (Industrial Perforadora de Campeche), Grupo Carso (Swecomex and Servicios Integrales GSM), Grupo Diavaz/DMGP Servicios de Integridad, Grupo TRADECO and Materiales y Equipos Petroleros (Matyep).

However, PEMEX also acquires equipment and supplies from at least 111 Canadian firms every year, and purchases from these companies rose from US$69 million in 2006 to US$613 million in 2009. Canadian firms have invested extensively in Mexico in order to service the oil and gas market more effectively, and several Canadian drilling companies established offices in the country in 2009 and 2010.

PEMEX’s planned investments are in the billions, and it has a capital expenditure program worth approximately US$20 billion over the next two to three years. The corporation has demonstrated that it is serious about diversifying its supplier base, and is encouraging joint ventures between local and foreign companies so they can win PEMEX contracts. Some Canadian companies have succeeded in selling directly to PEMEX, which is the more challenging approach, while many others, particularly in oil and gas services, have been able to sell indirectly to PEMEX as sub-contractors or suppliers to U.S. or Mexican companies. These varied strategies for engaging the Mexican private sector have been very successful for many Canadian firms.

PEMEX uses two types of procurement:

› The first is for “common purchases” such as supplies and equipment. The procurement process begins with the publication of the tender documents in the Diario Oficial de la Federación (DOF), on the web page of the subsidiary conducting the purchase and on Compranet, the federal government’s procurement site.

› The second type of procurement is used for acquisitions, leasing, works and services related to core oil and gas production activities. It is governed by a set of managerial purchasing guidelines (Disposiciones Administrativas de Contratación, or DAC) published in January 2010. Tenders are published in DOF and on Compranet.

For both types of procurement, the tender documents describe the goods, works or services being sought. They set out what is being purchased, the proposed delivery schedule, the competence and experience level required, and the guidelines for satisfying such requirements. They also provide information about payments, payment terms and price adjustments, as well as criteria for proposal evaluation. The tender documents include guidelines on how contractors are allowed to subcontract to other suppliers.

Particular areas of opportunity include equipment and services for exploration, seismic data acquisition and interpretation, drilling, production, enhanced oil recovery, pipeline transport, and health, safety and environment needs.

http://dof.gob.mx/

http://www.compranet.gob.mx/



Major entities in the oil and gas industry include:

› PEMEX

› Energy Regulatory Commission (CRE)

› Mexican Institute of Petroleum (IMP)

› Ministry of Energy (SENER)

› Asociación Mexicana de Empresas de Servicios Petroleros A.C. (AMESPAC)

2.12 Selling to the governmentThe Mexican government purchases a large variety of services, raw materials, spare parts and finished goods from the private sector every year. Government procurement is in the range of US$3 billion annually, about half of which is in the services area.

The procedures for bidding on government contracts are set out in the Law on Public Works and the Law on Acquisitions, Leases and Services, which are available online (in Spanish) through the Ministry of Public Administration (SFP) web site.

Procurement is generally carried out via open tendering through public notices. Open tendering can be of two types: national, in which only Mexican companies can participate (and the procured goods must have at last 50 per cent Mexican content); and international, in which both Mexican and foreign firms can compete.

Information on open tenders (in Spanish) is available on the Sistema Electronico de Compras Gubernamentales (CompraNet) web site. Tenders are also advertised through notices published regularly in the Diario Oficial de la Federacion (subscription required).

http://www.pemex.com/

http://www.cre.gob.mx/

http://www.imp.mx/

http://www.energia.gob.mx/

http://www.amespac.org.mx/

http://www.funcionpublica.gob.mx/

http://www.compranet.gob.mx/

http://dof.gob.mx/


3 oPPoRtunities FoR cAnADiAn investoRs

Mexico’s investment environment is changing rapidly as the government and the private sector take a more global view. consequently, Mexico has become Latin America’s premier destination for FDi.

this evolution has been brought about by measures such as guaranteed access to arbitration under international law and by the numerous FtAs Mexico has concluded with other nations. there are 12 FtAs in effect, and canadian investors should note that together they provide access to 44 countries representing 60 per cent of world gDP.



3.1 Mexico’s investment climateFDI in Mexico is governed by the 1993 Foreign Investment Law, which follows the provisions of the foreign investment chapter of NAFTA. It thus assures non-discriminatory treatment of most FDI in Mexico, removes performance requirements for FDI projects and liberalizes automatic approval procedures for FDI. Expropriation of property is forbidden except for a public purpose, and even then is subject to international law and must include compensation at fair market value. Mexico’s NAFTA membership also guarantees open conversion and transfer of funds to Canadian investors.

