Overseas Business Risk - Mexico

Information on key security and political risks which UK businesses may face when operating in Mexico.

Political and Economic

Foreign Office Travel Advice on Mexico is regularly updated and should be your primary source of information before travelling to Mexico.

More information on political risk, including political demonstrations and security risks is available in FCO Travel Advice.

Political Security

Mexico has a Federal republic system of government covering the 31 states and the Federal District of Mexico with powers separated into 3 branches: independent executive (President), legislative (Congress) and judicial (Supreme Court of Justice, federal and local systems). The President is elected for a 6-year term and may not hold office a second time. Congress has two chambers and consists of a Senate and a Chamber of Deputies. The judges making up the Supreme Court are appointed by the President, with the consent of the Senate.

President Calderon was elected in fiercely contested federal elections in 2006. His term ends in 2012, scheduled with elections in July next year. Mexico is now widely considered to be a stable democracy.

Political demonstrations can occur across the country. These can be tense, confrontational and turn violent, and onlookers can be quickly drawn in. You should avoid all demonstrations and monitor local media. Sporadic outbursts of politically motivated violence occur from time to time in certain areas of the country, particularly in the southern states of Veracruz and Guerrero. Incidents can sometimes embroil travellers.

Economic Security

Mexico is an upper-middle income, less indebted country with a population of around 112m with an average of 26. GDP per capita is just over US$15,114 PPP (2011), but this is distributed very unequally with 44.2% of the population living in some type of poverty, while at the same time being home to numerous billionaires (including the world’s richest man Carlos Slim) and a large and growing middle class that has comparable living standards to Western Europe or the US or Canada.

Businessman reading newspaper

Mexico is the easiest place in Latin America in which to do business (World Bank).

The country’s GDP is mainly driven by the service sector, which accounts for 63% of GDP. Mexico is one of the most open economies in the world, with 12 Free Trade Agreements covering 44 countries; including the US, EU and Japan. Nonetheless, Mexico’s main trading partner remains the US, where around 80% of Mexican goods and services are exported (2010). Despite only 7.5% of Mexican products being exported to Canada, Canada is Mexico’s 2nd largest exporting destination. Mexico’s main exports are manufactured goods – including a large automotive industry – closely followed by oil and oil related products.

Mexico weathered the Global Financial Crisis fairly well, without any of the significant banking failures or emergency bail-outs that we saw in other countries. However, Mexico was hit hard by the subsequent global economic downturn. Economic activity fell by 6.1% in 2009, mainly as a result of falling international (particularly US) demand for Mexican manufactures, coupled with falling remittances and the outbreak of A(H1N1 influenza) in May 2009. The crisis also led to a severe (around 30%) devaluation of the Mexican Peso against the US dollar during the last quarter of 2008. Despite this, unemployment has remained relatively low (currently around 5%), and inflation – managed by the independent central bank – stable (currently 3.25%). Growth reached 5.5% in 2010. Public finances are sound, economic management is sensible.

Mexico is now officially out of recession and looks set to grow healthily over the next few years. Mexico has considerable growth potential, and Goldman Sachs has predicted that it could become the 7th largest economy in the World within the next 40 years. Mexico has many natural advantages, including a large, educated workforce; stable macroeconomic indicators; Free Trade Agreements with 44 countries and, not least, the world’s largest consumer on its doorstep.

Nonetheless, significant structural problems remain. Key challenges over the next few years will be tackling falling oil production, reducing trade dependence on the US, improving competitiveness, improving security, reducing poverty and taking on the monopolies and trade unions that continue to have a huge impact on the Mexican economy. An important step has been taken with the approval of reforms to the Competition Law.

The legal environment regarding foreign investment in Mexico has been simplified over the last two decades. A broad consensus in favour of deregulation has gradually been built in Mexico, but there is still a sizeable element that remains suspicious of foreign control in Mexican industries. Those that have been particularly vocal have been the leftist Democratic Revolution Party (PRD), as well as some members of the centrist Institutional Revolutionary Party (PRI). The current administration of President Felipe Calderón is decidedly pro-foreign investment. Mexico’s economy will grow significantly in coming years, and is predicted to become the 7th largest economy and the 5th largest ‘Emerging Power’ economy.

Information on political risk, including political demonstrations, is available in the FCO Travel Advice.

Bribery and Corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

In 2010, Mexico was ranked 98 (ranked 89 in 2009) out of 180 in the Transparency International’s corruption perception index (CPI)

Bribery and corruption are a significant problem in Mexico and one that the government is working hard to counter. Government tendering follows strict guidelines to reduce the risk of corruption in the awarding of contracts. Numerous British businesses report successful business operations in Mexico free of corrupt practices. It is important to develop close business relationships with your potential clients but this should not be confused with corruption. A Mexican business partner or agent will be well placed to advise you on normal business practice. You should familiarise yourself with British bribery legislation which, since 2002, also applies to UK registered companies and UK nationals committing acts of bribery wholly outside the UK.

Visit the Business Anti-Corruption portal page providing advice and guidance about corruption in China and some basic effective procedures you can establish to protect your company from them.

Read the information provided on our Bribery and corruption page.

Terrorism Threat

There is a low threat from terrorism in Mexico. But you should be aware of the global risk of indiscriminate terrorist attacks, which could be in public areas, including those frequented by expatriates and foreign travellers.

Read the information provided on our Terrorism threat page

Protective Security Advice

Business Disputes

The vast majority of British businesses have not been prevented from operating in Mexico by the security risks although many Mexican and foreign businesses choose to hire private security. Business travellers should keep a close watch on their briefcases and luggage even at apparently secure locations such as the lobby of their hotel.

