Mexico Market Realities & Sales Channel Strategies Vince Lencioni LGA Consulting, General Manager 2011
Four Part Presentation <ul><li>I . Mexican Market & Import Dynamic </li></ul><ul><li>II. Channel Options & Related Technic...
I. Mexican Market and Import Dynamic
Mexican Regions and Cities <ul><ul><ul><li>Regions  – Industrial/Business Style Dynamic </li></ul></ul></ul><ul><ul><ul><u...
Mexico Indicators & Demographics <ul><ul><ul><li>GDP : $1.5 Trillion; Imports: Over $300 Billion </li></ul></ul></ul><ul><...
US Exports to World, Latam, & Mexico  <ul><li>Canada 21%, Mexico 12% </li></ul><ul><li>Mexico > China + Japan </li></ul><u...
Mexico Imports: 2008 <ul><li>Top Sectors </li></ul><ul><li>(Up 11.6%, 3 Qtrs up, 4th down) </li></ul><ul><ul><li>21.3% Ele...
Mexican Imports by Composition
NAFTA has been a Bilateral Benefit   <ul><ul><ul><li>NAFTA – Good resulting in Benefits </li></ul></ul></ul><ul><ul><ul><u...
Concern I: NAFTA - Bad or Incomplete <ul><ul><ul><ul><li>Labor and Environmental Measures </li></ul></ul></ul></ul><ul><ul...
II. Channel Options & Related Technical Trade Issues
I. First Experience with Mexico: Indirect <ul><ul><ul><li>Exporting by Diversion – Manufacturer unaware </li></ul></ul></u...
II. Decision to take the next step:  How to sell more proactively in Mexico <ul><ul><ul><li>As direct requests or indirect...
Channel Market Strategies – Intermediaries <ul><ul><ul><li>US intermediaries – Usually very sector and client specific </l...
Mexican Distributor Option <ul><ul><ul><li>Most typical & traditional market entry strategy </li></ul></ul></ul><ul><ul><u...
Mexican R ep/Agent Option <ul><ul><ul><li>Not as typical, growing with push towards selling direct </li></ul></ul></ul><ul...
Reasons for Incorporation in Mexico <ul><ul><ul><li>Selling through intermediaries not viable </li></ul></ul></ul><ul><ul>...
Mexico Incorporation Options & Details <ul><ul><li>Incorporation Options   </li></ul></ul><ul><ul><ul><li>SA (Limited Liab...
Contracts in Mexico <ul><ul><li>General Contracts Issues </li></ul></ul><ul><ul><li>Always use contracts  - W ith intermed...
NOMS & Other Technical Trade Issues   <ul><ul><ul><li>Obligatory Product Certifications/Registrations </li></ul></ul></ul>...
Mexico Customs Issues   <ul><ul><ul><li>Tariffs at 0% ( except with retaliation, 90 at 20%* ) </li></ul></ul></ul><ul><ul>...
III. Retail, Gov´t & B2B Sales Dynamic
Credit & Collections Challenges & Realities in Mexico <ul><ul><ul><li>Finance/Credit  </li></ul></ul></ul><ul><ul><ul><ul>...
Business Financing Sources Source: Banco de Mexico;  Numbers in (  ) = last years figures 10.7 (10.3) 11.9 (10.3) 15.6 (14...
Trade Finance & Credit – Due Diligence   <ul><ul><ul><li>Offering financing/credit terms to clients  </li></ul></ul></ul><...
Payments: Mexico vs. Latam Source: Latin America Business Monitor (2008) 17% 37% 52% 7.  Argentina 19% 36% 57% 6. Mexico 1...
Mexican  Collections Advice <ul><ul><ul><li>Preparation Actions  (before there is a problem) </li></ul></ul></ul><ul><ul><...
IV. LGA Services
Current LGA Staff and Infrastructure <ul><ul><ul><li>Office  in northern Mexico City suburb </li></ul></ul></ul><ul><ul><u...
LGA Services – Two Service Groups <ul><ul><ul><li>Export Business & Sales Development: Mexico & Latin America </li></ul></...
Realities about Secondary Information on Mexico segments/Market <ul><ul><ul><li>Secondary Information – Non-Existent, Bad,...
<ul><ul><ul><li>Why obtaining info on your own is difficult: </li></ul></ul></ul><ul><ul><ul><ul><li>Mexican Associations ...
Preliminary Market Analysis Services <ul><ul><ul><li>Market Product Viability Analysis </li></ul></ul></ul><ul><ul><ul><ul...
Market Access and Channel Services   <ul><ul><ul><li>New to Market & Growth Strategies : Retail, Wholesale, B2B, Catalog <...
