Doing business in Mexico

Mexico is a market of tremendous potential, but doing business there requires patience and knowledge of Mexican social customs and business etiquette.

U.S. food companies can sell either directly to a Mexican customer or indirectly through a broker, distributor or agent. Each method offers advantages and disadvantages. Your company's size, resources and expected export volume will determine the best approach.

Direct: Only a small volume of U.S. exports moves this way as most Mexican retailers and food service companies are not set up to import directly. Selling directly requires a great deal of effort and would probably make sense only if a company has a limited number of potential customers.

Broker: Most U.S. products are sold through U.S. or Mexican brokers based in the United States, normally with offices located in the major border cities such as Laredo, McAllen and El Paso, Texas; Nogales, Arizona; and San Diego, California. Other important Mexican-U.S. brokering locations are San Antonio, Houston, Los Angeles and, to a limited extent, Chicago. Products moving to the Caribbean beach resorts are normally brokered out of Miami and U.S. cities along the Gulf of Mexico.

Using a broker is probably the easiest sales method but offers the fewest rewards. The U.S. supplier does not need to worry about logistics and red tape, and payment is ordinarily handled like any other domestic transaction with all the customary legal protection. However, the U.S. company has no control over where the product ends up or its arrival condition and it is difficult to build a brand identity.

Distributor: For small and medium U.S. food companies, it is probably best to tap into an existing distribution network -- either that of a distribution company or a Mexican food processor. U.S. companies should benefit from higher margins at the should benefit from higher margins at the expense of considerable time supervising distributor(s) and some payment risk. The difficulty is the shortage of good distributors.

The support you will need to provide the distributor will vary depending on the contractual terms you work out. For instance, you may agree to provide funding for advertising and promotional support or you may consider extending payment terms to match the terms the distributor must provide its Mexican customers.

Agent: Another option is to sell through a Mexican-based agent. The investment in time and effort is great but the rewards are larger as well. This route makes sense if you have a significant export volume or an extensive product range.

It is probably best to contract with a company rather than hire an individual to represent your firm. Mexican labor laws make it difficult and expensive to dismiss an individual.

Finding a Distributor

Finding a distributor is not easy. And because they are limited in geographic coverage, a company may need several distributors to cover all of the major markets in Mexico.

The U.S. Agricultural Trade Office can usually provide you with a list of distributors. Also check with U.S. companies already distributing their product in Mexico for recommendations. You cannot check on credit ratings the way you can in the United States. Therefore, you should: -- Inspect warehouse facilities and delivery capabilities to make sure that they are able to meet the special requirements for delivering your products. -- Check references with companies the distributor already represents. -- Ask the retailers or food service outlets to which they distribute about their reliability and timeliness.

Most distributors will ask for an exclusive to represent your products for the whole country; however, few can deliver on this. Most distributors need to sell to sub-distributors in other parts of the country. This will result in additional markups, raising prices unnecessarily. Though cumbersome, it is best to have distributors in each of the key regions of the country.

Getting Paid

U.S. companies should sell only on the basis of cash or an irrevocable letter of credit when doing business in Mexico for the first time. As you develop rapport with your customers and they build a good payment track record, you may decide to move to a less rigid form of payment.

Due to high commercial interest rates in Mexico (as high as 30 percent in some instances), maintaining inventories can be costly. Therefore, payment terms can significantly affect company profits and also dictate the schedule by which your distributor will want to pay you. For instance, terms are a minimum 45-60 days for the major supermarket chains.

Promoting Your Product

Mexican consumers are greatly influenced by promotion and advertising, but personal contact is also important. While billboards, radio, and television are very popular, in-store promotions, handouts, recipe cards, and other forms of direct merchandising are important promotional tools, especially for new-to-market products.

U.S. exporters should support their importers and distributors with promotional campaigns, especially during the introduction phase.

Most companies use locally based public relations and advertising firms to promote their products.

Learn Social and Business Customs

Business hours are generally 10:00 a.m.-8:00 p.m. in Mexico City with time out for a lengthy lunch between 2:30 and 5:00 p.m. In the north, particularly in Monterrey, work hours conform more to U.S. practice. Factories also tend to get started earlier.

Breakfast, usually beginning at 8:00 or 8:30 a.m., has become a popular meal for business meetings and lasts no more than one hour. Because lunch is the main meal of the day, it tends to be much longer, social in nature and quite filling. At times, an important business lunch can last into early evening. When inviting Mexican contacts for a meal, keep in mind that a breakfast is a setting for getting down to business, whereas a lunch has more of a social element.

Mexican National Holidays

Holiday              Date
New Year's           January 1
Constitution Day     February 5
Benito Juarez Day    March 21
Holy Week(*)         March/April
Labor Day            May 1
Independence Day     September 16
Columbus Day         October 12
Day of the Dead      November 2
Revolution Day       November 20
Virgin of
  Guadeloupe Day     December 12
Christmas(*)         December 24 & 25

(*)It is rare to find decision-makers in their offices or to get anything accomplished from around December 20 until the second week of the New Year, and during the week before Easter.

