Current News Mexico has been trying to grow more stronger job’s to help the retail market expand private consumption, To achieve an increased access to credit. While its per capita retail sales of $3,420 is among the highest in Latin America, Mexico is still well behind its neighbor to the north, the United States. Mexico’s market is well saturated, and is entering the closing phase of the window of opportunity as sales area per capita surpasses 200 square meters. The market has seen a wide range of mergers and acquisitions, some by players seeking to expand in Mexico and others by companies seeking to sell off assets to focus on core businesses. Internet sales grew by more than 35 percent in 2014 to reach $12 billion, and many foreign brands entered or expanded their presence in Mexico. Mexico has the largest stock exchange in Latin America. But as of February 2016 Mexico’s IPC index fell 1.33 percent to its lowest level since November. Most investors have blamed the fall on broad concerns over economic fundamentals, erratic policy implementation and heavy-handed government meddling in the private sector. Showing a moderate degree of resilience by facing a challeng in their global economic environment. Reform efforts have continued in many areas related to enhancing regulatory efficiency and liberalizing investment regimes in the retail market.
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History Today she is the country’s patron and her name is invoked in religious ceremonies, political speeches and literature. Indian Christianity is fused with ancient beliefs. The early missionaries won over the indigenous people by identifying Catholic saints with Indian gods and allowing old festivals to be celebrated. Acceptance of the new religion was greatly helped by the appearance of the Virgin of Guadalupe in 1531. Old traditions still survive however. In the traditional Indian world almost everything has a spiritual dimension animals, trees, rivers, wind, rain, sun and hills have their own gods or spirits. And these may be invoked in ancient ceremonies for their own purposes. Witchcraft and magic also still survive. General breakdown by religion Roman Catholic make up 89%, Protestant 6%, other 5%. Seen how very small percentage of other religions are also practiced in Mexico including Protestantism and Judaism. Acceptance of the new religion was greatly helped by the appearance of the Virgin of Guadalupe in 1531. Old
traditions still survive however. In the traditional Indian world almost everything has a spiritual dimension animals, trees, rivers, wind, rain, sun and hills have their own gods or spirits. And these may be invoked in ancient ceremonies for their own purposes. Witchcraft and magic also still survive. General breakdown by religion Roman Catholic make up 89%, Protestant 6%, other 5%. Seen how very small percentage of other religions are also practiced in Mexico including Protestantism and Judaism. 92.7% of people speak Spanish and another 5.7 % speak an indigenous language. Indigenous languages include Mayan, Nahuatl, and regional language. Mexico’s Independence day, falls on the 16th September since 1810. The current population of Mexico is 128,028,360 as of Tuesday, February 16, 2016, based on the latest United Nations estimates. Mexico population is equivalent to 1.73% of the total world population. It’s noted that 78.1 % of the population is urban. In addition the median age in Mexico is 27 years old. Know to be an overwhelmingly large ethnic group in Mexico is the Mestizos who are of mixed Spanish and Indian ancestry. They control most of the money and the power. The next largest group is the indigenous population who largely retain their sense of distinct identity. The Mexican government recognizes 56 different indigenous groups and these cultures that have survived largely because of their rural isolation. These people are generally poor and their main wealth is traditional and spiritual and their way of life filled with communal customs and rituals. Mexico is the most populous Spanish-speaking country in the world and the second most-populous country in Latin America after Portuguese-speaking Brazil. Highly developed cultures, including the Olmec, Maya, Toltec, and Aztec, existed long before Spain conquered Mexico in 1521. Mexico was a Spanish colony for 300 years until 1821 when it formally achieved independence. Religion plays a central role in Mexican culture and the overwhelming majority of the population is Roman Catholic. The Mexican Catholic Church’s most important symbol is Nuestra Senora de Guadalupe, a dark-skinned manifestation of the Virgin Mary who appeared to a Mexican Indian in 1531 on a hill near Mexico City . 2
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P.E.S.T.E.L Political • Mexico has an IVA or VAT (value added tax) on most sales transactions, including sales of foreign products. The VAT is 11 percent for products staying in the Mexican border region and 16 percent for products going to the interior of Mexico • Silk or leather clothing items (except for shoes) pay a 5-percent luxury tax in addition to the VAT. U.S. goods entering Mexico do not have to pay this 5 percent luxury tax when their product is purchased by a business. • Entries of certain textile and apparel products require that additional information be submitted to Mexican Customs Authority, reported in a Document entitled “Annex 18.