Very few FDI transactions require government approval, unless they are in sectors restricted by the Mexican Constitution or by provisions of the Foreign Investment Law. One category of restrictions covers sectors reserved in whole or in part to the state and includes:

› petroleum, basic petrochemicals and other hydrocarbons;

› telecommunications;

› nuclear energy and radioactive materials;

› electric power generation, transmission, and distribution;

› coinage and printing of money;

› the postal service;

› airports; and

› control and surveillance of ports.

The second category covers sectors reserved for Mexican nationals and includes:

› retail sales of gasoline and liquid petroleum gas;

› non-cable radio and television services;

› credit unions, savings and loan institutions, and development banks;

› certain professional and technical services; and

› domestic transportation for passengers, tourism and freight.

3.2 Investment incentivesMexico provides various incentive programs for foreign investments. The following are the major ones:

› The IMMEX program (formed by the combination of the older PITEX and maquiladora programs) came into effect in 2006. IMMEX provides several forms of tax and administrative relief, such as avoidance of the General Import Tax and VAT payment, prompt VAT refunds, reduced customs fees and easier import/export declarations.

› The ALTEX program provides tax incentives to export-intensive companies, including a simplified tax system for clearing customs and immediate refunds of VAT credit balances.

› The ECEX program also allows expedited VAT returns, as well as financing through government-owned development banks.

› Various PROSEC programs (sectoral promotion programs) eliminate or reduce the most-favoured-nation import duties on listed inputs that are used to produce specific products. PROSEC programs support 22 sectors, including electronics, home appliances, automotive and auto parts, textiles, apparel and footwear.


› Several Mexican states, such as Sonora and Yucatan, have developed their own industrial development policies and can provide state-level support to potential investors. This can include reductions in real estate prices as well as cuts to state payroll taxes and to transfer and deed registration taxes. Some jurisdictions offer employee training programs and new infrastructure where needed. For details, you can consult the various Mexican finance, economy and environmental ministries, as well as the state development agencies.

3.3 Foreign trade zonesIn 2002, Mexico approved the operation of free trade zones (FTZs) that would allow the manufacturing, repair, distribution and sale of merchandise. Two FTZs, both in San Luis Potosi, had been established by 2010, but the regulatory regimes are still being developed.

3.4 LabourThere is a minimum-wage law with three tiers, and a worker’s minimum pay is determined by geographical location. Unfortunately, inflation has outstripped wage increases for several years and most workers are making less in real terms than they used to. Even so, strikes have been uncommon and few have gone on for long. Government mediators are available when management and unions are unable to reach an agreement.

A six-day, 48-hour work week is standard. Overtime pay is required if this level is exceeded, at double pay for up to nine hours of overtime and triple pay for overtime of more than nine hours. Employees are entitled to holidays, paid vacation after one year of service, vacation bonuses, and an annual bonus equivalent to at least two weeks’ pay. Companies are responsible for these additional costs, which can add 30 to 35 per cent to an average salary.

A company must also contribute a tax-deductible 2 per cent of each employee’s salary into an individual retirement account and, beginning in the second year of operations, must distribute 10 per cent of its pre-tax profits as profit sharing.

Note that skilled labour and qualified technicians and engineers can be hard to find in Mexico, and this might cause staffing problems if you elect to open a Mexican affiliate.

3.5 Corporate social responsibilityCorporate social responsibility (CSR) integrates values such as honesty, respect and fairness into daily business practices. In Mexico, CSR is encouraged by several professional and non-governmental organizations that are committed to the country’s sustainable development. The government is anxious to support responsible environmental practices, and both the Secretary of the Environment and Natural Resources (SEMARNAT) and the Federal Environment Protection Agency (PROFEPA) encourage businesses to participate in environmental audits.




3.6 Social unrestPolitical unrest in itself is not a major risk to investors, as Mexican governments are quite stable. That said, the violence that has accompanied the government’s war on Mexico’s drug cartels is a concern. Certain parts of the country, notably those along the border with the United States, as well as non-border areas where the cartels are active, present greater risks than other regions. If you are considering an investment in Mexico, you should pay close attention to possible security problems in the area where you intend to do business and allow for such issues in your planning.

Still, it is important to keep the threat in perspective. There are more than 2,400 Canadian affiliates with investments in Mexico, and some have taken steps to increase security due to their location. However, most Canadian affiliates are based in more secure regions of Mexico and are not affected by social unrest.


4 estAbLishing YouR PResence in Mexico

Foreign companies are permitted to establish and own Mexican businesses in several forms, subject to the restrictions mentioned in section 3.1. the type of business presence you set up will determine what kinds of operations you can carry out, and what liabilities and responsibilities will apply to your business.



4.1 Establishing a business entityThe following business types are the most common.

4.1.1 Sociedad Anonima (S.A.)

An S.A. is the equivalent of a Canadian corporation and has the following characteristics:

› It must have at least two shareholders.

› A Board of Directors may be formed to run the company.

