© Crown copyright 2018
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: firstname.lastname@example.org.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/overseas-business-risk-mexico/overseas-business-risk-mexico
Mexico is a federation with a presidential system of government. There are three levels of government: federal, state and municipal. The President is the head of state, government and military. Mexico is composed of 31 states and Mexico City; powers are separated into three branches: executive, legislative and judicial. The President is elected for a 6-year term and cannot stand for re-election. Congress is constituted by the Senate (6-year term) and the Chamber of Deputies (3-year term).
President Peña Nieto (PRI) took office in December 2012 and in his first two years launched an ambitious reform programme, including education and fiscal reforms, an infrastructure and transportation programme, and opening up the energy and telecoms sectors to competition. The Pact for Mexico, an agreement formed with opposition parties, in place until the end of 2013, was crucial to passing the legislation.
Security remains a huge challenge in Mexico, and domestic trends are not encouraging: the homicide rate has increased from 2016 to 2017, and may continue to do so in 2018. According to official figures, last year registered an increase of 23% in intentional homicides, compared with 2016, ending the year with a rate of 24 homicides per 100,000 inhabitants.
Corruption is sometimes referred to as endemic, and public dissatisfaction is high. Despite significant advances in Mexico’s anti-corruption legislation and the creation of a new anti-corruption system, doubts remain about high level political will to tackle the problem.
This year, local politics will be dominated by the 2018 presidential election. In addition, it will be influenced by external factors, most importantly, the development of the bilateral relationship with the US. Nationalism is also on the rise, as well as anti-American sentiment, fuelling the presidential hopes of the left wing MORENA and its leader Andrés Manuel López Obrador (running for the presidency for the third consecutive time) as the anti-establishment option for 2018.
Information on political risk, including political demonstrations, is available in the FCO Travel Advice under the section Political Advice.
Mexico is an upper-middle income country with a population of around 123m. According to IMF forecasts GDP per capita for 2017 will be 17,753 PPP. However, wealth is distributed very unequally, with 43.6% of the population living in poverty and 40% of the national income held by the top 1%. Mexico’s GDP is mainly driven by the services sector, which accounted for 63% of GDP in the third quarter of 2017. In terms of competitiveness, the 2018 World Bank’s “Doing Business” index ranked Mexico as the easiest country to do business within the Latin American and Caribbean region.
Mexico is the biggest exporter in Latin America. Mexico’s commercial structure is defined by large intra-industrial trade, as its main exports are in the same industries as its main imports: machinery, electrical equipment, automobiles, mechanical inputs, minerals, oil and gas. With 12 Free Trade Agreements covering 46 countries, including the US and the EU, Mexico is one of the most open economies in the world. Nevertheless, Mexico’s main trading partner remains the US, where around 81% of Mexican goods and services are exported (2016). Despite only 2.7% of Mexican products being exported to Canada, it is Mexico’s 2nd largest exporting destination, whilst the UK currently accounts for less than 1%.
The Mexican economy is highly dependent on US demand for imports (mainly manufactured goods) and economic activity has decreased since 2010 mainly as a result of falling international demand for Mexican goods. This way, while in 2010 growth reached 5.5%; by 2016 it was of 2.3%. The IMF predicts annual growth of 2.0% in 2017, 2.3% in 2018, and of 3.0% in 2019.. These lower growth expectations are the result of a a decrease in government revenue - mainly due to low oil prices. fall in consumer and investment confidence, , the depreciation of the peso against the dollar, natural disasters – several hurricanes and two major earthquakes in September 2017 – and overall uncertainty regarding the US-Mexico relationship.
Monetary policy is responsible and efficient. However, inflation accelerated in 2017 to its highest rate in 17 years (6.77% in December). This was primarily due to a weaker peso against the US dollar (which contributed to higher prices of imported goods, especially from the US) and a sharp increase in petrol and diesel prices since January 2017, when the Mexican government ended fuel subsidies ahead of the liberalisation of the market.
With respect to the overnight interest rate target, the Central Bank of Mexico (Banxico) raised it five times in 2017 – from 5.75% to 7.25%. This was in an attempt to counteract inflationary pressure,s caused by the Mexican peso weakening (due to capital flight, currency speculation, and reduced investor confidence), and external pressures, including the renegotiation of NAFTA and the US tightening its own monetary policy. However, analysts estimate that Banxico will gradually normalise its policy rate between 4Q2018 and 2Q2019: dropping from 7.25% to 6% - although this may depend on the number of US FED rate hikes this year.The depreciation of the Mexican peso is expected to continue in 2018exacerbated by the recentUS tax reform), and the political and market uncertainty around the Mexican Presidential election, and the renegotiation of NAFTA. These phenomena generally explain the volatility the peso has experienced in the last few months.