Environmental • Climate varies, along the coast it is hot and humid. Also swamp to desert from tropical lowland jungle to high alpine vegetation • Dry season is November to May, followed by four months of significant rainfall. Average rainfall of 170mm in July
Social • Between 2009 and 2013, e-commerce sales in Mexico grew 400%, according to Euromonitor International. Mexico’s direct-to-consumer e-commerce sales expect to double between 2014 and 2018 to $5.5 billion, according to Forrester Research Inc. • In 2015, 65.1 million Mexicans will go online, making it the eighth-largest Internet user population in the world • Mexican retailers are evolving from sales oriented focus, to a customer-centricity focus. This means that the main goal to grow revenue is now driven by understanding customer needs through the shopping experience. 4
P.E.S.T.E.L Economy • Second largest economy in Latin America, just after Brazil • In 2015 the US dollar appreciated impacting the exchange rate against the Mexican peso. With limited domestic price increases consumers became aware that luxury products in categories like jewelers, writing instruments, timepieces and apparel and footwear especially, were now more attractive to purchases domestically than abroad.
• Middle class has grown at a consistent rate and will continue to grow • According to BCG projects to reach 1.6 million more households to enter the middle class by 2018
Technology • Mexico lags behind many more technologically developed countries in terms of educational programs and research, it is a definite leader in Latin American due to its development of science and technology programs in the 20th Century. • Technology programs remains low with its annual investment in research and technology development at 0.31% of it GDP. This is comparatively low to other developing nations such as China (0.7%), Brazil (0.8%), and India (0.8%).
Legal • Federal Consumer Protection Law which protects consumers • 6 days of work, employees are entitled to one day of rest with full pay. Maximum of 48 hours per week • Minimum wage 70.10 pesos ($4.19)
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Economic Overview Mexico has a $1.26 trillion economy, making it the 15th largest economy in the world, and the 11th taking into account power purchasing parity. This makes Mexico a so-called “middle power”: falling just short of being a G7 economy, it is nevertheless an economic power to be reckoned with its 122 million inhabitants, the GDP per capita currently stands at about$10,000, placing it firmly in the “upper middle income” countries. Adjusted for purchasing power, the GDP per capita is about 60% higher, at roughly $16,000. That puts it in the same league with countries like Turkey, Romania, and Brazil, but still far below countries like the U.S. ($55,000) or Switzerland ($58,000) Economic growth is forecasted to rebound to 3.5% in 2015, more or less in line with compounded average annual growth in the years following the global financial crisis of 2008-2009. Before that, growth averaged about 4-5% per year. The country faced its last severe economic crisis in 1994. Despite the positive forecasts, the Mexican economy faced a number of challenges in recent years. Growth was under 2% in 2013, and under 3% in 2014. The price of commodities, important for Mexico’s income from exports, has been falling in what has been called “the end of the commodity super cycle”.The government of Enrique Peña Nieto, which came to power in December 2012, has been pressing ahead with what has been seen by many as an “ambitious reform agenda.” This includes an overhaul of the taxing system, cuts in government spending, and the liberalization of certain economic sectors such as energy and telecommunications .Mexico is traditionally seen as a commodities and manufacturing giant. It has the largest proven silver reserves in the world, and the tenth largest oil reserves. PEMEX, the state-owned oil company, is one of the largest oil producers in the world, with revenues of about $130 billion. Due to rising wages and less favorable trade terms, Mexico recently gained competitiveness as a automobile exporter. Large automotive companies such as Volkswagen, Toyota, Nissan, Ford, General Motors and Fiat Chrysler have increased their production in Mexico recently, or have announced their intentions to do so.Thanks to its membership of the North American Free Trade Association(NAFTA), Mexico has been able to become one of the United States’ largest trade partners. It exports mostly manufactured goods, industrial goods, and automobiles. It has a positive trade balance with the United States, and as a consequence, has become one of the largest holders of U.S. treasury bonds. Mexico became the first Latin American country to enter the Organization for Economic Co-operation and Development (OECD) in 1994. It was later joined by Chile. Colombia is in talks to join the OECD as well. The current president of the OECD is a Mexican, Jose Angel Gurria. Mexico is the OECD country with the second highest degree of economic disparity between the rich and the poor, behind Chile. The bottom 10% on the income rung disposes of 1.36% of the country’s resources, whereas the upper 10% dispose of almost 36%. Twenty-six percent of GDP comes from the informal economy, a part of the economy in which almost 60% of the Labor-workforce. Occupation agriculture is 13.4%, industry: 24.1% service 61%. Unemployment Rate is at 4.5% as of 2015.
