Guidance

Overseas business risk: Mexico

Updated 6 June 2023

1. Overseas Business Risk – Mexico

1.1 Updated 06 June 2023

2. Politics

Mexico is a federation with a presidential system of government. There are three levels of government: federal, state and municipal. The President is both the head of state and government. Mexico is composed of 32 states, and powers are separated into three branches: executive, legislative and judicial. The President is elected for a six-year term and cannot stand for re-election. Congress is constituted by the Senate (six-year term) and the Chamber of Deputies (three-year term), and its members can be re-elected consecutively for up to 12 years.

President Andrés Manuel López Obrador (AMLO) from the Morena party took office in December 2018, the first leftist politician to come to power in Mexico’s recent democratic history. During his term, he has launched a series of reforms and counter reforms to those crafted by his predecessor, Enrique Peña Nieto (PRI party). During the remainder of his tenure, he would focus in consolidating his reforms, mainly in the energy, social and security fields, and finishing his infrastructure projects.

The energy sector has been a public policy priority. The government has sought to revive the fortunes of state hydrocarbon and electricity companies PEMEX and CFE. The business environment has therefore become more difficult, due to changes in regulation and overarching uncertainty, for private and foreign investment in the energy sector, particularly in clean energy.

Tackling corruption is another political priority for the president’s rhetoric. Several high-ranking former public figures allegedly involved in corruption scandals have been investigated; however, Impunity levels remain stubbornly high, with major corruption cases gone unpunished, due to reduced institutional capacity.

In the social sphere, the new government has expanded social programmes to benefit students, the poor and the elderly. These social programmes also aim to tackle violence, as the federal government believes that lack of opportunities and poverty are the root causes of insecurity.

Notwithstanding, impact has been limited and security – and poverty - remains a huge challenge in Mexico. Despite the pandemic, homicides remain at near record levels – there are approximately 90 murders a day nationwide. There is also continued concern over the violence between organised crime groups, as well as the militarisation of public security.

Information on political risk, including political demonstrations, is available in the FDCO Travel Advice under the section Political Advice.

3. Economics

Mexico is an emerging market, currently the 13th largest in the world (IMF 2023). Mexico is also the second largest economy in Latin America after Brazil, with growing domestic demand including in sectors of interest to the UK, such as financial services advanced engineering, healthcare, retail and technology. Mexico is one of only three Latin American members of the OECD (alongside Chile and Colombia).

GDP reached pre-pandemic levels for the first time in the third quarter of 2022, earlier than analysts had expected at the start of the year. GDP growth of 2022 was 3.1%, after growing 4.8% in 2021, off the back of a stronger recovery of services, manufacturing and construction. Growth in 2023 and 2024 is likely to be weaker, given expectations of slowing US demand.

Mexico’s GDP is driven primarily by the services sector, which account for around 64% of GDP. Mexico is ranked 55th in IMD’s 2022 World Competitiveness Ranking.

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 14 Free Trade Agreements covering over 50 countries, including the UK and the EU, Mexico is one of the most open economies in the world. Nevertheless, Mexico’s main trading partner remains the USA, where around 80% of Mexican goods and services are exported to (2020). Despite only 2.7% of Mexican products being exported to Canada (2020), it is Mexico’s third largest biggest trading partner, whilst the UK currently accounts for less than 1% of Mexican exports. In recent months the phenomenon of ‘nearshoring’ has gained prominence as Mexico is expected to benefit from the relocation of supply chains from Asia to countries geographically closer to the US.

Monetary policy is responsible and efficient. The Central Bank (Banxico) started to respond to inflationary pressures by starting a hiking cycle in the first half of 2021. Inflation remained high throughout 2022, with an annual rate of 7.82%. The interest rate reached 11.25% after Banxico’s latest rate rise in March 2023, but better prints in 2023 point to a pause in the hiking cycle. Inflation is expected to return close to the 3% target by the end of 2024. Banxico continues to be one of the most respected institutions in Mexico.

Public finances are competently managed, Thanks to the 2014 tax reform, a rebalancing of the economy away from oil and restrained government spending, net public debt as a proportion of GDP (49.7% in 2022), remains low compared to international figures.

The Mexican peso has been one of the best performing currencies since 2022. International Reserves are currently around USD$200 billion and represent an important shield against exchange rate volatility. Current account deficits might be compensated for by large capital account surpluses. This, added to huge reserves, protects Mexico from suffering balance of payments crises.

