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4.6 Challenges Facing Exporters

Despite the positive portrayal of the Mexican market, foreign companies need to pay attention to certain potential risks and challenges when trading with Mexico.

High Dependence on the US Economy

Companies should take heed of the economy risk stemming from the high dependence of the Mexican economy on the US. As performance of the US economy has shown significant weakness amid the current housing and financial crises, foreign companies should be aware of such potential country risk when doing business with or extending credit to Mexican companies.

Hostile Sentiment towards Chinese Products

The Mexican labour market is highly dependent on certain manufacturing sectors, such as toys, clothing and footwear. Yet the increasing threat from China, especially amid the waiver of protectionist measures such as anti-dumping duties, has led to a hostile sentiment towards Chinese imports. This will also affect Hong Kong exports as many Mexican companies and consumers are aware of the fact that most Hong Kong imports are in fact made in the Chinese mainland.

Difficulty in Customs Clearance

Notwithstanding the recent extension of working hours[1] in the customs offices in Mexico, it is reported that, in some cases, products of Hong Kong origin will take longer time for customs clearance as the Mexican customs officials usually pay extra attention to Hong Kong and mainland imports to avoid possible circumvention of AD measures. According to some Mexican customs brokers, it takes on average three to four days more for Hong Kong and mainland imports to clear customs, even with a full and complete set of documents.

Tyranny of Distance

So far there are no direct flights between Hong Kong and Mexico. Most passengers flying from Hong Kong to Mexico have to transit in the US, usually in Los Angeles. Altogether it will take more than 20 hours to arrive in Mexico City. Regarding ocean shipments, it will take 20-23 days to arrive at the port of Manzanillo, the most important port for Hong Kong and mainland exports in Mexico. Given the gruelling journey, comprehensive export financing and insurance will be difficult and expensive to obtain, which may cause cash flow problems, particularly to small and medium enterprises.

Language Barriers

As the biggest Spanish-speaking country in the world, most people on the street in Mexico speak only Spanish. Despite close business ties with the US, English proficiency remains low in Mexico, due mainly to the non-inclusion of English language in the formal education curriculum in the public schools. Granting that the situation is better when it comes to the business arena, new-to-the-market businesspeople are strongly advised to appoint a reliable interpreter to accompany them at business meetings to facilitate business negotiations and avoid undesirable surprises.

Crime and Violence

Although the Mexican government has taken some bold steps in combating crime and violence, they remain one of the most urgent concerns facing foreign businesspeople in Mexico. It is reported that Mexico has one of the highest rates of kidnappings in the world, while turf wars between drug traffickers and gangland killings frequently occur in urban centres.

[1] The customs offices in Mexico used to close at 3 p.m. before the recent extension to 6 p.m.

Content provided by Hong Kong Trade Development Council
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