With a population of 122 million and the 11th highest GDP in the world by purchasing power parity, Mexico is predicted to become one of the world’s top 10 economies in the next 10 or 20 years. And, as one of Latin America’s “mega-markets”, Mexico’s economy is packed with potential for UK exporters.
Mauricio Munguia, Latin America Desk Head at Santander, interviewed the head of UKTI in Mexico, Stephen Cartwright, and International Trade Manager and Latin America specialist at UKTI, Angus Murray, to find out more.
Mauricio Munguia: Although there is strong potential for growth, Mexico already has a good trade relationship with the UK. What is it about Mexico that makes it such an attractive export destination? And what more could be done to drive UK-Mexico trade?
Stephen Cartwright: Mexico is one of the easiest places in the world to do business – certainly the easiest place in Latin America. It is a huge market of 122 million people, with a rapidly expanding middle class and a young median age of 26.
Moreover, the UK is committed to advancing trade relations between the two countries. In 2012, David Cameron – the UK Prime Minister at the time – appointed Baroness Bonham Carter as his trade envoy for Mexico. In April, the newly-appointed Trade & Investment Minister, Lord Price, visited Mexico on only his second day in office. This was followed by a visit from the former Foreign Secretary, Phillip Hammond, three weeks later – a clear reflection of how important Mexico is to the UK government.
Angus Murray: Mexico is in a key geographic location. Its near neighbour is the United States while it is also strategically placed to access Central and South America, Asia and even the EU.As part of the Pacific Alliance, Mexico is one of the most open markets in Latin America and one of the easier markets to enter for those exporters wishing to gain a foothold in the region.
Cartwright: That said, the UK’s share of trade is smaller than our peers: about 0.7% of Mexico’s imports come from the UK, but the figures for Germany, France, Italy and Spain are much higher. Given this, as one of the largest import markets in the world, Mexico still offers great opportunities for UK firms.
Mauricio Munguia: It certainly sounds like Mexico offers fantastic opportunities across a breadth of industries. Which key sectors should British exporters focus on?
Cartwright: The reforms introduced by the Mexican government over the past several years have opened up a variety of sectors. Licensing in oil and gas has become accessible for the first time in 75 years, as national companies such as Pemex are effectively undergoing privatisation. Linked to this is the growing sub-sea sector, which – given that the UK currently supplies 45% of the world’s sub-sea equipment – offers substantial opportunities.
Mexico also has plans to build a new airport projected to cost US$ 9.16 billion. Indeed, infrastructure generally is another promising sector for UK firms with expertise in the construction, management and financial structuring of such projects.
Finally, the food and drink sector is definitely worth a look. Mexico’s expanding middle-class presents great opportunities for UK companies, particularly with respect to premium products. Scottish Whisky is the fourth biggest export from UK to Mexico, and other spirits, beer and cider are starting to do well. Mexicans are both well-educated and well-travelled and so there is a strong appetite for more sophisticated brands.
Mauricio Munguia: The opening of the El Palacio de Hierro Polanco in Mexico City was considered by many to be a milestone in the development of luxury department stores worldwide – and certainly British brands are very well represented there. Are there any other s areas that UK exporters should consider?
Cartwright: The food and drink sector is certainly one to watch. In fact, Waitrose is due to begin operating within the next year, and they will certainly be followed by other British brands.
Mexicans are particularly willing to pay for premium products. British heritage brands are particularly sought-after. This is, of course, further boosted by Mexicans who travel abroad and return to Mexico with very specific consumer tastes.
Murray: Yes, El Palacio de Hierro has its own floor dedicated to English brands – El Salón inglés – with its own tea room. That says it all really! Without a doubt, British brands are seen as “top notch”.
Cartwright: There is, of course, more that can be done to drive trade between the two countries. One crucial way of addressing this is to increase awareness of Mexico’s economic potential but also to counter any negative perceptions of the country.
Mauricio Munguia: Can you go into detail on that point – what are the main obstacles for ambitious UK exporters?
Cartwright: Firstly, the cost of doing business. While the cost of exporting to Mexico is not particularly high when compared to similar markets such as Brazil or China, it does entail a degree of investment.
A second barrier relates to the security situation. While the vast majority of Mexico is perfectly safe, there are risks to be aware of in certain regions. As with any crucial decision, businesses must weigh the risks of entering the market with the opportunities.
The final point to note is bureaucracy. The process of opening a business bank account is relatively easy but there are still challenges, particularly relating to intellectual property protection.
Murray: A more practical obstacle lies in complex customs and logistics. It is imperative that businesses conduct any necessary research and planning beforehand. There are also some challenges around regulation and the registration of products.
Mauricio Munguia: British companies certainly have a great deal to consider. How might organisations such as UKTI and Santander help them?
Cartwright: There are, of course, ways to overcome the obstacles outlined above. UK firms should most certainly take advantage of the services offered to them by UKTI, as well as banks, such as Santander, who are able to provide support and advice. Another suggestion is that firms try and reach out to businesses that have already established themselves in the market – it is always good to talk to people who have first-hand experience.
Murray: UK companies should utilise the support offered by UKTI. We are able to provide solid market intelligence, research, in-depth advice and also introduce businesses to key contacts and partners. Making the right connections is absolutely crucial in Latin America – there is no substitute.
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