Doing Business

Doing Business in Mexico 2015

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21 Doing Business in Mexico 2015 This system is relatively competitive when compared to Mexico's major trading partners and with developing countries seen as competitors for attracting Foreign Direct investment. With the previously mentioned reform, the former flat tax (called IETU) has been repealed, which makes the Mexican tax system simpler. There are some tax incentives specifically designed to attract foreign investment, mainly around the in-bond manufacturing (maquiladora) industry. With more than seventy double tax conventions in force and always in the process of broadening its treaty network, Mexico is able to resolve taxation issues with all its significant trading partners, providing an effective instrument to solve differences in tax treatment among foreign investors and their governments. Local competitor attitude toward foreign investment Most local businessmen tend to favor foreign investment in Mexican industry as strengthening the private sector and react very favorably to opportunities to invest in joint venture companies with established foreign companies. Successful Mexican industrialists generally prefer joint investments with foreign companies that can make modern technology available and that will act as technical partners, with local marketing and administration to be supervised by the local industrialists. Labor attitude toward foreign investment Organized labor does not officially oppose foreign investment and, in fact, may actually prefer to deal with the management of companies having substantial foreign capital, on the grounds that such companies tend to be more amenable to the collective- bargaining process. Special investment opportunities Moderate labor costs (when expressed in U.S. dollars) have made the establishment of in-bond processing plants to handle labor-intensive operations increasingly attractive to foreign investors. Moreover, foreign investors are also finding it advantageous to utilize their knowledge of world markets to organize Mexican companies to export locally manufactured goods, not only to the United States and other trading countries, but to customers in other parts of the world as well. Nevertheless, Mexico's large and still increasing population has resulted in considerable demand for all types of consumer goods, including durable goods and, in particular, basic necessities. As the formerly high rates of inflation have been reduced, the volume of effective local demand has increased substantially. This environment, together with the previously mentioned reductions in customs duties and in other trade barriers offers an interesting market and trade opportunities for exports to Mexico, as well as for local production. The two largest unsatisfied local markets are probably those for agricultural equipment and housing, particularly low-cost units. There may also be an improved market for importing machinery and equipment to Mexico. Most of the direct foreign investment in Mexico is allocated to four industrial sectors: automotive, petrochemical, apparel, and electronics. Wireless telephone service is one of the fastest-growing areas of the electronics industry. 3

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