Those in the know see Mexico growing as an economic power over the next couple of decades, and making the leap from being the world’s 15th largest economy (where it’s currently ranked), to the fifth.
And the Mexican economy has continued to grow despite other Latin American countries seeing their’s shrink.
Trade between the UK and Mexico is worth around£1.1 billion, and the top five UK exports to Mexico are:
- Power generating machinery and equipment
- Road vehicles
- Medicinal and pharmaceutical products
- Essential oils and perfume materials.
Here’s everything you need to know about exporting to Mexico.
Where is Mexico?
The 14th largest country in the world, Mexico borders the United States in the north, and Guatemala and Belize on the south. The Gulf of Mexico on the east, with the North Pacific Ocean on the west.
Its capital, Mexico City, is almost 9,000 miles from London, with regular flights departing from the UK.
The national language is Spanish, the currency is the Mexican peso, and the dialling code is +52.
The pros and cons of exporting to Mexico
Trade between the UK and Mexico is worth upwards of $32 billion, and there are a number of large UK companies operating out of Mexico, including HSBC, AstraZeneca, GlaxoSmithKline, and HSBC.
The main benefits of UK businesses exporting to Mexico are:
- market about the same size as the whole of western Europe with a population of over 120 million
- Mexico and the EU have a free trade and a double taxation agreement
- largest economy in Latin America, after Brazil
And the strengths of the Mexican market include:
- free trade access to the US market from Mexico under the North American Free Trade Agreement (NAFTA)
- first Latin American member of the Organisation for Economic Co-operation and Development (OECD)
- more free trade agreements than any other country – 11 agreements covering 44 countries with a potential market access of up to 60% of the world’s Gross Domestic Product (GDP)
It’s not without its problems though, and there are a number of challenges to UK companies doing business out there, notably:
- open and competitive market, so be sure of your products unique selling points (USPs)
- takes time to build and maintain relationships with clients and distributors
- language barriers mean that interpreters may be required
- legal requirement to label products in Spanish
And remember, you can now screen share and video conference, using Crankwheel.
How does tax work in Mexico?
The main tax rates in Mexico are:
- VAT – known as IVA, this is charged at 16%. Some items, including foodstuffs; water; agricultural supplies; books and magazines, have a zero rate, while VAT Exempt Supplies include immovable property, land, financial services, insurance, cultural exhibitions and events, imports.
- Corporation tax – charged at 30%
- Income tax – charged between 1.92% and 32%, depending upon income. Non-residents pay between 15% and 30%
How will I be affected by customs in Mexico?
There are strict rules when it comes to goods entering and leaving Mexico, and all goods must be presented to the customs authorities along with the accompanying documentation, and goods can only enter at authorised locations.
Mexican customs charge a processing fee of 0.8%, based on the cost, insurance and freight (CIF) value of the goods, and if you’ll need to use a customs broker when shipping any goods over the value of $1,000.