Top Challenges U.S. Companies Have With Operations in Mexico

Starting a new business in Mexico or expanding your U.S. business into Mexico is a hot topic right now. The benefits of doing business in Mexico include a lower cost of living, lower operational costs, participating in the 15th-ranked world economy, and being close to the center of trade for the Americas. But if you’re considering expanding or starting a business in this bustling Central American country, you should know ahead of time some of the challenges you may face.

Establishing Yourself in a New Market

While setting up a new business in Mexico can be complicated, it’s much harder in many other countries. According to the Doing Business 2019 report, Mexico received a score of 85.6 out of 100 for ease of starting a business compared to other countries.

Before entering any new market, whether it’s domestic or international, a smart business owner will research the new market, their buyer persona, trading laws, customs, and more. Be sure to research all of the local building permits and business permits that apply, and go through the appropriate federal offices to submit applications, obtain certificates, and set up inspections.

New Customs and Culture

With any new business or market, it’s wise to not make assumptions about your buyers. Mexican buyers and business owners prefer close relationships with regular, direct communication. Do your research on popular channels of communication in order to nurture and develop these strong relationships, and be open to new customs that you should apply to your business practices.

Paying Taxes

Before starting a business in Mexico, you should research the tax laws, fees, and exclusions in place in both Mexico and the U.S. Whether you’re doing business in both countries or you’re a U.S. citizen only doing business in Mexico, you’ll have to understand Mexican tax management in addition to U.S. tax management. Reporting your income to government authorities in both countries is required by law, so it’s best to seek the advice of a professional tax authority so that you can report your finances accurately.

Trading

Currently, trade between Mexico and the U.S is protected under NAFTA, and as of 2019, Mexico is the biggest trading partner of the U.S. Businesses operating in Mexico with the hopes of trading with the U.S. will have to adapt to any regulation changes that may occur under the current U.S. leadership.

A business that does trade between the two countries, or with other countries as well, must pay a number of fees. Therefore, it’s important to understand your trading costs before making any assumptions about your finances. As with any new venture, there are positives and negatives to doing business in Mexico. Business owners should weigh the pros and cons before jumping in. Though there are challenges to setting up a business in Mexico, they’re not insurmountable, and many small business owners are taking advantage of the booming market down south.

Learn about localized versions of ERP business management software for Mexico that cover taxation requirements, local business practices and compliance reporting. The system Sage X3 ERP provides pre-configured parameters to ensure compliance with legal regulations and local accounting rules.