There has been an increase in Mexico’s debt-to-GDP since 2014, fuelled partly by the collapse in the global oil price. However, with the tax reform of 2014, non-oil revenue has increased dramatically, and non-mandatory expenditures have decreased, so net public debt as a proportion of GDP in 2017 (48%) continues to be low compared to international figures (US (106.1%), Spain (99.4%), UK (89.3%), among others). International Reserves are currently around US$173bn and represent an important shield against exchange rate volatility. Current account deficits are more than compensated for by large capital account surpluses. This, added to huge reserves, prevents Mexico from suffering a balance of payments crises or a sudden stop.
Mexico has considerable growth potential; PwC has predicted that it could become the 9th largest economy in the World by 2030 and the 7th largest by 2050. Mexico has many advantages, including a large, young workforce, a privileged geographical position for trade, and stable macroeconomic indicators.
3. Bribery and Corruption
Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or as Scottish partnership to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case, it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.
In addition, a commercial organisation representing a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere. In 2017, Mexico was ranked 135 out of 180 countries in the Transparency International Corruption Perception Index. See full report here
Bribery and corruption are a significant problem in Mexico, with high profile allegations involving representatives from the main political parties.. But there have been important improvement in recent years, and Mexico is a signatory of the 2016 London Anti-Corruption Global Agreement. There are currently 10 former Governors currently under investigation, one in jail, and another being prosecuted. Government tendering guidelines are being strengthened to reduce the risk of corruption in the awarding of contracts: but this can lead to the lowest bid winning without consideration of quality, and also there are of course loopholes that many exploit. Numerous British businesses report successful business operations in Mexico that are free of corrupt practices or at least have managed to find ways to avoid this preventing them doing business.
Mexico is modernising its legislation against corruption, most recently with the creation of the National Anticorruption System. The new anticorruption laws started implementation in July 2017, with similarities to the UK Bribery Act 2010. There is one independent body with the authority to coordinate cross Government efforts against corruption. The new laws give the Superior Auditor´s Office the powers to run ‘real time’ audits and to monitor resources transferred from the federal government to states. The Ministry of Public Administration and Court for Administrative Justice are being strengthened; the latter will be entitled to sanction both government officials and companies involved in corruption. Anti-Bribery protocols are being created and all public servants are required to declare their assets and interests, although these will not be made public. Companies will be required to have in place corporate liability mechanisms.
Mexico ranked 103 of 138 countries in the Irregular Payments and Bribes indicator of the 2016-2017 WEF Global Competitiveness Index (ranked 103th in 2015-2016). See full report here
It is important to develop close business relationships with your potential clients but this should not be confused with corruption. A Mexican business partner or agent will be well placed to advise you on normal business practice, as will UK companies already in the market. You should familiarise yourself with British bribery legislation which also applies to UK registered companies and UK nationals committing acts of bribery wholly outside the UK.
Visit the Business Anti-Corruption portal which provides a variety of advice and guidance about corruption in Mexico and some basic effective procedures you can establish to protect your company from them. Also read the information provided on the UK Government’s Bribery and corruption page.
4. Rule of Law and Human Rights
Despite a number of initiatives to address security, justice and human rights problems, Mexico’s human rights situation remains of concern. Since 2006, the military has played a leading role in public security and there is a high rate of impunity for crimes including human rights violations. Out of 69 countries, the Global Impunity Index 2017 ranked Mexico as the 4th. See full report here.
The Mexican National Institute of Statistics and Geography estimates that 93.7% of crimes in 2015 were either not reported or not investigated. In Mexico, there is an average of four judges per 100,000 inhabitants in Mexico (below the global average of 17 per 100,000); every judge receives approximately 500 new cases per year. 43.3% of Mexico’s prison’s population has not been sentenced.
Cases of torture, enforced disappearance and extrajudicial execution have been particularly high profile during the last year. According to the data from the National Registry for Missing and Disappeared Persons, more than 29,000 people remain abducted, forcibly disappeared or missing. Human rights defenders and journalists face violence and intimidation, in person and online. According to Freedom House 2018 Index, Mexico is partially free. See full report here. There are high levels of violence against women.
