This is the second post in a series about the CPTPP, and what this means for Singapore companies. Click here for the first post: Breaking down the CPTPP – Singapore’s first FTA involving Mexico.
1. Mexico is opening up to Asia as a suitable business partner
The first thing we know about business is that it’s all about location, and Mexico’s location is an ideal one. Situated strategically with the US to the north and Latin America to the south, Mexico is a perfect spot to begin expanding your business regionally. Having a strong commitment to free trade only sweetens the deal, as their strong business ties giving them access to over 40 countries through 12 FTAs: the perfect for firms looking to boom. Now, with the recently ratified CPTPP, there are even more opportunities for Singapore companies to do business with Mexico.
With shifting global climates, Mexico has also began looking across the pacific for new partners, and this is where Singapore companies can come in to fill the gap.
2. New trends are opening doors for Singapore companies
Mexico on its own boasts a population of over 120 million people, and a great abundance in natural resources including massive oil reserves in the gulf, and enough silver that it ranks number 1 globally as its main producer.
On top of that, the recent spurs in technology and Mexico’s growing middle class have increased demand for more goods and sophisticated services, leading to the growth in the ICT sector as e-commerce and IT are quickly becoming the hottest thing in town.
Tourism is also booming, with an explosion of visitors entering the country, with Mexico experiencing a 64% increase in tourists the past 10 years (12% up from 2018) with an increased focus on the Asian business and leisure tourists, over 39 million international visitors went to Mexico in 2018.
According to Francisco Rios, Enterprise Singapore’s Regional Director in Mexico, “it’s a small jump from this to understanding that opportunities abound for local companies in the areas of leisure, hospitality, retail, ecommerce, tech, and logistics to dive into the Mexican tourism market.”
3. Mexico is a great place to source new products for the Southeast Asian market
With Mexico’s diverse culture, it is a great place to source new products to bring across the pacific. Mexico businesses are also often unfamiliar with Southeast Asian markets, and this is where Singapore companies can act as a bridge between Mexico and the SEA region. According to Mr. Eddie Siow, CEO of IM Holdings, despite Singapore’s small market size, our real strength lies in our ability to aggregate orders.
“You have to realise, the further you are, the more exotic the product.” He adds, saying that goods such as instant avocado powder are in high demand in niche industries, but rarely reach the mass required for shipping to be cost effective. So Singaporean companies such as his help aggregate orders from all over the region, and cut out the middle-men involved in these transactions, cutting as much as 300-400% of the unnecessary costs.
Armed with regional experience and cultural familiarity, local firms can help Mexican suppliers navigate SEA by leveraging Singapore’s connectivity as a regional hub to distribute goods from Mexico to the region and vice-versa. IM Holdings already has such an arrangement in place with Argentina, acting as the regional distribution hub for goods coming in from Argentina, through Singapore, and to IM Holding’s regional network.
4. You can leverage existing projects there to get a foot in the door
Singapore already has boots on the ground in Mexico, with Surbana Jurong having secured a master-planning contract inter-oceanic corridor by the state government of Veracruz and Oaxaca in May this year. Spanning 300km, the corridor connects the Atlantic city of Coatzacoalcos, and the Pacific city of Salinas Cruz and presents multiple interesting entry points into the Mexican market.
Deputy Director Strategic Planning Raphael Chua of Surbana Jurong says that his company is aiming to identify and strengthen existing clusters, and that there will be plenty of exciting opportunities in the months ahead. Surbana Jurong is also optimistic that this project “will present downstream opportunities for other Singapore companies in infrastructure, textiles, and furniture, agriproducts, and logistics.”
5. Be prepared for the challenges
Have patience in your approach to Mexico. Ivan Hernandez, Developmental Director of SBE International, emphasises the need for proper legal representation.
“You need to do your homework, and doing your work is also seeking out the right channels,” This includes getting to know the Mexican business community, understanding the specific local norms and getting a certified customs agent in Mexico. There are cases of entire shipments of goods getting stuck at the ports in Mexico simply because the correct papers were not signed.
Companies looking to market their products and services there can explore the Market Readiness Assistance (MRA) Grant.
Find out more about opportunities in Mexico here.
