HSBC Doing business in Mexico

8
Introduction
Doing business in Mexico
Located in the North American
subcontinent, Mexico is framed
by the U.S. to the North,
Guatemala and Belize to the
south, the Gulf of Mexico to the
east and the Pacific Ocean to the
west. The country’s official name
is Estados Unidos Mexicanos
(United States of Mexico), its
official language is Spanish,
with only a small portion of its
population boasting a command
of English. Its functional
currency is the Mexican peso.
Mexico is a Federal Republic
comprised of 31 States and a
Federal District (Mexico City)
with its political system made up
of three levels of government,
federal, state and municipal,
and government made up of
three powers; the executive
(President), the legislative and
the judicial.
For over 50 years, the main
engine powering Mexico’s
economy has been crude
extraction and exportation;
however, more recently, other
factors have emerged that
have grown over time, such as
remittances sent back to Mexico
by Mexican residents in the
U.S., and also the transformation
industry (e.g. automotive,
textile, electronics) and sectors
such as tourism, construction,
telecommunications have been
growing in the last decade.
Economic environment
Nearly 25 years ago, Mexico
embarked on a path towards
greater economic openness,
with an emphasis on opening
itself to foreign trade and on
attracting foreign investment.
Throughout this period, many
significant changes were made
to the Foreign Investment Law.
Free trade agreements were
signed with the most important
economies worldwide (the
North American Free Trade
Agreement, the Free Trade
Agreements with the European
Union and Japan, among
others), as well as a number
of tax treaties to avoid double
taxation, signed with more
than 30 countries.
Mexico has reached a
consistent, solid and stable
macroeconomic framework, as
a result of the monetary policy
implemented by Banco de
Mexico (Central Bank) and the
Finance Ministry, thus allowing
for certainty in the decision
making of companies seeking
to invest in Mexico. In addition,
the country is moving forward
in terms of infrastructure,
seeking to balance a worldclass
logistics platform to
further facilitate business
operations by taking advantage
of its geographic location.
According to the most recent
report on global competitiveness
issued by the World Economic
Forum (WEF), in terms of the
macroeconomic stability subindex
rank, which measures
five variables (public finances,
domestic savings rate, interest
rate differential and public debt),
Mexico improved its position
by 20 places between 2008
and 2009, moving from the
48th position (of an overall 133
countries) to the 28th.
In summary, Mexico boasts:
85 airports (26 national
and 59 international), 16
international sea ports, 27,000
km of railways and 123,000 km
of main highways.
In order to contribute to
increasing the country’s
competitiveness, the Federal
Government increased its
investment in infrastructure
from 3% of the GDP to 5%
over the past three years,
through its most important
infrastructure programme
in decades.
Mexico recorded a population
112.4 million in 2010, 45.7
million of which is classified
as the country’s Economically
Active Population. The forecast
is for the number to double
over a 30-year period.
One of the most important
A challenge for the Mexican
economy is to consolidate
the country’s recovery in
production and employment.
To strengthen this process,
Mexican products must be
better positioned in international
markets and greater foreign
investment must be attracted.