› It must be set up with a minimum of 50,000 pesos in capital stock.

› It has an indefinite life span.

› Stock ownership is freely transferable.

› Operational losses cannot be transferred to the Canadian parent.

› Limited liability is provided to shareholders.

The Sociedad Anonima de Capital Variable (S.A. de C.V.) is a variation of the S.A. that has variable capital. Its advantage is that the minimum fixed capital can be changed after the corporation is set up. Both entities are for non-public companies; a publicly traded company is called a Sociedad Anónima Bursátil de Capital Variable (S.A.B. de C.V.).

4.1.2 Sociedad de Responsabilidad Limitada (S. de R.L.)

This is a limited-liability partnership and has the following characteristics:

› It can be up to 100 per cent foreign-owned.

› It must have at least two partners, and the partners must manage the company.

› It must have a minimum of 3,000 Mexican pesos in starting capital stock.

› It exists only while it is doing business and any changes in the partners or in the partnership composition may cause it to be liquidated.

› Partnership share transferability is restricted.

› If structured properly, it may offer tax advantages by allowing operational losses incurred by the Mexican entity to be used by the Canadian parent.

› Limited liability is provided to the partners.

There is a common variation of this entity, which is the same in most respects except for having variable capital. This is the Sociedad de Responsabilidad Limitada de Capital Variable (S.R.L. de C.V.).

4.1.3 Sociedad Civil (S.C.)

The “civil partnership” or S.C. is the most common organization for professional service providers. It has no minimum capital requirements, no limit on the number of partners, and is taxed as a corporation.



4.1.4 Branches

A foreign company may open a branch, called a sucursal, instead of incorporating. A branch provides rights and responsibilities that are similar to that of a corporation, including tax liability and access to local courts. Establishing one requires authorization from the Ministry of the Economy, as well as registration with the Public Commerce Registry and the National Foreign Investment Commission. The branch must also obtain a federal taxpayer identification number.

4.1.5 Joint ventures

Depending on the nature of your business interests in Mexico, you might consider setting up a joint venture (JV) with a Mexican partner. JVs are considered to be independent of their parent companies and you must register your JV separately in order to pay taxes. When setting up a JV agreement, you should always use local legal counsel that specializes in this form of business arrangement.

In a JV, it’s common for the partners to share information about intellectual property (IP) or for one partner to licence its proprietary technology to the other(s). Be sure that your JV agreement specifies exactly how the venture is to be structured and operated, and precisely how any IP rights are shared and controlled. For more information on IP protection, please refer to section 6.2.

4.2 Sales representativesIf you don’t want to set up a permanent business establishment in Mexico, you can still do business there by using sales representatives. In this case, you are considered a non-resident business.

Having good Mexican sales representatives is usually a necessity for operating in the Mexican market and is strongly recommended. These individuals or firms can be very useful for a non-resident business, since they will be familiar with local conditions and can represent you to the local business culture. They can also help you find customers, arrange distribution channels, handle documentation and provide after-sales service. In return, you should be prepared to provide them with suitable training, marketing support and product support.

One note of caution: be sure that your sales representatives don’t engage in activities that would require you to establish a Mexican business entity. For example, don’t let them use your company name on their business materials, such as their letterhead – this may make the government believe that your firm is operating an undocumented Mexican subsidiary, which can lead to difficulties.

Because of the variety and size of Mexico’s various markets, it’s best to appoint a number of representatives to cover your various target cities, since granting an exclusive, national agreement is not usually in your best interests. You can cancel a sales agreement if something goes wrong, but be sure the contract specifies why and how the cancellation should be carried out. It is generally better to contract with a company instead of hiring an individual representative, since Mexico’s labour laws can make it difficult to fire people. Finally, as in any country, due diligence is a must when choosing sales representatives for your firm.



The most common types of sales representatives in Mexico are sales agents, commission agents and distributors.

Sales agents

Sales agents carry out business transactions in Mexico on behalf of the foreign company. Fees are usually in the form of commissions on orders accepted.

Commission agents

Commission agents are representatives who have limited powers to act on your behalf; for example, they can inform customers about payment methods and pricing, process orders and accept payments for you. These are considered auxiliary business services and are permitted to non-resident firms. Agent fees usually are in the form of commissions on orders accepted, or a retainer plus commissions.

Distributors

Distributors acquire your products from your Canadian operation and resell them for you in Mexico. They also can help you develop your Mexican customer base and can arrange servicing or after-sales support through third-party Mexican businesses. Note that if you are a non-resident company and want to stay that way, make sure that your distributors function only as purchasers, wholesalers or retailers of your Canadian-originated goods.

