Doing Business in Mexico
In Mexico City, most offices are open from 9:00am to 5:00pm, but they can be open until 7:00pm from Monday to Friday. Most people leave for lunch around 2:00pm and take between 1 and 2 hours. The federal branch of the Mexican government has tried to institute a 9:00am-6:00pm schedule, but they tend to stay later. The local government is going by the old rules of being in by 10:00am and leaving very late at night after a long lunch break. Lunch is generally expected to start between 2:00pm-3:30pm and end between 4:00pm-5:30pm.
Mexico City is a relatively formal place, so Mexican business people wear suits. Guadalajara and Monterrey are different in that a collared shirt with pants is enough. Except for use in a beach resort, shorts do not enter into the dress code anywhere. Not even for a picnic. In fact, the easiest way to spot a tourist in Mexico City is by looking for people in shorts. If you are invited to a picnic or a tour of the countryside, dress casually but elegantly. Polo style shirts, a sweater and sports slacks are best.
This is difficult because it very much depends on the type of company you're dealing with. Many multinational corporations negotiate like one does in the US, but in Mexican business circles "yes" can mean no and "no" can mean maybe.
In Mexico it is impolite to turn people down. As an example, if you organize a party, most people will assure you that they will attend regardless of whether they will or won't; only a last-minute confirmation will get you the right answer. Only in situations where people have no interest in the deal is it pretty common for people to refuse to take your calls (always with a polite lie), or to tell you that they'll "study the situation" and get back to you. It's the "don't call us, we'll call you" syndrome.
It is important that you learn to distinguish between those cases where your business partner may need a bit more pushing and those cases where there is no chance of actually proceeding through with the deal. People like to promise you the world while they are leading you down the garden path. The best way to avoid being taken down that road is to sit down and do the numbers meticulously and with realistic assumptions.
Closing a Deal
Like in all countries, including the US, you have to be careful and look for references from your potential business partner if you don't want to be had, or at least have your time wasted. It is important to remember that Mexican firms are often underfunded and thus can run into serious supply problems. This is a function of the dearth of credit and the cost of money (a loan in pesos has an interest rate of 25% a year; in this respect, Mexican business people are heroes). It's best to have these issues worked out beforehand. If the Mexican company is going to need a little money up-front to get the raw materials to produce what you want, then you should just make sure that they will dedicate their company to working on your order.
Make sure to leave a paper trail. The exchange of money and merchandise should happen at once. Payment should be by certified check, approved credit card transaction or with a transfer of funds in a bank. If you're supplying a Mexican company, the perennial letter of credit is the best idea.
Business Breakfasts & Lunches
A lot of business is done at breakfast and/or lunch. Breakfasts are also the preferred choice to meet, get to know, and exchange information over the potential business deal. People tend to have a power breakfast and/or a power lunch, lasting over two hours, in expensive settings. Unless you want to go out drinking, breakfast is the best bet.
It is impolite to split the bill. The person who is making the sale is traditionally expected to pick up the tab, or alternatively, the person who suggested or "invited'' other parties to join him/her for a meal is understood to be offering to pay for that meal. (People rarely split the bill during a business meal.) Tips, which are not included in the bill, are generally around 10%, although people are very appreciative of a good tip and they often deserve one.
Once again, the conventional wisdom relies on the stereotype that business deals are only closed between friends. While you should probably develop the ability to share friendly banter with your customers in Mexico don't feel the need to "suck up." What there does have to be is trust. Too many foreigners come in demanding meetings and consideration, promising the world and in the end not getting anywhere. Nothing irritates a Mexican more than going through the steps and having the person they're dealing with not make a decision. This is especially onerous because of the fact that Mexicans can be generous, and they often spend money on their business contacts.
Business meals are the time to get to know each other. Conversation may wander through many different topics, while the actual topic at hand is sometimes reached over coffee (or cognac, depending on who you're dealing with). From business breakfasts and business lunches people usually move on to an after-hour business outing, where drinking is involved, or are invited for dinner in a family setting. Breakfast meetings are very recommendable, in that they are much more to-the-point.
