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Making It in Mexico -- Business Customs and Practices
In the past five years, what U.S. firm hasn’t given Mexico some thought? A surge of businesses have considered the possibilities, and many have actually entered the pool. Some start gingerly with small transactions and pilot projects, while others aggressively plunge in with hefty investments right from the start.
Still, Mexico is not the ideal market for every product–let alone every company with exporting objectives. To succeed, you need to appreciate that Mexico is a culturally unique market. To master this market requires patience, research and understanding.
Becoming sensitive to Mexican social customs and business etiquette is a small but vital aspect of cross-border deal-making. We offer some tips.
Open for Business
In Mexico City, business hours are generally 10:00 a.m. to 8:00 p.m., 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.
When inviting Mexican contacts for a meal, keep in mind that a breakfast is a setting for getting down to business, whereas a lunch is more of a social event. 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 the early evening.
Dinner is generally a lighter meal eaten after 9:00 p.m. and is not considered an appropriate time for business.
What’s in a Name? Plenty!
Mexicans usually have three names. On a business card, these are presented 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. Pablo Gomez Ortega would be addressed as Sr. Gomez. Increasingly, Mexicans are abbreviating their maternal family name. In such cases, the name would appear as Sr. Pablo Gomez O. In other cases, the maternal name is dropped altogether.
Take the lead from your Mexican contacts before switching to a first-name basis.
Mind Your Meeting Manners
Rule No. 1: Slow down. Most first-time visitors to Mexico try to crowd in too many appointments per day. As a rule of thumb, make no more than four appointments a day.
No. 2: Don’t get down to business immediately. "Small talk" is important. It shows that you’re not in a hurry and that you are interested in your Mexican host. It can also lead to a long friendship and business relationship.
Mexican companies, many of which are family run, are extremely hierarchical. Decision-making is not usually delegated. Make sure that you get to know the real decision-maker in a company.
Do Business in Spanish
English is not widely spoken in Mexico; those who live in the northern states are more likely to be bilingual.
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:
Your Contact in Mexico
Selling directly to the Mexican market requires a great deal of effort and works best for companies that have a limited number of potential customers. Only a small, but growing, volume of U.S. exports move this way as most Mexican retailers and food service companies are not set up to import directly.
Using a broker may be the easiest sales method--the U.S. supplier won’t have to worry about logistics and red tape and payment is ordinarily handled like any other domestic transaction with the customary legal protection.
However, in most cases this method offers the least rewards. Furthermore, the U.S. company has no control over where the product ends up or its arrival condition. It’s also difficult to build brand identity this way.
An alternative is to employ a Mexican distributor–either a distribution company or a Mexican food processor. The trade-off is more direct access to the market at the expense of time spent supervising distribution and the greater degree of payment risk. Be advised that good distributors are in short supply, so do plenty of advance research.
How much support will you need to provide a distributor? That depends on the contractual terms you work out. For instance, you may agree to provide funding for advertising and promotional work or you may consider extending payment terms to match the terms the distributor must provide its Mexican customers.
Another option is to sell through a Mexican-based agent. The investment in time and effort is great but the rewards are larger. This route makes sense if you have a significant export volume or an extensive product range.
It is probably wiser to contract with a company than to hire an individual to represent your firm. Mexican labor laws make it difficult and expensive to dismiss an individual.
Finding the distributor for your products in is not likely to be easy, and Mexico’s vastness implies that you may need several to cover all of the major markets.
The U.S. Agricultural Trade Office can usually provide a list of distributors. Also, compare experiences with other U.S. companies already distributing products in Mexico.
You cannot check credit ratings in Mexico the way you can in the United States, so make it a point to:
Although most distributors will ask you for an exclusive to represent your products for all of Mexico, few can deliver on this. To cover the whole country, most need to subcontract, resulting in added markups that are passed on to consumers. Though cumbersome, it is best to have distributors for each of the key regions of Mexico.
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, 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.
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