4.3 Licensing and transfer of technologyA licensing or technology transfer agreement means that a Mexican company is allowed to use your technology or other IP in return for payment or some other form of reimbursement. These agreements can include the use of copyrights, trademarks, patents or industrial designs; the provision of engineering and technical expertise; the rendering of advisory, consulting and supervisory services; and the licensing of software. Agreements of this type do not require you to establish a permanent Mexican business entity.

When setting up one of these agreements, be very careful to protect your IP from unauthorized use either by your licensee or by third parties. For more information on IP protection, please refer to section 6.2.

4.4 FranchisingDuring the five years prior to the 2009 recession, Mexico’s franchising industry was growing at between 14 per cent and 17 per cent annually. At that point it was already one of the country’s most important growth sectors, providing about 600,000 jobs, and this upward trajectory is likely to continue as the economy recovers. Food and restaurant franchises have historically been the most popular segment of the industry, but the services subsector is in the process of overtaking it. Opportunities in the latter area are diverse and include personal care, education, training, repair and entertainment.


5 FinAnces AnD tAxAtion

because of their competent risk management and large reserves, Mexican banks remained solid even in the face of the economic and financial crisis of 2008–2009. that said, credit has been tight since the downturn, and is subject to more stringent terms and conditions than before 2008.

somewhat offsetting the shortage of credit is Mexico’s low corporate tax burden. A 2010 kPMg study assessed the tax competitiveness of 95 cities in 10 countries and determined that Mexico’s overall business taxes were the most competitive of all the countries surveyed. (canada, incidentally, was second only to Mexico in this regard, despite our reputation in some quarters as a jurisdiction with high corporate taxes.)



5.1 The financial systemThe Bank of Mexico is the country’s central bank. Its management and operations are independent of the government, and its primary functions are to provide currency to the domestic economy and to ensure the stability of the currency’s purchasing power.

The private banking sector is highly concentrated, with a few large banks controlling most of the market. Regional and niche banks account for the remainder. Of the six largest banks, five are foreign: these are Citibank, Grupo BBVA, Santander, Scotiabank and HSBC. There are also some development banks that provide credit to priority sectors, including agriculture, fishing, importing and exporting, industrial development, public works and tourism.

5.2 Trade and investment financingThe large Mexican banks, like most financial institutions elsewhere in the world, responded to the global financial crisis by cutting back on their lending. They have remained profitable despite the downturn and the credit market is now loosening, although new loans are made at considerably higher rates than in 2008. Large companies have relied mainly on the bond market and on multilateral and export credit agency support for their financing needs.

A government-owned development bank, Nacional Financiera, S.N.C. provides loans to companies in priority sectors and acts as the financial agent of the federal government in the negotiation, contracting and management of credits from abroad. It also promotes joint ventures for the production of capital goods and offers fixed-rate financing for various purposes. Its main clients are small and medium-sized enterprises.

The state-owned Banco Nacional de Obras y Servicios Públicos, or Banobras, promotes and finances infrastructure projects and public works, primarily through sub-national government lending and project financing.

5.3 Paying taxesThe federal government is the only Mexican entity that taxes the income of corporations, so there are no state or municipal corporate income taxes. Corporations resident in Mexico are taxed on their worldwide income from all sources, while non-resident corporations are taxed on their Mexican income alone. The corporate tax rate is 28 per cent.

In addition, there is a flat-rate business tax (IETU) that was introduced in 2008 to replace the former minimum tax on assets. It applies to both local Mexican companies and to Mexican business establishments owned by foreign firms. It is levied on the sale of goods, the rendering of services and the rental of property. The IETU rate is 17.5 per cent.

Note that Canada and Mexico have a tax treaty that allows Canadian companies to avoid double taxation when operating in Mexico.

The corporate tax year is the same as the calendar year and cannot be more than 12 months long.

http://www.nafin.com/portalnf/content/otros/english.html

http://www.banobras.gob.mx/opcionesdeayuda/Paginas/English.aspx


5.4 Getting paidDomestic interest rates are high, so obtaining local credit can be very expensive for a Mexican company. This means that a potential Mexican buyer will look closely at the payment terms you are offering, and if the sale involves high-priced financing on the buyer’s part, you may lose the sale to a competitor who offers more lenient terms. When arranging payment terms with a Mexican firm, therefore, you will have to balance your need for secure payment against the financial needs of your buyer.

Several payment options are available, each with its own advantages and disadvantages to either party:

Cash in advance

For you, this is the fastest and most secure form of payment. The Mexican company, however, must finance the purchase from its own resources, and if it has to borrow the cash to do so, it will be penalized by the high local interest rates. The buyer also has no guarantee that the goods will be delivered as promised. For the buyer, consequently, cash in advance is the least desirable method of payment, and you may lose the sale if you insist on it.

Confirmed letter of credit (L/C)

This is very secure for both you and your buyer, but confirmed L/Cs are very expensive for Mexican companies. Insisting on L/Cs may cost you sales.