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Socio Economic and Political Stability Factors The Mexican economy continues to expand at a moderate annual rate of growth of 2.4 percent as the economic recovery lost steam during the first half of 2015. Moderate growth during the first semester of 2015 in Mexico has been attributed to weakness in industrial production in the U.S., a further drop in the volume of oil production reducing annual GDP growth by about 0.4 percentage points and financial market volatility. A gradual recovery of economic activity is expected to continue, with economic growth strengthening from 2.3 percent in 2015 to 3.0 percent in 2017. The expansion of economic activity will rely on growth of private consumption and investment, with an increase in manufacturing exports following the significant real exchange rate adjustment and robust growth in the U.S. eventually providing additional support. Despite higher income and excise tax revenue and in order to maintain fiscal consolidation
plans, the government decided to respond to lower oil revenue by reducing public sector spending in 2015 and 2016, by 0.7 percent of GDP in each year. A strong commitment to sound public finances is at the core of the government’s policy response to the challenges posed by an increasingly complicated external environment, despite the possible dampening impact on the pace of economic growth.The Federal government of Mexico and the governments of each of the states of Mexico maintain and function with a division of power and authority on a three branch (sector) system: Executive, Legislative and Judicial. The executive branch of the government is the administrative branch, which charged with the administration of the government. The Federal level has a President and ministers of government (also known as Secretaries of government). The President also has the authority/responsibility of approving the laws passed by the congress (legislative) The legislative branch of government is the law making branch, which is charged with the review and determination of when and where laws are necessary. This branch receives assistance from the Executive branch by its proposal of laws and at times by its rejection of laws passed by the legislative branch. The legislative body is composed of a chamber of deputies (similar to that of the house of representatives in the US) and a chamber of senators (similar to that of the senate in the US). The proposals of law must pass both chambers before being brought to the President for his ratification. There are Federal level courts and State level courts. The Federal level Courts resolve issues foreseen under federal laws and the State level courts (for each state) resolve issues foreseen under state level laws.The legal system is Mexico provides for Federal Laws and State laws. There is a Federal Constitution and a state constitution for each of the states of Mexico. Since legislative and executive heads are elected, the concept of political parties is very present in Mexico. Although there are several (more than 15) political parties, the two front runners are the “PRI” and “PAN parties. 10
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Import and Export Volume Foreign Trade
2015
Main Export Partners (%)
Main Import Partners (%)
U.S 80
U.S 54
Canada
China
3
18
China 2
Japan 5
Spain 2
South Korea
Main Export Products (%) Manufacture Goods
4
Main Import Products (%) 85
Intermediate 76
Oil 11
Capital Goods
11
Agricultural
Consumer Goods
3
3
Mining 1
The Mexican economy is highly dependent on exports to the United States, which account for about 80 % of its total exports. Mexico has undergone a profound economic transformation since the mid- 1990s as a result of economic liberalization and its joining the North American Free Trade Agreement (a free trade bloc with the U.S. and Canada also known as NAFTA). There has been rapid and impressive progress in building a modern, diversified economy, improving infrastructure, and tackling poverty. Today, the country enjoys a more open economic and political system and is more integrated with the world economy. What drives many of their import and export are Agriculture, ranching, timber, mining, oil, natural gas, fishing, tourism and manufacturing are Mexico’s primary revenue earners. Mexico has a free market economy with a mixture of modern and outmoded industry and agriculture, increasingly dominated by the private sector.
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Mexico’s Transportation Data The value of U.S.-Mexico freight totaled $43.0 billion in November 2015, down 1.9 percent from November 2014, as two out of the five transportation modes – air and truck – carried more U.S.-Mexico freight value than in November 2014. Freight carried by truck increased by 4.9 percent, led by shipments of electrical machinery, which were up 10.5 percent. Air freight value rose 2.7 percent while rail freight value declined 4.3 percent. Pipeline freight value decreased by 37.5 percent and vessel freight value decreased by 40.7 percent mainly due to lower crude oil prices. Trucks carried 72.3 percent of the $43.0 billion of the value of freight transported to and from Mexico, followed by rail, 13.8 percent; vessel, 7.4 percent; air, 2.9 percent; and pipeline, 0.6 percent. The surface transportation modes of truck, rail and pipeline carried 86.7 percent of the total U.S.-Mexico freight flows.
