CITC Export Guide to Mexico

Opportunity is Right Across the Border

Mexico is the most populous Spanish-speaking country in the world with a market the size of Western Europe (all of it). The country is part of more free trade agreements than any other one, putting its potential market up to 60% of the world’s GDP. And that’s only the beginning. The government has taken on substantial economic reforms since 2014, opening up some sectors to investments and ensuring safer operations to counteract the rise in organized crime and the ongoing corruption problems.

Since 2016, Mexico offers Special Economic Zones to foreign companies who would like to invest in economically underdeveloped areas in the south in exchange for various incentives, including infrastructure development prerogatives, trade facilities, easier regulatory processes, and duty-free customs. Interest rates are still high in the rest of the country, despite signs of growth in the banking system and a stable economic growth in general, but Mexico also offers manufacturing labour costs comparable to those in Asia, a young and skilled labour force, extensive natural resources and a government that encourages foreign investment.

Mexico has the largest taxi fleet in the world. You want to take a ride? In this guide, we will guide you through the process of reaching Mexico’s consumers, successfully making sales on ecommerce channels, and getting your products to reach the desired consumers.

Trade Data

Marketing

Shoppers

The typical Mexican consumer has seen tremendous gains in purchasing power over the past decade and is likely to see further gains in the future. Most consumers – over 75% of the population – reside in urban centres where the United States tends to have a strong influence on consumer habits. However, there is considerable disparity among purchasing power throughout the country. Approximately 20% of the population lives below poverty level and more than 58% in precarious conditions. Wives are largely the ones in charge of a family’s purchasing within a typical household. While men will become involved in the acquisition of services or larger purchases, a family’s day-to-day shopping is dominated by wives. Within this context, family and friends exert a strong influence on purchasing habits. Mexican consumers tend to be very aware of brand names and focused on the cost-benefit ratio of a product or service. The consumer tends to seek out an individualised customer service experience.

Social Media

According to a recent study conducted by the Internet Mexican Association (AMPICI), 90% internet users in Mexico access social networks and about 46% approve of having publicity in social media. The most important promotional tools chosen by companies are direct mail, social media and telemarketing.

Major Shopping Categories

During the first quarter of 2015, over half of those shoppers purchased from international retailers, most of which were from the United States. Apparel and accessories account for most online purchases in Mexico, with digital downloads trailing closely. Although furniture, computer equipment and software, and consumer electronics are low on the list in terms of purchase incidence, they lead in terms of money spent.

Major Retail Holidays

El Buen Fin (“the good weekend”) occurs in Mexico across four days in November. In 2015, El Buen Fin took place from November 13-16, the weekend prior to celebrations of the Mexican Revolution, which ended during this time in 1920. In 2014, retailers in Mexico City accrued approximately €11.3 billion. Originally inspired by Black Friday, El Buen Fin was conceived to increase consumption in Mexico, thereby boosting its economy, as well as offering some assistance to the overall welfare of the country’s families.

eCommerce & Technology

Domestic and preferred card schemes

Many Mexican cards are not suited for cross-border online use. A local acquirer therefore is recommended for enhanced autorisation rates and settlements. A small percentage of online payments are done via PayPal and (offline or online) bank transfers. 

Security

Gemalto, the world leader in digital security, announces that BBVA Bancomer, the largest bank in Mexico, is using its Ezio® Suite to secure growing internet banking and mobile banking usage in Mexico. The new solution leverages the benefits of Ezio optical technologies to validate transactions. Fraud, social engineering and phishing attacks present a difficult challenge. The Ezio Suite gives banks the power and flexibility to quickly deploy authentication and transaction signing solutions to defend against attack, while maintaining best in class user experience

Mobile Appetite

Almost half of Mexicans are connected to the Internet, and of these users, roughly two-thirds make purchases online. 

The Competitive Intelligence Unit (CIU) estimates the number of smartphone users rose 41.4% in Q2 2015 when compared to the same period a year earlier. This robust increase in the base of users of the advanced mobile device brought their total up to 62.5 million, or 59.8% of all mobile connections in the country. Penetration levels among top earners have been higher for a while, leaving further growth to low-income consumers. It is precisely this group—with limited disposable income and requiring inexpensive devices—who is boosting sales of smartphones made by “underdog” brands like Lanix, ZTE and Huawei. According to the CIU, the group of smartphone manufacturers with less than a 2% slice of the market in Mexico expanded their combined share from 3.4% in Q2 2014 to 9.2% in the same period this year.

Considering that growth in the bases of smartphone users and overall mobile internet users in Mexico are now primarily driven by newcomers from the lower rungs of the socioeconomic ladder, it is unsurprising that second generation (2G) connections represented the majority of mobile accesses to the web in Q1 2015, according to the CIU. 3G connections took just over a third of the market while 4G LTE access grabbed a 7.3% slice during the same period.

Alternative Payments methods

Mexico is the second-biggest retail ecommerce market in Latin America, and compared to Brazil, a much more mobile market when it comes to online purchases. Besides cards, cash-based methods and bank transfers are also popular in Mexico, with a smaller percentage of payments occurring via PayPal. Installments (for cards) are also popular, and a domestic entity is required to support this type of payment. 

