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Mexico as an investment destination

North South University

Department of MIB

Report
Mexico As An Investment Destination

Subject
INTERNATIONAL BUSINESS (INB372)
Section: 13

Instructor
Samira Rahman

Submitted By

ID Name Roll
1631782030 A.K Mainul Hasan 06

1811980630 MD. Mountasir Mamun Milu 15

1812867030 MD. Nasimul Haque Nasim 22

1620612030 A.M. Mubashir Ahmed 04

1712617630 Mahmud Ur Rahman Saad 07

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Mexico as an investment destination

Table of Content

Number Name of the Content Page

1 Introduction, Location, Mexican culture, 3

Language of Mexico
2 Mexican Music, Traditional Mexican 4-5
food, Holidays in Mexico, Festivals of
Mexico
3 Hofstede Cultural dimensions, Local 6-7
companies, Political System
4 Market Economy, Mexico and FDI 8

5 FDI Inflows Of Mexico 9

6 Government System, Government 9-10

policies
7 Natural Resources 11

8 Economic Integration, Overall 12-13

Attractiveness
9 Our decision, Conclusion 13-14

10 References 15
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Mexico as an investment destination

Introduction
Mexico, the official name "the United Mexican states “and the capital is Mexico City. It is
situated in the southern portion of North America. It is bordered to the north by the United
States, to the south and west by the Pacific Ocean, to the southeast by Guatemala, Belize, and
the Caribbean Sea, and to the east by the Gulf of Mexico. (“Mexico,” n.d, para1). Mexico‟s
total area is 1,972,550 km² and their total population is 128,649,566. 82.7% of Mexican
people follow Catholicism. Mexico is the world's fifteenth-largest economy by nominal GDP
and the eleventh-largest by PPP. Mexico is the member of NAFTA, UNICEF, UNESCO etc.
Mexico has 32 states.

Location

MEXICO sits on the North American continent. This occupies 1,943,945 sq. km of land, and
20,430 sq. km of water. The country's total area is roughly 1,964,375 square kilometers
making it the world's 14th largest nation.

Advantages of its location: Mexico is the largest silver producer in the world, so far. This will
be one of the best gold markets in the next five years, according to the statistics.

Disadvantages of its location: Mexico has the second highest degree of inequality among
member nations, according to the organization for Economic Co-operation and Development.

Mexican Culture

Mexico's culture has undergone a significant transformation over the past few decades and
differs across the region. Most Mexicans reside in towns, but smaller rural populations also
have a major role to play in the country's vibrant cultural culture. Mexico is the 12th most
populous country in the world, with an estimated 125 million inhabitants in July 2018,
according to central intelligence agency's World Fact book. Mexico is composed of different
ethnic groups. The community mestizo (American-Spanish) makes up 62 per cent of the
population. Amerindians, or primarily Amerindians, account for 21 percent of the population,
while 10 percent is white. Those groups are developing a culture unique to Mexico.

Languages of Mexico

“¿Cómo están todos? Estoy bien. Gracias Señor.” (In Spanish)

“How are you everyone? I'm good. Thank you, sir.” (In English)
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The majority of Mexicans speak in Spanish about 92 per cent of the entire population.
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Approximately 6 per cent of the population speaks Spanish as well as a few other languages,
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Mexico as an investment destination
such as Mayan, Nahuatal and other languages.

List of all information about Mexican language-

1. Mexico has 68 indigenous languages spoken by approximately 6 million people.

2. There is officially no official language in Mexico.
3. Chocolate, onion, and avocado were all of Nahuatl descent.

4. Mexico's most widely spoken native language is Nahuatl.

Mexican Music

The music in Mexico is very diverse and has a wide range of musical styles and performance
style. Music is a big part of the everyday life of the Mexican people. Their songs reflect their
history, their feelings and their nationalism. Mariachi is a kind of music frequently performed
at large events such as a marriage ceremony or quinceaneras. There's also Ranchera,
influenced more by folklore. The Mexican uses a special expression when they yell during
the musical interlude, which is "EL Grito Mexicano" The Mexican also induces in
international music and also has a major influence on the global music industry.

