22 June 2018
Mexico: Market Profile
- To pursue a path towards greater economic openness, focusing on the liberalisation of international trade and attraction of investment flows, Mexico has made big changes to its Law on Foreign Investment and signed a wide web of free trade agreements with its trading partners. Meanwhile foreign trade incentives programmes such as Import Tax Refund to Exporters (DRAWBACK), Manufacturing, Maquila and Export Service Industry (IMMEX) and Sectorial Promotion Programs (PROSEC) to tax incentives programmes such as a tax credit of 30% of total spending on research and development activities (R&D) to support companies that invest in research, technology development and innovation are widely offered. More information on the investment environment and the relevant regulations can be found at ProMéxico.
- The inflows of foreign direct investment (FDI) to Mexico exceeded US$26.7 billion in 2016. As of the end of 2016, China’s total stock of FDI to Mexico topped US$578 million, up from US$151 million in 2007. Hong Kong, holding an accumulated FDI stock of US$220 million between 1999 and 2016, was the 6th largest Asian investor in Mexico, after Japan, South Korea, Singapore, Taiwan and the Chinese mainland.
- As an important step in accommodating greater synergies, Hong Kong signed a Comprehensive Agreement for the Avoidance of Double Taxation (CDTA) with Mexico on 18 June 2012, which entered into force on 7 March 2013. Meanwhile, Hong Kong also has an Air Services Income Agreement with Mexico effective since 3 December 2008. In addition to the customs co-operation agreement signed on 31 March 2016, a bilateral Investment Promotion and Protection Agreement (IPPA) is also pending signing.
- Hong Kong’s total exports to Mexico rose by 7% to US$3.1 billion in the first ten months of 2017, while its imports from Mexico surged by 30% to US$692 million.
Current Economic Situation
With its close links to the US, Mexico has benefitted from the continued pick-up of the US economy. This, together with the recovering domestic construction sector and structural reforms in the energy (allowing for private sector participation), telecommunications (cracking monopoly), labour (moving workers into the formal labour sector to boost productivity) and financial (providing easier credit access to SMEs) markets, has provided new impetuses to the Mexican economy.
Yet the upcoming general elections on 1 July 2018 are narrowing the window of time to put the necessary reforms into action, while a stronger peso will impact exports and the trend of industrial relocation to Mexico, especially in view of a more protectionist trade policy stance adopted by the US administration, exemplified by the NAFTA renegotiation and tax reform. Taken together, the Mexican economy is expected to see a 2.1% expansion this year, followed by a slightly slower growth of 1.9% in 2018.
The Mexican government has taken decisive steps in recent years to further liberalise its import regulations in place on a wide array of products. These efforts have greatly enhanced the prospects for exporters in the Mexican market, who currently face a considerably lower import barrier than few years ago.
The Harmonised System is used for goods classification and customs clearance in Mexico. As a WTO member, Mexico affords at least most favoured nation (MFN) tariff treatment to all its trading partners. Tariffs are levied on most products entering Mexico, applying ad valorem to the CIF values of imports. Since 2008, Mexico has embarked in a years-long, unilateral effort to reduce its MFN duties rates on approximately 97% of manufactured imports. The most recent round of cuts took place on 1 January 2013, covering certain apparel, textile made-ups and footwear, reducing the MFN duty rate for apparel and textile made-ups imported into Mexico to 20%. Tariffs aside, most imports are subject to a 16% value-added tax (VAT) in Mexico, while a 0.8% ad valorem customs processing fee is levied on imports.
In Mexico, all imports must be accompanied by an import declaration, which must contain a broad range of information including a commercial invoice (must include information about the place and date of issue, name and domicile of the consignee, detailed description of the merchandise and name and domicile of the seller), a bill of lading or airway bill, documents showing compliance with non-tariff regulations and restrictions, certificates of origin, applicability of antidumping duties, documents demonstrating guarantee of payments of additional duties when imports appear to be undervalued, and information allowing identification, analysis and control of the imports (such as serial number, brand, model or technical specifications).
