Nearshoring in Mexico presents itself as an unstoppable wave, a golden opportunity for companies around the world. However, like a rough sea, this phenomenon hides dangers beneath the surface that can cause inexperienced navigators to founder. The Mexican coasts, rich in opportunities, are also guarded by legal reefs that can shatter the dreams of expansion for those who are not adequately prepared.
If you are considering bringing your company to Mexico, you must know the secrets to navigate these dangers and turn challenges into triumphs. Ignoring them could mean the difference between resounding success and a resounding failure.
Secret 1: “Regulations bury the unprepared”
Mexico, like any sovereign country, has a complex web of laws and regulations that govern business activity. These rules, which range from labor and tax to environmental and immigration, can be a labyrinth for foreigners. Not understanding them or underestimating them is a fatal mistake.
Labor reforms, for example, have substantially modified the rules of the game in terms of hiring, subcontracting and benefits. The extension of the vacation period, the quotas for employees over 60 years of age, the reduction of the working day and maternity and paternity leave are just some examples of the new provisions that companies must consider. Ignoring them can result in costly fines, labor lawsuits and even the suspension of operations.
The same occurs with tax regulations, which vary depending on the type of company, the activity it carries out and its location. A misstep can mean an unexpected tax burden or problems with the authorities. It is crucial to understand tax residence and the concept of “permanent establishment” to avoid unpleasant surprises.
But it’s not just about complying with the law. It is also crucial to understand how these regulations are applied in practice, how they are interpreted and how they are negotiated. This is where the importance of advisors comes into play.
The importance of the Right Advisors
In the intricate world of Mexican financial and tax regulations, having expert advisors is essential. These professionals will not only help you understand and comply with the laws, but they will also guide you in making strategic decisions to optimize your tax burden and protect your assets.
A good advisor will keep you up to date with changes in legislation, help you identify savings opportunities and represent you before the authorities in case of audits or requirements. In addition, they will provide you with valuable information on the best financial practices in Mexico and help you design a strategy that fits your needs and objectives.
Secret 2: “Culture is not a checklist”
Mexico is a country with a rich culture, with values and customs that influence all aspects of life, including business. Thinking that Mexican culture is simply a list of “things to do and not do” is a dangerous simplification.
Culture permeates the way business is done in Mexico, from communication and etiquette to relationship building and conflict resolution. Ignoring these subtleties can lead to misunderstandings, unintentional offenses and, ultimately, the failure of the expansion.
For example, negotiations in Mexico are usually more indirect than in other cultures, with a greater emphasis on building trust and establishing personal relationships. Trying to impose an aggressive or confrontational negotiation style can be counterproductive. Similarly, managing teams in Mexico requires an approach that values hierarchy, respect and social harmony.
Language, a fundamental cultural bridge
Language is a key element of culture and, in the workplace, its mastery can make the difference between success and failure. Although many Mexicans speak English, Spanish remains the lingua franca in the business world.
For companies expanding into Mexico, it is essential to have staff who are proficient in Spanish, both for internal communication and for negotiations with clients, suppliers and authorities. In addition, it is important to consider language when designing training materials, internal policies and communications for employees.
Beyond compensation: the human factor
While the compensation package is an important factor in attracting and retaining talent in Mexico, it is not everything. Mexicans value aspects such as work-life balance, the opportunity for professional growth, recognition for their work and a positive work environment.
In addition, family and holidays have an important weight in Mexican culture. Companies that demonstrate sensitivity to these values, offering flexible hours, permits to attend to family matters and celebrating local festivities, can generate greater commitment and loyalty on the part of their employees.
Culture also influences the interpretation and application of regulations. What may seem like a legal technicality in another country, in Mexico may have cultural connotations that affect its application. For this reason, it is crucial to have a deep knowledge of Mexican culture to successfully navigate the legal and regulatory environment.
Secret 3: “Relationships are key: the ‘who’ is more important than the ‘how'”
In Mexico, personal relationships are the basis of business. Knowing the right people, building trust and cultivating long-term relationships can open doors that would otherwise remain closed.
This is especially important in the legal and regulatory field. Having a network of contacts that includes lawyers, accountants, officials and other key players can facilitate regulatory compliance, problem solving and obtaining privileged information.
Relationships can also help overcome cultural obstacles. A local partner with experience and connections can guide foreign companies through the complexities of the Mexican market, helping them avoid costly mistakes and build a solid foundation for success.
Government relations, chambers and clusters
In the world of nearshoring, government relations, chambers of commerce and industrial clusters play a fundamental role.
- Government relations: Establishing solid relationships with government officials at the federal, state and municipal levels can facilitate obtaining permits, licenses and authorizations, as well as access to support programs and tax benefits.
- Chambers of commerce: Chambers of commerce, both local and international, are an excellent meeting point to establish contacts with companies from various sectors, learn about market trends and participate in events and activities that promote nearshoring.
- Clusters: Industrial clusters, which group together companies from the same sector in a specific geographic region, offer opportunities for collaboration, synergies and access to specialized suppliers.
Collaboration between governments, companies and organizations is fundamental to create a favorable environment for investment. Initiatives such as attending international fairs, creating promotion platforms and governors’ tours are examples of how relationships can drive nearshoring.
Nearshoring: a path with obstacles and opportunities
Nearshoring in Mexico is not an easy path. In addition to the legal and cultural challenges, companies must be prepared to face logistical challenges, such as the availability of skilled labor, transportation infrastructure and security. It is crucial to consider these aspects to ensure an efficient and profitable operation.
However, the opportunities offered by nearshoring are undeniable. Mexico has a strategic geographic location, favorable trade agreements, a young workforce and competitive costs. Taking advantage of these benefits requires a comprehensive strategy that considers all aspects of the business, from legal and fiscal planning to cultural adaptation and relationship building.
Are you ready to bring your company to Mexico?
This article is based on the insights of our CEO, Viridiana de la Garza. If you are looking for an expert to help you navigate Mexican market, schedule a 30-minute appointment with our CEO, Viridiana de la Garza. With years of experience in business expansion to Mexico, she will provide you with a personalized assessment of your situation and an action plan to achieve success.
Don’t let regulations, culture or lack of contacts stop you. Turn challenges into opportunities and dominate nearshoring in Mexico!
Book a session with our CEO Viridiana de la Garza.
Sources
González, O., & Ramírez, J. (2023, June 20). The legal challenges and implications of nearshoring in Mexico. Stratego. https://www.stratego-st.com/revista-st/comercio-exterior-y-panorama-economico/los-retos-e-implicaciones-legales-del-nearshoring-en-mexico/
Morales, R. (2023, July 23). State governments promote nearshoring in Mexico. El Economista. https://www.eleconomista.com.mx/empresas/Gobiernos-estatales-promueven-el-nearshoring-en-Mexico-20230723-0081.html
Ayala, J. R., & Legaspi, D. (2024, October 15). Navigating the Legal Landscape for Nearshoring in Mexico [Podcast]. Santamarina y Steta. https://www.santamarina.com/en/knowledge/navigating-the-legal-landscape-for-nearshoring-in-mexico/