Passengers have been robbed and/or assaulted by unlicensed taxi drivers, particularly in Mexico City. At airports, use only authorised prepaid airport taxi services. In Mexico City, use better regulated “sitio” taxis from authorised cab ranks. The majority of crimes involving taxis in Mexico City occur in Ixtapalapa.

Read the information provided on our Protective security advice page

Intellectual Property

Scope of Mexico's IPR Problem

As in many developing countries, the scope of Intellectual Property Rights (IPR) abuses across Mexico’s industrial sectors continues to outpace the government's enforcement efforts. Losses to Mexican and international companies due to trademark counterfeiting, copyright piracy, and patent infringements lie in the hundreds of millions of dollars annually and are growing. Solutions to this problem, which significantly affects the film, music, software, pharmaceutical, and textile industries, are hampered by a lack of capacity and coordination among law enforcement entities, competing crime-fighting priorities, weak application of IPR laws, and insufficient planning and coordination among industry sectors.

Businessman working at a computer

Despite this, the situation is Mexico is better than in many other emerging economies. The protection of IPR is complicated by Mexico's extensive poverty. Black markets provide a significant source of employment in the informal sector, which accounts for up to 30 percent of the total economy. Illegally reproduced goods, sold at a fraction of the cost of their legitimate counterparts, also give poor consumers access to otherwise unattainable items. Some government leaders are reluctant to crack down on piracy out of fear that this could lead to social unrest.

IPR Protection in Mexico

Under NAFTA and the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Mexico is obliged to implement certain standards for the protection of intellectual property and procedures to address infringements such as piracy and counterfeiting. Despite a fairly comprehensive set of IPR laws and an increasing number of seizures and arrests, the extent of IPR violations in Mexico remains significant. Monetary sanctions and penalties are minimal and generally ineffective in deterring these illegal activities.

In Mexico, the Attorney General's Office (PGR) is responsible for investigating and prosecuting IPR crimes. The Mexican Institute of Industrial Property (IMPI) is the government agency responsible for administrative enforcement of IPR. Unfortunately, Mexican IPR laws are weakly applied and poorly understood. Mexican judges have often rejected cases involving IPR crimes, discouraging prosecutors from building cases. Some feel it is pointless to try cases since industry attorneys routinely cut deals with the infringing party before the judicial process is complete. Industry representatives, in response, say the cumbersome judicial system makes staying in court prohibitively expensive.

Copyright Protection

Copyright piracy remains a major problem in Mexico. Although enforcement efforts by the Mexican government are improving (see below), piracy levels continue to rise, resulting in closures of legitimate copyright-related businesses, according to industry sources. Counterfeit sound and motion picture recordings are widely available throughout Mexico, where piracy has shifted from traditional formats to optical discs (CD, DVD, CD-ROM) and internet piracy. The International Intellectual Property Alliance (IIPA) estimates that trade losses due to copyright piracy in Mexico totaled $933 million in 2009. That year, music piracy represented 82 percent of the total market. Industry estimates the business software piracy level at 59 percent in 2009.

In July 2003, the Mexican Congress amended the Mexican copyright law. These amendments failed to address the comprehensive reforms needed by Mexico to: (1) effectively implement the obligations of the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty (Mexico is a party to both agreements); and (2) correct existing incompatibilities in the law with Mexico’s obligations under the NAFTA IPR Chapter and the WTO TRIPS Agreement.

Mexican law enforcement agencies have conducted thousands of piracy raids. In 2003, the Attorney General's Office created an IPR enforcement unit, which combines federal prosecutors and police to make the enforcement regime more effective and efficient.

More information can be found here International Intellectual Property Alliance.

Read the information provided on our Intellectual Property page.

Organised Crime

Foreign Office Travel Advice for Mexico is regularly updated and should be your primary source of information on the security situation and organised crime in Mexico.

Millions of foreign visitors, including 300,000 British nationals, safely visit Mexico each year and the UK is Mexico’s third largest provider of tourists. This also includes tens of thousands who cross the border with the US every day for study, tourism or business and at least one million foreign residents who live in Mexico. The Mexican government makes a considerable effort to protect foreign visitors. Nevertheless, crime and violence are serious problems. While most victims of violence are Mexican citizens, it poses serious risks for British nationals who may happen to be in the wrong place.

Drug related violence in Mexico is on the increase and is a particular problem in the states of Chihahua, Sinaloa, Sonora, Coahuila, Nayarit, Nuevo Leon, Jalisco Tamaulipas, Durango, Baja California (Norte), Michoacan and Guerrero. There has been a recent increase in the number of crimes, murders, firefights and roadblocks linked to drug turf wars, including areas away from the US border. The security situation is fluid and armed clashes between security forces and drug groups are commonplace in certain areas, and can occur at any time without warning.

Seek advice from local contacts, avoid travel off the beaten track, stay abreast of media coverage of events in the areas, to or through which, you intend to travel, and ensure that trusted contacts are aware of your travel plans. Be aware of your surroundings at all times and of the risks of travelling to certain areas. You should include security measures in all of your travel plans and register on LOCATE. There is no evidence to show British nationals will be specifically targeted, although there is a risk of being in the wrong place at the wrong time.

Short-term opportunistic kidnapping - called "express kidnapping" - continues in urban areas, particularly in Mexico City. Victims are required to withdraw funds from credit or debit cards at a cash point to obtain their release. Where victims have friends or relatives living locally, a ransom may be demanded from them.

Longer-term kidnapping for financial gain also occurs, and there have been allegations of complicity by police officers. Where practicable, you should try to be discreet about discussing your financial or business affairs in locations where you may be overheard by third parties.

Read the information provided on our Organised crime page.