Unsecured open account

You, the seller, agree to ship the goods to your Mexican buyer, who will pay for them within 30 to 90 days of either shipment or receipt. This is ideal for the Mexican company, since it receives the goods before it has to pay for them. For the same reason, it is also the riskiest form of payment for you. A willingness to be paid on this basis can help secure a sale, but be very sure that the buyer’s credit is good before you agree to these terms.

Open account with receivables insurance

This could also be called “secured open account.” In this form of payment, a financial institution such as EDC provides you with accounts receivable insurance (ARI) so that you’ll get your money even if your buyer fails to pay. At the same time, because the financial institution secures your payment, you can offer your customer all the benefits of open-account payment with minimal risk to your bottom line. This form of payment is an excellent option for both buyer and seller.

EDC specializes in ARI and can provide it in various forms to suit your needs. For more information, please refer to section 8.1.

Documentary collections

With documentary collections, your Canadian bank sends shipping documents to a correspondent Mexican bank. When the goods arrive at Mexican Customs, the Mexican bank presents the documents to the buyer, who then pays before actually receiving the goods. This is known as documents against payment (D/P). It is very secure for you, and your customer doesn’t have to pay until the goods arrive at Mexican customs. In addition, your customer knows the goods have arrived in Mexico, so there is no worry about non-delivery. This form of payment is also inexpensive compared to an L/C.

An alternative is documents against acceptance (D/A). In this arrangement, the buyer can pay within 30, 60 or 90 days of the documents being presented by the bank. This is good for the buyer, who is being provided with credit for up to 90 days at your expense. It is risky for you, however, because your buyer receives the goods before paying for them.



Payment via foreign buyer financing

In this form of payment, a Canadian financial institution such as EDC makes a loan to a qualified Mexican company so it can buy your goods. In practice, the money is paid directly to you before the goods are shipped, so this is very secure from your point of view. For the Mexican buyer, the loan can be attractive because it can be less expensive than a loan from a Mexican bank. The disadvantage is that the buyer must agree to the loan before receiving the goods, and must repay it even if the goods are never delivered.

EDC specializes in various forms of foreign buyer financing. For more information, please refer to section 8.3.



6 the LegAL PeRsPective

Property and contractual rights may be enforced in Mexican courts, but the process can be very slow and inefficient. this is why careful due diligence is so important when doing business in Mexico – it can help you avoid situations that may involve you in the country’s legal system.


6 the LegAL PeRsPective

6.1 Dispute settlementBecause Canada and Mexico are both NAFTA members, disputes involving cross-border investors can be settled under the provisions set out in NAFTA Chapter XI. Either party to a dispute may demand arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law, or the Arbitration (Additional Facility) Rules of the International Center for Settlement of Investment Disputes. The Mexican government and courts recognize and enforce awards obtained through these mechanisms.

Where NAFTA rules do not apply, the waters are murkier, and it can take years to resolve a contractual or other business disagreement. Moreover, Mexican law may see such a dispute as a criminal matter as well as a civil one, and a judge in these cases may order the arrest of some of the people involved. Such drastic action is unlikely, but even so, you should always retain Mexican legal counsel if you become involved in a business dispute.

6.2 Intellectual property protectionThe theft of IP and the counterfeiting of merchandise is an ongoing problem in Mexico. The government is trying to improve the protection of IP, but enforcement is hindered by the inefficiency of the legal system, weak penalties for transgressions and public indifference to IP rights. This means that protecting IP, such as patents, trademarks, designs and copyrights is crucial when you are doing business in Mexico.

It is important to realize that IP protections registered in Canada do not extend to Mexico. To protect your rights in the latter country, you must register and enforce them under Mexican law, and it’s best to do this with the help of local legal counsel.

Two different laws and government departments govern IP protection in Mexico:

› The Industrial Property Law, administered by the Mexican Institute of Industrial Property (IMPI), covers licences, patents and trademarks. Registration of a licence or patent can require many weeks, so consider this as you plan your Mexican business strategy.

› The Federal Copyright Law, administered by the National Institute of Author Rights, covers copyrights. Mexico has signed several international copyright treaties but you should still register your copyrights in Mexico to gain as much protection as possible.

6.3 CorruptionYou may never encounter corrupt behaviour while doing business in Mexico, but you should be sensitive to its existence. Needless to say, your company should never become involved in it. Note that Canadians who become embroiled in corrupt activities, such as bribery of government officials, can be prosecuted in Canadian courts under Canada’s Corruption of Foreign Officials Act.


7 DeLiveRing to Mexico

when pricing your goods for sale in Mexico, you should be aware that logistics and transportation are more expensive there than in canada or the united states. the u.s. commercial service estimates that between 8 per cent and 15 per cent of the cost of a product in Mexico is related to logistics.