Dinner is usually a lighter meal eaten after 9:00 p.m. and is not generally a time for business.

What's in a Name?

Mexicans generally have three names. On a business card, they would generally appear in the following order: first name, paternal family name and maternal family name. In addressing someone, you should use the paternal family name. For instance, Sr. Jose Chavez Gonzalez would be addressed as Sr. Chavez. Increasingly, Mexicans are abbreviating their maternal family name. In such cases, the name would appear as Sr. Jose Chavez G. In other cases the maternal name is dropped altogether.

Take the lead from your Mexican contacts before switching to a first-name basis.

Plan Your Meetings

Rule No. 1 -- Slow down. Most first time visitors to Mexico try to crowd in too many appointments per day. This common U.S. practice has two negative effects. Too tight a schedule will make you and others anxious. This anxiety will have a negative impact on the person you are trying to impress with your product and limit spontaneity and the opportunity to build business relationships. As a rule of thumb, make no more than four appointments per day.

Rule No. 2 -- Reserve the first few minutes of the appointment for social talk, rather than immediately getting into business. Take the lead from your Mexican host. This period of "small talk" is important. It shows you're not in a hurry and that you are interested in your Mexican host. It could lead to a long friendship and business.

Mexican companies, many of which are family run, are extremely hierarchical. Decision-making is rarely delegated. Make sure that you meet with the real decision-maker in a company if you want results. If it's a family-run business make sure you get to know both the father and the son.

Rule No. 3 -- Ask a lot of questions about the company you are visiting. The first appointment will normally last about an hour, but may go longer if your host wants you to stay for a tour of the offices, factory, warehouse or store. You may wish to invite your host to do something social at a later time.

Surmounting Language Barriers

English is not spoken widely in Mexico. There are some regional variations, with people in the northern states bordering on the United States more likely to speak English.

Mexicans prefer to conduct business in Spanish. If you do not speak Spanish proficiently, travel with an interpreter. Here are some suggestions on how to work with an interpreter: -- meet with your interpreter before your first business meeting and review technical phrases you are likely to use. -- face and speak toward the person you are meeting with -- not toward the interpreter. -- speak in short sentences so that the interpreter has time to translate. -- abbreviate your presentation because translating increases the meeting time immensely.

Getting Around in Mexico City

-- Try not to be on the road during the rush hours--9:00 to 10:00 a.m. and 7:00 to 9:00 p.m. -- Consider using the prevalent Volkswagen Beetle or Nissan taxis, which have meters but no air conditioning. These taxis, painted yellow and white or green and white, are the most economical form of chauffeur driven transportation. Make sure the driver puts the meter on when you enter. If the meter is "broken", leave and flag down another taxi. -- Taxis outside the hotels work on a flat fee and are usually much more expensive. However, they are airconditioned, cleaner and more comfortable. Some of these drivers speak English. -- Ask the taxi driver to wait for you to finish your appointment, if you are meeting in a remote neighborhood where a taxi may be hard to find and if you do not expect to be long. Negotiate a fee for his time. -- Make sure you know the cross streets as well as the exact street address of each appointment; addresses may repeat on the same street. Don't assume that street numbers run in sequence.

Getting Started

If your firm is interested in the Mexican market you should follow these steps to get started.

1) Contact the U.S. Agricultural Trade Office (ATO) in Mexico City for information on the market for your products and to obtain initial contacts.

2) Check with USDA's Animal and Plant Health Inspection Service (APHIS) for horticultural products or with the Food Safety and Inspection Service (FSIS) for meat products to determine the health and phytosanitary requirements for your products.

3) Contact your state Department of Agriculture to see what assistance it can provide. Many states have trade promotion offices in Mexico City.

4) Check with your commodity trade association. Many of them also have offices or representatives in Mexico City.

5) Exhibit at, or visit, USDA's U.S. Food and Beverage Exhibition held each September in Mexico City and other trade shows.

6) Plan a trip to Mexico to meet with prospective customers, importers and distributors. -- Mail is extremely slow, so make initial contact by fax at least two weeks in advance. (Failure to respond promptly may not indicate lack of interest; send repeat faxes.) -- Follow-up by telephone to schedule appointments. -- Confirm appointments when you arrive. -- Do not expect to make sales at the first meeting; take time to get to know your customers. -- Visit the Central de Abastos, the large, central wholesale markets located in Mexican cities, if you are selling horticultural products.

7) For in-depth information, hire a market research firm knowledgeable about the Mexican food and agribusiness sector to evaluate market potential, competition and distribution channels, and to identify additional contacts.

8) Plan a second trip to choose a distributor to handle your products. Be sure to check references and do not give a countrywide exclusive.

COPYRIGHT 1994 U.S. Department of Agriculture
COPYRIGHT 2004 Gale Group