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March 15, 2017 | by Steve Lawrence

Bullish on Mexico

Despite NAFTA uncertainty, south of the border looks like a strong opportunity.

Bill Chisholm paints an all but irresistible picture of doing business in Mexico. Now president and CEO of Samuel, Son & Co. which has facilities in that country, Chisholm was CEO for ArcelorMittal Mexico from 2009 to 2013. First conclusion: the man is no newcomer to the pitfalls and rewards of doing business there. Second conclusion: Bill Chisholm is no starry-eyed Mexico fan. Talk with him, even briefly, about the country’s business climate and it’s clear he is tough-minded and realistic.

In parts of the country like the major manufacturing center in and around Monterrey, crime and corruption are concerns. But these become “costs of doing business” in Chisholm’s view that in no way detract from the “immense buying opportunity” that he says Mexico now presents. In any case, with GDP growth expected to nudge 3% annually over the next five years, the country’s growing prosperity dulls the decreasing impact of that crime and mainly small-time, local cop-type corruption.

“Look at all the powerful reasons to consider business in Mexico,” Chisholm recently told MSCI’s Carbon Conference. “You have a stable government, low inflation, the increasing size and strength of its domestic market, a young skilled and trainable workforce, and continuing low labor costs,” he said. “Manufacturing there is becoming increasingly high tech and there is opportunity emerging all along the supply chain.”

He pointed to the roaring automotive sector, where foreign and domestic investment is growing in every manufacturing function from punching and stamping to electronics assembly. The same growth, he said, is evident in machining and equipment, IT, infrastructure, general construction, and metal fabrication, among other sectors.

“U.S. companies have literally billions invested in Mexico and its manufacturing future,” Chisholm said. “So yes, it is likely that NAFTA will require some tweaking, but after some 20 years of development and growth, that sector is thoroughly entrenched.

“You have an enviable labor force there that is as much as 27% cheaper than in major industrialized countries,” he said. “It is a young and educated force as well. Where Canada and U.S. struggle with aging populations, Mexico now has 50% of North America’s population under 24.”

Just as important, Mexico wants our business, he added. “The various Chambers of Commerce and business associations are a big help and offer more direct contact with the government than happens here,” he said. “Though there are trade unions that are also part of doing business, it is often possible to pick the union you will deal with as you negotiate your deal.”

That said, Mexico has its own distinctive business culture that must be successfully navigated. “It helps if you speak some Spanish, for instance,” Chisholm said. “Realize that business is done in a more formal way than in the U.S. or Canada, and is largely based on personal relationships, face-to-face talk, and trust.

“Negotiations are not confrontational,” he said. “And Mexicans value family and a sense of belonging very highly. The most important day in Mexico is Mother’s Day.”

A favorable, cost-competitive business environment, a young, talented and skilled workforce, a growing investment in its own infrastructure and a load of available government incentives; seems like Mexico, as Chisholm says, would be worth a look if you have expansion plans.

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