7.1 Using customs brokersThe Tax Administration Service (SAT), an agency of the Ministry of Finance and Public Credit, manages Mexico’s customs service. SAT regulations require you to use a licensed Mexican customs broker to clear goods through customs. Mexico’s Confederation of Customs Brokers web site (in Spanish only) can help you find a broker.

Brokers can help both you and your buyer in many other ways as well. They can:

› review all documents submitted by you, the exporter;

› prepare and submit customs documents, such as permits and authorizations;

› ensure that tariff classifications are correct, and that your shipment complies with any applicable non-tariff regulations;

› prepare declarations for the determination of import duties;

› ensure that what is in your shipment agrees with the packing list and invoice;

› cover various fees related to the customs process;

› help with matters related to warehousing, insurance, taxes, duty drawbacks and so on;

› provide information on transportation and logistics;

› clear the goods through customs and arrange shipping from the port of entry to the customer; and

› act as your legal representative to the customs service if necessary.

Goods entering Mexico are deposited in your customs broker’s warehouse. They are cleared through Mexican customs upon the presentation of the required documents by the broker, and when the duties and other charges have been paid.

7.2 Using freight forwardersBecause international shipping is complicated and time-consuming, you may save trouble and expense if you use a freight forwarder. You can hire these agencies merely to negotiate a rate with a carrier, or have them do everything from arranging insurance to finding a reputable customs broker. Some forwarders specialize in shipments to certain countries, while others concentrate on particular types of goods. Check the Canadian International Freight Forwarders Association web site for more information.


http://www.aduanas.sat.gob.mx/

http://www.shcp.gob.mx/

http://www.caaarem.org.mx/

http://www.ciffa.com/


7.3 NAFTA and Mexico’s import regimesUnder NAFTA, goods made in Canada may be eligible for duty-free treatment or reduced duty rates when entering Mexico. To show that the goods qualify for NAFTA treatment, the importer has to provide proof of origin in the form of a Certificate of Origin. As the exporter, you should be prepared to provide this certificate for your Mexican buyer.

Mexico has several “import regimes” whose tariff rates are affected by NAFTA qualifications. The following two regimes are the ones most commonly used by Canadian exporters:

Permanent imports

As the name suggests, these goods are intended to remain in Mexico. Tariff rates vary according to the merchandise, and apply to the FOB value of goods that are NAFTA qualified, and to the cost, insurance and freight (CIF) value of goods that are not NAFTA qualified. A VAT of 15 per cent applies on the same FOB/CIF basis, except in U.S.-Mexico border regions where the VAT is 10 per cent. A customs user fee of 0.8 per cent is applied on the CIF value of non-NAFTA products.

Temporary imports

There are no tariffs on temporary imports – that is, goods that are to be re-exported within six months – unless they enter the country under an IMMEX/maquiladora program. In the latter case, no VAT applies to the imports and there are no duties on raw materials, but duty must be paid on imports of capital equipment. Your customer can claim preferential treatment for certain NAFTA-qualified temporary imports by providing a Certificate of Origin.

7.4 Non-tariff barriersWhile there are almost no tariff barriers for Canadian exports to Mexico, there are some non-tariff barriers that might affect your shipments. These include import licences, standards regulations and Canada’s own export controls.

Import licences and certificates

Various Mexican ministries, such as the Ministry of Economy and the Ministry of Agriculture may require import licences or certificates for certain products. The Ministry of Agriculture, for example, requires various types of sanitary certificates for shipments of livestock or animal products, and for most seeds, plants and plant by-products. Many agricultural and food products must also have a Certificate of Origin. You can obtain up-to-date information on these requirements from your customs broker.

Standards regulations

Before selling goods in Mexico, you should verify that they comply with any mandatory Mexican standards. These standards are referred to as Normas Oficiales Mexicanas (NOMs) and are developed by the Mexican Bureau of Standards (DGN), which is part of the Ministry of Economy. NOMs are technical regulations that cover product performance and/or product safety in areas such as building and construction materials, electronics, chemicals, pharmaceuticals and medical equipment.

If your product is subject to a mandatory NOM, it must be tested for compliance in a laboratory accredited by Mexico. If it passes, it will receive a certificate of compliance that must be presented to Mexican customs before the product can be imported into the country. You can obtain up-to-date information on applicable NOMs from your customs broker.


http://www.economia.gob.mx/swb/swb/

http://www.sagarpa.gob.mx/Paginas/default.aspx


Note that under Chapter IX of NAFTA, Mexico, the United States and Canada have agreed to provide national treatment in standards-related issues. National treatment means that locally manufactured products must comply with the same requirements as imported ones.

Mexico also has a set of voluntary standards with the acronym NMX, which are issued by a number of Mexican standards bodies. You have to comply with an NMX standard only if you want to claim that your product meets it (for marketing purposes, for example).