Business Development Services <ul><ul><ul><li>Client and Buyer Searches </li></ul></ul></ul><ul><ul><ul><ul><li>For direct...
Corporate Legal and Accounting Services <ul><ul><ul><li>Corporate Law Services  – Incorporation, Contracts, Collections, L...
Collections and Litigation Supervision <ul><ul><ul><li>Extra Legal  – Interface/visit with client as attorney, try to coll...
LGA: Strategic Assistance with focus on and services for local implementation <ul><ul><ul><li>Allows companies to access m...
<ul><li>LGA Consulting </li></ul><ul><li>(Mexico City) </li></ul><ul><li>US Toll Free Number: 1-888-750-0988 </li></ul><ul...
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Mexico Market Realities &amp; Sales Channel Strategies

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Mexico Market Realities &amp; Sales Channel Strategies

  1. 1. Mexico Market Realities & Sales Channel Strategies Vince Lencioni LGA Consulting, General Manager 2011
  2. 2. Four Part Presentation <ul><li>I . Mexican Market & Import Dynamic </li></ul><ul><li>II. Channel Options & Related Technical Trade Issues </li></ul><ul><li>III. Retail, Gov´t & B2B Sales Dynamic </li></ul><ul><li>IV. LGA Services </li></ul>
  3. 3. I. Mexican Market and Import Dynamic
  4. 4. Mexican Regions and Cities <ul><ul><ul><li>Regions – Industrial/Business Style Dynamic </li></ul></ul></ul><ul><ul><ul><ul><li>North (Monterrey & US border) – 29% GDP </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Central (Mexico City, Guadalajara, Bajio) - 52% GDP </li></ul></ul></ul></ul><ul><ul><ul><ul><li>South (Tourism, oil, least urbanized areas) – 19% GDP </li></ul></ul></ul></ul><ul><ul><ul><li>Major Cities </li></ul></ul></ul><ul><ul><ul><ul><li>Mexico City: 20 milion+; 31% (40%) GDP; “NY/CHI/LA” </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Monterrey: 3.8 million+, 7.5% GDP; “Barcelona/Houston” </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Guadalajara: 5 million+; 6.3% GDP; #1 Agri;“San Diego” </li></ul></ul></ul></ul><ul><ul><ul><li>Other Regional Cities ( 1 to 3 million inhabitants ) </li></ul></ul></ul><ul><ul><ul><ul><li>North: Tijuana, Juarez, Tampico, other border cities. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Center/Bajio: Queretaro, Leon, SLP, Aguascalientes </li></ul></ul></ul></ul><ul><ul><ul><ul><li>South: Puebla, Villahermosa, Veracruz, Acapulco </li></ul></ul></ul></ul>
  5. 5. Mexico Indicators & Demographics <ul><ul><ul><li>GDP : $1.5 Trillion; Imports: Over $300 Billion </li></ul></ul></ul><ul><ul><ul><ul><li>US sells it 50% of Imports, buys 80% of its exports </li></ul></ul></ul></ul><ul><ul><ul><li>Population – Somewhere between 107 & 125 million </li></ul></ul></ul><ul><ul><ul><ul><li>Urban (72%) vs. Rural (28%) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Working Age Population: 53% large cities, 14% medium cities (10,000 to 100,000); 33% small cities/rural. </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Employment: Large 10%, Medium 12%, Small/Micro: 66% </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Age: 40% (0-19), 24% (20-34), 36% (35+) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Income: Upper (5%), Middle (40%), Lower (55%) </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Upper and half of middle can buy imports: 25% </li></ul></ul></ul></ul></ul>
  6. 6. US Exports to World, Latam, & Mexico <ul><li>Canada 21%, Mexico 12% </li></ul><ul><li>Mexico > China + Japan </li></ul><ul><ul><li>China < ½ of Mexico </li></ul></ul><ul><li>Export Growth Rates 2008 : </li></ul><ul><ul><li>Canada 4.8%; Japan 6.2% </li></ul></ul><ul><ul><li>Mexico 11.3%; China 9.5% </li></ul></ul><ul><ul><li>Germany 10%; Brazil 33% </li></ul></ul><ul><li>US Exports to Latin America as % of Exports to Mexico: </li></ul><ul><ul><li>Top 10 LatAm:$105 Billion </li></ul></ul><ul><ul><li>69% of Exports to Mexico </li></ul></ul><ul><ul><ul><li>Up from 59% (Brazil) </li></ul></ul></ul><ul><ul><li>Mexico = 56% EU Top 10 </li></ul></ul><ul><li>Nevada Exports to Latin Amer as % of Exports to Mexico </li></ul><ul><ul><li>Mexico = Top 10 Latam </li></ul></ul><ul><ul><li>Argentina 50 Million, Up 33% </li></ul></ul><ul><ul><li>Brazil 37 Million, Up 50% </li></ul></ul><ul><ul><li>Chile 34 Million, Up 342% </li></ul></ul>
  7. 7. Mexico Imports: 2008 <ul><li>Top Sectors </li></ul><ul><li>(Up 11.6%, 3 Qtrs up, 4th down) </li></ul><ul><ul><li>21.3% Electrcl Mach (+11%) </li></ul></ul><ul><ul><li>14.6% Industrial Mach (+8%) </li></ul></ul><ul><ul><li>9.5% Oil (+60%x) </li></ul></ul><ul><ul><li>8.5% Vehicles (same) </li></ul></ul><ul><ul><li>5.3% Plastics (+2%) </li></ul></ul><ul><ul><li>4% Med Instruments (same) </li></ul></ul><ul><ul><li>3% Iron & Steel (+29%) </li></ul></ul><ul><ul><li>3% Chemicals (+18%) </li></ul></ul><ul><ul><li>2% Iron/Steel Products(+5%) </li></ul></ul><ul><ul><li>2% Paper Products (+3%) </li></ul></ul><ul><ul><li>*VERY SIMILAR TO US EXPORTS TO MEXICO </li></ul></ul><ul><li>Mexico Import Dynamic (2006-08) </li></ul><ul><li>US: from 51 to 49% </li></ul><ul><li>2008 Growth: 10.8% </li></ul><ul><li>China: from 9.5 to 11% </li></ul><ul><li>2008 Growth: 18.6% </li></ul><ul><li>*Elimination of Chinese Quotas will make this dynamic continue </li></ul><ul><li>Top 4 Digit Mexican Imports </li></ul><ul><li>1. Oil & Gas +60% (9% of total) </li></ul><ul><li>2. Autoparts: +5% (4.3%) </li></ul><ul><li>3. Tel. Equipt: +94% (3.7%) </li></ul><ul><li>6. Vehicles: -11.4% (2.6%) </li></ul>
