It is an emerging economy with considerable natural resources and a growing middle class. However, there remains a wide difference between rich and poor, north and south, rural and urban. Its trillion-dollar free market economy contains a mix of modern and outmoded industry and agriculture. It is increasingly dominated by the private sector.
As the world's 14th largest economy, Mexico is sometimes considered the 'fifth BRIC'. It has a major advantage of being part of the North American Free Trade Agreement (NAFTA) with the United States and Canada. The United States receives over 70 percent of Mexico's exports and provides 60 percent of its imports. Given this, the Mexican economy is heavily influenced by the highs and lows of the American economy. Mexico is currently looking for opportunities to trade with other countries to reduce its dependence on the United States.
Mexico is New Zealand's 24th largest export market overall and 16th largest export market for dairy products. Two-way trade in 2012 was worth NZ$516 million. The majority of New Zealand exports are dairy (particularly milk powder), albumin and meat. Dairy products accounted for 62 percent of New Zealand's exports to Mexico. New Zealand's main imports from Mexico include electronic communication equipment, computer components and malt beer.
In October 2012, Mexico formally became a Trans-Pacific Partnership (TPP) negotiating partner. This will provide an opportunity for New Zealand businesses to seize opportunities in increasing two-way trade and investment links between Mexico and New Zealand.
While Spanish is the official language, English is widely spoken and many business people hold meetings in English. Despite this, it is a definite advantage to be able to speak Spanish and it is critical for management, supervisors and administration staff.
Facts about Mexico's economy
- Mexico has risen in rank over six consecutive years in the World Bank's 'Ease of doing business' rankings - in 2013 it ranked 48th (up from 53rd in 2012). The climb was largely due to improvements in the ease of starting a business and getting electricity connected.
- Mexico is consistently a major recipient of Foreign Direct Investment. Sectors that attract the most investment are manufacturing (accounting for 60 percent) and the financial sector (28 percent). Major investors include companies from the Netherlands and the United States.
- Mexico is the 14th largest country by area and the 11th most populated nation (114 million in 2012).The country is very youthful, with 60 percent of the population under the age of 25.
- Mexico is a price sensitive market and New Zealand companies must price products competitively. Demand is also high for after sales service, so companies should think about how to support this effectively in-market.
- New Zealand has a double taxation agreement with New Zealand and there are no restrictions on the repatriation of profits from Mexico.
- Because of NAFTA, the Maquiladora industry enables duty-free imports of all production-related machinery, equipment, materials and components for the manufacturing of export products. Maquiladoras are manufacturing or export assembly plants near the border of the United States, producing parts and products for the American market.
- Mexico also offers business incentives such as favourable tax treatments for research and development, and inward foreign direct investment incentives.
- Currently there are high tariffs on some imports of interest to New Zealand. Wine, dairy and fruit attract a 20 percent import tariff, and milk powder a 63 percent import tariff and a quota system.
- Mexico requires the use of a customs broker (agente aduanal). Import duty rates generally range from zero to 20 percent.
NZTE recommends New Zealand companies doing business in Mexico employ a local law firm to advise on local laws, agreements etc.
Two way trade information
Opportunities for New Zealand businesses
Opportunities exist in a variety of sectors in Mexico. NZTE's priority sectors include food and beverage, information, communication and technology (ICT), and agribusiness.
Food and Beverage
Competition in the food and beverage market is increasing due to Mexican food producers developing products to better suit modern consumers. Changes have also occurred in the retail sector in Mexico with the decline of open air markets and small grocery stores and the growth in modern supermarket chains. Today, over 60 percent of all food products are purchased from supermarkets.
New Zealand has a reputation for producing high quality food and beverage products. Opportunities exist for New Zealand companies to supply ingredients for local food processors.
Information, communication and technology (ICT)
ICT is one of the promising sectors in Mexico. As the sector grows, it is becoming more service-centric. Technologies are often offered under a service contract or lease to reduce costs for businesses. Strong growth is particularly expected for Software as a Service (SaaS) or Infrastructure as a Service (IaaS) and Platforms as a Service (PaaS).
Recently there has been a growth in ICT investment, particularly for government and corporate solutions. For example, the Mexican Government is increasing its spend on ICT projects related to e-government, health, education, highways, safety and security and energy and environment.
Mexicans are increasingly using their mobile phones to access the internet. Approximately 85 million Mexicans have a mobile phone and internet users are expected to reach 34 million by the end of 2013.
Production in the Mexican agricultural sector is predicted to increase in response to rising demand from domestic consumers (especially a growing middle class). With a large land area and range of climates, Mexico is naturally suited to large scale agricultural production across a diversified range of products. However, less than 20 percent of cropland is irrigated.
Agriculture producers in Mexico are therefore open to new and innovative processes and products. There are opportunities for New Zealand companies in areas such as modern agricultural machinery (e.g. addressing pasture management, irrigation) efficient technologies (e.g. climate control, sheep and beef genetics, agricultural consulting) and animal feed.