Greetings in Society
In Mexico it's a common practice for people of the opposite sex to greet one another with a kiss on the cheek, especially if they already know each other, but also upon first meeting. Among men, a handshake suffices. A simultaneous bear hug is common between close male friends. When it comes to business, the proper practice is a handshake, regardless of gender. A kiss or a hug can be acceptable among business associates who have developed a personal relationship.
Mexicans are very status conscious. They care about what you wear, what car you drive. Professional titles are also very important. It is customary to address your business partner as licenciado, which is the equivalent of a bachelors' degree. Do this even if you know that your business partner is not a licenciado. Ingeniero (engineer) and doctor (either medical doctor or PhD) are also quite common
In Mexico, time is not money. Mexicans may take their time to reach a decision. Nepotism is a common practice in business circles. Not only may the son of the owner work for the company (indeed, as is often the case in the USA) but many relatives of the CEO and higher-level managers may do so as well.
Bureaucracy is big in Mexico. Always take with you to meetings copies of the most relevant files and legal documents that may be required during the transaction. It is also very important to take your original passport or photocopies as proof of identification when you're closing a deal.
Using Telephone, Fax and Internet
The telephone is a useful tool to set up appointments and ask some general inquiries, but deals are never closed over the phone. The telephone is considered an informal means of communication. It is also the method used to make sure you are not stood up: confirm all meetings the day of the meeting (or the afternoon before, if it's for breakfast the next day).
Cellular phones are pervasive in Mexico. Fax machines are also very common. Faxes are preferred to phone calls when with dealing important issues. Remember that a spoken commitment in Mexican business culture is never binding. Practically all professionals in the service industries have email.
In most cases when phoning a Mexican businessperson, you will have to go through one, two or three secretaries before reaching the desired person. These secretaries may not speak English, so have a short sentence in Spanish prepared, asking for the specific person.
Newspapers & Magazines
The Diario Oficial is a government newspaper edited daily, containing information about new federal laws. It is your duty to keep abreast of the latest legislation. It is possible to buy specialized selections of it according to your line of business. It can be purchased and subscribed to on-line, Website.
Types of Companies
The Ley General de Sociedades Mercantiles (Corporate Law) recognizes as business entities the general partnership (sociedad de nombre colectivo), the limited liability partnership (sociedad en comandita simple), the limited liability company (sociedad de responsabilidad limitada), the stock corporation (sociedad anónima), the limited liability stock partnership (sociedad en comandita por acciones), and the cooperative (sociedad cooperativa). The LGSM regulates the operations of the above-mentioned companies, except for the cooperative which, due to its nature, is governed by a special law.
The above-mentioned companies are considered Mexican, since they are incorporated in Mexico under Mexican law, regardless of the nationality of their partners or shareholders or the source of their capital. It is important to note that the LGSM allows general partnerships, limited liability partnerships, limited liability companies, stock corporations, and limited liability stock partnerships to be formed as variable capital companies. As such they have a fixed minimum capital that cannot be less than the legal minimum and a variable capital that can be increased by subsequent contributions of the partners/shareholders or by the admission of new partners/shareholders and decreased as the result of a partial or total withdrawal of contributions with a minimum of formalities.
The business entities regulated by the LGSM can be divided into two large groups: partnerships and stock companies. In partnerships, the personal characteristics of the partners are taken into account and, therefore, the inclusion or exclusion of partners, or the exercise of the right of withdrawal of a partner, are treated or regulated in a special manner. Furthermore, these types of companies are intuitu personae and the number of partners is limited. Partnerships recognized or regulated by the LGSM are the general partnership, the limited liability partnership, the limited liability stock partnership, and the cooperative. Stock companies are those for which investment of large sums of capital is required and therefore, regardless of the personal characteristics of the shareholders, they are invited to invest in the business through the contribution of capital.
The stock company par excellence regulated by the LGSM is the stock corporation (sociedad anónima). Above we have referred to partnerships and stock companies and we have specified five of the six types of companies that the LGSM regulates, deliberately excluding reference to the limited liability company (sociedad de responsabilidad limitada), is neither a pure partnership nor a pure stock corporation, but rather mixed, its existence and regulation having characteristics of both types of companies: intuitu personae elements of the partners and elements of stock companies.