Traditional Mexican food

Mexican cuisine is widely varied. Because every city has its own culinary traditions, it goes
from region to region. The Mexico's most popular cuisine is Tamales, Pozole, Mole and
Tacos. All of the cuisines are made from Mexican traditional ingredients. Most of Mexican
cuisine is popular all over the world. Mexican desserts are especially tasty and special. Soda
is a very popular beverage in Mexico, as well established beverage industry in the region.
Mexican people love to toast with Tequila and other traditional drinks their well-beings. Hot
chocolate from Mexico has the same rich, chocolate flavor that people love the most.

Holidays in Mexico

Dia del nino (Day of the Child) : In Mexico, 30 April is child's day, which is a day dedicated
to celebrate children's rights and well-being.

Dia de las Madres (Mother‟s day) : Mexico celebrates Mother's Day on May 10. The day
starts in the early hours of the morning with a serenade for mom. She gets flowers and gifts
until mother is fully awake.
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Dia de Independencia (Independence Day): The celebration of Mexican Independence Day
starts on September 15th at 11 pm when the president steps out on his balcony to ring a bell
loudly and re-enact the speech by Miguel Hidalgo, making a plea for Mexico's independence
from Spain. (hidalgo, 1810)

Dia de los Muetos (Day of the Dead): One of the most popular holidays in Mexico is The
Day of the Dead. The Dead Day runs October 31st to November 2nd. The Day of the Dead is
a vibrant festival which honors the dead loved ones.

Festivals of Mexico

The Nobel Prize winning Mexican writer Octavio Paz said,

„The art of the fiesta has been debased almost everywhere else, but not in Mexico‟ (Paz,
2019)

Son Jarocho Music festival: In early February, thousands of people flocked to Tlacotalpan's
colonial river to celebrate Candelaria, a religious festival featuring a majestic image of the
virgin floating down the river.

Festival de Mexico: The operative word for the festival de Mexico is massive, just like
anything else in the sprawling capital. Around 50 venues, including dance, music, theatre,
and opera, set around the city stage top notch national and foreign acts.

Festival Internacional Cervantino: Guanajuato ranks among the crème-de-la-crème of

Mexican colonial cities and the Cervantino festival in October takes it to another level. Once
a relatively small festival dedicated to the works of Spanish novelist Miguel Cervantes of
Don Quijote fame, the cervantino has morphed into one of Latin America‟s foremost arts
extravaganzas. (lonely planet, 2019)

There are many other festivals such as -

Morelia International Film Festival

Day of the Dead

Carnaval in Veracruz & Mazatlan

Guelaguetza Festival
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Fiestas de Octubre
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Mexico as an investment destination

Hofstede Cultural dimension

The highest Hofstede Dimension in Mexico is Uncertainty Avoidance (UAI) (82), which
indicates the low level of uncertainty tolerance in society. Strict rules, laws, police, and
regulations are adopted and implemented in an effort to minimize or reduce this level of
uncertainty. The main aim of these populations is to monitor anything to minimize or avoid
the unexpected. Because of this high feature of uncertainty avoidance, society does not
readily tolerate improvement, and is rather risky adverse.

Local Companies

The top five local companies of Mexico are presented below:

1. Arca Continental: The company manufactures bottles and distributes the Coca-Cola
products in Mexico. It is South America's second-largest Coca-Cola distributor and the third-
largest in the world with $11.3 billion in market value.

2. Grupo Bimbo: It is a Mexican banking company which operates in 22 countries. It has one
of Mexico's biggest distribution networks and the U.S. The company has a $13.5 billion
market cap.
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3. Grupo Financiero Banorte: It was founded in 1899, and is headquartered in Monterrey,

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Mexico as an investment destination
Mexico. The Company offers corporate and retail banking and financial services. The role
consists of the services which follow Banking, long-term savings, brokering and so on, the
company's market capital is $15.2 billion.

4. Fomento Economico Mexicano: This is Mexico's second-largest company. This company

is the largest beverage firm in both Mexico and Latin America at present. Furthermore,
FEMSA has been the world's biggest independent Coca-Cola bottler as of September 2011.
The Group has $33.6 billion in market value.

5. Grupo Televisa: It is a multimedia company. The corporate headquarters is in Mexico. The

company is Latin America's largest, and is the first of its kind in the Hispanic-speaking
world. As a big international company the company has achieved success. Its market value is
at $15.6 billion.