  8. 8. Mexican Imports by Composition
  9. 9. NAFTA has been a Bilateral Benefit <ul><ul><ul><li>NAFTA – Good resulting in Benefits </li></ul></ul></ul><ul><ul><ul><ul><li>Trade: Tariff Elimination = trade explosion </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Trilateral Trade: over $900 Billion annually </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Bilateral Trade: over $365 Billion annually </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>US Exports to Mexico: Over $150 Billion annually </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>US Agricultural Exports – Mexico #2 destination </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Manufacturing </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Production Sharing - bilateral synergies </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Help keep jobs in the US & region vs. moved to Asia </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Social </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Implementation of progressive measures in Mexico </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>US better appreciate and understanding of Mexico, especially since the increase in the importance of Chinese imports </li></ul></ul></ul></ul></ul>
  10. 10. Concern I: NAFTA - Bad or Incomplete <ul><ul><ul><ul><li>Labor and Environmental Measures </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Ineffective, last minute Clinton iniciatives </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Environment: Big Need, not regulatory-driven </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Government Procurement Accessibility </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Mexico - Federal: ok; Muni, State, Pemex: same </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>US - Mexico opportunities are complex/difficult </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Superficial/ineffective like labor/environment </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Transportation – 1994 and 2008 and 2009 </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Teamsters vs. Canacar: keep border closed </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Does anyone really want the border open? </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Regulatory Concerns – Noms, Permits </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Mexico: Delays, Testing, Enforcement and NOM/Permit holding Inconsistencies; US: Regulatory: very complex </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Feelings by both sides: Reopen NAFTA renegotiations </li></ul></ul></ul></ul>
  11. 11. II. Channel Options & Related Technical Trade Issues
  12. 12. I. First Experience with Mexico: Indirect <ul><ul><ul><li>Exporting by Diversion – Manufacturer unaware </li></ul></ul></ul><ul><ul><ul><ul><li>Product sold to US company, sent to Mexican operation </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Sales to US distributors/reps that end up in Mexico </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Examples: Martinelli and Oshkosh B´Gosh </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Mexican companies request sales and you delivery to US border and they import it </li></ul></ul></ul><ul><ul><ul><ul><li>Mexican clients trying to go around US distributors </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Or Mexican clients stumble on company website </li></ul></ul></ul></ul><ul><ul><ul><li>Maquiladora: buying decisions by US home office, product sent to US or border location </li></ul></ul></ul><ul><ul><ul><ul><li>Maybe regional rep/distributor calls on Mexican maquila plant but product shipped to US location </li></ul></ul></ul></ul><ul><ul><ul><li>TERMS: Cash in advance or extending credit to US entity </li></ul></ul></ul>
  13. 13. II. Decision to take the next step: How to sell more proactively in Mexico <ul><ul><ul><li>As direct requests or indirect sales increase, or with addition of new international sales people </li></ul></ul></ul><ul><ul><ul><li>Decision – dictated by costs vs. investment mentality, sector dynamic, Int´l experience (CEO & sales), possibly US DOC, State, or Association export development efforts </li></ul></ul></ul><ul><ul><ul><ul><li>Using US trading company – most expensive option but can test market and give access </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Short term/transitory: Less & less likely for Mexico </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Direct Sales with own US sales staff – Right staff, right sales volume potential, and finite, large sales targets </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Finding Mexico-based distributor or rep/agent </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Even with resources, local presence often needed </li></ul></ul></ul></ul></ul>
