What are some things to consider when entering or doing business in Mexico?

Many Korean companies have been advancing into Mexico and will accelerate further in the future.
The relocation of Korean production bases overseas is not an issue that only happens in a day or two.

There are many external and internal factors that caused Korea’s manufacturing-based economy to begin to collapse.

Among them, the most notable thing is probably the rapid increase in the minimum wage.

For this reason, the overseas expansion of Korean companies is accelerating.

Overseas expansion can be broadly divided into two reasons: (1) establishing a production base and (2) establishing a sales base.
There are two reasons: establishing a sales base because the narrow Korean domestic market is not sufficient, or entering a production base to reduce costs through low labor costs.

Korea’s first overseas expansion began in China. Although it is the closest country, many companies have expanded into China and succeeded because of the perception that it has abundant human resources and is cheaper than our country. Afterwards, it expanded to countries such as Vietnam, Indonesia, and Malaysia. Since then, Central and South America and India are on the rise.
At the center is Mexico.

[Things to consider when doing business in Mexico for the first time – Reasons why Mexico is popular]

Among them, there are two main reasons why Mexico is on the rise.

1) Proximity to the United States, Korea’s largest trading market

Reduce logistics costs (close to the US, overland transportation is possible)
Benefits from FTA (depending on the item, you can enjoy tariff benefits based on FTA)
Tax benefits (You can enjoy corporate tax deduction effects by adjusting the transfer price through multilateral transactions in several countries: Korea-USA-Mexico-+A)

2) Increased cost savings due to low labor costs

As of 2023, Mexico’s minimum wage is 207 pesos (general) and 312 pesos (border areas).
*The reason why Mexico chose a higher minimum wage compared to other countries is explained in the link below.<2023년 멕시코 최저임금 얼마일까?>

[Things to consider when starting a doing business in mexico for the first time – wage level and productivity/manpower supply and demand]

Mexico’s wage levels were mentioned above.
Minimum wage and the money I should be paid are different.
Wow, Mexico is cheap~~ Cheap~~ If you start a company here, it will definitely be profitable, right? (It will definitely fail)
The minimum wage is literally the minimum wage. It is possible if you instruct and operate a simple task with a low barrier to entry. For example…food/service/simple labor, etc…..

However, finding a technician is difficult and expensive.
Finding a complete technician is difficult and expensive.
Decent managers are hard to find and expensive.

Other regions, such as Mexico City/Queretaro, have relatively low wages, but
In the case of Monterrey, Mexico, the salary level of managers is 1.5 to 3.5 times that of managers of the same level.
Should be. Even if you have money, you can’t do it all.

They say they can afford to hire expatriates, even if they hire all of them (who don’t speak Spanish).
Interpreters are difficult to find and expensive.
People who know Spanish and know how to do other things (production/quality/management, etc.)
Hard to find and expensive.
Starting from 70,000 to 80,000 pesos. + In many cases, expatriates are provided with support such as expatriate allowance/house/car/etc.

Rather than advancing unconditionally, it is better to proceed when you are ready to send a good person (manager/corporation head level). If you go blindly, you may go through all kinds of trial and error and lose your money.

Originally, there were many American companies, but recently (as of 2023) many Chinese companies are also entering the market.
Labor costs are rising significantly across the board, including production workers.
If labor costs continue to rise at this rate, it seems only a matter of time before they rise to a level similar to that of Korea. (5-10 years?)

[Things to consider when doing business in Mexico for the first time – location and incentives]
[Things to consider when doing business in Mexico for the first time – SCM]
[Things to consider when doing business in Mexico for the first time – corporate tax/value-added tax/PTU]