Mexico innovation opportunities
When confronted with the differences between your own market and the market of Mexico you will likely feel that you have to adapt your product/service significantly to make it fit the preferences and expendable income of local people. While many may see this as a challenge this can also proof to be a great opportunity for your company! Adapting to a new market, like Mexico, will allow your company to innovate. Not only will operating in Mexico lead to new insights to be more successful in Mexico, you will most likely also pick up on ideas to be more successful in your home market.
This document provides a short overview of innovation aspects, business opportunities and challenges in Mexico. It will also give advice on best practices for starting and developing an innovative business venture, considering Mexico’s country context. May it help you to explore Mexico and lead you to innovation and success.
Opportunities and tips for innovation and doing business in Mexico
- Mexico is the second largest economy in Latin America and the 14th in the world. Due to growth of income, domestic consumption is increasing, while 12 signed free trade agreements facilitate international trade. Consider production and trade within and outside Mexico.
- The IT sector in Mexico is rapidly developing, but this requires investments in construction of data centres, infrastructure, R&D for hardware and software. It is a good time to enter this sector and to offer novel technological solutions!
- The oil sector is one of major contributors to economic growth, as it accounts for 40% of total government revenues. Foreign investors show significant interest in this sector, however, currently the oil sector lacks technological capabilities to improve productivity and to get to the deep-water fields.
- Mexico has 85 mln. internet users and 86.3 mln. smartphone users. E-commerce, digital marketing and social media sector are rapidly growing in the country.
- The electronics industry is expanding in Mexico, due to development of telecommunication technologies. The country has a large, young population of engineers and technology designers, and a good supply chain network in the electronic industry. Consider development of electronic products.
- The aerospace industry is one of the biggest in Mexico. Companies that are involved in assembly, maintenance, repair and operations services for aircraft fleets, as well as, those in metallurgy, machining and surface treatment industries might find large opportunities in Mexico.
- Online shopping is becoming popular in Mexico, hence, e-commerce, particularly the sale of edible goods, is growing. Local companies are searching for ways to innovate the payment system and to make good deals with transport companies.
- Mexico has more trade agreements than any country in the world, therefore it is a good place for international trade and for transit of goods. In addition, the presence of special economic zones and lower labour costs than in other North American countries increase Mexico’s attractiveness in terms of production location.
- The in Mexico is the 7th largest in the world. However, a large number of products and parts for automotive vehicles are being imported from the US and China. In light of growing domestic demand, consider production of vehicle parts and investment in the sector.
- Mexico has a large agricultural sector, however, it lacks modern farming machinery and irrigation systems. The demand for dairy products exceeds local production, therefore dairy producing and trading companies might find the Mexican market very profitable.
On Level 2 you can find information about innovation climate in Mexico, while Level 3 will tell you more about business activities in Mexico.
This page will tell you about innovation ecosystem, major technology sectors, innovation and business practices in Mexico.
Mexico’s innovation, science and technology ecosystem has significantly improved in the last decade. The continuous efforts of the government and economic growth encouraged entrepreneurship and enabled public support for innovation. The National Council on Science and Technology (CONACYT) became a central instrument in advancing technological modernisation and in devising strategies for development of human resources. The main ambitions of the Mexican government are oriented towards digital transformation of the economy and boosting human capital.
The ambition of the Mexican government is to make the country the second-largest exporter of ICT in the world. However, a lack of investment into the sector, digital skills gaps, a low ICT adoption rates in local companies, public protection of several ICT companies from international competition and a poorly developed digital infrastructure hamper digitalisation of the economy.
The quality of education in Mexico is the central concern of the government and a critical barrier for scientific, technological development and innovation. Mexico is open to international collaboration between academic institutions, however, the links between business/industry and the science/research community are relatively weak. To stimulate technology transfer and to foster science-industry relations the Ministry of Economy and CONACYT supported the creation of knowledge transfer offices throughout the country.
The R&D expenditure, both in public and private sectors, is lower than in the EU. To stimulate R&D and entrepreneurship in the country the Mexican government created the National Institute of the Entrepreneur in 2013, deployed the Fund for Supporting SMEs and the National Entrepreneur’s Fund, and launched the Innovation Incentives Programme that offers competitive grants for R&D and innovation in companies. Formal evaluations showed that above-listed instruments have been effective in stimulating innovation, particularly in SMEs. As a result, the Mexican business community and innovativeness received a significant boost. Meanwhile, Mexico City emerged as a dynamic business and start-up center of the country.