The economic policy of AMLO’s administration continues to generate uncertainty. Reviving the fortunes of PEMEX, the most indebted oil company in the world, is the centrepiece of that policy. The cancellation of projects run by international companies such as the Mexico City International Airport and a brewery in Baja California have added to uncertainty among both national and international investors across a number of sectors.

4. 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 a Scottish partnership to bribe anywhere in the world. In addition, a commercial organisation carrying out 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 that form part of the offence take place in the UK or elsewhere.

Bribery and corruption are a significant problem in Mexico. Mexico ranks 126th out of 180 countries in the Transparency International Corruption Perception Index, improving 9 places since 2017, despite the increase in scandals and recent criticism over impunity levels and political use of anti-corruption investigations. The ranking remains of serious concern, placing Mexico alongside countries such as Uzbekistan and Niger. There are currently 15 former governors under investigation in Mexico, one in jail, and other former high-level public servants being prosecuted. During the COVID-19 pandemic, the Mexican government has increased opaque single source contracting in public procurement to record levels – unofficial estimates place the figure at between 70-80% - using national security rationale to prevent investigation into the detail and deploying the military to carry out key infrastructure projects. Despite this, tendering guidelines and public procurement platforms are being strengthened to reduce the risk of corruption in the awarding of contracts. However, this in turn can lead to the lowest bid winning without consideration of quality, and there are still several loopholes that many exploit. Numerous British businesses report successful business operations in Mexico that are free of corrupt practices, or that have managed to find ways to avoid this preventing them from doing business.

Mexico is a signatory of the 2016 London Anti-Corruption Global Agreement. Mexico has modernised its legislation against corruption, most recently with the creation of the National Anticorruption System, although there have been setbacks in its implementation. Mexico’s Anti-Corruption laws, with similarities to the UK Bribery Act 2010, began to be implemented in July 2017.

There is one independent body in Mexico with the authority to coordinate cross-government efforts against corruption. The law gives the Superior Auditor´s Office the powers to run ‘real time’ audits and to monitor resources being transferred from the federal government to the Mexican 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 corporate liability mechanisms in place.

Mexico ranked 116 of 141 countries in the Incidence of Corruption of the 2019-2020 WEF Global Competitiveness Report (improving from the previous edition). However, impunity levels remain stubbornly high, with major corruption cases gone unpunished, due to reduced institutional capacity and obstructive action.

AMLO is currently pushing for a reform to the National Anticorruption System. A reform that includes changes to tackle anti-money laundering by merging external oversight & coordination institutions into federal ministries, increasing the capacities of the Financial Intelligence Unit, and reducing the capacities of the National Transparency & Data Protection Institute. In the 2022 Basel Global AML Index, Mexico ranked 60 of 128 countries, with a middle risk level of 5.20/10 of money laundering and terrorist financing, which should be considered by companies when preparing due diligence plans and strategies.

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 operating 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. Information is also available on the UK Government’s Anti-Bribery and Anti-Corruption pages.

To support with Mexico in the fight against corruption, in July 2019 the Department for Business and Trade (DBT) and the FCDO launched the Business Integrity Initiative pilot. This work produced tools and products to support companies seeking to navigate Mexico’s business environment and worked with the Mexican Government to set mechanisms and protocols to work towards the reduction of corruption risks. The initiative delivered a country integrity report, and four key projects:

• Work with Mexico’s National Commission for Regulatory Improvement to streamline and simplify the administrative regulations for businesses in three states (Mexico City, Jalisco, Nuevo León) via a digital inventory
• Creation of an integrity toolkit for SMEs part of global and national supply chains, including a risk assessment bot, ethics code, risk analysis manual, whistle-blowing channel and protocol for receiving gifts

• Work with Mexico’s Ministry of Public Administration to produce a ‘white list’ of companies considered reliable to do business with in Mexico

• Delivery of a communications campaign promoting the benefits of integrity as a business model ##4. Rule of Law and Human Rights

Despite a number of initiatives to address security, justice and human rights problems, Mexico’s security and human rights situation remains one of serious concern. Since 2006, the military has played a leading role in public security and there is an extremely high rate - nearly 95% - of impunity for crimes including for human rights violations (NGO México Evalúa).

The Committee to Protect Journalists’ Global Impunity Index 2022 ranked Mexico in sixth place, and Mexico is consistently recognised as one of the most dangerous places in the world to be a journalist, second only to war-torn Afghanistan. Media freedom is at serious risk, and violence and aggression against journalists is commonplace; in the first six weeks of 2022 alone, five journalists were killed because of their profession and several more have narrowly escaped violent attacks Reporters Without Borders. This follows nine killed for their profession in 2021, and eight in 2020, suggesting an upward trend in violence against journalists.