  14. 14. Channel Market Strategies – Intermediaries <ul><ul><ul><li>US intermediaries – Usually very sector and client specific </li></ul></ul></ul><ul><ul><ul><ul><li>Rep and distributor options varied and plentiful </li></ul></ul></ul></ul><ul><ul><ul><li>Mexico intermediaries – smaller market so much broader </li></ul></ul></ul><ul><ul><ul><ul><li>Distributors culture with fewer viable reps who are hard to find </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Distributor margins higher than US, more than expect </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>No MANA in Mexico, rep agencies few, low-tech approach </li></ul></ul></ul></ul><ul><ul><ul><li>National & Multisector Coverage Challenges </li></ul></ul></ul><ul><ul><ul><ul><li>Exclusivity vs. Non-Exclusivity – National, Regional, Sector </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Some Industries require local coverage and stocking and are hard to cover with one intermediary (hardware, MRO). </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Multisector coverage challenges – sector vs. functional focus </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Often with overlapping regional coverage issues </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Need for multiple intermediaries = channel conflicts </li></ul></ul></ul></ul></ul>
  15. 15. Mexican Distributor Option <ul><ul><ul><li>Most typical & traditional market entry strategy </li></ul></ul></ul><ul><ul><ul><ul><li>When practical, the first method considered </li></ul></ul></ul></ul><ul><ul><ul><li>Role : Imports product, usually stocks product, buys/resells product, controls price/margins, accepts buyer credit risk </li></ul></ul></ul><ul><ul><ul><li>Advantages : Holds stock, does marketing and in-market work, provides after-sale service, only one credit issue. </li></ul></ul></ul><ul><ul><ul><li>Disadvantages : No control of price or margins, branding and sales staff control issue, may carry multiple and even competition product, usually won´t broaden focus for you. </li></ul></ul></ul><ul><ul><ul><li>Distributor when : below $5-10,000, commodities, replacement parts, stocking, if master distributor appropriate, if broad coverage needed/wanted </li></ul></ul></ul><ul><ul><ul><li>Decision : Big fish in small pond vs Small fish in big pond </li></ul></ul></ul>
  16. 16. Mexican R ep/Agent Option <ul><ul><ul><li>Not as typical, growing with push towards selling direct </li></ul></ul></ul><ul><ul><ul><li>Nature of Reps - Hard to find, very small, accidental not professional reps, suspicious, little formal organization </li></ul></ul></ul><ul><ul><ul><li>Role : Does not buy/resell nor import product, finds & forwards clients. receives commission when client pays, helps with AR. </li></ul></ul></ul><ul><ul><ul><li>Advantages – You control pricing, have better marketing/ branding control, will help with service, helps with AR with pay contingency; Better meet commitment & presence expectations . </li></ul></ul></ul><ul><ul><ul><li>Disadvantages – You are responsible for invoicing, importing AR/credit risk with clients, no stock in country = delays, </li></ul></ul></ul><ul><ul><ul><li>Rep When : Above $5-10,000, capital goods, non-stocking, master distributor inappropriate, want more than distributor support, and/or service/technical knowledge important. </li></ul></ul></ul><ul><ul><ul><li>Decision : Agency vs. One man vs. De facto employee </li></ul></ul></ul><ul><ul><ul><ul><li>Possible need for “dependent” rep/”de facto” employee </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Need for “Evangelism” and Industrial Rep Challenges </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Nevada company example </li></ul></ul></ul></ul></ul>
  17. 17. Reasons for Incorporation in Mexico <ul><ul><ul><li>Selling through intermediaries not viable </li></ul></ul></ul><ul><ul><ul><ul><li>Service requirements require OEM local presence </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Simple client demands (automotive) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Want rep but need to stock product </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Import Registrations and NOM control issues </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Government procurement viability needs </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Local Invoicing requirements (e.g. catalog sales) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>High demand but price sensitivity won´t allow for intermediary margins and commission </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Channel market complexity requires local presence, warehousing, and distribution. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Market Potential and importance to overall export sales warrants investment in proprietary staff and distribution. </li></ul></ul></ul></ul>
