Mexico is a land of opportunity for exporters. There is a growing consumer class, providing demand for quality goods and boosting the economy. In fact, it has been predicted that Mexico will become the 8th largest economy in the world by 2050. Mexico is currently Canada’s 5th largest export market. With an expanding industrial base and advantageous labour demographics, it’s no surprise.
It’s clear that this emerging market is an attractive place for enterprising Canadian exporters to expand their businesses. But, just like any new market, Mexico has its own unique cultural characteristics and challenges.
Alberto Quiroz, Certified International Trade Professional (CITP®|FIBP®) and Regional VP of Sales at CES Inc., is an expert in business development in global markets. With work experience in over 20 countries, he knows a thing or two about the importance of identifying and adapting to cultural differences, and the ways people do business around the world. Alberto has shared his wisdom and experience in building strong relationships with trade partners in Mexico.
1. Lay the groundwork for your Mexican market entry
Technology has made elements of researching this emerging market much easier. According to Alberto, leveraging technology to do your preliminary research is just the beginning. With the ease and speed of gathering information online you can lay the groundwork for your entry strategy. Chat programs like Skype, and decreasing long-distance phone rates make it possible to get a feeling for your potential clients before investing in a market visit.
“Technology has been great for international trade for elements such as research. There’s so much information available, and it’s fast and easy.”
Alberto says it’s a common misconception that making the investment in time and money, required for an in-person visit, isn’t worth it when you can use technology to connect with clients. But once you have established the viability of entering the Mexican market, scheduling an in-market visit to see your clients face to face is crucial, Alberto says.
“You can learn a lot about a person and a situation even in just five minutes of face-to-face time.”
Technology is also making travel quicker and easier, with more direct flights and easier connections.
Today’s technology allows us to find and view possible business locations through applications like Google Earth. But Alberto stresses the importance of traveling there in person to get a fuller picture of the place you’ll be setting up shop.
“If we’re going to do a store analysis and find out how much space there is in the store, what the location’s like, there’s nothing like actually going to the place and seeing it and taking pictures. [Google Earth] gives you an idea, but in order to be really effective, there’s nothing like being there, feeling it and understanding it and seeing what it’s like inside.”
It may seem like there’s more transparency with everything being online, but it’s like Facebook, says Alberto. People still only put out the things they want you to see. And that might not be the reality.
2. Prepare for the unexpected in any new market
In any new market, there will be elements of the unexpected. In order to avoid costly delays, fees, or missed opportunities, use any resources available to plan around unique situations.
In Mexico there is a high regard for foreigners, Alberto says, so if you say you are coming from the Canadian Embassy, you will have an easier time getting into the country. The Mexican business culture places high value on personal meetings, to form strong partnerships.
“When you go in person, it gives your customer the sense that there’s a commitment. You show that you’ve taken the time and you have the means to go there in person,” Alberto points out.
In an effort to establish a strong relationship with a client and close a sale, Alberto made plans to bring a product over the border for an in-person demonstration. This proved to be more difficult than anticipated because despite careful preparation, the logistics involved in bringing the product to the customers were more than a little complicated.
“We had to get the machinery there, get it across the border, pay a bond, pay someone to be the importer of record, get the truck, have a warehouse to put it in…”
The process involved dealing with different rules from different municipalities. In order to get the truck, he needed to map out the route and fill out paperwork including licensing and registration. Google Maps wasn’t able to tell him about the one-way streets and illegal left turns. Even with all of that worked out, there was a delay in the truck leaving the factory.
“There are a lot of little things that you really have to know and understand beforehand.”
The address that Alberto wanted to take the product to wasn’t accessible by day without a special residential permit. There was also a local holiday that fell on a weekday. Not knowing that Mexican custom is to celebrate a weekday holiday on the following Monday, cost them precious days of travel.
The details are what will cost you. But ultimately, Alberto stresses that the people he dealt with were mostly kind and understanding of the set-backs he’d experienced. The effort was worth it.
“Their reaction when they saw the machinery was magnificent. It comes to a point where if you make the effort, it’s an investment, but it pays off. You are eliminating elements of doubt.”
3. Make sure you get paid
When doing business within Canada or North America exporters enjoy certain protections with financial compensation. The case is different when doing trade with Mexico. Manage risks by protecting your financial interests through diligent planning.
Work with supporting organizations like Export Development Canada (EDC) to ensure you’ve protected your interests and have a secure and reliable method of compensation. Export Development Canada offers Accounts Receivable Insurance (ARI) to protect Canadian exporters from issues like non-payment of goods and services as a result of insolvency or contract cancellation. In the event of a non-payment EDC will cover up to 90% of the losses for insurance holders.
According to Alberto, personal relationships can make all the difference when it comes to the invoice.
“In Mexico, you have to walk with your invoice and present it in person to the customer and get your receipt so that you can get paid. If you tried to mail it, it would probably get lost in the mail,” Alberto warns.
However, don’t let this deter you from trading with the opportunity-rich nation. Technology is not only making it easier to connect and travel, it’s making it easier to get paid. Alberto also adds that where once it was a concern to convert currency, now it’s easy to open a letter of credit and pay through multiple online options.
“There are so many ways to do payment and manage risk, and there are options that are more helpful for you and your customers.”
Expanding into this emerging market requires a commitment to do diligent research, build a strong business plan, and put in the effort required to foster strong business relationships through in-market visits. It comes with its share of challenges, cautions and cultural shifts. But ultimately, growing your business in the Mexican market offers a bounty of opportunities for any exporter up for the adventure.
Join thousands of other individuals and businesses that have acquired the skills to succeed in new markets like Mexico through the FITTskills program from the Forum for International Trade Training. This international business training program and the related professional designation (CITP®|FIBP®) are the only ones recognized by the World Trade Centers Association and the Canadian government.