Advice for the small foreign investment in Mexico

You can skip if you don’t want to do business in Mexico.

THE RULES

-AVOID LAWYERS

-DO YOUR OWN HOMEWORK

-UTILIZE GOVERNMENT AGENCIES FOR FOREIGN INVESTMENT

Lawyers in Mexico, as in the United States, should be avoided; however, at times they can be a very “necessary evil” – as the saying goes.

My work as a consultant at a Mexican law firm and my experience as a foreign investor in Mexico, over the past fifteen years, has taught me that in order to succeed you must educate yourself regarding the rules of the game; of course, this is true of investing in any country. The U.S. businessman at home understands enough about his country’s civil laws and tax code to intelligently manage a legal or fiscal professional. The foreign client is vulnerable to professionals overcomplicating their matter, overcharging for services or shortcutting the legal process. The client often ends up paying government fines for non compliance and repays someone to do the work correctly.

Education is the operative word for neophyte foreign investors. There are over 500 seminars annually on Mexican investment that are scheduled throughout the Americas. Choose one that includes a comprehensive discussion of the following: foreign investment as it pertains to establishing a foreign owned business, tax laws and international tax reporting agreements between the U.S. and Mexico; how to use bank trusts for acquiring coastal and border property as a foreigner, and how to purchase property as a foreign owned Mexican corporation. Avoid a one day crash course on investing in Mexico.

The comprehensive conferences I have organized in Baja California always require two to three days to cover the subjects properly. Handouts should include a copy of Mexican foreign investment law in english and an outline of tax obligations in Mexico for foreigners. The U.S.-Mexico Chamber of Commerce is a good organization to check with, in addition to their own seminars and trade shows, they can advise you on the quality of other workshops.

Ron Sharpe is a furnishings factory owner in Rosarito, Baja California who speaks very little Spanish and has never used a lawyer either to establish his successful business or in the running of same. What Ron has is patience and dogged determination. He tirelessly goes to Mexican authorities for assistance. He finds that his lack of Spanish and desire to do things himself strikes a responsive chord and produces an extra effort on the part of bureaucrats to help him. Ron is unique in this regard. Speaking Spanish, in most instances, is imperative for successfully running a business in Mexico. Entrepreneurs, who do not speak Spanish can choose a total immersion program from one of the hundreds of fine foreign language schools throughout Mexico. My clients have typically become fluent within six weeks of training.

Exploiting governmental resources

If you are a U.S. citizen the first agency to contact would be the department of trade in your state. Somebody in the state commerce or economic development department has the responsibility for advising you on commerce with Mexico. The Small Business Administration has computerized training programs on international trade and, in the Western United States, have folks who are knowledgeable about trade between the U.S. and Mexico. These agencies are a good resource for identifying educational opportunities close to your home and typically have someone they work with on the Mexican side of the border to refer to as well.

Another important resource, already mentioned, is the U.S./MEXICO Chamber of Commerce with offices in most major cities throughout the U.S.. In Mexico BANCOMEXT is the trade bank with offices in the major cities, i.e., Tijuana. They are are staffed with english speaking investment counselors and provide a library with directories to help foreign investors find suppliers and or joint venture partner candidates in specific industrial sectors. Bancomext also provides guidance in seeking loans for international trade ventures.

Most small investors who seek my help are usually not investing out of a singular desire to do business. They are mostly motivated by a love of Baja where they have spent great vacations and want to spend more or all of their time here. My advice is to proceed slowly. Try living for a while in the area you have selected for your future Mexican home and spend some time talking to Mexican officials at the state and municipal levels to determine their attitude toward foreign investors. Also, seek out foreign and native entrepreneurs in the area to test out your business ideas and seek their advice on market feasibility and potential problems.

Living and doing business in Mexico area, over an extended period of time, is always quite different than vacationing there. You may discover the area is too remote and lacking in services to fill your long term needs either business or personal.

I am more than happy about my decision to move to Ensenada, where my first investment was a vacation home. I soon realized when my “getaway” became my primary home that my beach property, with no nearby business services, was too remote a location. I also learned that it was great living there on holidays but not on a permanent basis – (too quiet for this Oakland homeboy), so I ended up renting an apartment in town.

Being close to international business resources is important when doing due diligence. For prospective foreign investors the following resources are available in Mexico: State Economic Development and Tourism, Department of Foreign Investment (if considering a tourism related business), bankers and of course lawyers and accountants recommended by foreign entrepreneurs and government officials. Other agencies to solicit counsel from are Mexican chambers of commerce: CANACO, for retailers; CANACINTRA, industrialists; COTUCO, tourism; and an Association called COPARMEX, a small business organization to assist small to medium sized businesses in Mexico. COPARMEX can help with legal, accounting, and bilingual personnel selection and training. All of these agencies have offices in major Mexican cities.

TAKE YOUR TIME, DO YOUR HOMEWORK AND SELECT PROFESSIONALS CAREFULLY and like any business anywhere – LOTS OF LUCK!

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