  18. 18. Mexico Incorporation Options & Details <ul><ul><li>Incorporation Options </li></ul></ul><ul><ul><ul><li>SA (Limited Liability Corp., similar to a C Corporation ) </li></ul></ul></ul><ul><ul><ul><ul><li>Traditional incorporation mode in Mexico </li></ul></ul></ul></ul><ul><ul><ul><li>SC (Civil Society, similar to partnership) </li></ul></ul></ul><ul><ul><ul><ul><li>Traditional entity for law and accounting firms </li></ul></ul></ul></ul><ul><ul><ul><li>SRL (Limited Liability Corp. with some minor partnership elements, similar to a S Corporation) </li></ul></ul></ul><ul><ul><ul><li>Honorarios (Independent contract like sole proprietorship) </li></ul></ul></ul><ul><ul><ul><li>AC (Civil Association, similar to non-profit corporation) </li></ul></ul></ul><ul><ul><ul><li>Limited Partnerships exist but are not used in Mexico </li></ul></ul></ul><ul><ul><ul><li>Branches were “non grata” in Mexico, still seldom used </li></ul></ul></ul><ul><ul><li>Board of Directors vs. Sole Administrator </li></ul></ul><ul><ul><li>Powers and Liabilities </li></ul></ul><ul><ul><li>Procedure: Time, Costs (Notary & Registration) </li></ul></ul>
  19. 19. Contracts in Mexico <ul><ul><li>General Contracts Issues </li></ul></ul><ul><ul><li>Always use contracts - W ith intermediaries, clients, & employees </li></ul></ul><ul><ul><li>Mexican Distribution Contracts </li></ul></ul><ul><ul><ul><li>Mostly based on free will of parties : US = Mexico </li></ul></ul></ul><ul><ul><ul><li>Avoiding violations in Local Civil & Commercial Law Imperatives </li></ul></ul></ul><ul><ul><ul><li>Typical Conctract Clause Elements – virtually same as in US </li></ul></ul></ul><ul><ul><ul><ul><li>Definitions, Appointment/Agreement, Obligations of Distributor & Manufacturer, Commercial and Technical Terms, Intellectual Property, Legal /Law Aspects, Termination & Renewal, Dispute Resolution, Other Provisions </li></ul></ul></ul></ul><ul><ul><li>Basic Mexican Contractual formality Issues </li></ul></ul><ul><ul><ul><li>Preamble/Declarations </li></ul></ul></ul><ul><ul><ul><li>Rep of signing parties duly empowered </li></ul></ul></ul><ul><ul><ul><li>Applicable Language </li></ul></ul></ul><ul><ul><ul><li>Does not create employee relationship </li></ul></ul></ul><ul><ul><ul><ul><li>Labor Liabilities </li></ul></ul></ul></ul><ul><ul><ul><li>Termination Conditions </li></ul></ul></ul><ul><ul><ul><ul><li>Labor Regulations </li></ul></ul></ul></ul><ul><ul><ul><li>Law and Tribunals: Specified vs Applicable </li></ul></ul></ul><ul><ul><ul><ul><li>Location of goods </li></ul></ul></ul></ul><ul><ul><ul><li>Two witnesses </li></ul></ul></ul>
  20. 20. NOMS & Other Technical Trade Issues <ul><ul><ul><li>Obligatory Product Certifications/Registrations </li></ul></ul></ul><ul><ul><ul><ul><li>Performance and Safety Standards to protect consumers not normally applicable to industry </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Importer held, some can be held by US companies </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Discrepancies between government agencies </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Label Retail/Consumer Requirements </li></ul></ul></ul><ul><ul><ul><ul><li>General and Food products: NOM 50 and 51 </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Specific Product labeling standards:electronics,clothing </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Products not sold in retail environment can be exempt </li></ul></ul></ul></ul><ul><ul><ul><li>Importers must insure that products meet these standards before they can import, unlike UL </li></ul></ul></ul>
  21. 21. Mexico Customs Issues <ul><ul><ul><li>Tariffs at 0% ( except with retaliation, 90 at 20%* ) </li></ul></ul></ul><ul><ul><ul><ul><li>Europe close to 0% as well – no US advantage </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Rest of world without trade agreements: closer to 20%* </li></ul></ul></ul></ul><ul><ul><ul><li>IVA vs. Sales Taxes: import & sales processing </li></ul></ul></ul><ul><ul><ul><li>Intercompany pricing & customs valuation issues </li></ul></ul></ul><ul><ul><ul><li>Non-tariff issues if not barriers </li></ul></ul></ul><ul><ul><ul><ul><li>Mexican NAFTA retaliation measures </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Chinese Quotas and Safeguard Mechanisms </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Regulatory </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>NOMs – Border vs Domestic Enforcement </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Health Permits – Cofepris problems/delays </li></ul></ul></ul></ul></ul>
  22. 22. III. Retail, Gov´t & B2B Sales Dynamic
