Cross Border Business Risks Pursuing Opportunities Abroad
Excellent opportunities exist to expand operations tin Mexico, but prepare for the unique risks in the region.
Small and Medium Enterprises (SME) looking to reach the next stage of growth for their businesses wisely look to expanding their operations abroad as the catalyst for that growth. Mexico in particular is an appealing target of such expansion ventures as it presents many unique opportunities. Because of shared western and Hispanic culture, Mexico has always presented a place where products and services that proved successful at home can more easily transfer and replicate that success.
The North American Free Trade Agreement (NAFTA) struck down many of the barriers that previously made Mexico accessible only to large firms and corporations that could afford to maintain their factories and offices in Mexico to avoid the high tariffs on trade. The reduction in red tape meant SMEs could now operate in a market whose trade totals with the US totals more than $1 billion a day. Mexico’s geographic proximity also provides an alternative for Asian based manufacturers and opportunities to enter the supply chain.
Taking advantages of the opportunities in the Mexican market can be a wildly successful financial decision, when the right steps are taken along the way. Knowledge of the unique risks of a region and preparation is vital when doing business outside the US. The security situation in Mexico presents day to day risks for business owners that they are unlikely to have faced in their US operations. These risks should not discourage SMEs from taking advantage of the opportunities available, but SMEs have to be aware of their presence and take steps to protect themselves, their businesses and their employees.
One of the more critical risks that have to be addressed is kidnap for ransom and extortion. Mexico consistently ranks as the most affected country in the region with nearly 60 percent of recorded kidnap for ransom cases in Latin America in 2014, according to Unity Resources Group’s statistics. It is, however, difficult to generate reliable numbers. While official figures show 1,394 reported kidnappings in 2014, the Mexican NGO Alto Al Secuestro counted 2,818. Furthermore, official figures account for a decrease of 17 percent in kidnappings compared to 2013, but Alto Al Secuestro estimates a 30 percent increase. With an estimated 90 percent of kidnappings not reported, the actual number may be far higher – and a survey of Mexico’s National Statistics Agency estimated that in 2013 there were over 130,000 kidnappings nationwide. The statistics show that proper security procedures and awareness are an absolute necessity.
Next- Primary risks and Outlook