Innovation sectors and technology
Due to targeted public financing, as well as, contribution of market players, the aerospace, automotive and biotechnology sectors are most innovative in Mexico. Among other rapidly developing and scientifically advanced sectors are renewable energy and clean technology, nanotechnology and advanced computing sectors.
Despite significant investment into the ICT sector, it is still less competitive on an international arena, primarily due to a lack of adequate infrastructure. Nevertheless, a growing number of Mexican innovators are focusing on consumer electronics, smart cities, robotics, self-driving vehicles, sports and health technologies.
Innovation culture and practices
The Mexican population is welcoming innovations, however, since product innovation is normally more capital-intensive the business community in the country is more receptive to organisational, marketing or process innovations. A recent business survey revealed that only around a half of Mexican companies that have introduced innovations are SMEs, which is significantly lower than in the EU. Smaller companies are more flexible and willing to test novel ideas in Mexico. Economic growth raises positive expectations of entrepreneurs about business success and thereby fosters the culture of entrepreneurship and innovation.
The young Mexican population is tech-savvy, therefore most innovations are focused on high-tech. Many local innovations have been inspired by foreign inventions, however, a large share of Mexican inventors is focusing on addressing local, social challenges. Innovative corporate responsibility programmes and business/finance networks stimulate social innovation and contribute to expansion of the micro-credit system.
The Mexican government has introduced several measures to further encourage innovation. Among them are the cultivation of entrepreneurship through promotion of business skills trainings, expansion of education in English to support knowledge discovery and orientation towards internationalisation of business, nurturing of local companies in special economic zones and in business incubators.
This page highlights major economic sectors and iconic products, shows business trends and explains how easy it is to do business in Mexico. In addition, you will find the list of websites, which provide some hands-on information.
What is the country known for?
The biggest sectors are: textiles, clothing, chemicals, motor vehicle and its parts, mining, iron, steel, petroleum, food and beverage, tobacco, consumer durables, tourism.
The service sector is the major driver of economy, accounting for 64% of GDP in 2017, while industrial sector represents 31.6% and agricultural sector only 3.9% of GDP.
Coffee, cotton, silver, oil, flat-screen TVs, malt beef, tequila, bakery products, sugar, corn, lime, oranges, chocolate, pork, canned fruit, tomato, avocado, wine.
How easy is it to do business in Mexico?
Based on the World Bank ranking:
Emerging markets average
Overall – ease of doing business
Doing business in Mexico is significantly easier than in other emerging markets, on average. The process of getting a credit, resolving insolvency or contract enforcement is relatively simple and fast. Due to membership in NAFTA, the Pacific Alliance, the free-trade agreement with the EU and several other trade treaties the trading across borders is facilitated and it offers large opportunities for entrepreneurs.
Among more challenging aspects of doing business in Mexico is the payment of taxes, property registration, getting electricity and construction permits. Corruption, violent conflicts, presence of drug cartels, income inequality (almost a half of the country’s wealth belongs to 1% of population), relatively poor infrastructure in some places in Mexico, as well as, high dependence on foreign trade (it accounts for almost 80% of GDP in 2016) result in higher economic volatility and affect the ease of doing business in the country.
Business trends in Mexico
The growth of income and busy lifestyle transform consumer behaviour in Mexico. A growing number of population prefer good quality products, look for convenience, customer service and are more inclined to choose brand products.
The Mexican economy is gradually turning towards specialisation in production of heavy-weight machinery, such as vehicles and electrical equipment. Mexico is becoming a major manufacturing center for electronics. As a result, a growing number of investors find the country attractive for business.
Mexico City hosts a large number of international business events, particularly those that focus on business opportunities in Latin American countries. Hence, the city offers a large network of business associations and it is emerging as an important business hub.
- European Cluster Collaboration platform – Mexico (in 2018: https://www.clustercollaboration.eu/international-cooperation/mexico?key...)
- National Council for Science and Technology (in 2018: http://www.conacyt.gob.mx)
- EU-Mexico trade agreement (in 2018: http://ec.europa.eu/trade/policy/in-focus/eu-mexico-trade-agreement/)
- Business Coordination Council (in 2018: www.cce.org.mx/)
- Mexican Council of Foreign Trade (in 2018: http://comce.org.mx/)
- Mexico City National Chamber of Trade, Services and Tourism (in 2018: www.ccmexico.com.mx/)
- National Chamber of Consulting Companies (in 2018: www.cnec.org.mx)
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