  23. 23. Credit & Collections Challenges & Realities in Mexico <ul><ul><ul><li>Finance/Credit </li></ul></ul></ul><ul><ul><ul><ul><li>Upfront or 50/50 – maybe initially, but…. </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>LC use limited – not Asia or Europe </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Credit can sometimes be more important than price to both the representative and your client – lesson from Asians/Europeans </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Bank lending to business up in 2008 (18%) but in 2009? </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>2007: 75% of companies did not want bank financing </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>60% relied on vendor credit before crisis, now? </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Selling with Open Account – Sooner or Later…. </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Offer credit and build in 90-120 days of financing costs </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Be upfront about financing costs: let the client decide </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Always try to include a promissory note as a guarantee </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Don´t even think about late fees without dependence </li></ul></ul></ul></ul></ul>
  24. 24. Business Financing Sources Source: Banco de Mexico; Numbers in ( ) = last years figures 10.7 (10.3) 11.9 (10.3) 15.6 (14.9) 11.7 (11.9) 13.3 12.6 Subsid Group 9.7 (5.0) 4.1 (4.5) 3.4 (2.3) 1.4 (1.0) 3.2 2.38 Foreign Bank 26.9 (26.8) 22.3 (20.4) 20.5 (18.8) 16.6 (12.8) 20.0 17.33 Mexico Bank 36.0 (46.4) 50.3 (53.8) 54.7 (60.4) 65.5 (70.1) 56.3 61.8 Vendor 2008 AAA 2008 LARGE 2008 MED 2008 SMALL 2008 ALL 2007 ALL Percent of Total Financing
  25. 25. Trade Finance & Credit – Due Diligence <ul><ul><ul><li>Offering financing/credit terms to clients </li></ul></ul></ul><ul><ul><ul><ul><li>Important & unavoidable (See Business Financing Table) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Before extending credit, review Mexican credit reports, consider export insurance, check foreign references </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Payment problems before crisis (#6 Latam), worse now. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Before crisis: Terms given (62) vs. terms offered (48). </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Credit Strategies to avoid non-payment and litigation </li></ul></ul></ul><ul><ul><ul><ul><li>Promissory Notes, Guarantees, Liens, Trusts, Transfers. </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Fast, Easy, no collateral, no fees, no interest rates </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Secured financing still underdeveloped / underused </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Need to verify that company is good for guarantee </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Make owner sign guarantee as individual as well. </li></ul></ul></ul></ul><ul><ul><ul><li>Bankruptcy – Improved laws and debt security </li></ul></ul></ul><ul><ul><ul><ul><li>Only as good as position in debt line, still long delays </li></ul></ul></ul></ul>
  26. 26. Payments: Mexico vs. Latam Source: Latin America Business Monitor (2008) 17% 37% 52% 7. Argentina 19% 36% 57% 6. Mexico 17% 37% 58% 5. Chile 18% 32% 62% 4. Venezuela 16% 32% 61% 3. Peru 16% 32% 67% 2.Colombia 15% 27% 63% 1. Brazil 60 days + 30 days + Prompt Pay Country
  27. 27. Mexican Collections Advice <ul><ul><ul><li>Preparation Actions (before there is a problem) </li></ul></ul></ul><ul><ul><ul><ul><li>Check out financial viability – especially distributors </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Sign guarantees or include guarantees in invoice </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Keeping good reception document records </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Payment delays = prompt further sales freeze </li></ul></ul></ul></ul><ul><ul><ul><li>US company collection efforts in Mexico </li></ul></ul></ul><ul><ul><ul><ul><li>US company or collection agency – little affect, no fear </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Local Mexican agency calling – some affect </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Often never get decision-maker to answer </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Local Mexican attorney discussing litigation – best </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Sometimes debtor will wait until start of litigation to pay </li></ul></ul></ul></ul><ul><ul><ul><li>Litigation threat essential: low non-payment consequences </li></ul></ul></ul><ul><ul><ul><ul><li>Small amounts, high costs – no small claims court </li></ul></ul></ul></ul><ul><ul><ul><ul><li>$20,000 or less: Mexicans believe exporters won´t litigate, and they shouldn´t unless they want to “publickly punish” </li></ul></ul></ul></ul>
  28. 28. IV. LGA Services
