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We will determine together whether an expansion to Mexico is feasible based on availability of workforce, logistics, production and labor costs and among many other factors.

How to initiate an expansion to another country

Companies operating in today’s economic environment need to establish an international presence in the marketplace. This, of course, means you start outsourcing or nearshoring, or you take initiative and start an independent expansion by yourself in another country. However, running an international business with operations in more than one country should not be underestimated and it will take a lot of effort to communicate with employees thousands of kilometers away. Though it can be done successfully with support from us from Mexpansion as we will assist you in managing your company locally. We have listed a few things you need to keep in mind when starting a business in a foreign country

We will be on set for you in Mexico and with our network we help you to overcome language barriers, help you to get to know the culture, advise you in the supply chain and build up the company together.

Network, partners, or knowledge of the country

Without a network, partners, or knowledge of the country it is hard to execute an expansion. A critical factor is the need for local representation when starting a business in a foreign country to guide you around the potential problems and misunderstandings. More importantly, we will help you to ensure full compliance in every aspect of your local business, whether it is in terms of finance, reporting, taxes, legal questions, banking, or labor and trade laws. Recruitment, especially, is a major consideration and a big challenge.

We would like to leverage the relationships we have and help you in all the mentioned aspects below to execute your expansion successfully. For example, if you don´t speak Spanish, but are heavily pushing a product or service in Mexico, we will call on our network to get your message out. You do not want to have your products seized or your operations shut down due to some miscommunication or misunderstanding with local government officials. A local agent, or sometimes an attorney or accountant experienced in international law, can be invaluable when establishing a physical presence in a new country.

Network, partners, or knowledge of the country

Without a network, partners, or knowledge of the country it is hard to execute an expansion. A critical factor is the need for local representation when starting a business in a foreign country to guide you around the potential problems and misunderstandings. More importantly, we will help you to ensure full compliance in every aspect of your local business, whether it is in terms of finance, reporting, taxes, legal questions, banking, or labor and trade laws. Recruitment, especially, is a major consideration and a big challenge.

We would like to leverage the relationships we have and help you in all the mentioned aspects below to execute your expansion successfully. For example, if you don´t speak Spanish, but are heavily pushing a product or service in Mexico, we will call on our network to get your message out. You do not want to have your products seized or your operations shut down due to some miscommunication or misunderstanding with local government officials. A local agent, or sometimes an attorney or accountant experienced in international law, can be invaluable when establishing a physical presence in a new country. 

Do not underestimate the language barrier and different time zone

Communication is key. It is already tough enough to manage your own employees on your site, it will be even more difficult when they are miles away and maybe even in another time zone. In addition, if they speak a different language than you do this will not make it easier at all. Their workday might just start when yours is over, thus meetings must be taken at different times. To effectively manage their operations overseas, you need an ongoing, open dialogue and speak to them at least once if not twice or three times a week.

How to keep control with thousands of kilometers of distance

Even though there is a huge distance, modern technology is widely available all over the world and will help a lot to overcome the distance. Shared workplaces, shared technology, and cloud storage will make working remotely a seamless process. This advantage enables us to work more internationally as an organization. A global expansion of companies likewise prompts further evolution of existing technology. For instance, Google Hangouts and Microsoft Teams enables colleagues to have a face-to-face interaction plus the ability to share documents and create presentations across different offices. With the right technology it can be a smooth process. However, it will never replace face to face meetings completely.

You might be worried about or even object to the fact that you will need to send over technicians every month to train employees or fix problems on machines, processes, or other things. However, with the latest technology such as Google 3D glasses you will be enabled to guide your local workforce to solve issues.

Cultural differences must be taken into consideration

Working with and among international and global business leaders and companies opens a completely new business perspective. However, it also comes with challenges, as cultures vary based on region, country, religion, and more. In addition to a possible language barrier there are a lot of cultural behaviors, attitudes, and sensitivities that can affect your business. For these reasons you should consider employing a cross-cultural business consultant until you and your people feel confident enough to understand the nuances of communication. Remember that something as simple as a handshake may have a significance that you do not understand. In some countries, religious customs may affect how and when business is conducted. It is no accident that locals appreciate it when you make the effort to work with them in their “language” – be that in words, gestures, culture, gesticulations, feedback, commentary, conflict, or anything else. Read more about the cultural differences here.

People work together differently in every country

In Asia, for example, employees tend to avoid asking their managers questions and are more indirect in sharing their feedback and concerns. On the other hand, European teams ask a lot more questions and report back to their management team. To give some more examples in American culture and schools you are rewarded for speaking up and for sharing your opinions and ideas, even if you do not necessarily have new insights to add. In British culture, people are more introverted and quieter with their opinions in groups and prefer to give feedback more openly in smaller groups or 1:1. One solution could be to DE standardize operating procedures across cultures, and on top to train staff to communicate performance feedback differently because some cultures are proud and steeped in their tradition, so all issues need to be addressed carefully and diplomatically.

 

Regulatory climate and political stability

Every country has its own version of immigration, financial, taxation, and employment law. If your company requires the import or export of goods, you will need to check out any restrictions on the products being moved and the costs associated with their movement.

