Istanbul Chamber of Industry organized another successful event, on the business and investment opportunities in Mexico. Through this event we had the opportunity to listen to the experiences of Totomak Automotive and Kros Automotive in Mexico. The presentations and information shared by the Board Member of ISO, Consul General of Mexico in Istanbul, Turkish Commercial Attaché in Mexico and the President of DEIK Turkey-Mexico Business Council were very fruitful and insightful.
Mexico, being a part of the United States-Mexico-Canada Agreement (USMCA), which entered into force on July 1, 2020 replacing the NAFTA agreement, has close trade relations with the USA and Canada. Many US and European brands and companies have production facilities for spare-parts or final products in Mexico.
There is currently no free trade agreement between Turkey and Mexico however both countries are working on building a strong base for such an agreement. Currently import tax is between 10-25% for finished goods and 0-10% for semi-finished goods.
The geographical distance and language barriers can create a challenging business environment. Nevertheless, introduction of direct flights by Turkish Airlines has shortened the travel time. At the same time cultural similarities make it easier to do business between the two countries as both have a culture of open and friendly communication and even similar cuisines.
All in all, it was advised that finding a local partner or consultant is crucial when developing a new business in Mexico, whether it is a direct investment and setting-up of a factory, or whether it is setting up a sales channel for semi-finished or finished products. Visiting fairs is always a good idea as well.
For companies thinking of a direct investment in Mexico, it was advised to work with a local head-hunter company or a local consultant to select the most qualified and suitable personnel. It is even better if the management team is selected prior to the selection of the remaining personnel, with whom they can handle all hiring.
There are various incentives for labor, training and technological infrastructure costs with different terms and conditions per state. Inflation has been recorded between 3-5% in the last years while the minimum wage has seen a large hike in the last two years with 16% in 2019 and 20% in 2020. Once a proper training program is implemented, Mexican employees are eager workers, and they manage the operations well.
Consumable materials are not easily accessible, and the pricing is not competitive, it was mentioned that the cost of purchasing in Mexico is sometimes 2-3 more than in Turkey. Turkish companies operating in Mexico advised companies to keep higher stocks of their spare parts due to higher local costs and the longer delivery times.
E-commerce is rapidly expanding in Mexico, parallel to the global trend in the world after the pandemic. According to Statista the e-commerce market was 10.6 million USD in 2018, 14.3 million USD in 2019 and 18.8 million USD in 2020 largely composed of electronics and media and fashion. E-commerce is largely dominated by marketplace providers such as Mercado Libre, Amazon and Walmart. Other significant players include Aliexpress, Asos, Soriana and Sears. One key factor to consider is that payment terms and conditions are different compared to Turkey. In Mexico credit card ownership rates are low.
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On a special note, we would like to also mention our personal experiences in Mexico and attest to its beauty and potential. SBA Consulting co-founder and partner Ful has studied in Morelia Michoacan, Mexico, as a Rotary Exchange Student, learning Spanish and becoming a fluent speaker within months due to the warm-hearted Mexican friends and family, and graduating from high school. Ful still has very close ties with family and friends in Mexico.
Our co-founder and partner Nur was a key-note speaker at the 38th Textile Symposium organized by Canaintex in Mexico, representing Werner International, where she presented a speech on Public Policies and spoke about Incentive Programs applied by various countries towards the textile industries.
In addition to the business potential it provides with its high population and ease of access to both North and South American countries, it is a beautiful country with warm-hearted people, amazing food and remarkable sites to be visited. For this reason we are always delighted to work on new projects related to Mexico.