Transportation between the U.S and Mexico for Each Mode of Transportation
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Trade Agreements In an effort to diversify and increase trade with other countries, Mexico has a total of 12 trade agreements involving 44 countries Mexico is a founding and active member of various hemispheric flora that support regional political and economic cooperation within Latin America. Mexico is, for example, a founding member of the OAS and the Inter-American Treaty of Reciprocal Assistance (Rio Treaty). Mexico has always been a staunch supporter of international cooperation through multilateral institutions. Mexico maintains diplomatic relations with 176 countries. Mexico also is a founding member of the United Nations and participates as an active member in more than seventy other international flora, including the General Agreement on Tariffs and Trade (GATT; now the World Trade Organization--WTO), the Organization for Economic Co-operation and Development (OECD), the Asia Pacific Economic Cooperation (APEC) forum, NAFTA, and the Rio Group. In addition, the Mexican government was among the leading members of the Inter-American System that drafted the Treaty of Tlatelolco, which prohibits Latin American countries from acquiring nuclear weapons. Some of the key trade challenges include the competitiveness of its export sector for value-added products and services that can be threatened by the Pacific Alliance. Mexico has other motivations for continuing trade liberalization with other countries, such as expanding market access for its exports and decreasing its reliance on the United States as an export market. By entering into trade agreements with other countries, Mexico is seeking to achieve economies of scale in certain sectors of the economy and to expand its export market. Free trade agreements provide partners with broader market access for their goods and services. Â 14
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Apparel and Textile Overview Textile and apparel machinery market depends strongly on foreign demand. Demand for textile machinery satisfied mainly by foreign trade partners as imports account for 80% of market size. Textile and apparel machinery industry fast-growing with 8% CAGR over 200142015, but local machinery manufacturing base remains weak compared with foreign producers. Industry is capital-intensive, but profitability still accounts for 16% of turnover. Boost in exports (up 152% over 2015-2016) underpinned by US buyers. Industry expected to expand 59% over 2013-2018, but local manufacturers will remain suppressed by foreign suppliers The apparel industry in Mexico represents one of the largest manufacturing sectors in the Mexican economy. Employing nearly 460,000 workers, Mexican apparel industry employment has more than doubled since 2000. It is estimated that Mexico’s apparel industry produced nearly $8.5billion of product in 2015, up from just $3.6 billion in 2014. There are currently more than 22,000 apparel companies in Mexico, with the average company employing just about 40 workers and with many companies employing less than 5 workers. So-called large firms (with more than 500 workers) account for less than 2 percent of all apparel companies in Mexico. Primary Manufactures in Apparel and Textile Industry (%) Apparel Manufacturer
43
Double-Knit Fabric Manufacturer
23
Spin, Weaving & Finish Fabrics
19
Manufacturer Textile Material
13
2015
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Main Suppliers
Shipping resources Mediterranean Shipping Company Mexico ,S.A. DE C.V
Distribuidora De Textile Aventa Distribuidora De Textile Aventa is known as the largest manufacturer of knits, yarn to fabric to finish apparel.
Address: Industria Automotriz 128, Delegación Sta Ana Tlapaltitlán, 50200 Toluca de Lerdo, Méx., Mexico Phone: +52 722 279 0900
Textile Unidos S.A de C.V A vertical company so they have their own productions. They are based in Mexico, and provide a finishing process and dyeing process to textile
Address: Fco.I. Madero No. 32 San Esteban 53560 Mexico Phone: +52 728 508 9935
Address: Ings. Militares No. 2 Col. Empleado Municipal Naucalpan, EM 53380 Mexico Phone: +52 507 265 6001
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Address: Circuito Santa Monica, California, 78395 San Luis, S.L.P., Mexico Phone: +52 444 826 7000
Address: shipping, trucking, freight, distribution Constituyentes Nte No 107 and delivery service to Sears, Walmart, Querétaro, Querétaro 76050 Superama, Liverpool, Palacio de Hierro México and Comercial Mexicana in Mexico Phone: +52 442 211 1800 Confeccionistas Unidos Sa De CV
Address: Oriente 153 # 3215, Col Díaz Mirón Ciudad de Mexico D. F.Mexico 07400 Phone: +52 576 811 1583
Provides seafreight and airfreigth quotes for both exports and imports within 24h. Macys, Walmart
Address: Jaime Balmes No. 8, Int. 201, Col. Los Morales Polanco,Mexico DF Phone: +52 (55) 4777-8800
Monta Cargas Electronicos Mec, S.A. de CV
Plus Textile del Norte Sa De CV Known for their garment print factory. They can print on complete garments or cut pieces.