Other Payments Methods

As the ecommerce market matures, international payment companies are launching ever more sophisticated products into Latin America, encroaching on the turf of legacy players. Visa launched Visa Checkout—a card-on-file wallet—in Mexico, Colombia, and Brazil in 2015 and PayPal’s OneTouch feature makes ecommerce more seamless. E-commerce giant AliExpress has made signi cant strides with its proprietary gateway, AliPay, and YellowPepper is powering multiple digital wallets in Colombia, Mexico, and Ecuador.

Digital Invoicing

Mexico, Brazil and Argentina have teamed up to launch a pilot program that strengthens cooperation between the countries in exchanging digital invoices. The nations are already situated in one of the world’s highest-ranked continents when it comes to digital billing. 

Customer Experience

Online commerce is growing slowly but steadily in Mexico, thanks in large part to the ways in which digital merchants are reaching the unbanked population of the country. As a recent Wall Street Journal article explains, although eCommerce presently only makes up about 2 percent of Mexico’s approximately $203 billion in annual retail sales, that’s four times what the percentage was five years ago, and consulting firm Euromonitor International predicts that it will double again by 2020.

The obstacle for online retailers, the WSJ story goes on to share, is that only 22.6 million credit cards are in use among a population of 119.5 million, which obviously limits the ability for many consumers in the region to pay for goods via the Internet. The solution has been to expand those consumers’ payment options.

Product information for clothing can be incomplete online, and returns are not always simple, so customers prefer to finish their purchase o line to reduce the risk of buying clothes that do not meet their expecta- tions. For less customized products such as television sets and mobile phones, Mexicans feel more confident making purchases online, a pattern that is reflected in the higher percentages of sales completed online for these items.

Local Entities

Installments (for cards) are also popular, and a domestic entity is required to support this type of payment. 

Conekta, established in Mexico in 2012, enables advanced features less commonly found in Latin America, including recurring payments, card-on-file and anti-fraud tools that negate the need for authorization via 3D Secure.

Mobiles Payments

In 2015, it is expected that Mexico will record a 40% increase in mobile commerce. After Brazil, Mexico is the second largest ecommerce market in Latin America. It has substantially grown during the last few years and the trends show that it will continue to do so in the future. 

Only 17 percent of mobile phone users were shopping on their smartphones as of 2012, a percentage that will certainly increase in coming years. Higher-income consumers in Mexico’s three largest cities—Mexico City, Guadalajara, and Monterrey—accounted for more than half of all online sales in 2013, so as the rest of the country catches up there will be an opportunity for online retailers. Mexico’s proximity to the United States makes it a prime location for cross-border ecommerce.

Logistics

Infrastructure

Ineffective delivery systems and low financial inclusion have also delayed the development of ecommerce, feeding a cultural distrust of the postal service and online payments. Customs procedures for express packages continue to be burdensome. Mexico’s de minimis level is $50 and regulations still hold the courier 100 percent liable for the contents of shipments.

Import Duties

In addition to duty, imports are also subject to sales tax, customs processing fee (DTA), and in some cases to excise. Duty rates in Mexico vary from 0% to 140.4%, with the average duty rate at 13.97%. Some products can be imported free of duty (e.g. laptops, and other electronic products).

Legal & Regulatory

Fx Policies

Mexico maintains open conversion and transfer policies. In general, capital and investment transactions, remittance of profits, dividends, royalties, technical service fees, and travel expenses are handled at market-determined exchange rates. Mexican peso (MXN)/ USD exchange is available on same day, 24- and 48-hour settlement bases. The establishment of an automated clearinghouse for cross-border financial transactions between the U.S. Federal Reserve and the Bank of Mexico has facilitated payments between financial institutions in both countries. In 2010, in an effort to prevent money-laundering transactions, Mexico imposed limits on the amount that could be deposited in USD. This provision was effective; it reduced the amount of dollars repatriated to the United States by over 50 percent. The measure also affected legitimate dollar transfers by businesses along the border. In 2014, in an effort to boost economic growth, the SHCP decided to revisit the 2010 regulation placing limits on the amount of U.S. dollar cash deposits that could be made into banks in border areas. The original intent of the 2010 regulation was to keep illicit cash proceeds smuggled from the United States out of the Mexican banking system. The 2010 regulation stated banks could not accept more than $4,000 per month from individual account holders or more than $14,000 from business entities operating in the U.S. border region or defined tourist areas. The 2014 modifications allow border–and tourist–area businesses to: exceed the $14,000 per month U.S. dollar cash deposit limit, provided they have been operating for at least three years; provide additional information to financial institutions justifying the need to conduct transactions in U.S. currency; and provide three years of financial statements and tax returns. The limit on individual account holders remains unchanged.

To date, very few Mexican financial institutions have taken advantage of these new regulations. It is unclear whether this is due to the additional reporting requirements attached to the 2014 regulatory changes, or to a lack of interest in receiving larger U.S. dollar deposits. U.S. dollars are widely used to conduct day-to-day transactions on the Mexican side of the border area.

In January 2014, the head of the Secretary of Finance and Public Credit, Financial Intelligence Unit disseminated a resolution outlining its authority to freeze the assets of designated persons and entities, namely those involved in money laundering, terrorism, or terrorist financing.