Canadian export controls

Some exports – including military and nuclear technology, firearms, softwood lumber and goods of U.S. origin – are subject to Canadian export controls and require permits if they are to be exported from Canada. Export controls are the responsibility of the Canadian Export and Import Controls Bureau (EICB). Various guides to these controls are accessible from the EICB home page.

7.5 DocumentationThe following documents must be presented to Mexican customs before the imported goods can be released to the buyer. All of them must be in Spanish.

Importation Declaration (pedimento de importación)

This is the key import document and is submitted to customs by the customs broker. Once it is validated, the broker pays all applicable taxes and duties on behalf of the Mexican importer, and if all supporting documentation is then approved by customs, the goods are released.

Commercial invoice

This must include date and place of issue, name and address of the consignee, name and address of supplier, shipper’s invoice number and customer’s order number, and a detailed listing of the goods in the shipment, including quantities, types, identification numbers and unit value.

Packing list

This should include the number of packages in the shipment and a detailed list of the merchandise in each package.

Bill of lading or airway bill of lading

This must include information such as the weight of goods, the total amount of goods, the name of the consignor, the consignee’s name and address, and the port of destination.

wood packagingspecial regulations apply to wood packaging materials, such as crates and pallets. these rules are intended to keep foreign pests and diseases out of Mexico. since the regulations often change, you should check with your customs broker to make sure that your wood packaging complies with current regulations.


http://www.international.gc.ca/controls-controles/



NAFTA Certificate of Origin

This is necessary for obtaining NAFTA tariff benefits.

Certificates, licences or permits

If any of the goods are subject to import controls, the appropriate certificates, licences or permits must be included with the documentation.

7.6 Labelling and markingAll products intended for retail sale in Mexico must bear a label in Spanish before they can be cleared through customs. If the product must comply with a NOM (see section 7.4, under “Standards regulations”), it must bear a label giving the business name and address of the importer, the business name of the exporter, the country of origin, the trademark of the product, handling instructions and any mandated safety warnings. In most cases, the label must be attached to the product itself, not to its container.


8 soLutions FRoM eDc

eDc provides many kinds of solutions for canadian investors and exporters. these financial products and services are designed for a broad spectrum of markets, but there are also several Mexico-specific solutions for canadian companies with Mexican affiliates.



8.1 Accounts Receivable InsuranceYour company’s accounts receivable can be a major financial asset, but without Accounts Receivable Insurance (ARI), there’s always a risk of non-payment. EDC’s ARI can cover your full book of business for up to 90 per cent of your losses against risks such as refusal to pay, refusal to accept the goods, bankruptcy or insolvency, or contract cancellation.

In Mexico, EDC can assist you in obtaining ARI through its agreement with Mexico’s largest credit insurer, Atradius Seguros de Credito (AS). With AS providing ARI directly to your Mexican affiliates, their accounts receivable will be protected, and your financial institution may boost your working capital support because it knows your receivables are safe.

8.2 Surety Bonding InsuranceBefore signing a contract, many foreign buyers will require you to post a performance guarantee in the form of a surety bond. Before issuing the bond, however, your bank will require that you provide collateral for it, which can tie up your cash or credit line. You can avoid this by using EDC’s Surety Bond Insurance, which insures the bond on your behalf, so that the bank will provide it without demanding collateral from you.

In Mexico, most buyers require such a bond in the form of a “fianza,” which is the market’s preferred bonding instrument. Obtaining fianzas, however, can be difficult and costly, since underwriters will often require local cash or letters of credit before accepting the risk.

To solve this problem, EDC has set up a reinsurance program in partnership with Fianzas Monterrey, a major Mexican surety institution. Fianzas Monterrey issues you the performance bond and EDC reinsures it, which means you can obtain the fianza you need to sign your contract – but you won’t need to tie up your cash reserves or lose access to your operating credit.

8.3 Foreign Buyer FinancingProposing an attractive financial package to a potential foreign buyer can be a critical part of making a sale. You can take advantage of this through EDC’s various buyer financing programs, which can provide financing directly to your foreign customer for an export sale of capital goods and/or services. You get an immediate cash sale because EDC assumes the risk of non-payment and disburses the funds directly to you, normally in a manner that matches the payment terms in your contract.

If you have a Mexican affiliate that requires financing for capital goods purchases, or if a Mexican customer needs cash to buy your products, EDC may be able to help by providing direct financing. Alternatively, EDC may be able to guarantee up to $5 million in loans to Mexican buyers or your Mexican affiliate through special arrangements and partnerships with institutions such as Scotiabank Mexico and Northstar. This can help you secure a valuable contract or expand your business’s investment in Mexico.



