As a diversified market with a variety of consumer demands, Mexico offers excellent opportunities for companies looking to grow globally. Wisconsin’s trade representative for Mexico, Efren Flores, offers some insight into creating and executing a successful export strategy in the market.
Q: What sectors of the Mexican economy are especially strong right now and have the best prospects for the coming year?
A: Currently the strongest sectors in Mexico’s economy are automotive, computer components, telecommunications and equipment, construction, tourism, medical devices and home appliances. In addition, there are three up-and-coming sectors that are growing: aerospace, renewable energy, and food and beverage. Mexico’s aerospace sector has experienced double-digit annual growth over the past five years, and current demand for products and services is estimated at $440 million. Mexico is looking to meet more of its energy needs from sustainable sources such as solar, thermal, hydroelectric, wind and biomass. Thanks to reform in the energy sector, private investment is now allowed in this sector. Home and industrial consumers are looking for alternatives to generate their own energy to reduce costs and benefit from tax incentives. The food and beverage sector is one of the most robust and dynamic sectors in Mexico. Mexican food processors are seeking new production technologies and better raw materials, and are implementing lean manufacturing principles to improve products and grow their export sales.
Q: What are some of the major differences between U.S. and Mexican consumers?
A: Mexican consumers follow global trends and are always seeking out the latest product, but they are also price-conscious. The average Mexican consumer is willing to dip into savings or establish a credit line in order to buy the most recent technology, the most reputable brand or the trendiest new beverage or food. Mexican manufacturers will work with their banks to arrange extended payment terms for their customers. Many U.S.-made products are perceived as having higher quality that will last longer than products made elsewhere (although Japanese and Korean products have a similar reputation for superior quality). However, competition is increasing in the higher-quality, higher-price-point end of the market, as several Mexican brands and manufacturers are gaining market share as they position their products to compete with imported goods.
Q: Are there strategies that a Wisconsin firm could use in Mexico that would set it apart from other U.S. companies and make export success more likely?
A: Wisconsin firms should be aware of how business is conducted in Mexico. Remember your new Mexican partner is introducing your firm and products to a new market. Export sales will not happen overnight, and you should not expect high volumes of sales in the first year. Wisconsin companies must be patient, flexible and open to ongoing follow-up. Do not assume the deal is over if you do not receive a response to your email or phone call. Too many U.S. firms only communicate by phone or email and cite security issues as a reason not to travel to Mexico in person. It is very important to meet a Mexican prospect face-to-face and build a level of trust, as well as gaining a better understanding of the market, customers, product requirements and competition. Also, since the cost of capital in Mexico is very high, being able to offer credit terms is often a more important deciding factor than price point for a Mexican buyer. U.S. firms lose ground to their Canadian, European and Japanese competitors if they are comparatively more conservative when it comes to credit terms.
Q: If a typical Mexican importer could have anything in a re-negotiated North American Free Trade Agreement (NAFTA), what do you think they would want most?
A: Mexican businesspeople recognize some changes to the NAFTA agreement would make the region more competitive against other countries or regions for importing and exporting. Mexican importers would like to have clear rules of origin and would like long-term certainty about the future of the agreement, so they can start forecasting their purchases and get better exchange rates.