Foreign Companies
The top five international companies in Mexico that have put their marks on are listed below:
1. Volkswagen
2. Sabritas
3. Nestle
4. Wal-Mart
5. Ford.

Political System
CPI:

If we talk about Mexico corruption perception index it was ranked 135/180 in 2017 and 130/180 in
2019 (according to Transparency Internationals CPI)

In this graph we can see the scores of Mexico from 2010 and onwards. In 2010 its score was 31 then
slowly it keeps increasing and went to 35 in 2014. Then it from 2016 to 20ies 18 it came to 29.
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Mexico as an investment destination
The scores represent:

Scores Perceived as less corrupt Perceived as more corrupt

100–90 89–80 79–70 69–60 59–50 49-40 39-30 29–20 19–10 09–00

Market Economy
Mexican economy is one of the world’s largest economy [11th by GDP (ppp) and 13th by GDP
(nominal)] Mexico has mixed economy means both private-owned and state-owned companies has
made it. Economic activities are also regulated by the government. Currently Mexican economy is
the 15th largest in the world. It has a workforce of 53 million with an unemployment rate of 6.5%.

Mexico and FDI

Mexico is one of those countries that has most open to FDI and it is worlds fifteenth largest foreign
direct investment recipient. Mexico is earning billions from this foreign direct investments and most
of them are coming from United States of America (USA),Canada and Spain.

But in recent times Mexico is suffering much for organized crime lack of reforms in the energy sector
and tax regulations. Corruption and inefficiency in administration is also a big issue.

In short the positive points for Mexico are:

1. Mexico is very open for foreign direct investments and it is also a member of NAFTA, OECD,
G20 and the Pacific Alliance.
2. Costs of labors are not that high.
3. Has a strategic geographic location and is a transit platform for North and Latin America.
4. One of the biggest tourist destinations (8th in the world).
5. Has economic and political stability than other countries in the region.

Some negative points are:

1. Heavily dependent on USA.

2. Corruptions and crime rates are rising.
3. Transport and oil sectors are ineffective.
4. In border areas there is drug gang violence.

Still the govt. manage to secure environment for the foreign investors and increase the security by
creating Pro Mexico(2007) and SEZs(2016) to attract FDI.
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Mexico as an investment destination

FDI inflows of Mexico

FDI 2016 2017 2018

Inward flow (in million dollars) 30,865 32,091 31,604

Number of Green field Investments 485 563 600

Stock 473,424 490,574 485,807

FDI inwards 11.1 n/a n/a

FDI stock 45.3 n/a n/a

FDI inflows by industries and countries:

Main investing countries (2018)

USA 38.8%

Spain 13.1%

Canada 10.1%

Germany 8.2%

Japan 6.7%

Main invested sectors (2018)

Manufacturing 49.1%

Electricity water and gas 13.5%

Mining 4.4%

Financial service 7.9%

Retail and wholesale 8.9%

Government System
Federal government of Mexico is the national govt. of Mexico. It follows the federal govt. system
and the central govt. is established by the constitution. As per the constitution the faderal govt.
has three parts
1. Executive: This power is exercised by the president and his cabinet.

2. Legislative: This power is controlled by the congress of the union, senate and the chamber of
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3. Judicial: This power is headed by the judiciary consisting Supreme Court of Justice of the
Nation.

Government Policies
Tax: Different types of taxes and their highest and lowest rates are given below (data from 2006-
2020)

TAXES HIGHEST LOWEST UNIT

Corporate Tax 42.00 28.00 percent

Personal Income Tax Rate 35.00 28.00 percent

Social Security Rate (Employees) 2.93 1.65 percent

Social Security Rate (Companies) 14.70 7.58 percent

Sales Tax Rate 16.00 15.00 percent

Social Security Rate 17.63 0.00 percent

Income Tax:

Mexico has recently lowered its interest rates by 0.5% points and before it was from 7% to an annual
rate of 6.5%. Mexico’s reduction in interest rate can counters a weakening of prices, or a possible
deflationary situation. It also revitalizes the economy and helps to increase exports.