Now serves the U.S., Mexico and Canada markets with its focus on Freight to and from Mexico utilizing its fleet of trucks and trailors. Universal Scientific Industy
Confeccionistas Unidos Sa De CV Manufactures womens’ apparels; basically coordinates and separates (jackets, blouses, skirts, trousers, and t-shirts).
Address: Colonia Escandon, Del. Miguel Hidalgo Lerdo, Méx., Mexico DF Phone: +52 55 5091 7070
Valeo Sistemas Eléctricos, S.A. De C.V.
Grupo Kaltex, S.A. de C.V. Manufactures and commercializes textile products. It provides synthetic fibers, garments, and textile home products The company markets and sells its products through distributors and wholesalers.
Duration: 2 months or more Lead Time: 2-3 times a week Fees: $ 237.50 (estimate)
Address: Tenayuca #25-C, Col. Son Bartolo Tenayuca, Tlalneplantle, Mexico Phone: +52 55 5388 7000
Levys, big box retailer Bloomberg Current Market Rate ; $4,244.89-$4,691.72 Time Travel 23.72 Varies on tax and duties
Address: Monte Alban # 223 Querétaro, 76040 México Phone: +52 442 214 2710
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How to Conduct Business U.S. businesspeople have more and more reasons for doing business in Mexico. To be successful, however, they need to keep in mind cultural differences between the two countries. For example, Mexico’s typical business culture meetings start off slowly, with Mexican businessmen exhibiting behavior that is gentle and compromising as they warm up to the actual topics and purpose of the meeting. As well, in Mexico there is a considerable gap between the executive level and the various levels of the rest of the company, causing the executive who well may agree with you to mentally translate how the rest of the corporation can and will execute. There is a sizable down-shift process from top management levels to the execution levels in Mexico. The following list are do’s and don’t in the country when conducting business 1. Mexicans dress formally for business meetings with suits and ties, and will expect you do the same in the major cities (Mexico City, Guadalajara, Monterrey, etc.) 2. When it comes to business greetings, the proper practice is a handshake, regardless of gender. 3. Become customary to use an associates first name within minutes of the initial meeting. 4. Mexicans also tend to attach the word “NO” to the end of a comment, seemingly turning each statement into a question 5. Mexican businessmen or women are customarily late for a scheduled-appointment, usually by 15 to 30 minutes due to traffic. 6.Do Not make the O.K. hand gesture commonly used in the U.S.; it is considered vulgar 7. Do not throw documents on the table when negotiating; it is considered rude 8.Generally speaking, business meetings and negotiations proceed slower than they do in the U.S. They do not usually occur on the weekends, as that time is reserved for families
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Risks and Benefits Perhaps one of the greatest challenges businesses will face when manufacturing in Mexico is the lack of regulation the Mexican government places on brokers and logistical providers in the country. Manufacturing in Mexico is becoming more appealing to businesses in North America and Asia due to lower labor costs, the country's 44 free trade agreements and, of course, close proximity to the U.S. This means more manageable and cost-effective supply chain logistics. In order for manufacturers in Mexico to reap the benefits of close proximity to the U.S., it is important to be prepared with knowledge of the logistical climate, relations with other major regions and key strategies for maximizing efficiencies. The cost of moving freight from Mexico throughout North America pales in comparison to the freight rate in Asia. By improving a speed to market,and reducing inventory cost and improved supply chain transparency are major advantages to procurement teams who leverage the proximity of Mexico Lastly as e-commerce becomes a way of life for consumers, there will be increasing demands on companies to improve speed to market, and creating efficiencies in this arena will depend on manufacturers' abilities to optimize their logistical operations. So as the rise of e-commerce is bound to have a major impact on how manufacturers in Mexico handle supply-chain logistics.
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