Mexico has ratified 79 ILO conventions and 7 of the 8 fundamental labour rights conventions, most recently the Minimum Age Convention on 10 June 2015. It has not ratified the Right to Organise and Collective Bargaining Convention. The Mexican Constitution sets out rights to organise unions and strike, to a living wage and to an 8 hour work day. It also sets out the right to compensation following unjustified termination of employment and protections for women and children. Union leaders in Mexico are a powerful interest group with sometimes hereditary or purchasable access to well paying jobs and benefits. Because of this, workers can be vulnerable to a lack of meaningful representation.
In Mexico there are concerns with the violation of economic, social and cultural rights as a result of large scale commercial projects. Projects are taken forward without adequate consultation of communities that will be affected. These projects are mainly developed in rural areas and affect the livelihood of indigenous and farming communities. Discrimination and extreme levels of inequality also play a role in how these cases unfold.
There are some conflict related issues to mining in Mexico. Most of these are because of contamination, damage to communities and dispossession of land in areas with mining developments. Many of the companies involved in these conflicts are foreign. Good practice for consulting communities about investment projects is being developed by a number of civil society organisations and the Mexican Government is drafting National Action Plan in line with the UN Guiding Principles on Business and Human Rights.
See reference to Mexico in the Foreign and Commonwealth Office’s Human Rights and Democracy Report
5. Organised Crime and Terrorism
The Foreign Office Travel Advice for Mexico is regularly updated and should be your primary source of information on the security situation and organised crime in Mexico.
Mexico was ranked 142 out of 163 countries in the 2017 Institute for Economics and Peace’s Global Peace Index. See full report here
Mexico’s militarized drug war hit its ten-year birthday during 2016. Although the President inherited the current crackdown from its architect and his predecessor, he has more or less stuck to the same song sheet for his security strategy: deploying more soldiers (and a new militarized police force) onto the streets and going after the bosses of criminal networks. This has caused a fragmentation of drug trafficking organisation (DTO) and is seen as one of the main factors of insecurity and this remains top concern for most Mexicans.
The homicide rate has continued to rise since 2015. The number of kidnaps and extortions has risen. However, criminal activity varies widely geographically. We recommend seeking specific advice for your business in order to minimise operating and security risks.
Mexico benefits from friendly relations with neighbouring countries which makes geopolitical risk very low. Furthermore, there is a low threat from terrorism in Mexico. You should also be aware of the global risk of indiscriminate terrorist attacks, which could be in public areas, including those frequented by expatriates and foreign travellers.
Although the threat of terrorism is low, it is advisable to read the information provided on our terrorism threat.
6. Protective Security Advice
The Centre for the Protection of National Infrastructure also provides protective security advice to businesses
6.1 Business disputes
The vast majority of British businesses have not been prevented from operating in Mexico by the security risks, although many Mexican and foreign businesses choose to hire private security.
6.2 Travelling around
Mexico receives more British tourists a year than any other Latin American country. There were on average over 500,800 British nationals that visited Mexico in 2017. British nationals safely visit Mexico each year and the UK is Mexico’s third largest provider of tourists. Most victims of crime and violence in Mexico are Mexicans involved in criminal activity, but the security situation also poses risks for foreigners. Be alert to the existence of street crime as well as more serious violent crime like robbery, assault and vehicle hijacking. In certain parts of Mexico you should take particular care to avoid being caught up in drug related violence between criminal groups. See Crime and Violence.
6.3 Presidential elections in 2018
To further feed the political uncertainty, as well as Mexico, there are elections in Brazil, Columbia, Costa Rica (note Costa Rica in 2017 became one of the main transit routes), Paraguay, Venezuela , as well as local elections in San Salvador and political unrest in Honduras and Guatemala. This means that more political attention will be focused on these - and not on the fight against organized crime.
Seek advice from local contacts, avoid travel off the beaten track, stay abreast of media coverage of events in the areas, to or through which, you intend to travel, and ensure that trusted contacts are aware of your travel plans. Be aware of your surroundings at all times and of the risks of travelling to certain areas. You should include security measures in all of your travel plans and register on Facebook or follow us on Twitter @ukinmexico. There is no evidence to show British nationals will be specifically targeted, although there is a risk of being in the wrong place at the wrong time.
