The debate over immigration and “the wall” continue. Yet, underneath the partisan bickering, stereotypes and fear, it is important to remember the many reasons why it makes sense to do business in Mexico and Latin America.
NAFTA Becomes USMCA
President Trump recently revised NAFTA (North American Free Trade Agreement) into the more-difficult-to pronounce USMCA (United States-Mexico-Canada Agreement), the new free trade agreement between the governments of Canada, Mexico, and the United States.
Ever since NAFTA was first signed in 1988, it has set the stage for Mexicans and Americans to become very comfortable doing business together over the course of the last 30 years. Many Mexican executives have since gone to university or graduate school in the United States or participated in corporate training programs here. And the proliferation of American media in Mexico provides a lot of cultural understanding of how to communicate and deal with Americans.
Today, USMCA in combination with the tariffs imposed on Chinese goods make it much more favorable to do business with Mexico. Plus, Mexico is far easier to travel to, being just south of the U.S. Most of Mexico is in the Central or Mountain time zones and far easier to schedule conference calls with. In other words, there is no need to schedule calls before or after work like when calling Chinese companies where the time difference is 12 hours between New York City and Beijing. And with the U.S. Dollar being as strong as it is currently, that means that now it makes even more sense to invest abroad and expand your business while U.S. dollars go further.
Perception vs. Reality of Mexico
Americans may perceive Mexico as “poor” because of the immigrants coming here. Many Latin American immigrants who come to the U.S. are indeed poor, working as farm laborers, for example. Yet surprisingly, there are 36 million Mexicans in Mexico’s middle and upper class, which equates to a number larger than the total population of Spain. Mexico’s census shows that the average age is 27 years old (INEGI Encuesta Intercensal 2015), making Mexico a very young country. (In contrast, the U.S. Census reported that the national median age was 38 years in 2017). Plus, in recent years, Mexico’s GDP growth has hovered around 2% while inflation remains below 5%, which is especially low when compared to the double digital inflation that Mexico experienced in the 1970’s.
American Multinationals Doing Business in Mexico
Lastly and arguable most importantly, many American multinationals see a significant percentage of their revenues coming from south of the border. For example:
- AT&T has 15 million subscribers in Mexico, after acquiring two mobile carriers there*
- Citibank owns Banamex, the largest bank in Mexico with 1,479 retail branches*
- Walmart has 20% of its stores in Mexico, its second largest market*
- Mexico is the second largest market (outside of the U.S.) for both PepsiCo and Coca-Cola*
*From the companies’ respective 2017 annual reports.
Watch me present at VCU’s School of Business in this video on “Using Digital Platforms to Expand Your Business Into Mexico, Latin America, and the U.S. Hispanic Market”
Jumping off Point for Latin America
Mexico is Latin America’s second largest market, behind Brazil. It serves as a jumping off point for doing business in Latin America. Spanish is one of the top three languages in the world, behind English and Mandarin. Over half a billion people speak Spanish natively including the 20 Spanish-speaking countries across Latin America and Spain. There are 254MM Internet users across Latin America, which includes Brazil, where they speak Portuguese.
Two Case Studies: Flipboard and Amtrak
In my video presentation, I outlined two Latin American case studies. When I worked at Flipboard, the news curation app/website based in Palo Alto, California, we launched the Spanish-language version with a variety of new partnerships: media brands, journalists, and influencers. We dramatically grew traffic and engagement by developing more localized content via partnerships. Read the case study for details. And in the second case study, Amtrak launched its Spanish-language website and app, originally catering to the U.S. Hispanic market. While the government-owned train company did increase sales among U.S. Hispanics, Amtrak also saw sales growth from Spanish and Latin American tourists traveling to the U.S. These tourists wanted train tickets and of course felt more comfortable buying them in their native language. Surprisingly, this led Amtrak to translate its e-commerce platforms into German, French and even Mandarin, again for international tourists who wanted to see the U.S. while vacationing by train.
U.S. Hispanic Market = Entryway for Mexican Market
The Internet and social media have drastically changed how recent waves of immigrants to the U.S. such as Latinos “acculturate,” or adapt to a new culture. Today, Skype, WhatsApp, email, and Facebook enable immigrants to keep in touch with their relatives back home to a far greater extent than previous generations of immigrants ever have before. There are 51 million U.S. Hispanics, 65% of which are Mexican-American, or approximately 33 million. They constitute $1.2 Trillion in spending power. But what’s interesting is how this market can serve as a launch pad into Mexico. One example of that is for financial services companies. In 2017, U.S. Latinos sent $28 billion USD back to relatives in Mexico. These remittances were the #1 source of revenue for Mexico’s GDP. Mexican retailers, like Elektra, can find new revenue opportunities by offering deals to Mexicans picking remittances in their stores.
In conclusion, if we look past the partisan debate over immigration and “the wall,” Mexico presents many business opportunities as well as a launch pad for expanding into Latin America. To learn more, contact me, sign up for my email newsletter or read my other case studies. Gracias!