Credit Management November 2022

COUNTRY FOCUS
AUTHOR – Adam Bernstein
5G is expected to speed up following the
proposed auction of 5G wavebands in
2022. Similarly, television broadcasting
represents an opportunity for investment
following the government’s auctioning of
two national networks.
Infrastructure and construction
With such a large economy and population,
Business Monitor International believes
that this sector will have grown by 12
percent in 2021 (post COVID) and should
maintain a growth rate of 3.1 percent
per year until 2025. As for overall value,
Globaldata thinks the construction
market was worth $151.2bn in 2021.
Announced projects include a new
airport for Mexico City at the Santa Lucía
Military Base; the Isthmus of Tehuantepec
Inter-Oceanic Corridor; the ‘Maya Train’
on the Yucatan Peninsula; rural roads;
and various sector-specific developments
in oil and gas production, refinery
development, agricultural production,
and mines. The Secretariat of Finance and
Public Credit reckons that this spending
should be worth around $82.56bn (2021).
Beyond the public sector, projects are
likely to include mixed-use buildings
(retail, corporate, and housing), offices,
logistics and manufacturing hubs,
shopping centres, and general retail.
Notably, there is demand for plywood,
bricks, concrete and flooring. There is
also call for environmentally friendly
products and services; Mexico has joined
the World Green Building Council (WGBC)
and is seeking to learn best practices from
Europe, Canada, and the United States.
Other sectors
Apart from these six key areas, other
sectors present opportunities too.
Tourism is important as it (pre-COVID
data from Statista) represents around 8.5
percent of GDP, employs 3.9m people,
offers 24,700 plus hotels, and offers
great value to visitors along with golden
beaches and ancient history.
When it comes to the energy sector
Mexico is ranked 13th globally in crude oil
production, 21st in crude oil reserves, 16th
in refined capacity, and 5th in logistics
infrastructure according to the US Trade
Department. Statista noted that in 2021,
the sector accounted for 3.3 percent of
GDP – part of a general decline in recent
years.
Growth did follow market liberalisation
in 2013; now foreign investors can buy
into the energy sector. But the current
government brought in law from June 2021
which prohibited private companies from
importing and exporting hydrocarbons
from a different place than authorised.
There’s also agriculture to consider
which contributes 3.8 percent of GDP –
down from 13.1 percent in 1965 as a result
of the growth of other sectors (World
Bank). The Economist thinks the sector
is worth $39.5bn in 2020. Key products
are coffee and sugarcane, bananas,
pineapples and mangos as well as cacao
and rice. Vanilla is also grown, as is cotton.
Personal Tax
Income tax is banded in to one of 11 rates
from 0 percent on income to 7735 Mexican
Pesos (MXN), up to 35 percent on anything
above MXN 3,898,140.13.
However, for employees considered
non-resident for Mexican tax purposes,
the tax rate applicable varies from 15
percent to 30 percent. The first MXN
125,900 of employment income received
in a 12-month floating period will be tax
exempt. Beyond that the rate is 15 percent
to MXN 1m, above that the rate rises to 30
percent.
Resident individuals are subject to
Mexican income tax on their worldwide
income, regardless of their nationality.
Non-residents, including Mexican citizens
who can prove residence for tax purposes
in a foreign country, are taxed only on
their Mexican-source income.
Corporate Tax
The federal corporation tax rate is 30
percent. But the tax liability for those
engaged exclusively in agriculture,
livestock, fishing, and forestry activities is
reduced by 30 percent. There are no state
corporation taxes.
VAT
The general rate is 16 percent and also
applies to digital sales. VAT exempt
transactions include the sale of land, credit
instruments, residential construction,
interest paid by banks, medical services,
education, and rentals of residential
property. There’s a zero rate for the likes of
publications, basic foodstuffs, medicines,
and agricultural goods and services.
Compulsory profit sharing
Although not a tax, every business unit
with employees (irrespective of the type
of organisation) is required to distribute
10 percent of its annual profits among all
employees, except general directors and
managers. £1 is worth around 23.5 MXN
at the time of writing.
IN SUMMARY
So, despite the description of Mexico by
the presenters of Top Gear, it’s patently
clear that while its culture differs from
ours. It’s most certainly an economy
worthy of consideration; there’s much to
look to exploit – especially as the UK has
left the European Union.
Adam Berstein is a freelance writer.
Brave | Curious | Resilient / www.cicm.com / November 2022 / PAGE 19