Market Entry Strategies: Expanding Business to Mexico 

• Expanding business into Mexico presents companies with wonderful opportunities to expand their operations. Mexico is known for its steady economy, free trade agreements such as USMCA, and strategic geographical location. However, in order to expand your business into Mexico, companies should navigate through the process of Mexico company registration and have an effective understanding of Mexican business culture. The following blog presents to Market entry strategies for companies wanting to expand their business into Mexico.  

Understand Mexican Market  

• For companies wanting to expand their business into Mexico, it is necessary to understand the economic landscape, customer behavior, and regulatory atmosphere of the market. The economy of Mexico is the second largest in Latin America and has a GDP of more than $1.3 trillion.  

Economic landscape 

• For the year 2025, the Mexican economy is predicted to witness slow growth, a rise in inflation, and a shift in US policies. It has been predicted that there will be a potential decrease in the economic growth of the country from 1.3% to 0.6% in 2025. The relocation of supply chains to Mexico of international corporations will create new opportunities for small to medium-sized companies, creating growth for industries like automotive, production, and aerospace.  

Consumer behavior 

• The age of typical Mexican online shoppers is between 25 and 44 years old who prefers mobile-friendly shopping platforms. It is expected that the number of e-commerce Mexican shoppers will increase by roughly 44 million users will rise between 2024 and 2029, which showcases a growth of 59.5%.  

• The e-commerce sector will be one of the fastest-growing sectors in Mexico, due to the rise of the internet and the usage of social media platforms. Companies should focus on building trust with Mexican consumers and focusing on implementing better security measures in their online transactions.  

Market Entry Strategies 

Exporting to Mexico  

• Exporting to Mexico is one of the simplest ways to expand your business in the country. The country has extensive legislation about foreign trade operations, providing authorities with power to establish penalties for non-compliance. In 2024, the Mexican government has increased importation tariff rates between 5% and 50% for multiple goods, consisting of steel, textiles, footwear, wood, and aluminum. These tariffs create fair market conditions which will be beneficial for small and medium-sized enterprises and businesses entering the country. Goods coming from Canada and USA will be imported free of the general import tax and value added tax if their customs value are not more than specified limits. Furthermore, under the IMMEX program, there are specific goods which are meant for re-export and now can be imported duty-free in Mexico. The USMC agreement has also eliminated several tariffs for North American businesses which had made exporting to Mexico easier.  

Create a local presence  

• For companies wanting to have direct control over their business, they should consider setting up an office in the country. Companies can also set up a branch office in Mexico in order to carry out its business and generate income. Branches in Mexico do not have a separate legal personality and is the same as their parent company. In order to successfully penetrate Mexican market companies can even acquire or invest in a subsidiary or collaborate with a local business in order to set up a joint venture.  

• To incorporate a company in Mexico, businesses will have to go through the process of Mexico company registration with the Public Registry of Commerce. Lastly, it is mandatory for all companies to have a legal representative for their business and a registered physical address where the books of accounting will be stored.  

Mergers and acquisitions 

• Foreign companies can also opt to acquire an existing Mexican company to get an immediate market access and a loyal consumer base. In Mexico, the opening of new markets because of multiple free trade agreements has enabled new companies to enter and create a competitive market. Mergers and acquisitions have also allowed companies to create a stronger market presence. For instance, Grups Alsea, which is a Mexican company mainly uses acquisitions as a primary way to enter new markets.  

• Mergers and acquisitions also provide competitive advantages if the merger takes place between two companies. It enables companies to use synergies, improve competitive advantages, as well as capitalize on new market opportunities.  

Joint Ventures 

• For companies wanting to expand business into Mexico, Joint Ventures is a useful strategy. JVs in Mexico is usually established by a contractual agreement or a company. US based companies usually use this strategy to enter Mexican market.  

• Joint ventures can provide companies with expertise, talent, as well as operational space which helps in launching operations rapidly. This strategy also helps businesses to navigate complex Mexican market while also using local expertise.  

• Joint ventures allow companies to successfully launch their products or services into new markets by combining resources. Lastly, JVs and strategic alliances are often considered to be suitable options to test challenges of new markets.  

Franchising 

• Franchising has proven to be a successful market strategy for expanding business to Mexico. Mexican market is receptive to franchise model and has supported its growth over the years. Franchises in Mexico account for around 5% of the total economic output of the country. The food and beverage sector of Mexico has been made by more than 32% of franchising businesses. This is then followed by retail, health, business consulting, and personal care services. Furthermore, franchising model in Mexico do not require high investment fees and are more successful than regional businesses. Lastly, United States franchise concepts are well-regarded in Mexico’s market because of the concept brand familiarity.  

Regulatory and Legal Considerations for Expanding Business to Mexico 

Foreign investment law 

• Mexican government promotes foreign investment, and grant foreigners the freedom to easily engage and participate in multiple sectors. However, they should not fall into the limited scenarios highlighted by the Foreign Investment Law. Foreign investment is specific activities is limited to maximum shareholding participation of 49%.  

Tax compliance 

• It is important for foreign companies to ensure compliance with Mexican tax laws in order to avoid any penalties or extra fees. Companies should have a team of tax advisors to ensure proper adherence with the country’s tax requirements.  

• Corporate income tax rate in Mexico is 30%. This rate is applied to all the corporate entities, and even associations of civil nature and branches. Whereas the standard value added tax rate in Mexico is around 16%.  

Register in the Federal Taxpayers Registry 

• In order to participate and carry out commercial transactions and adhere to the tax regulations, a company should register with the RFC and get a tax identification number.  

Conclusion  

• Expanding business to Mexico presents companies with multiple opportunities. However, it requires strategic planning and selecting the right market entry strategy to establish a successful foothold of business in the Mexican market. It is crucial for companies to understand Mexico’ regulatory framework to successfully navigate through the market without any penalties. Contact Tetra Consultants to successfully understand Mexico’s legal framework for establishing your business.  

• Contact us and our team of experts will get back to you within 24 hours.