In line with our objectives, VTZ Law Firm has developed a Doing Business in Mexico Guide with a strong focus on foreign investment in manufacturing activities. It is our goal as trusted advisors and business facilitators to guide foreign investors, providing insights in a concise manner.
Before the coronavirus outbreak, economists predicted that Mexico was heading to be the seventh economy of the world in 2050. Mexico would be growing at a 3.5% annual average rate over the next three decades, a growth rate superior to that of developed economies. Mexico’s size of the economy, demographic, sound macroeconomics, stable public finances, as well as recent amendments to strategic economic sectors have contributed to a better economic performance according to the OECD.
Today, Mexico is one of the most attractive foreign investment destinations. Besides being the 15th largest economy in the world, Mexico is a “free market” economy that is opened to international trade and foreign investment. As a result, Mexico has a highly diversified economy, modern industries, and a developed financial market. This is the result of a shift from protectionist towards liberal economic policies since the beginning of the 1990s, particularly, with the North American Free Trade Agreement.
Needless to say, there is still much work to be done to improve the general conditions of life for Mexicans, as well as for the business environment. For instance, the World Economic Forum identifies Mexico’s five most problematic factors for business: corruption, crime and theft, inefficient government bureaucracy, tax rates, and tax regulations. However, there is hope. In recent years, business facilitation measures have been in the political agenda as well as tackling corruption, which is now more relevant than ever as a result of Mexico’s modern free trade agreements (FTAs). In fact, it is clear that Mexico’s competitiveness relies on its extensive FTAs network as a pivotal force for its economic development.
Therefore, the United States-Mexico-Canada Agreement (USMCA), which entered into force in July 2020, will continue to consolidate the country as an attractive business destination as long as Mexico successfully implements said agreement.
Mexico is living a historic moment. The political map changed significantly following the general elections held in July 2018. Mexico’s president, Andrés Manuel López Obrador (AMLO), and his party, the National Regeneration Movement (Morena), have continued the trend to promote, for instance, free trade agreements, but they have also adopted new and controversial policies. For instance, Mexico’s investment and trade promotion agency, PROMEXICO, was extinguished as result of “austerity” measures.
Vázquez Tercero & Zepeda (VTZ) seeks to fill that void and promote Mexico as a business destination for international companies and foreign investors in an honest and concise manner. This is why VTZ has developed Doing Business in Mexico 2020, which is divided into seven chapters:
In these executive guides, VTZ aims to help and to provide insights regarding relevant legal topics on business, trade, tax, and labor for potential investors, that seek to reap the best out of Mexico and the manufacturing industry.
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Business Law, Creating a Company in Mexico, Doing Business in Mexico, featured, Foreign Direct Investment, Guide, International Trade, labor, Manufacturing Industry, Migration in Mexico, Taxation in Mexico
Our fifth chapter of Doing Business in Mexico, Creating a Company in Mexico, will provide a general overview of the process to incorporate a company as well as information on company types in Mexico, including some tax-related comments. Furthermore, other business legal structures are explained.
This Chapters includes the following sections:
In recent years, Mexico has changed its Company Law to facilitate the creation of a company. As a result, Mexico relaxed requirements, reduced the days as well as the number of procedures to start a business, and, thus, has improved its Starting a Business indicator of the World Bank’s Doing Business 2020.
According to this study, 8 steps are necessary to create a company in Mexico, but under the assumption that only Mexicans are involved. In that sense, a company with foreign capital is subject to additional steps as noted below.
Before reading this chapter, we strongly suggest reviewing our Foreign Investment Chapter because Mexico prohibits or restricts foreign capital in certain activities or economic sectors. Needless to say, most economic sectors are not subject to foreign investment controls and, thus, we will focus on the “all other” activities or economic sectors that do not have foreign investment restrictions.
We will first outline the steps that a foreign investor must take to incorporate a company or opening a business. Then, we will provide a general picture of the type of companies as well as other business structures suitable for foreign investors.
The steps to create a traditional company do not vary as to the type of company, such as a stock company or limited liability company.
The intervention of a Notary Public or Public Broker is necessary to incorporate a company in Mexico. Due to the limited legal powers of a Public Broker, entrepreneurs normally prefer to retain the services of a Notary Public.
Are you planning to “shake hands” with your business partners in Mexico or will you delegate the tasks to your trusted advisor?
If a foreign investor, as an individual, is not planning to sign the corporate deed personally, the foreign investor must sign a Power-of-Attorney (POA) in his country, naming his Mexican attorney or attorneys and listing their powers. Once signed the POA, the foreign investor must either apostille or legalize his POA and, of course, send by express packaging services the document.
If the investor is a foreign legal entity, said entity may have to provide additional documentation depending on their residence to prove its legal existence as well as the powers of the legal representative signing the POA. The additional documentation has to be apostilled or legalized. This is normally the case with Asian legal entities.
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 Mexico Starting a Business rank in the Doing Business is 107th out of 190 economies.