According to the National Survey of Victimization and Perception of Public Safety (2021) of the Mexican National Institute of Statistics and Geography (INEGI), 93.3% of crimes in 2020 were either not reported or not investigated. In Mexico, there were an average of four judges per 100,000 inhabitants in 2020 (below the global average of 17 per 100,000); each judge receives approximately 500 new cases per year. INEGI reported that by the end of 2021, 27.8% of Mexico’s prison population has not been sentenced (INEGI 2021).

Cases of torture, enforced disappearance and extrajudicial execution continue to be a problem in Mexico. According to the data from the Ministry of Government, more than 96,000 people remain abducted, forcibly disappeared or missing. Human rights defenders and journalists face violence and intimidation, in person and online. According to Freedom House 2021 Index, Mexico is partially free. See full report here. There are consistently high levels of violence against women, and Mexican laws do not adequately protect women and girls against gender-based and sexual violence.

Mexico has ratified 81 ILO conventions and eight of the eight fundamental labour rights conventions. The Mexican Constitution sets out rights to organise unions and strikes, to a minimum wage and to an eight hour work day. It also sets out the right to compensation following unjustified termination of employment and protections for women and children. However, more broadly, over 2,000 UN recommendations on human rights from various bodies have not been actioned or implemented. Mexican authorities suggest work is ongoing for implementation, but with little substantial evidence.

Union leaders in Mexico are a powerful interest group with sometimes hereditary or purchasable access to well-paying jobs and benefits, affecting workers’ meaningful representation. Nevertheless, a new law that democratises unions was recently published under pressure from the USMCA (United States-Mexico-Canada Agreement) which should give a greater voice and representation to workers.

In Mexico there are concerns with the violation of economic, social and cultural rights as a result of large-scale commercial projects. Projects are sometimes taken forward without adequate consultation of the communities that will be affected. These projects are mainly developed in rural areas and can 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 issues related 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 FCDO’s 2021 Human Rights and Democracy Report.

5. Organised crime and terrorism

The FCDO 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 137 out of 163 countries in the 2022 Institute for Economics and Peace’s Global Peace Index. The homicide rate sits at 26.6 per 100,000, according to the Mexico Peace Index 2022. With Mexico’s militarised ‘drug war’ hitting its sixteen-year anniversary in 2022, the current administration has significantly dialled down rhetoric on the war on drugs, without weakening organised crime.

Criminal gangs continue to diversify their operations; from drug trafficking to cargo and fuel theft, kidnappings and extortions, though criminal activity varies widely geographically. Corruption is an enabler for organised crime and that the two are linked. We recommend seeking specific advice for your business 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. However, it is worthwhile to 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 in the terrorism threat section of the FCDO’s Travel Advice for Mexico. ## Protective Security Advice

The Centre for the Protection of National Infrastructure also provides protective security advice to businesses.

5.1 Business disputes

The vast majority of British businesses have not been prevented from operating in Mexico by security risks, although many Mexican and foreign businesses choose to hire private security.

5.2 Travelling around

Mexico receives more British tourists a year than any other Latin American country. On average over 500,000 British nationals visit Mexico every year. The UK is Mexico’s third largest provider of tourists and most visits are completed safely. Most victims of crime and violence in Mexico are Mexicans, 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 violence between criminal groups. See Safety and Security.

5.3 Elections

Elections can further feed political uncertainty and insecurity. Mexico usually conducts elections during the first week of June. You should avoid rallies and demonstrations and check travel advice.

5.4 Advice

Seek advice from local contacts, avoid travel off the beaten track, stay abreast of media coverage of events in the areas you are visiting, including those 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 follow us on Facebook or Twitter. 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.

6. Intellectual Property

6.1 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 Rights (IPR) abuses across Mexico’s industrial sectors continue. Anti-piracy efforts remain particularly weak at state and municipal government level, and losses to 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 limited to, film, music, software, pharmaceutical, literature, the clothing and textile industries and 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, a lack of deterrent sentences and insufficient planning and coordination among industry sectors and government agencies.

The protection of IPR is 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 that needs to be addressed is in itself a positive step forward.

6.2 IPR protection in Mexico

On 5 November 2020, Mexico’s new Federal Law for the Protection of Industrial Property entered into force. Additionally, the Mexican Law for Copyrights was amended on 1 July 2020. These reforms harmonise the country’s legal framework and adherence to the IPR commitments that Mexico subscribed to through the recently joined USMCA and the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership).

