5 reason why Indian companies should invest in Mexico

Mexico offers the discerning investor access to several bustling markets including a vibrant domestic market with a rising middle class.

It can't be helped, if the name Mexico conjures up visions of tequila and sombreros in one's mid, but once one pushes past the stereotypes, it doesn't take long to figure out that Mexico offers the discerning investor a vast market with plenty of opportunities. With a population of almost 130 million, a rich cultural history and diversity, and abundant natural resources, Mexico is among the world′s 15 largest economies in the world and the second largest economy in Latin America.

What makes Mexico so special

According to a recent World Investment Report of the United Nations Conference on Trade and Development (UNCTAD), Mexico is one of the top developing nations in which to invest.

In recent years the Mexican economy has opened itself up to foreign investments in various sectors including but limited to telecommunications, public utilities and petroleum. In addition, the Mexican government has been encouraging private players with government owned companies relinquishing their predominant position.

1. Geographical location

Mexico's close proximity to the US, one of the largest consumer markets in the world is huge advantage. The two countries share a common border of more than 2,000 miles. The country's proximity to the United States means that a truck carrying manufactured goods can drive from Mexico and deliver its cargo to any location in the continental US in less than 48 hours. In addition to its advantageous position in North America, Mexico is the bridge between the US and Canada and the rest of Latin America.

2. Access to markets

In addition to its close proximity to the US, Mexico also holds a total of 14 Free Trade Agreements that encompass commercial relations with a total of 46 countries throughout the world, this gives investors the ability to ship goods duty-free to most of the world's major markets. Four of Mexico's most significant trade agreements include the United States-Mexico-Canada Free Trade Agreement, The Trans-Pacific Partnership (TPP), The Mexico-EU Free Trade Agreement, and the Pacific Alliance, which is an agreement between Chile, Colombia, Peru, and Mexico.

In addition, Mexico also has a huge domestic market of 130 million. A recent study by the Financial Times indicates that 53 per cent of Mexican consumers have access to supermarkets, “hypermarkets,” and department stores.

3. Infrastructure and services

Mexico has some of the best infrastructure and services in the world. Not only are these services of good quality but they are also cheaper than the prices compared in their countries. In addition, Mexico's government presented an almost $14 billion infrastructure investment plan. Ranging from a concession to revive a planned train link between Mexico City and the central city of Queretaro to investments for state oil firm Petroleos Mexicanos (Pemex), the raft comprises some 39 projects.

4. Main sectors for investment

Some of the top sectors for manufacturing in Mexico are:

Manufacturing:

According to World Bank data, manufacturing industries represent 17.1 per cent of GDP and 15.8 per cent of the national economy. With 43.4 per cent of foreign direct investment (FDI), the sector is the largest in the country. These industries grew by 1.3 per cent during the year. FDI is driven upwards by the automotive and aerospace manufacturing industries.

According to some estimates, investment in Mexico′s automotive industry is expected to increase by USD $10 billion over the next several years. Major automakers have confirmed this trend, with BMW investing in a new plant in San Luis Potosí for over USD $1 billion, and Nissan recently investing USD $278 million into their Aguascalientes A1 plant. While the aerospace industry has been, and continues to be, one of the government's top priorities for the country's economic development. Mexico is fourteenth in the world ranking of the industry. According to reports the Mexican government has put in place a strategic program, Pro-Aereo, to position Mexico as a member of the ten global exporting countries.

Real estate

As one of the world's top 10 most visited countries and the most popular international tourism destination for US travellers, Mexico is a global tourism powerhouse. The high volume of tourists provides huge opportunities for those who invest in Mexico real estate in the form of resorts, rentals and guest houses. Mexico's natural beauty is also a huge attraction, offering beautiful vistas and seaside views. Areas such as the Riviera Maya and the Yucatan Peninsula are among the places with the greatest investment potential. In addition, they are becoming a point of attraction not only for those looking for fun and nightlife but also for those who want to have experienced close to nature. Perhaps the most important factor is that real estate investment in Mexico can give you a higher return on investment.

Fintech

According to Latin Hub Business, Mexico is the second-largest market for fintech start-ups in Latin America. Between 2017 and 2022, Mexico's fintech market is expected to double, reaching a value of US$68.2 billion. Latest figures show that there 515 fintech companies in Mexico with an estimated revenue volume of about MX$68.409 billion (approximately US$35.03 billion). Today Mexico is the Latin American country considered to be the most dynamic and with the highest level of technological development. This ecosystem has created about 3,600 direct and perhaps as many indirect jobs. According to Entrepreneur.com, 80% of new companies are now operational and 48% of them are in growth/expansion.

5. India and Mexico

India and Mexico share a multitude of social factors, such as food habits, dress styles and artistic forms, cultural and family values, as well as European connections of the colonial era. The two countries have several bilateral agreements & MOUs, including for Investment Promotion and Protection, Double Taxation Avoidance, Extradition, Administrative Assistance in Customs Matters, Air Services, S & T Co-operation, Space Cooperation, Promotion of Traditional Medicine, Tourism Promotion, Cultural Exchanges.

Under ITEC program, 20 training slots are available to Mexican participants annually. A scholarship is also offered to Mexican diplomats for training at the FSI of the Ministry of External Affairs once in two years. Almost 300 businessmen visit Mexico every year to participate in the biggest Expos like InterModa (Fashion sector), Expo Ferreterra and CIHAC (Construction sector), and Plastimagen (plastics sector). As per information given by the Indian embassy in Mexico, Investments from India in Mexico are estimated close to 3 billion USD. Most of the leading Indian companies in IT/software (TCS, Infosys, Wipro, NIIT, BirlaSoft, HCL, Aptech, Hexaware, Patni, etc.) and pharmaceutical (Hetero labs, Sun Pharma, Dr.Reddy's Laboratories, Torrent Pharmaceuticals, etc.) sectors have set up joint ventures in Mexico.