Mexico is vital market for US exporters

Young, growing Mexico is a vital market for US exporters
As one of the two countries with which the United States shares a land border, Mexico is of vital importance as a trading partner. The US relationship with Mexico is shaped by a complicated mixture of mutual interests coupled with shared problems, growing interdependence and different national perspectives.
Historical factors, cultural differences and economic disparities add further complexity to the relationship.
The most outstanding feature of the bilateral relationship in recent years has been the North American Free Trade Agreement (NAFTA), which has transformed trade among Mexico, the United States, and Canada.
In 1999, the United States accounted for 88% of Mexico’s exports and provided 74% of Mexico’s imports. The United States exports more goods and services to Mexico than to all other Latin American countries combined. Mexico is Wisconsin’s third most important export customer after Canada and Japan.
Thanks to NAFTA, 85% of US goods now enter Mexico duty-free. Remaining tariffs are between 5% and 10%, with the highest rates applied to agricultural products and finished motor vehicles. For goods that qualify as North American origin under NAFTA, tariffs will be phased out by 2009 or earlier, depending on the product.
Mexico is also a natural market because of its high receptivity to US suppliers. Mexican buyers have a genuine respect for the quality of US-made products. US standards, business practices and consumer styles are enthusiastically embraced in Mexico, especially by the large segment of the population that is under 25 years old.
Mexico’s population is rapidly approaching 100 million people.
A variety of distribution channels are available to American firms in Mexico. US companies that sell direct to Mexican end-users should preferably have Spanish-speaking sales representatives, even though many Mexican firms employ English-speaking staff of their own. American companies can also sell through distributors located in the US, distributors or wholesalers located in Mexico, Mexican manufacturers of complementary products, or independent Mexican sales agents. Small retailers and family-owned businesses characterize the market. Only about two percent of industrial firms employ more than 250 workers, and more than 90% have only 10-15 employees.
Profit margins on goods sold in Mexico are generally high. Exporters should look carefully at added costs such as import duties, export packing, special labeling requirements, broker’s fees, transportation costs and taxes to determine if their products can be delivered to the customer at a competitive price. The use of a customs broker, though no longer required by law, is strongly recommended when the exporter is not familiar with Mexican standards and customs processing procedures. Mexico assesses a value-added tax, called IVA in Spanish, of 15% on the cumulative value (cost plus freight and other charges) of imports.
Exporters to Mexico benefit from the closeness of the market and easy transportation links to major Mexican cities. Mexico City time is the same as US Central Standard Time.
This article is based on information provided by the U.S. Department of Commerce, Commercial Service, in Mexico. For more information about doing business in Mexico, contact the U.S. Export Assistance Center in Milwaukee at 414-297-3473. The Commercial Service’s Web site on Mexico is located at: www.uscommerce.org.mx
MEXICO AT A GLANCE
National capital: Mexico City
Form of government: Federal republic under centralized government
Official language: Spanish
Population: 98.6 million (1998 est.)
Population growth rate: 1.77%
GDP per capita: $7,700 (1997)
Literacy rate: 90% of people age 15 and over can read and write
Major industries: Food and beverages, tobacco, chemicals, iron and steel, petroleum, mining, textiles, clothing, motor vehicles, consumer durables, tourism
Exports to: United States 85%, Canada 2%, Japan 1%, Spain 1%, Chile 1%, Brazil 1%
Imports from: United States 75%, Japan 4%, Germany 3.5%, Canada 2%, South Korea 1.5%, Italy 1%
Major foreign investors: United States, Netherlands, Japan, Germany, Canada
Source: CIA World Factbook
Best Prospects for US Exports
Automotive Parts and Supplies
Electronic Components
Building Products
Telecommunications Equipment and Services Computer Hardware, Software, and Services Franchising
Food Processing and Packaging Equipment
Water Resources Equipment and Services
Pollution Control Equipment
Security and Safety Equipment
Electrical Power Systems
Airport Equipment and Services
Source: U.S. Embassy, Commercial Service, 2000
April 13, 2001 Small Business Times