Here in this graph we can see the progression of interest rates in Mexico
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Mexico as an investment destination

Natural Resources
Mexico is a country with abundant natural resources. Mexico is among the world‟s largest
producer of oil, silver, copper, gold, lead, zinc, natural gas, wood and agriculture. And other
resources include timber from extensive forests and agriculture land.

Metals:
Mexico has an extensive mining history which goes back as far as 500 years. The country is
among the leading producers of certain minerals in the world. In 2010 the world's top silver
producer after delivering approximately 4,411 tons. That massive production accounted for
approximately 17.5 per cent of global silver production that year.

Gold is also a major mineral that accounts for a huge portion of the mineral sector and the
GDP as a whole. In, 2010 the country‟s gold mines managed to produce about 160046.78
pounds of gold. Gold managed to account for at least a quarter of the sectors total revenue.

Iron is also a major mineral in Mexico. In 2010 the country irons mines here able to produce
14 million metric tons of iron.

Copper, too, is found in Mexico as natural resources. In 2010 Mexico's copper production
increased by around 12 percent compared with the production of the previous year.

Similarly, zinc production increased in 2010 by 3 per cent compared to production in 2009.
Demand for copper and zinc is expected to grow in 2020. That is going to be the big boost for
Mexico business.
And Mexico is also one of the leading global producers of coal.

Petroleum:
The massive petroleum sector means that the country the 11th largest global producer of oil.
As to the quantity of oil reserves, Mexico has 17th reserves on the worlds. Only three
countries produce more oil in the West Hemisphere than Mexico does. Such nations include
the United States, Venezuela and Canada. While oil production has declined in recent years,
the oil sector still contributes around 10 per cent of the country's export revenue.

Agriculture:
Agriculture is another key resource. Many of the agricultural products in modern times
include items such as meat, potatoes, milk, rice, poultry and many more. Coffee is one of
Mexico's principal export goods. .Certain cultures include bananas, mangoes, coffee, rice and
cocoa.
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(Ferdinand Bada, 2018)

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Economic Integration
In spite of being known as a developing country, Mexico‟s economy is growing remarkably
as it has a mammoth growth in different sectors. Enriched natural resources, good foreign
investment and an efficient labor market play a vital role in their growing economy. But
Mexico is also facing several drawbacks because off their position in the trade bloc.

Mexico’s current allies

The current allies of Mexico are USA, Canada, Brazil, Chile, Cuba, Peru, Venezuela, India,
Iran, Japan, Lebanon, Philippines, Austria, Denmark, France, Germany, Italy, Spain and
Russia. Despite of having so many countries as their allies their biggest ally is USA. Because
Mexico is involved in several trade deals with USA. Mexico‟s majority of the economy
growth involves US foreign investment. USA also had a vital role in the Mexican revolution
which took place in the beginning of the 20th century (1910-1920) which has enhanced the
economic and diplomatic ties between these two countries. Despite of all these the current
Mexican population don‟t have a positive view about USA. However it doesn‟t affect the
economic and diplomatic ties of Mexico and USA.

Major Exports and Imports

As already mentioned above that USA is their biggest ally, 80.3% of the total exported goods
of Mexico are exported there. 5.4% of the goods are exported to Canada. In exporting the
electronic goods, Mexico is the sixth largest in the world. Mexico is also the largest in North
America in exporting automobiles. Besides these, petroleum is also one of the major export
items of Mexico.

Like export the major import partner of Mexico is also USA. 48.97% of the total goods are
imported from there. A significant percentage of the goods are imported from China as well.
Refined petroleum, electrical machineries and vehicle parts are the top imported goods of
Mexico.

Trade block involvement of Mexico

Mexico is involved with North American Free Trade Agreement (NAFTA). Since strong
restrictions are not imposed, NAFTA enables Mexico to trade more freely with fewer
restrictions alongside USA and Canada which are the two other members of this agreement.
As we already mentioned above USA and Canada to be their top two exporting countries,
NAFTA plays a very important role here. Both USA and Canada make up most of Mexico‟s
import and exports because of NAFTA. So NAFTA is helping Mexico along with USA and
Canada to boost their GDP rate for the last 26 years.