8.4 Political Risk InsuranceEDC’s Political Risk Insurance (PRI) can help you protect your assets and investments from political uncertainty in Mexico and many other markets. For your cash, inventory, equipment or other assets, EDC’s PRI can insure up to 90 per cent of your losses from government action, civil unrest or the inability to convert or transfer currency. For investments such as equity, shareholder loans or guarantees, EDC can insure up to 90 per cent of your losses resulting from unpredictable political events. Not only that, having PRI may make it easier to obtain loans or working capital from your financial institution.

More solutions from eDcAs well as these programs, eDc offers a broad range of other services, programs and resources that can help you do business not only in Mexico but also around the world. You’ll find them all on the EDC web site, or call 1-800-368-6664.

http://www.edc.ca/

EDC | Doing BusinEss with MExiCo40

9 AppEnDix A – KEy ContACts

EDC Head OfficeExport Development Canada 150 Slater Street, Ottawa ON K1A 1K3 Tel.: 613-598-2500 Fax: 613-237-2690

Ottawa Mexico Support Team

Stephanie Butt Thibodeau Regional Vice-President Mexico, Central America and the Caribbean Email: [email protected]

Diane Belliveau Regional Manager Mexico Email: [email protected]

Jean-Sébastien Charron Senior Associate Mexico, Central America and the Caribbean Email: [email protected]

EDC in MexicoThe EDC Mexico team can be reached at:

Embassy of Canada Schiller 529, Col. Bosque de Chapultepec (Polanco) Del. Miguel Hidalgo, 11560 Mexico City, D.F., Mexico Tel.: 011-52-55-5387-9316 Fax: 011-52-55-5387-9317

Team members and areas of expertise:

Johane Séguin EDC Chief Representative Oil and gas; information and communication technologies Email: [email protected]

Nathan Nelson Regional Manager Infrastructure, mining and power Email: [email protected]

http://www.edc.ca/


9 APPenDix – keY contActs

Mariana Novo Associate Regional Manager Light manufacturing and resources Email: [email protected]

Marcos Pruneda Regional Manager (Monterrey) Transportation and life sciences Email: [email protected]

Adriana Martinez Coordinator Email: [email protected]

Canadian Trade Commissioner Service in MexicoMexico City Embassy of Canada Schiller 529, Col. Bosque de Chapultepec (Polanco) Del. Miguel Hidalgo, 11580 Mexico City, D.F., Mexico Tel.: 011-52-55-5724-7900 Fax: 011-52-55-5724-7982 Email: [email protected]

Monterrey Consulate General of Canada Torre Gomez Morin 955, Ave. Gomez Morin No. 955, Suite 404, Col. Montebello, 66279 San Pedro Garza Garcia, N.L., Mexico Tel.: 011-52-81-8378-0240 Fax: 011-52-81-8356-9965 Email: [email protected]

Guadalajara Consulate of Canada World Trade Center, Av. Mariano Otero #1249, Piso 8, Torre Pacífico Col. Rinconada del Bosque, 44530 Guadalajara, Jalisco, Mexico Tel.: 011-52-33-3671-4740 Fax: 011-52-33-3671-4750 Email: [email protected]

Embassy of Mexico in Canada 45 O’ Connor Street, Suite 1000, Ottawa, ON K1P 1A4 Tel.: 613-233-8988 Fax: 613-235-9123

http://www.tradecommissioner.gc.ca/eng/office.jsp?oid=51&cid=002



http://www.sre.gob.mx/canadaingles/


9 APPenDix – keY contActs

Canadian Chamber of Commerce in Mexico Natalie Buylla, General Manager Tel.: 011-52-55-5580-3690

ProMexico offices in Canada Montréal (covers New Brunswick, Newfoundland, Nova Scotia, Prince Edward Island and Quebec) 1501 McGill College, Suite 1540, Montréal, QC H3A 3M8 Tel.: 514-287-0899 Fax: 514-287-1844

Toronto (covers Manitoba, Ontario and Saskatchewan) 1 Dundas St. West, Suite 2110, P.O. Box 11, Toronto, ON M5G 1ZA Tel.: 416-867-9292 or 416-867-9325 Fax: 416-867-1847

Vancouver (covers Alberta, British Columbia, Northwest Territories and the Yukon) Suite 1365, 200 Granville Street, Vancouver, BC V6C 1S4 Tel.: 604-682-3648 Fax: 604-682-1355


http://www.promexico.gob.mx/wb/Promexico/america2#can

www.edc.caeDc is the owner of trademarks and official marks. Any use of an eDc trademark or official mark without written permission is strictly prohibited. All other trademarks appearing in this document are the property of their respective owners. the information presented is subject to change without notice. eDc assumes no responsibility for inaccuracies contained herein. copyright © 2011 export Development canada. All rights reserved.

If you would like more information, please contact us at

1 -800-368-6664 Monday to Friday from 8 a.m. to 6 p.m. Eastern Standard Time.

www.edc.ca

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