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Facilitating business to Canadian companies and investors in Mexico

By: Alejandro Rojas

Today, the so called red-tape-barriers are increasingly playing an important role to do business between countries that have gradually eliminated their import duties and other trade barriers. Regulations, standards and the openness to allow the participation of foreign investors are now part of the equation.

What’s have been the advances in the NAFTA region? The answer is short: the three amigos are moving towards the harmonization of processes, the mutual recognition of each other partner’s standards and the access to foreign investors in key sectors has improved.

Mexico’s competitiveness and productivity policies

According to Undersecretary of Competitiveness and Standardization of the Secretariat of Economy, Rocio Ruiz, “doing business in Mexico is no more expensive or complex than in other countries.” For that reason, the Mexican government has launched programs to reduce or eliminate the transaction costs related with international trade, starting a new business and the compliance of domestic regulations.

“Mexico is a competitive economy at macro level: stable macroeconomic environment, we have 23 FTA’s, exchange rate and inflation at acceptable levels. Next step to enhance our competitiveness has been the adoption of structural reforms, most of them directed to attract and facilitate the operation of international companies in strategic sectors like energy, telecommunications and manufacturing,” adds Ruiz.

Rocio Ruiz, Mexican undersecretary

“By simplifying procedures – we are convinced that the attraction of companies from our main partners like Canada will beneficial for the country by enhancing regional supply chains and promoting trade,” Ruiz adds.

Harmonization of Standards and Mutual Recognition Agreements (MRA)

MRA’s are agreements that facilitate trade by providing the mutual recognition between the participant countries of testing laboratories and mutual acceptance of results of testing undertaken by recognized testing laboratories, i.e., a specific product tested by an accredited Canadian laboratory could be imported into Mexico without the necessity of being tested for a second just by accepting the results of technical testing originally undertaken in Canada.

In Mexico, the Undersecretary Ruiz explains the harmonization of standard and the negotiation of MRA’s as follows: “in the manufacturing sector, Mexican industry and authorities evaluate national regulations vis-á-vis international standards, and specifically those applicable in Canada and the US. Next step is to work towards an equivalence between domestic and international regulations, to finally establish the acceptation of standard certifications extended in the country of origin or at least same provisions.”

In North America, Mutual Recognition Agreements and the harmonization of standards have found green field in dynamic sectors like automotive and electronics, with advanced discussions in  the aerospace and steel industries. Currently, Canadian agencies like SCC and CSA have signed agreements with the Mexican General Directorate of Standards (Direccion General de Normas) – EMA Mexican Accreditation Entity (Entidad Mexicana de Acreditacion).

Main agreements between Mexico and Canada:

  • Auto sector: tires, safety devices, physical and mechanical conditions of new vehicles - currently under analysis and harmonization.
  • Electronic and electrical devices: 47 harmonized standards and 35 products in process of homologation (fuses, switches, household appliances, wire connectors, among others).
  • Safety and performance of electric, electrical and gas appliances (methods): Mexico and Canada signed a Mutual Recognition Agreement to harmonize 11 standards (energy efficiency standards for house appliances, test method for measuring energy consumption in household clothes washers, method for measuring lumen maintenance of LED light sources, among others).
  • In April 2015, the Secretariat of Economy and the Standard Canadian Council (SCC) established an MOU  to homologate standards extended by both institutions, as well as to exchange information.

“In the past, standards and regulations were used as technical barriers to trade. The elimination of these barriers are now an instrument that Mexico is using to expand trade and to attract foreign investment,” says Ruiz

 National Single Window: reducing costs and improving certainty to Canadian companies

The National Digital Strategy launched by President Peña Nieto’s establishes the use of IT as key element to enhance Mexico’s competitiveness. For businesses, this strategy has translated into the reduction of transaction costs to do business in Mexico through the elimination of procedures, streamlining paperwork for business and the use or IT technologies.

Undersecretary Rocio Ruiz explains that the initial operation of websites like www.tuempresa.gob.mx has strongly benefited companies around the world by facilitating the starting of new business (6 days currently), the compliance of regulations and the access to strategic information from potential partners in Mexico. Under the National Digital Strategy, the Mexican government will move forward through the establishment of the national single-window gob.mx that will merge all government sites and will operate around 700 government procedures.

Through the elimination of transaction costs, the harmonization of processes and the usage of IT platforms, Mexico has improved the conditions to attract Canadian companies to invest or to sell their products in the Mexican market.  

New opportunities for Canadian investors

According to the Mexican Secretariat of Economy, 3,600 companies in Mexico currently operate with Canadian investment in sectors like manufacturing, services, real estate and mining.

However, what sectors offer business opportunities for Canadian investors? As result of recent structural reforms, including constitutional amendments, and the deregulation to register new investments in Mexico, FDI can participate:

  • Manufacturing: 100 per cent foreign investment is allowed in all manufacturing industries in Mexico (only areas reserved to the State remain such as land transportation, explosives). Companies are only required to register before the Secretariat of Economy and to report performance requirements when investment is above US$20 million.
  • Telecommunications: cap has been increased from 0 per cent to 49 per cent.
  • Energy: private and foreign investment has been opened in areas such as oil exploration and production, electricity generation and distribution, natural gas processing, storage and transport.

For further information contact: alejandro.rojas@cme-mec.ca

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