Increased Interest in Business Expansion to Mexico under USMCA

After 25 years, the governments of the United States, Mexico, and Canada, modernized and improved the old NAFTA, to reach a new agreement known as the USMCA (United States-Mexico-Canada Agreement), which came into effect in July of this year. USMCA marks the beginning of a new historical chapter between the three North American countries, whose economic relations will now take place in a freer, fairer, and more stable 21st century business environment.

The USMCA will have a positive impact on multiple Mexican industries, including the automotive, manufacturing, and medical sectors, but will also stimulate the e-commerce ecosystem and technology companies such as Fintechs. Market observers note an increased interest in business expansion to Mexico from multinationals and foreign entrepreneurs from all over the world.

How does the USMCA support business expansion to Mexico?

USMCA aims to encourage innovation, economic growth, and job creation across the United States, Mexico, and Canada, whose GDP represents more than 20% globally. Likewise, this agreement will contribute to increasing confidence in Mexico as a country with favorable conditions for the incorporation of foreign companies looking to expand their business in Latin America.

According to some experts, UMSCA will stimulate Asian investment in Mexico, as relations between China and the United States have substantially deteriorated over the last years, resulting in different non-trade barriers imposed by the American government over products that are produced in China. Therefore, Mexico, a strategically located country, with a not-so-expensive labor force, could be a golden opportunity for companies thinking about expanding from Mexico to the rest of North, Central, and South America.

Furthermore, Mexico has numerous commercial advantages over the United States and Canada, which makes it a very attractive country for foreign investors, even more than the United States or Canada. This is partly because the Mexican market offers greater flexibility in wages, and the workforce is much less expensive than in other large markets.

Likewise, the exchange rate in Mexico makes the process of incorporating a company much cheaper, an aspect that should definitely be considered when expanding in the region. 

Doing business in Mexico with USMCA 

Mexico's economy is not only the second-largest market in Latin America, but it is ranked fifteenth worldwide and can be considered as a launching pad for North American companies to expand further in the region.

The USMCA will support the development of small and medium-sized companies doing business in Mexico, who will be able to benefit from the new legal framework established by this agreement. They will have access to a clear, transparent, and predictable regulatory framework for business planning. This will boost the success of companies that have contributed to Mexico’s economic growth, employment generation, and community development.

Financial technology companies known as Fintechs will also benefit from the renewal of trade relations between the United States, Mexico, and Canada. The USMCA promotes the use of blockchain and facilitates the expansion and unrestricted operation of Fintechs across the three countries. At the same time, USMCA prohibits all ‘discriminatory’ regulations applied to foreign products that are usually distributed through e-commerce platforms.

 Furthermore, as one of the Latin American business hubs, whose official language is Spanish - one of the world’s most spoken language - it offers a significant opportunity for companies that are beginning a process of incorporation into the region. In other words, if you expand to Mexico, you will be more prepared to expand and succeed in other important and vibrant Latin American markets.

Mexico's industries opportunities after USMCA

Automotive sector

In the automotive sector, the USMCA will provide greater investment for the commercial development of direct suppliers to assembly plants. This is because the agreement established a rule of origin of 75% local content in vehicle assembly. Therefore, car manufacturers that are far from reaching that level will be able to make new investments in original equipment production plants.

Medical sector

The USMCA is crucial to the pharmaceutical industry and the medical device sector in Mexico. It allows companies established in the country to export their products to the United States and Canada with fewer restrictions. Moreover, medical companies could also expand to Latin America once strategically installed in Mexico. It is worth mentioning that Mexico has a reputed pharmaceutical export market worldwide.

Opportunities for the medical sector in Mexico under USMCA are even better when one considers the massive Mexican consumer market of more than 126 million people. This has made the country an internationally competitive production platform.

Manufacturing industry

One of the sectors that will benefit most from the USMCA is the manufacturing industry, established mainly in the northern and central-western border states of the country. According to experts, a significant expansion and development of this business in Mexico is expected for the first year of implementation of the agreements.

Investors from the United States, Canada, Asia, and Europe will be able to benefit from the reduced transportation and logistics costs offered by the Mexican market.

Fintech sector

The Mexican Fintech ecosystem is by far one of the most developed in Latin America. Last year, the number of companies offering financial technology services increased by 14%, reaching a figure of 441 Fintechs. Under the USMCA, the business opportunities for these companies will be even greater, as the agreement guarantees complete access to the payment and compensation systems of the United States, Mexico, and Canada.

Furthermore, foreign Fintech companies will not be discriminated against in any of the three countries, and they will not have to disclose the software source codes, protecting users’ data. Likewise, they will be guaranteed full access to each country's financial regulatory framework so that they can operate and comply with local law.

USMCA places Mexico as one of the best investment destinations in Latin America

Thanks to the USMCA, Mexico is positioned as an attractive destination for foreign investors. The new agreement signed by the governments of the United States, Mexico, and Canada, not only benefits the automotive, medical, manufacturing and Fintech sectors, but also offers numerous opportunities for those who want to incorporate a company in Mexico and then begin a successful process of business expansion throughout Latin America.