7. Intellectual Property
7.1 Scope of Mexico’s IPR problem
Both Mexican and international companies claim loss of sales and weakening of brands due to counterfeit products, which the Mexican Government has recognised as an issue of importance. Despite federal government enforcement efforts, Intellectual Property Right (IPR) abuses across Mexico’s industrial sectors continue. Anti-piracy efforts remain particularly weak at state and municipal government level, and losses to Mexican and international companies due to trademark counterfeiting, copyright piracy, and patent infringements amount to billions of dollars annually.
Lack of IPR protection can affect a wide range of industries including, but not exclusively; film, music, software, pharmaceutical, literature and the clothing and textile industries as well as the food and drink sector, especially liquors. Solutions to the problem are often difficult to implement due to lack of resource, lack of communication between law enforcement agencies, slow court systems and a lack of deterrent sentences, and insufficient planning and coordination among industry sectors and government agencies.
The protection of IPR is also further complicated by black markets that provide a significant source of employment in the informal sector. Illegally reproduced goods, sold at a fraction of the cost of their legitimate counterparts, also give consumers with limited resources access to otherwise unattainable items. Some government leaders are reluctant to crack down on piracy out of fear that this could lead to social unrest - although the fact that this is recognised as an issue and needs to be addressed is in itself a positive step forward.
IPR is one of the major pillars to be discussed in the ongoing renegotiation rounds of the EU-Mexico Global Agreement, expected to be signed by the end of 2017.
7.2 IPR protection in Mexico
Under NAFTA and the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Mexico is obliged to implement certain standards for the protection of intellectual property as well as procedures to address infringements such as piracy and counterfeiting.
The Attorney General’s Office (PGR) is responsible for investigating and prosecuting IPR crimes. The Mexican Institute of Industrial Property (IMPI) is the government agency responsible for administrative enforcement of IPR. However, Mexican IPR laws are often poorly understood by both law enforcement agencies and there is a lack of expertise in the court system.
Mexico has a comprehensive set of IPR laws and an increasing number of seizures and arrests, but even so, the extent of IPR violations in Mexico remains significant. In fact, the World Economic Forum publishes every year the Intellectual Property Protection Index, which measures the extent in which IP is protected in a given country going from 1 (not at all) to 7 (to a great extent). Mexico occupies the 76th place of a total of 140 countries with an index of 3.8 for 2016. Furthermore, as a result of inspection visits during 2015, 7,550,699 products were seized for allegedly intellectual property infringement.
In April 2012, the Mexican Congress adhered to the Madrid Protocol of the World Intellectual Property Organisation, providing certainty for international companies looking to register their marks for use in Mexico. This was the first instance of a Central or South American country signing up to the protocol and is a big step forward in bringing Mexico in line with the international IP community. In December 2009, IMPI and INTERPOL started efforts alongside WIPO, ICC, INTA and OMA to address cross-border piracy trade. As a result, in 2011, the Mexican Customs Agency and the Mexican Industrial Property Institute (IMPI) launched a new trademark scheme to identify pirate products and facilitate customs procedures. IMPI also introduced recently an online system which facilitates and promotes the registration of trademarks.
Licensed software is another issue in the country. According to the Network Readiness Index published by the World Economic forum, Mexico is in the 76th out of 139 countries. In 2016, there was a software piracy rate of 54%, however, the rate shows some improvement compared to 60% during 2009.
This improvement is a result of the Mexican Government’s efforts, as IMPI has signed agreements with the Business Software Alliance. In 2012 Mexico became the first government in the world to earn BSA’s Certification in Standards-Based Software Asset Management for Organizations, a program known as CSS (O). The credential demonstrates the Mexican government’s commitment to promoting legal software use by implementing internationally recognized best practices for maintaining compliance with software licenses. See more here.
Enforcement efforts of copyrights issues by the Mexican government are improving; however levels of piracy are still high. In fact, between 2014 and 2015, more than two thousand inquiries for violations in copyright and industrial property were registered, according to the Office of the General Prosecutor (PGR in Spanish). Counterfeit sound and motion picture recordings are widely available throughout Mexico, where piracy has shifted from traditional formats to optical discs (CD, DVD, and CD-ROM) and internet piracy.
Furthermore, according to a survey created by the Mexican Institute of Industrial Property (IMPI), 48% of the population acquired a pirate product during 2016. The president of the National Chamber of the Transformation Industry estimated that in 2016, the economic impact of piracy resulted in losses of around MXN$ 230bn (approx. £ 9.3bn) accounting for 1.25% of GDP. With respect to the Government’s income, piracy generates losses of approximately MXN$ 6bn (approx. £ 240m) in indirect taxes.
For more information please contact: email@example.com