Mexico is also a part of The Mexico-EU Free Trade Agreement and Japan- Mexico Free
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Trade Agreement which were implemented in 2001 and 2005 respectively. This Mexico-EU
FTA and Mexico- Japan FTA pushed for a cut in tariffs which also helped Mexico to export
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more goods with fewer restrictions in countries like Germany and Japan.
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Mexico as an investment destination

Overall Attractiveness
If we plan to invest in Mexico, we must consider few important factors. We must identify the
certain benefits, costs and risks associated with investing in Mexico.

Benefits
We know that investing in a firm requires huge investment in manual labor. For instance, we
want to conduct the operations of our firms in USA and Canada and want to keep our
industries and portfolios close. In this case, making an investment in Mexico can be proved
as highly beneficial as it is one of the three members of NAFT A. Because the labor cost in
Mexico is significantly cheaper than USA and Canada.

Mexico has a high population growth rate as well which makes them a market with growing
potential. Mexico is a very familiar tourist place. So, investing in real state can also be very
effective and beneficial.

Costs
Certain costs are also there along with the benefits in terms of investing in Mexico. Political
corruption is quite evident in Mexico. So the business elites of Mexico use the political ties to
gain an illegal advantage over the foreign investors. It results in an increase cost in the
investment.

Risks
Crime rate is one of the alarming concerns of Mexico and many of the crime makers remain
unpunished. So certain risks are there while investing in Mexico. Beside this many types of
natural disasters occur in Mexico. Current political threats can also cause issues while
investing in Mexico.

Our Decision
Despite of the few risks and costs, the benefits of investing in Mexico seem more lucrative.
Considering the current economic condition of Mexico, investing in different sectors can be
highly profitable. Investing in real estate and attractive vacation destination can be a feasible
option as Mexico is quite popular a tourist destination. Investing in the stock market can also
be proven very beneficial considering the current favorable exchange rate.

To invest in Mexico and enter the market of this country, strategic alliance is required
because of the increased cultural diversity. A good relationship with the manufacturers,
retailers and distributors can make it easier to integrate in Mexican market.

Conclusion
Mexico has made great progress over the last few years from business and encouraging
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foreign direct investments. Infrastructure will be the biggest challenges faced by the Mexican
economy. Due to Mexico's rich culture, food and music people are so attractive to go for a
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holiday and Mexico has managed to attract people from 1990s. Many poor Mexicans have
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Mexico as an investment destination
migrated to USA in search of a job, but in the last couple of years more Mexicans immigrants
have returned to Mexico than migrated to the US. However Mexico has become a lucrative
place for foreign direct investment.
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References

(2019, March 8). Facts about Mexico: Mexican Language, Culture, Customs & Traditions. Retrieved

from https://bilingualkidspot.com/2019/02/07/facts-about-mexico-language-culture-

customs-traditions/

Pedro, & Reply, A. (1970, February 16). Traditional Mexican Music. Retrieved from

https://www.haciendatresrios.com/culture-and-tradition/traditional-mexican-music/

Zimmermann, K. A. (2017, July 20). Mexican Culture: Customs & Traditions. Retrieved from

https://www.livescience.com/38647-mexican-culture.html

Bada, F. (2018, october 23). WorldAtlas. Retrieved from

https://www.worldatlas.com/articles/what-are-the-major-natural-resources-of-

mexico.html

Ferdinand Bada. (2018, october 23). WorldAtlas. Retrieved from

https://www.worldatlas.com/articles/what-are-the-major-natural-resources-of-

mexico.html

Workman, D. (2019, March 12). Mexico‟s Top 10 Exports. Retrieved from

http://www.worldstopexports.com/mexicos-top-exports/

Workman, D. (2019, April 2). Mexico's top 10 imports. Retrieved from

http://www.worldstopexports.com/mexicos-top-10-imports/
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Table of Contribution
A.k Mainul Hassan (6)
MD. Mountasir Mamun Milu (15)
MD. Nasimul Haque Nasim(22)
A.M. Mubashir Ahmed (4)
Mahmud Ur Rahman Saad (7)
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Econmic Integration, Overall
Attractiveness(Benefits, Costs, Risks &
decisions),Table of Contents, Merging
and Editing
Culture, Hofstede Cultural Dimension,
Geographic Location
Cover page, Natural Resources
Political System, CPI Index,
Government Policies
Introduction, Economic System,
Conclusion
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