Keeping fingers on the pulse: How growth in Mexico offers benefits to Canadians

I took part in a recent webinar hosted by EDC entitled Mexico: Forging Ahead in the Face of Change. If you weren’t able to see it live, then I strongly urge you to watch it on-demand to hear from noteworthy panelists who truly have their fingers on the pulse of Mexico, including: Guillermo Rishchynski, Executive Director for Canada, Inter-American Development Bank (IDB); Flavio Volpe, President, Automotive noteworthy Parts Manufacturer’s Association (APMA); and Peter Hall, Vice-President and Chief Economist at Export Development Canada (EDC). In the week following our webinar, I’ve received many questions from viewers all wanting to know more about the Mexican market, and most importantly, how to do business there. It’s my hope this blog will help answer those questions and assist you in taking the next step.

With President Andrés Manuel López Obrador (AMLO) having just taken office on Dec. 1, and a recently negotiated trilateral trade agreement in place, Mexico is expected to step into a new chapter of economic growth. It’s worth mentioning that since NAFTA came into effect in 1995, our bilateral trade has increased fourfold, reaching $43 billion last year. We shipped close to $8 billion in exports to Mexico in 2017, making it our fifth-largest export market in the world.

Canadian companies looking to do business in Mexico will find ample opportunities in the automotive, aerospace, extractive, infrastructure, energy, telecom and retail sectors. With Mexico’s economy forecast to grow by 2.3% both this year and next, and with a solid macroeconomic framework firmly in place, Mexico is expected to demonstrate resilience in the face of future policy uncertainty.

In the leadup to his election win, AMLO consistently campaigned against violence, corruption and inequality. He vowed to “put the poor first” and provide better infrastructure to disadvantaged regions. While on the surface he appears to be a populist, his track record as mayor of Mexico City in the early 2000s suggests that he’s more of a pragmatist. Only time will tell.

In his inaugural address, he promised to “clean house,” starting with the top floors. He is looking to put procedures in place to avoid future corruption and impunity, to educate, and to make financial crimes a more serious offence. Naturally, these proposals have been well received by Canadian exporters and investors who recognize the importance of these measures to ultimately drive a better overall business climate in Mexico.

What comes next? I’d say we’re in wait-and-see mode, as with any new government. The new administration recognizes that there are considerable challenges ahead to improve rule of law, transparency, and investor predictability. If the first step in solving issues is the clear articulation of the challenges, then I’d suggest there’s reason to be optimistic.

I’m sure both political and economic analysts couldn’t help but notice that López Obrador’s inaugural speech recognized Canada as having “very important status” in the plans of his administration. To illustrate, a delegation of six designate secretaries led by Mexico’s new Secretary of Foreign Affairs, Marcelo Ebrard, visited Canada in October. Meeting with our government officials and Canadian companies, they were focused on getting to know Canada much better and also on bringing certainty to Canadian investors.

As co-panellist Guillermo Rishchynski pointed out—and I’ll note here that he was not only a former ambassador to Mexico, but also Canada’s Ambassador to the United Nations—one of the things that Mexicans appreciate about their relationship and interactions with Canadians is that we approach them as equals. Our two countries enjoy the kind of partnership that can emerge from shared values, trust, and a vision for the future where we each stand stronger.

One of the key advantages that Canadian companies would do well to capitalize on as they consider venturing into the Mexican market is the support offered by the Trade Commissioner Service (TCS) and Export Development Canada (EDC). If you’ve been seriously contemplating doing business in Mexico, but weren’t sure how or where to begin, start by contacting a trade commissioner in the Canadian regional office nearest you. They can help you assess your market potential, prepare you to do business there, and advise you about which trade missions would be best for you to attend. Once you’re ready to export, they’ll introduce you to trade commissioners who work in Mexico. These trade commissioners will provide you with all the pre-qualified contacts you’ll need to get the ball rolling such as sales agents and distributors, lawyers, translators, customers, and local government contacts.

Chances are, if you’re looking to do business in Mexico, you’ve likely already had dealings in the U.S. and are looking to expand your North American presence. So, you know that working deals outside of Canada comes with some additional challenges. EDC is here to help. We can start by providing free, economic analysis of Mexico through our Country Risk Quarterly report. If you’re ready to sign a deal, but are concerned about getting paid, we can provide you with credit insurance. If you need more working capital or other financing solutions, we can help with those as well. One of the other ways we can assist in creating business opportunities is by providing you with introductions to key Mexican buyers via our Connections Program. By way of background, EDC has extensive relationships with close to 20 of the largest Mexican corporations in a wide array of sectors. We have well-established partnerships with Pemex, the Comisión Federal de Electricidad, América Móvil, Cotemar/Lifting, Nemak, Axtel, Cinepolis and Soriana, to name a few. By providing these companies with financing at commercial terms, we encourage them to consider qualified Canadian suppliers for their procurement needs. These all-important introductions that we create are conducted during matchmaking events held in both Mexico and Canada, during trade missions. Our business introductions can help you break into new markets, like Mexico, and reduce your business development costs.

While I’m optimistic about the many opportunities that await Canadian businesses here, be sure to venture into Mexico with eyes wide open. Two business challenges remain: security and corruption. On the former, you need to understand that the dynamics are considerably different here than they are in Canada. Your security costs, in terms of your premises and personnel, will be higher and will require a deeper level of due diligence.

Regarding corruption, historically it’s been one of the top challenges for businesses. But on a more positive note, there have been marked improvements since the inception of NAFTA, and they’re expected to continue as the Canada-United States-Mexico Agreement (CUSMA) comes into effect. Regardless, be vigilant—as you should be when brokering deals anywhere, including Canada because no jurisdiction is immune to this business threat.

I sincerely hope I’ve addressed your questions. Should you need any additional support, please contact our Mexico team at mexico@edc.ca.