  29. 29. Current LGA Staff and Infrastructure <ul><ul><ul><li>Office in northern Mexico City suburb </li></ul></ul></ul><ul><ul><ul><li>Staff of 9 – Retail, B2B, Catalog, & Government sales experience; and Legal, Accounting, channel market strategy & logistics experience </li></ul></ul></ul><ul><ul><ul><li>Alliances and Collaborators: in Guadalajara, Monterrey, Brazil, Argentina, & the UK. </li></ul></ul></ul><ul><ul><ul><ul><li>Partner with locally-based NCED Italy rep on projects </li></ul></ul></ul></ul><ul><ul><ul><ul><li>MANA Member - Service provider in Mexico and will be participating in MANA webinar on Latin America </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Alliance for collection services with Receivables Control Corporation (RCC). </li></ul></ul></ul></ul>
  30. 30. LGA Services – Two Service Groups <ul><ul><ul><li>Export Business & Sales Development: Mexico & Latin America </li></ul></ul></ul><ul><ul><ul><ul><li>B2B – Majority of work that we have done for Wisconsin </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Retail/Catalog – Strong staff expertise & current clients. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Government Procurement – Water/Environmental Focus </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Commercial, Industrial, Municipal, Residential </li></ul></ul></ul></ul></ul><ul><ul><ul><li>In-Country Services </li></ul></ul></ul><ul><ul><ul><ul><li>Technical Assistance for In-Country set-up and operations </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Legal, Regulatory, Accounting, Fiscal, Collections </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Specialized Assistance for small foreign subsidiaries </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Sourcing, Strategic Alliance, & Joint Venture Assistance </li></ul></ul></ul></ul>
  31. 31. Realities about Secondary Information on Mexico segments/Market <ul><ul><ul><li>Secondary Information – Non-Existent, Bad, or Out of Date </li></ul></ul></ul><ul><ul><ul><ul><li>Market Information - NTDB, Canadian, Spanish </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Not always up to date, sometimes too broad </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Market Size – No information, need for models </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Import Data – Not readily available, need to get raw data and know how to analyze </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Lists of Distributors and Reps – Non-Existent in Mexico unlike in US, Asia, and Europe. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Company database Information – Local (Ibcon), US and International (Harris, Hoovers, Business Monitor) - problematic, not complete, not updated effectively </li></ul></ul></ul></ul>
  32. 32. <ul><ul><ul><li>Why obtaining info on your own is difficult: </li></ul></ul></ul><ul><ul><ul><ul><li>Mexican Associations – political, not institutional, not well funded, non-civil membership attitude </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Mexican public information - difficult to access, and government statistical information not always good </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Problems carrying out traditional surveys – suspicious of people asking questions much more than in the US </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Difficulty of getting info from intermediaries = they see info as commodity and do not want to share it. </li></ul></ul></ul></ul><ul><ul><ul><li>Related Problem: Attitude of US exporters – would rather just find an intermediary to sell their product rather than investigate first to determine viability of market and channel strategies. </li></ul></ul></ul><ul><ul><ul><li>LGA can help fill in these gaps so that you can have the tools to make Mexico market decisions </li></ul></ul></ul>
  33. 33. Preliminary Market Analysis Services <ul><ul><ul><li>Market Product Viability Analysis </li></ul></ul></ul><ul><ul><ul><ul><li>Estimated landed price for your product in Mexico </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Compare with competition – product mix & prices </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Help determine viability to decide about market entry or about how to change strategies to be more viable </li></ul></ul></ul></ul><ul><ul><ul><li>White Board Calls & Visits </li></ul></ul></ul><ul><ul><ul><ul><li>Conference calls with company decision-makers </li></ul></ul></ul></ul><ul><ul><ul><li>Secondary source location, evaluation, and Primary Investigation </li></ul></ul></ul><ul><ul><ul><ul><li>Determine what information does exist and its value </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Mexico Import data to better understand competition </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Primary efforts : Potential client search for viability information, Client or intermediary surveying, market size model creation. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Price & Competition Analysis – One time or on-going </li></ul></ul></ul></ul>