The types of business entities most common in Mexican law are, based on the number of companies formed, first, the stock corporations, and next the limited liability companies. This is due to the fact that both the shareholders in a stock corporation and the partners in a limited liability company have limited liability before the company and third parties. The liability of the partners or shareholders in either a limited liability company or a stock corporation is limited to the amount of the contributions made by the partners or shareholders to the capital of the company, while the liability of the partnersin partnerships is unlimited, joint and secondary, and therefore the assets of the partners could be affected.
Economic Activities in Mexico
As a general rule, there are no legal restrictions on foreign individuals and entities engaging in economic activities in Mexico, either directly or as partners or shareholders in Mexican companies.
However, the LIE (Ley de Inversión Extranjera or Foreign Investment Law) specifies certain activities in which foreign investment is not allowed and others in which it is limited.
Here we will discuss the activities that are reserved or subject to a specific regulation. We will also refer to the concept, regulation, and scope of neutral investment, a mechanism through which foreign investment can participate in certain reserved or specially regulated activities.
Foreign individuals and entities and Mexican companies having foreign investment cannot participate in activities related to the strategic areas that by law are reserved to the Mexican State, or in activities that are reserved exclusively for Mexicans and Mexican companies with a clause in their bylaws excluding foreigners.
Activities and acquisitions subject to a specific regulation.
There are certain economic activities and companies in which foreign investment is not excluded but is limited to a certain proportion, ranging from 10 to 49 percent. There are also certain sectors in which even when the foreign investment is limited to 49 percent, it is possible to surpass such percentage with an authorization of the National Foreign Investment Commission (Comisión Nacional de Inversiones Extranjeras, CNIE). In order to determine the percentage of foreign investment in the economic activities subject to maximum limits of investment, the foreign investment made in such activities indirectly through Mexican companies with a majority of Mexican capital is not counted, provided the latter are not controlled by the foreign investment.
Taxes in Mexico
This guide to taxes in Mexico has been prepared to assist those interested in doing business in Mexico, or those whose professional activity brings them to this country, and for whom knowledge about taxes and taxation in Mexico would prove to be very beneficial. It does not pretend to fully cover the subjects it treats, but is intended to answer some of the important, broad questions that often arise. In order to deal with specific problems, it is necessary to refer to the laws and regulations of the country and to obtain appropriate accounting and legal advice.
The Mexican tax system has been subject to comprehensive tax reform legislation. This legislation, enacted principally in 1986, 1988 and 1994, has dramatically changed the tax laws in an attempt to make the system competitive with the tax systems of Mexico's most important trading and investment partners as well as with the systems of countries competing with Mexico for foreign investment.
The principal taxes payable by individuals and by corporations operating in Mexico and, in certain cases, by foreign companies, are those levied by the federal government.
State and municipal governments have more limited taxing powers and until now have never levied general corporate income taxes; some states tax employers on salaries and professional fees paid by them. The principal taxes are as follows:oreigner is allowed to enter Mexico with a vehicle, which is not Mexican plated (e.g. US or Canadian), as long as you have the following:
Mexican Labor Laws differ from those in the US and are more heavily weighted towards protection of the employee. As an employer, contributing author and law professor Jaques Beaulne outlines how to protect your interests.
Most foreigners who come and live in Mexico think they can hire and fire an employee "just like back home". This line of thoughts can only bring situations that are not so pleasant and even situations of "legal extortion" in the short and long haul.
In Mexico one who hires a physical person must know the consequences of his or her act otherwise will be surprised by a "demanda" (lawsuit) in front of the appropriate labor authority.
First of all let us look at the hiring portion and then how one can protect himself from x-employees.
Hiring means exactly what it means everywhere in the world and this can be applied to hiring a physical person (great ape with large brain = human) or a moral person (one who can be called= Partnership, business, corporation).
When one hires a moral person one must have a contract to establish the duties and responsibilities of each parties. When one hires a physical person one should do the same and be aware of other "things to do". Actually replace the word "should" by "must".
The "other things to do" are:
Setting up a Business
Steps for Incorporation
Similar steps are taken for other corporate forms. To establish a Sociedad Anónima or a Limited Liability Company (the two most common corporate forms), the steps will be the following: