Doing business in another country, you should learn about the customs and laws of the country to eliminate the risk of financial woes. For investors and business owners, Mexico offers you a land of opportunities that rival many of the emerging markets, but learning the customs can be a time-absorbing process, which is why it helps to have a local provide insight.
Four Risks of Doing Business in Mexico
A Very Slow Start
One of the biggest challenges of doing business in Mexico is how Mexicans view business differently than Americans. For example, they might start off with something lighter than going straight to business and take you to a soccer game for a beer and good time. Many times, Americans fail to understand this and try to do business straight away, which can come off as rude.
The risks of expanding to Mexico is that you might misunderstand the culture and do something that offends your business partner before you get the chance to do business with them. This is why you should learn about the cultural differences between the U.S. and Mexico in business in order to ensure a good partnership.
Issues with Construction Permits
One of the dangers of doing business in Mexico is misunderstanding how long it takes to get a construction permit. The best way to go about this at the moment is to plan everything ahead. It takes 69 days to get a permit, and it requires 10 procedures when dealing with construction permits.
While this is more efficient than in the Caribbean and the rest of Latin America, it still takes a lot of time to complete. For example, a water and sewage connection can take about a month and getting a zoning certificate for specific land usage can be a complicated task.
Corruption and Improper Administration
Mexico has a well-developed financial sector that puts it in good stead with getting credit, but it can still be difficult compared to your U.S. counterpart. Investor protection continues as a contentious issue for those in Mexico. While NAFTA has done a lot to rectify some of the issues, you still have some problems that can crop up.
What risks could the company face in entering the market in Mexico? Well, corruption and improper administration have become major risks of doing business in Mexico. Structural reforms have been done, but the FDIs that would materialize have not yet been released.
Time Wasted Paying Taxes
Tax paying is also a laborious process within Mexico, and it takes an average of 337 hours of business every year to pay your taxes. Considering you only have to make six payments every year, that’s a lot of time spent doing your taxes. The corporate income tax rate sits at 30 percent, and it takes 155 hours to complete.
Before you start, you should understand the risks of doing business in Mexico. The laws are different, and they can sometimes be highly complex. For example, it takes 415 days to enforce a contract, and you have over 38 procedures involved in doing it, so it becomes a complex and intricate task. A shrewd investor will always look at the risks of doing business in Mexico or any foreign country for that matter.