As such, Mexico is obliged to implement standards for the protection of intellectual property – including protection for trade secrets and geographical indications (GIs), geographical names that protect the quality and reputation of a distinctive product from a region – as well as procedures to address infringements such as piracy and counterfeiting.

The UK-Mexico Agreement on the Mutual Recognition and Protection of Designations for Spirit Drinks, signed on 30 November 2020, is an important geographical indications agreement between the United Kingdom and Mexico to protect the spirits of both countries. From 1 September 2021, this agreement protects traditional spirits like Irish Whiskey and Scotch Whisky, Tequila, Sotol and Mezcal.

The Attorney General’s Office (FGR) is responsible for investigating and prosecuting IPR crimes. The Mexican Institute of Industrial Property (IMPI) – a decentralised body that is part of the Ministry of Economy - is the government agency responsible for administrative enforcement of IPR.

Despite Mexico’s new comprehensive set of modernised IPR laws, the extent of IPR violations in Mexico remains significant. The International Property Rights Index (IPRI) – the world’s only index entirely dedicated to the measurement of intellectual and physical property rights – placed Mexico 77th out of 129 countries in 2022.

6.3 Trademarks

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 goods and services for use in Mexico. This was the first instance of a Latin American country signing up to the Protocol and is a big step forward in bringing Mexico in line with the international IP community. As of 2020 Mexico has registered the 15th highest number of trademarks globally (two places below the UK), with levels currently at approximately 180,000 trademarks and 20,000 patents annually.

The newly passed law protects patents and trademarks created in Mexico and imposes harsh fines and penalties in cases of infringement, up to ten times more severe than what the law stipulated in the past.

6.4 Copyright

Enforcement efforts of copyright issues by the Mexican government are improving; however, levels of piracy are still high. The American Chamber of Commerce estimates that counter fitting costs Mexico £1.5 billion every year, and from the period 2016 to 2020 Mexican authorities destroyed 13 million counterfeited goods. Two thousand Mexican officials have been trained to identify these goods.

In response to USMCA, the Mexican government made adjustments to its intellectual property legislation on July 2020, including amendments to its Federal Copyright Law and Federal Criminal Code:

• Allowing copyright owners to request that any online provider – such as a social media platform - remove a post or published work due to copyright violation

• Gaining access to control technologies (e.g. digital rights management or DRM tools), and it becoming a federal crime to break these security mechanisms

Software

In 2012 Mexico became the first government in the world to earn BSA’s Certification in Standards-Based Software Asset Management for Organisations, a program known as CSS (O). The credential demonstrates the Mexican government’s commitment to promoting legal software use by implementing internationally recognised best practices for maintaining compliance with software licenses.

The 2020 amendment to the Copyrights Law focused on the incorporation of technological protection measures (TPMs) and rights management, where provisions were included (as sanctions) to allow criminal prosecution for the avoidance or circumnavigation of TPMs set to protect copyrighted works.

For more information please contact: ukinmexico@fcdo.gov.uk

7. Public procurement

With an approved government spending budget of 8.25 trillion MXN (more than £362 billion) for 2023, Mexico’s government procurement market is one of the largest in Latin American and the Caribbean, covering a vast spectrum of public spending from the acquisition of goods and services for infrastructure and construction works, to the purchase of supplies for wider sectors, such as health, defence and education.

The Mexican government has been making efforts to deliver transparency in procurement processes. With the publication of their Comprehensive Strategy for the New National Public Procurement System in 2019, they have the ambition to (1) make the federal government’s public procurement system a more transparent and open environment; and (2) contribute to national economic development by promoting strategic planning, social responsibility, and the participation of a diverse number of potential suppliers.

However, the market is not without its issues and while the Mexican government has been promoting a standardised approach, companies may face different, and sometimes difficult, conditions and requirements depending on the type of goods or services offered, with variance from one sector to another. For example, Mexican defence authorities have greater independence in their acquisition processes, whilst public procurement in the health sector has transitioned to a consolidated purchase approach through an alliance with the United Nations Office for Project Services (UNOPS).

In most cases, there does not exist a strict requirement to have local representation in Mexico and most procurement opportunities are listed on CompraNet (federal procurement information system). However, differences in procurement processes at sector and ministry level make it difficult for foreign companies to participate by themselves. As such, local representation or partnership with a local company can facilitate participation in the market.

8. Contact

For more information on conducting business in Mexico, contact the DBT team based in the country.

9. Other useful links

• DBT
• Business exports
• Exporting to Mexico
• Secretaría de Economía
• SAT