Mexico

Mexico is the leading market of the Spanish-speaking Americas and its proximity to the United States makes it more attractive for Basque companies. In fact, it is the country with most footholds by Basque companies – which are part of complex global value chains such as the automotive or aeronautics industries – to be positioned to take on the Mexican and also the US markets. Its macroeconomic stability, cultural and historical ties, along with free trade agreements make Mexico an idea place to venture into the American market.

An important market with great geostrategic advantages

Mexico, with a population of over 126 million inhabitants, is one of the world’s most open economies thanks to its 14 free trade agreements providing it with preferential access to over 50 countries. The United States-Mexico-Canada Agreement (USMCA) continues to be a cornerstone of Mexican foreign trade. Despite the trade agreements signed with the EU and the Asia-Pacific regions (through the CPTPP), the trade dependency with the United States makes Mexico a country highly susceptible to US policies and events. The “Fourth Transformation” project is expected to continue now that Morena – the political party that brought Andrés Manuel López Obrador to power and who has been succeed by Claudia Sheinbaum, the first woman president of Mexico – has won a second term. The project is based on driving social programmes, infrastructure projects, food and energy sovereignty, environmental protection and fighting corruption. The Mexican government’s policies in areas such as immigration, security and economic protectionism strain relations with the United States.

In recent years, Mexico has posted a better economic performance than most of the countries of the region, with 3.2% growth of the GDP in 2023 thanks to the macroeconomic stability, the development of inflation and monetary policies, and the nearshoring phenomenon. However, this growth is forecast to slow down between 2024 and 2028 to annual average growth of between 2.2% and 3% according to the source. The downturn in economic growth is linked to the moderate growth of the United States and to the drop in public investment due to completion of strategic infrastructure projects. Inflation is expected to continue falling, which will help the country’s poorest households. However, the country’s economy is continuing to grow thanks to the manufacturing industry, along with a skilled and low-cost workforce, and the integration of Mexico in the US value chains.

Mexico is one of the largest manufacturing exporters in the world, particularly in the automotive, electronics and household appliance industries. In 2023, exports stood at roughly USD 494 billion; it is expected to continue growing in 2024 due to the integration of the supply chains in North America and the nearshoring phenomenon, particularly in sectors such as manufacturing, telecommunications and energy. Between 2025 and 2028, the current account deficit will average 1.2% of the GDP per year, thanks to the inflow of remittances and foreign direct investment (FDI) driven by nearshoring which will help to mitigate other economic factors. The United States continues to be a major trade partner of Mexico both in terms of exports and imports. As regards imports, China has gained in influence, while Canada, Latin America and the European Union are the main destinations of Mexican exports.

The market in Mexico is dynamic and diverse, with a strong focus on manufacturing, particularly in sectors such as the automotive industry, electronics and aerospace. Those sectors benefit from the geographical proximity to the United States and from trade agreements such as the USMCA, which facilitate cross-border trade and foreign direct investment. Nearshoring has gained in momentum, attracting more investments due to the relocation of companies seeking to cut costs and risks associated with long and complex supply chains.

Domestic consumption also plays a crucial role in the Mexican economy, driven by a young and growing population. The retail industry is robust, with significant growth in e-commerce, particularly after the COVID-19 pandemic. A relatively stable macroeconomic landscape has been created by the monetary policy of the Bank of Mexico, which has maintained high interest rates to control inflation, along with structural reforms.

Mexico has become a hot spot for attracting foreign companies thanks to the volume of its domestic market, the skills and cost of its workforce, the proximity to the United States, its natural resources, free trade agreements, and its robust and stable financial sector. However, certain factors such as its high taxes, its weak intellectual property protection legislation and high corruption rates continue to be an obstacle for investors, even though Mexico is implementing reforms in that regard and incentives to maintain the country’s pull factor.

Companies accessing the Mexican market find it easy to transfer currencies and control capitals as the result of the great competitiveness of the financial and banking sector. Mexico has a robust financial industry that offers good access to credit for local and international companies. Even though income tax rates are competitive regionally, Mexico has a high tax burden and rates that are not very competitive globally. Tax incentives for key industries are likely to reduce this risk in the medium term. Mexico has a broad network of state-owned enterprises that condition the market and the structural costs of companies, such as CFE or PEMEX for the energy and fuel production sectors, respectively.

Mexico is an attractive country for foreign direct investment (FDI), particularly in the manufacturing sector driven by its specialised clusters, located on the northern border of the country and in its capital, Mexico City. This trend will continue to increase, as the country has become the main destination of supplier foothold driven by US nearshoring and to different favourable treaties with the Asia-Pacific area and the European Union. Trade in the country is expected to grow due to the new government’s technocratic policies, which will reduce political uncertainty, and investment in the country.

Mexico’s many free-market agreements mean that the country offers few barriers to international trade as the result of its tariff liberalisation. The main trade obstacles in Mexico are mainly non-tariff and contingent measures, labelling requirements and import permits. There is also a rather complex customs system and strict administrative requirements. However, companies do not face major obstacles in general.

Mexico is noted for being a country that offers international legal certainty, as it complies with the multilateral agreements and regulations established based on free trade agreements and Economic Complementation Agreements (ACE). In addition, it is an active member of leading international organisations such as the United Nations Organisation (UN) and agencies of the ilk of the World Trade Organisation (WTO). However, there are challenges regarding the protection of intellectual property, high corruption rates in the public sector and difficulties to implement reform.

Digitalisation has made the bureaucracy in the country more efficient. It is important to note that in 2023 Mexico implemented different reforms to offer companies greater flexibility, by relaxing regulations in different areas.

Contact office

Martha Márquez

Business Manager

BASQUE COUNTRY DELEGATION IN MEXICO

Av. Horacio 1213, Polanco, 11550 CDMX, Mexico

+52 (55) 5254 1552

rm-marquez@euskadi.eus

* Office hours:

Monday to Thursday: 7.30 a.m. to 4.00 p.m.
Fridays: 8.00 a.m. to 1.00 p.m.

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