Mexico is a land of abundant trade opportunities for U.S. businesses both large and small. Yet getting one”™s product into the country can be costly and requires navigating past regulatory roadblocks often raised by Mexican authorities in spite of the North American Free Trade Agreement and other treaties to ease and open the flow of trade across the border.
That was the message and experience shared by business owners and a global trade executive from JPMorgan Chase at a recent panel discussion in White Plains presented by the World Trade Council of Westchester, the international trade arm of the Westchester County Association. The panel discussion on doing business with Mexico was the first in a three-part “Trading with Our Neighbors” series.
Edmundo Gonzalez, who heads the New York office of Promexico, a newly formed Mexican government commission for trade and investment promotion, said Mexico, after decades of stagnation under repressive governments, now has a growing economy and growing domestic market with a “stable” inflation rate and a stable currency exchange rate with the United States. The slowdown in the U.S. economy could affect the Mexican economy, but so far there are no signs of that, he said.
Gonzalez said Mexico is the leading exporter in Latin America and, with $23.2 billion in foreign investment in 2007, leads the Southern Hemisphere region in that too. That influx of foreign investment “is going to change Mexico in the long run,” he said.
“Doing business in Mexico is very familiar for Americans,” said the Mexican trade official, touting his country”™s “near shore advantage” for businesses here. “It”™s not so different as doing business in China or India,” he said, referring to differences in cultures, geography and time zones. Among Mexican speakers of English, “The accent is different from India,” Gonzalez said.
Apparently that near shore at times can seem like a frustratingly far shore when doing business in Mexico.
Among the region”™s small-business owners in the audience was Nitzy Cohen, president of International Basics L.L.C., an export company she operates from her Westport, Conn., home. Looking for new marketing opportunities, Cohen found that Mexican bakeries, which she said account for 30 percent of the country”™s food processing, lack refrigeration. She decided to ship powdered baking ingredients there, products developed by her and mixed by manufacturers around the United States.
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Three years ago, she began shipping to Mexico and other Latin American countries. In an export business with small profit margins, her Mexican trade has yielded even smaller ones, as much as three to four times less than shipments elsewhere in Latin America, she said.
Those are the baking products that make it into Mexico. Frequently, she said, Mexican authorities reject the required product samples she first sends.
“It costs $100 to ship it (a sample) to Mexico today,” she said. “When they send it back to you, it costs you another 100 bucks because they charge you.”
The returned shipments and border-crossing impediments are not unique to Mexico in her business. Still, “I find it more with Mexico than any other Latin American countries,” she said. “It”™s mind-boggling. It”™s almost as if somebody does not want anything going into Mexico today.”
Alvaro Quintana, executive director and head of Mexico business for JPMorgan Global Trade Services, said the challenges of doing business there reflect “the struggle of a developing country to become modern and competitive.”
“One thing is sure, you can import and export anything to Mexico, but you have to follow certain steps,” he said. Mexico in 2006 had more than 3,000 trade regulations, “so compliance also is a challenge,” Quintana said.
Quintana said speeding border-crossing operations is a primary challenge facing the Mexican government. With 9,000 trucks daily crossing the border into Mexico from the United States, a system that relies on powerful customs brokers to coordinate inspections for contraband and compliance with Mexican legal requirements needs revamping, he said.
That broker system is costly as well for American businesses. For a northbound truck passing through U.S customs, the cost is $32, Quintana said. It costs $400 to $500 for a southbound truck to pass through Mexican customs, he said.
Herbert Krackow, president of Steel Source in Manhattan, has dodged those border-crossing obstacles by leaving the transport to Mexican companies. A former salesman for suntan lotion in Cancun with experience in the steel industry, Krakow started his own business buying steel from U.S. sources and reselling the commodity in the Mexican market on a “cash in advance” basis.
He ships his goods to a warehouse in Laredo, Texas, from which Mexican truckers haul it across the border for distribution to his company”™s clients. “They can get stuff across the border a lot faster than American truckers,” he said.
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When doing business in Mexico, “You have to have an agent,” said Krackow, who lived for four years in the country and who does 60 percent to 70 percent of his business there. “You have to have someone who speaks the language, who understands the ways of Mexico and knows the ropes.” Business in Mexico “is byzantine if you don”™t understand it.”
A frequent and admiring visitor to Mexico City, Nitzy Cohen left the session still determined to grow her export business down Mexico way. “There are so many untapped opportunities there and it”™s right within a two- to three-hour flight” she said. “I”™m sticking in this market because I”™m going to crack this nut.”
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