Political turmoil is becoming more common throughout the world, especially in countries with high unemployment rates and dictator regimes, in which there is no freedom of speech. While there are great rewards in most turbulent environments, there is also great risk. If you plan to start your new business in a country that is rapidly evolving -politically or economically- you must limit your financial exposure and personal risk until you are confident that you understand the environment and can cope with potential changes appropriately. We will analyze all factors together and advice you on political questions.

Establish an international banking relationship

If you anticipate exporting or importing goods from or to a country, you must be aware of currency differences and undertake measures to eliminate exchange risk where possible. This requires that you remain aware of constantly changing exchange rates. The foreign exchange market can be extremely volatile, and, if you do not pay attention, your revenues can quickly decrease as money is converted between currencies. In many cases, you are charged exorbitant fees and must wait several days for the money to clear and to become available in your account.

Local laws

Whatever country you expand to, it is essential to know the local laws because consequences can be disastrous if you run afoul of compliance. Knowing about local laws refers to more than just signing contracts. Every country has a lot of unique rules that you would never think about. For example, all new employees have to be sent to the doctor´s on their first day of work to get a health check. You will find more information about the laws in Mexico here.

Resolve logistics issues before setting up shop

Even where movement of goods is not physically restricted, many countries lack the infrastructure that exists in industrialized countries. In addition, regulations can affect the free flow of products within and outside of the country as well as fees, duties, and export taxes.

Expats as a cultural bridge and locals that know logistics best

Someone who is familiar with the country can serve as a cultural consultant. We are familiar with the country and will support your company in making the most of your opportunities. So, for example, to understand the various cultural, bureaucratic, and logistical differences between Europe and Mexico and how they need to be applied right on the site. Also, in targeting the market much more effectively and profitably.

The best strategy for recruiting is to find a local partner who understands the landscape, including wages, labor laws, and a typical office environment. We will help navigate everything from renting office space to contract norms for employees. Also, regarding the law firms since there are many rules and regulations, to which you just must play by. In the end, you only want to follow the letter of the law and make sure that you got off on the right foot and that you do not have any sort of regulatory issues.

There are so many things to consider when establishing a legal business – for example, a lot of rules around how you can hire employees. In addition, you need to make sure to be in compliance with myriads of employment laws and all types of filings and other bureaucratic issues.

Factors to pick the right location

Due to the fact that Mexico is located very centrally and has 64 international airports, 14 intermodal terminals as well as an excellent, modern road network with 54 border crossings to the United States, it is the perfect spot on the continent America to manufacture and/or being or acting as a service center.

The location we choose together for your business is a critical success factor that needs to be carefully evaluated. Not only the infrastructure or cost will be playing a vital role, but also aspects like labor skills, supply deliveries, traffic connection, tax advantages, size of warehouses or major storage space must be taken into consideration.

By analyzing your options and defining your needs, we are assuring to find the right business location for you.

We have listed up all important aspects which should flow into your decision why you pick the respective location.

Selecting the right location is a critical success factor in an expansion exprocess - we advise you the options based on your requirements

1. Overview of the feasibility study​

2. Factors to pick the right location

3. Our Locations in Mexico​

4. Prices to rent or buy properties in Mexico​

5. What logistics and transportation will be needed?​​

6. Human Resources: Personnel availability in Mexico​

7. Calculations of various Costs​

8. Legal Compliances and Certifications​

9. Requirements of any Certifications to ensure standards​

10. Supply Chain

It can be very costly if you expand and realize later that the infrastructureis not ensured or not sufficient, educated engineers are available. To avoid that, we execute a feasibility study.

1. Overview of the feasibility study

Once we have analyzed your market, company and established a financial forecast, we will conduct a detailed feasibility study of a possible expansion to Mexico. The best strategy for recruiting is to find a local partner who understands the landscape, including wages, labor laws, and a typical office environment – and that’s us.

We help to navigate everything from renting office space to contract norms for employees. The same regarding the law firm; there are many rules and regulations in which you just must play by – and we will analyze together whether it is executable.

In addition, always bear in mind that we build with you and other partners an eco-system, so rents, freight costs, location, logistics and administrative tasks can be shared and accordingly save costs.

It can be very costly if you expand and realize later that the infrastructure is not ensured or not sufficient, educated engineers are available. To avoid that, we execute a feasibility study.​

2. Factors to pick the right location

Selecting the right location is a critical success factor in an expansion exprocess - we advise you the options based on your requirements​

The location we choose together for your business is a critical success factor that needs to be carefully evaluated.

Based on your needs analysis from the Company and Market Analysis, we will provide you various locations to find the right one.

 

select the right location in mexico

Not only the infrastructure or cost will be playing a vital role, but also aspects like labor skills, supply deliveries, traffic connection, tax advantages, size of warehouses or major storage space must be taken into consideration.

We have listed up some important factors to take into consideration.

Traffic connections to the United States

International airplane connections

Security

Government Incentives

Taxes of the cities

Available workforce

Infrastructure & Logistic

Network

Rental Prices

Supply Chain

Real Estate

Regulations

3. Our Locations in Mexico

We have done a detailed and comprehensive analysis to decide which locations in Mexico to focus on.

