Mexico’scurrent economy is relatively healthy and enjoys the use of many free-tradeagreements.
Though there are several positive reasons to attempt entry intoMexico’s market, the government corruption and increase in drug-related crimesposes a substantial risk to foreign corporations that aren’t familiar with”greasing palms” to get their permits approved or investments accepted. “In2016, Freedom House reported that property rights in Mexico are protected by amodern legal framework but that the weakness of the judicial system, frequentsolicitation of bribes by bureaucrats and officials, widespread impunity, andthe high incidences of extortion harm security of property for many individualsand business.” (Mexico, 2017) Thecurrent corporate tax rate is set at 30 percent, and, more importantly, thereare no minimum capital requirements for launching a business. However, thecompletion of necessary licensing requirements continues to be costly deterringmany smaller businesses.
Also, strict labor laws in Mexico provide incentivesto small businesses to operate outside of their formal sector, but this makeshiring and firing employees quite expensive. Trade remains an important factorin Mexico’s economy with the value of their combined imports and exportstotaling 73 percent of their GDP, and, on average, the applied tariff rate is 5percent. Their financial sector is open and competitive as their bankingsystems remain well capitalized and foreign participation continues toincrease.Mexico’seconomy is currently positioned at $2.2 trillion and moves closer toward amanufacturing orientation since the North American Free Trade Agreement (NAFTA)became enforced in 1994. “Since 2013, Mexico’s economic growth has averaged 2%annually, falling short of private-sector expectations…Growth is predicted toremain below potential given falling oil production, weak oil prices,structural issues such as low productivity, high inequality, a large informalsector employing over half of the workforce, weak rule of law, and corruption.
“(Mexico Economy, 2017) It’s a volatile economy to enter without propereducation, understanding of culture and government corruption, and a largeamount of working capital.However,it is possible and potentially quite lucrative if corporations do their duediligence in educating themselves. First, the amount of capital needed must bea top priority. Without enough capital to bribe the proper officials, acorporation could find themselves with a building but no business license toperform work, or a business license to perform work but no permit to build afactory or office building. Also, as previously pointed out, hiring employeesin Mexico is quite costly. Economic integration and funding are also importantto the success of such ventures.
Thankfully, funding should not be an issue asMexico’s financial sector is growing and open to foreign investment andparticipation allowing for additional expansion funding to be acquired if needed,and, since Mexico participates in NAFTA and follows a similar economic style tothat of the United States, integrating the current economic system with the newone should not present too many difficulties. Ultimately,expanding the printing company into Mexico could result in increased profitsand supply through decreased wage, production, and fringe benefit costs. If thecapital is available to properly expand and adhere to the societal expectationsfor businesses within Mexico, there is no reason why an expansion would not bebeneficial to the printing company as well as the foreign market. Based on myanalysis of the Mexican markets and economic outlook, the printing companywould certainly benefit from increasing their international presence to includethe Mexican market.