Anti-dumping and Countervailing
As of December 2017, Mexico applies no anti-dumping (AD) order on Hong Kong’s exports. On the other hand, the transition duties imposed by Mexico on a range of Chinese mainland products were eliminated on 12 December 2011. Yet, the Mexican government has stressed that regular AD and safeguard actions against Chinese mainland products may be initiated to protect the domestic apparel, footwear and other sectors from injurious competition from abroad. As it now stands, Mexico applies several AD measures on Chinese imports such as hydraulic bottle jacks, mushrooms and seamless steel tubing, while it has initiated a number of investigation cases on imports such as children’s bicycles and certain steel products from the Chinese mainland, while it does not apply any countervailing (CV) measures on imports from the Chinese mainland or Hong Kong.
Product Standards and Labelling Requirements
Basically, Mexican product standard regulations can be classified under two categories, namely mandatory technical regulations (NOMs) including labelling requirements, issued by government agencies and ministries, and voluntary standards (NMXs) issued by recognised national standardisation bodies. In short, most of the standards and certificates are in line with US standards, so that Hong Kong companies can have their products tested and certified before shipment in Hong Kong or the Chinese mainland.
On labelling, all products intended for retail sale in Mexico are required to bear a label in Spanish prior to importation. Most NOMs require commercial information to be affixed, adhered, sewn, or tagged onto the product, with information such as the name/business name and address of the importer and exporter, trademark or commercial brand name of the product, net contents, use/handling/care instructions for the product and relevant warnings and precautions, if applicable, in Spanish.
With a wide network of free trade agreements in place, Mexico is having preferential access to 45 countries, including the EU, US and Japan. In a recent move of interest to Hong Kong traders, Mexico signed on 18 June 2012 a comprehensive agreement for the avoidance of double taxation (CDTA) with Hong Kong, aiming to encourage the flow of investment and talent between the two economies. With the enforcement by 7 March 2013, tax paid for income earned in Hong Kong by Mexican residents will be allowed as credit against tax payable in Mexico from the year of assessment 2014/2015 onwards, while a lower withholding tax will be applied to Hong Kong residents receiving interest from Mexico.
In a bid to have better synergy when making inroads into the Asian market, Mexico signed an accord in June 2012 with Chile, Colombia and Peru to establish the Pacific Alliance (PA) to reach out to the Asia-Pacific region as a united force. In February 2014, the PA members reached an agreement to eliminate tariffs on 92% of goods traded within the bloc by 2015, while the remaining 8% will be dropped progressively and steadily in following years. More recently, Mexico is a member to the Trans-Pacific Partnership (TPP) Agreement, which was formally signed by its 12 signatories in February 2016 although the new US president Donald Trump signed an executive order formally withdrawing the US from the trade deal in January 2017. Despite the absence of the US from the agreement, the remaining 11 TPP nations officially agreed on key aspects of the trade pact on 11 November 2017 and aimed to sign the document in early 2018.
Hong Kong’s Trade with Mexico 
Mexico was Hong Kong’s largest export market in Latin America in the first ten months of 2017. Hong Kong’s total exports to Mexico increased by 7% to US$3.1 billion in the first ten months of 2017, after decreasing by 5% to US$3.6 billion in 2016. Major exports to Mexico in January-October 2017 included telecommunications equipment & parts (shared 42% of the total), electrical apparatus for electrical circuits (9%), parts & accessories of office machines/computers (8%), computers (7%), electric power machinery & parts (6%), semi-conductors, electronic valves & tubes (5%) and toys, games & sporting goods (4%).
On the other hand, Mexico was Hong Kong’s 2nd-largest source of imports in Latin America in the first ten months of 2017, after only Brazil. Hong Kong’s total imports from Mexico soared by 30% to US$692 million in the first ten months of 2017, following a 5% decline to US$696 million in 2016. Leading import items in January-October 2017 included telecommunications equipment & parts (shared 30% of the total), semi-conductors, electronic valves & tubes (16%), parts & accessories of office machines/computers (14%), computers (11%), crustaceans, molluscs & aquatic invertebrates, chilled, frozen, dried, salted or in brine (5%), plastic waste, parings & scrap (3%) and fresh or dried fruit and nuts (not including oil nuts) (3%).
 Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.