Mexico is a very modern country with particularly good road, and international air connections.

However, if our partners wish to take other cities into consideration as well, we are not reluctant to do that. Based on our analysis, we have decided to focus on the following locations.

4. Prices to rent or buy properties in Mexico

Costs in Mexico vary from the locations, however in average, they are up to 10x times cheaper than in the United States​

$4.45 per m2 is the average price to rent in Mexico

Mexico is up to 300% cheaper than in the United States

$63 per m2 is the average price to buy in Mexico

Mexico and Monterrey are the most expensive cities to rent or buy a location

5. What logistics and transportation will be needed?​

Once the raw materials or goods have arrived in Mexico, it must be transported to the factory where it will be processed and then finally shipped to the end client.

We will do precise calculations in how many days the products can be shipped from Mexico to other countries in South America.

As you can extract from the graph, many deliveries from Mexico to anywhere in the United States can take between 1 and 3 days if there is a smooth process at the customs. Air Cargo will then be used more to the countries in the south part of America (Argentina, Brasil, Chile, Uruguay, etc.).

Here again it is so important to find the right, trusted and reliable partners – and we will help you in that matter.

6. Human Resources: Personnel availability in Mexico

Analysing whether the number of the right, qualified people can be found in Mexico to execute the activities of your organization is a critical success factor.

Together, we will look thoroughly at the various Human Resource standpoints and look what people will be needed.

7. Calculations of various Costs

Freight Charges Import / Export​

Freight costs can lead to unpleasant surprises because you must pay attention to a lot of details. Especially when you have to import the raw material and export the finished good.

Together we will make a calculation of how much the freight to Mexico would cost. We will determine to which Incoterms (find further below a short description) the products will be shipped, which will ensure that the quality remains high after the arrival as well as there are no delays.

Bear in mind that the cost of containers will decrease with other partners who will also establish their production or distribution center in Mexico.

  • What kind of cargo to transport
  • Raw material or finished products?
  • Where does the raw material come from?
  • Airline or ocean freight?
  • How much is the value of the freight? Volume?Weight?
  • How many transports yearly
  • Do you already have a partner for freight?
  • Insurance, Taxes, Document and Certifications
  • Document & certificate costs
  • Incoterms 
  • Tax costs

Customs

The U.S. – Mexico – Canada Agreement (USMCA) is a trade agreement between the named parties and replaced the North American Free Trade Agreement (NAFTA) in 2020.

Mexico was the first country in Latin America to sign a partnership agreement with the European Union (1997). The “EU-Mexico Economic Partnership agreement” entered into force in 2000 and established a free trade area between the two parties.

USMCA eliminates tariffs between the countries and has built in agreements and legal processes, with international rights for business investors.

Based on your needs, we will make investigations and gather information to figure out and calculate what impact and costs has the USMCA for your goods which would be transferred to the United States or other countries.

This includes export cost, logistic procedure, and documentation. For example if there is good with a high risk (e.g. explosive), it will have a different charge and time procedure than just normal commodities. 

 

More information will be given in the following page: https://www.cbp.gov/trade/priority-issues/trade-agreements/free-trade-agreements/USMCA/FAQs

Taxes

The taxes in Mexico are around 30%, is though depending of each state.

Thanks to a specific program called IMMEX which was introduced by the Mexican Government, no raw material which will be imported, processed and then exported from Mexico, will not be charged any taxes

The IMMEX program in Mexico is aimed exclusively at legal persons, which is an individual with rights and obligations that exists, not as a natural person, but as an institution that has been created by one or more natural persons.

 

Companies that are eligible to take the advantage and the benefits of the IMMEX program must export a minimum of at least $500k worth of finished products on an annual basis or must have exports that account for a minimum of 10% of yearly sales. 

8. Legal Compliances and Certifications

We will evaluate whether your goods or service need special regulations regarding laws. In addition, it is indispensable to familiarize with Mexico’s (labour) laws. As foreigners running business in Mexico need to be cautious of their hiring practices as they have strict labour laws in place to protect the employees.

A Mexican law firm will give us legal advice and help us to make sense of the (labor) laws of Mexico in questins like:

Creating a corporation

Setup the business

Advising on labor and tax law

Zoning and building permits

Environmental regulations

Immigration status

9. Requirements of any Certifications to ensure standards

If any certifications or licenses are needed, we will analyze how to get them:

ISO

Quality Standards

Environmental Health & Safety Certifications

Finance/Accounting Certifications

Information Technology/ Computer Engineering Certifications

Mechanical Engineering Certifications

Research Certifications

Quality Assurance (QA) Certifications

10. Supply Chain

Is a cost efficient Supply Chain possible with an Expansion to Mexico?

Together, we will draw the supply chain of the expansion process. On one side, there probably will be material which must be transferred from the company to the new location, on the other side there, raw materials might also be transferred from other locations.

Also, the process has to be defined when there are product returns. We will draw a plan how your supply chain will look like and what time will be needed for the whole process.