  34. 34. Market Access and Channel Services <ul><ul><ul><li>New to Market & Growth Strategies : Retail, Wholesale, B2B, Catalog </li></ul></ul></ul><ul><ul><ul><ul><li>White Board Calls and Visits </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Client Searches to help determine best channel market strategies before doing intermediary search </li></ul></ul></ul></ul><ul><ul><ul><li>Channel Market Strategies – Intermediary (Rep, Distributor), Sales Manager, Alliance Searches </li></ul></ul></ul><ul><ul><ul><ul><li>Candidate Searches </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Basic and More Advanced Options: Locate and coordinate visit vs. locate, interview, & decide. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Monitoring and interfacing with chosen intermediary until sales begin in earnest to ensure success </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Frustration of spending time & money on a search to see it fall apart during first six months. </li></ul></ul></ul></ul></ul>
  35. 35. Business Development Services <ul><ul><ul><li>Client and Buyer Searches </li></ul></ul></ul><ul><ul><ul><ul><li>For direct sales or to share with intermediaries to ensure they adjust sales focus areas to your product </li></ul></ul></ul></ul><ul><ul><ul><li>Government Bid Assistance – Direct & Indirect </li></ul></ul></ul><ul><ul><ul><ul><li>Analyze current and past government demand, competition dynamic, and integrator options </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Search for Integrators and/or for Intermediaries </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Help with government bid process if selling direct. </li></ul></ul></ul></ul><ul><ul><ul><li>Sourcing, joint venture, alliance partner searches </li></ul></ul></ul><ul><ul><ul><ul><li>Sourcing – With peso devaluations, Mexico is bargain, LGA can help identify and get quotes from partners </li></ul></ul></ul></ul><ul><ul><ul><ul><li>If you need a business partner, LGA can help find them </li></ul></ul></ul></ul>
  36. 36. Corporate Legal and Accounting Services <ul><ul><ul><li>Corporate Law Services – Incorporation, Contracts, Collections, Litigation supervision, labor Issues, intellectual property, “legal rep” </li></ul></ul></ul><ul><ul><ul><li>Regulatory – Identify & explain compliance for product and labeling standards (NOMs) and import permits and registrations </li></ul></ul></ul><ul><ul><ul><ul><li>Experience obtaining permits & standard compliance </li></ul></ul></ul></ul><ul><ul><ul><li>Accounting – Mexican accounting, payroll, tax paying, independent audit, litigation supervision, fiscal domicile, and tax reimbursement services </li></ul></ul></ul>
  37. 37. Collections and Litigation Supervision <ul><ul><ul><li>Extra Legal – Interface/visit with client as attorney, try to collect using litigation threat </li></ul></ul></ul><ul><ul><ul><ul><li>Little or now upfront funds – based on payment </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Current Workload: Receivables Control Corporation (RCC) and Wisconsin exporters (NACM/ICE) </li></ul></ul></ul></ul><ul><ul><ul><li>Pre Litigation Analysis - to determine viability </li></ul></ul></ul><ul><ul><ul><ul><li>BIL litigation review, bank & property asset review, document/case review </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Relatively low cost; can be done as package or piece meal </li></ul></ul></ul></ul><ul><ul><ul><li>Litigation Supervision – If after exhausting all other efforts and payment is not forthcoming </li></ul></ul></ul><ul><ul><ul><ul><li>With guarantee (Executive) or without (ordinary) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Find litigation attorney, work with and supervise throughtout the litigation process. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Mexican litigation without LGA supervision will be nightmare </li></ul></ul></ul></ul>
  38. 38. LGA: Strategic Assistance with focus on and services for local implementation <ul><ul><ul><li>Allows companies to access market worry-free </li></ul></ul></ul><ul><ul><ul><li>Can do everything but sell your product for you </li></ul></ul></ul><ul><ul><ul><li>One stop assistance: Business (Sourcing, Sales, Channels), Legal, Collections, Accounting </li></ul></ul></ul><ul><ul><ul><li>Working with LGA is like working with a US firm – communications, follow-through, follow-up. </li></ul></ul></ul><ul><ul><ul><li>LGA can offer you the custom (not boiler plate) services (a) to meet your specific costs/needs, and (b) en ensure your success in Mexico. </li></ul></ul></ul>
  39. 39. <ul><li>LGA Consulting </li></ul><ul><li>(Mexico City) </li></ul><ul><li>US Toll Free Number: 1-888-750-0988 </li></ul><ul><li>Tel. 011-52-555-378-3890 or 40 </li></ul><ul><li>E-mail: vlencioni @ lgaconsulting.com </li></ul><ul><li>Website: www.lgaconsulting.com </li></ul>

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