We identified an opportunity to develop a Neighbors contacts map that would show our updated and verified contacts around the country. In a map classified by ISIC sections (International Standard Industrial Classification), the locations of our contacts are presented in a systematic structure based on economic and industrial activities.

In visualizing the geography of our contacts, among the advantages we have identified so far are locating micro supply chains, ease in planning travel for business visits, and supporting our clients with strategic information for market entry.

The Neighbors Industrial Map is a project in development, and we are open to hearing suggestions that can benefit our work and the companies we support. If you are interested in reviewing the map with us, please do not hesitate to contact us.

El cargo Geographic Visualization of Neighbors Industry Contacts apareció primero en Neighbors.

We set up a series of meetings for Belinda to offer her company’s catalog of personal care products targeting spas and wellness centers in Mexico. She has done some research about the market but she’s a people person and likes to obtain information firsthand. Even though she isn’t totally in a position to start offering products, she wants to speak to some potential customers. We’ve seen this approach to market research work well, especially for catalyzing internal business cases for moving forward in export. We set up 10 meetings for her with hotels and spa chains in Mexico, as well as a couple of potential distributors just to get their perspectives.

Belinda doesn’t speak Spanish, nor does anyone at her company, so she has opted for an interpreter to join her meetings. Since they’re virtual meetings, simultaneous interpretation works a lot better than consecutive, so it’s especially beneficial to have a professional interpreter, not just a bilingual person. Interpreters typically charge by the day, up to 200 or 300 USD. We try to pack in as meetings as possible per day to minimize this cost, but due to companies rescheduling and other factors, the meetings end up taking place over 4 days, generating Belinda’s company about 800 USD in expenses just to hold virtual meetings. Granted this is cheaper than traveling to market, but it’s not chump change. Belinda did get a lot out of her market research, and she considers the expense more than justified, but now also 4 of the customers she spoke to are really interested in buying Belinda’s products and want follow-up meetings, which also require interpreters.

Small + Medium Companies Take a Cue on Scale

We talk a lot in our practice about calculating the costs of doing business overseas. Even in the most initial phases, which is typically generating sales to the new market made from your home country, the cost of reaching and delivering to those international customers is going to be higher than what it costs you to sell at home. This is because you’ve added not only distance, but also another legal system, another financial system, another language, and pues, another market, plus a whole lot more unknown variables.

When you’re beginning to sell in a new market, especially an international one, you’re not just expanding your business. You really need to be scaling it. If it costs more to sell in the new market, then your profit margin decreases. You’re in a sense losing money off your new sales, unless you’re generating greater economy of scale in the new market, or otherwise offsetting the higher cost of selling (such as by locating production there).

This hits harder for companies that operate at smaller scale, which is one of the reasons international business has historically been less accessible to small and medium companies than it is to larger ones. The larger ones are simply in a better position to afford the cost, and risks, of overseas business.

Back to our example of Belinda and the spa products, if she’s going to really pull off some sales, how many sessions with interpreters would she have before the cost ended up being the same as hiring someone who speaks Spanish to work at her company? What about instead dedicating that money to commission percentages, for a bilingual agent located in Mexico? Or a reseller discount? Especially since all of those options represent an investment in increasing her sales force for Mexico. Those folks can do a lot more for Belinda’s company than help with Spanish, and a lot of the support they offer in terms of sales, they’re potentially going to be better at it (for Mexico) than Belinda is herself.

Accessing a new market is not just about expanding sales. It’s part of a planned process, which should expand your business in a way that makes the most of the resources you’ll have to invest to manage risks and achieve sales.

El cargo Selling Internationally Costs More than Selling at Home apareció primero en Neighbors.

We’ve wrapped up our 2021 trade mission for Virginia to Mexico, which was all virtual this year. It was honestly fantastic– our 6th year as a company doing missions, and we’ve never been happier with trade mission results. One aspect that made it really great was the fact that our consultants were able to participate in this year’s meetings with the companies, something that was logistically impossible in years with in-person trade visits.

For those who aren’t familiar, trade missions are initiatives organized usually by governments or business associations to help companies access international export opportunities. They usually consist of a delegation of companies, who are set up with prospective partners or customers in the focus destination country. Since 2014, we’ve been supporting trade missions for the Virginia Economic Development Partnership in Mexico. Virginia normally does an intensive in-person format of 1-1 meetings during a period of 5 days for every company that participates, so we’ll do an itinerary for each company of up to 4 meetings per day.

Although Mexico City traffic somehow feels pre-pandemic again, this year, with COVID still pretty bad in North America and definitely in Mexico, we swapped out the logistical production of in-person meetings for accompanying the Virginia delegates to Zoom meetings. With a front-row seat to the companies’ meetings, we were able to observe how everyone has their own style for presenting and what different meeting participants did that worked really well.

Participants were of course able to bring in all manner of attendees from their offices, and from other offices, too. We had “Virginia” attendees from Japan, Colombia, Florida, and Vermont this year participating in the meetings. Some had mastered a more down-to-business style, hammering out solid action points. Others were great at invoking social interactions, including with the use of guitar, or the “welcome to my home” approach: “Meet Kuko, my dog.” Yet others made the most of the digital medium with immersive video presentations; we finally witnessed the potential of “Prezi”-style presentations— the un-PowerPoint, although the company appears to have done theirs in PP using macros.

Aside from seeing everyone’s virtual meetings best practices, our consultants were happy they actually got to hang out with the companies this year! Aside from making Neighbors management happy (we’re not happy unless our consultants are), we expect this time we spent forming relationships with the Virginia companies to help on the critical factor to the success of any sales intiative: follow-up. While companies may not expect to hit it off immediately with customers or partners they meet in our matchmaking, by letting our consultants join their meetings, they’ve now spent a full 10-15 meetings with someone based in the Mexico City megalopolis who they can personally feel comfortable turning to and keeping in touch with for little things and just because. The importance of growing this “relational” element in what could otherwise be a highly transactional experience cannot be understated.

El cargo Building relationships in virtual meetings apareció primero en Neighbors.

One of the best things about the USMCA update to NAFTA is its consideration of how to bring more small businesses into the fold of international trade agreements. This is critical!

Among the ways it does so, one is pretty common-sense. The US, Canada and Mexico are required to make information on tariffs and regulatory updates more accessible. You shouldn’t need a lawyer in-house to sell to your customers next door. Here’re Mexico’s portals on exporting for SMEs and USMCA (called T-MEC by Mexico). They’ve actually had another portal, SIAVI, for a long time, where you can get information on tariffs, and here is SNICE, yet another data portal they’ve added.

Another important factor is the USMCA providing more certainty in the digital landscape of international sales. While Mexico took this opportunity to clarify that yes, digital services are in fact liable for VAT, that was going to happen eventually, and we’re glad for the stability they’ve provided in finally pulling the trigger on that. And, we’re glad USMCA is there to help ensure Mexico’s levying mechanisms make sense for US and Canadian (and Mexican!) companies.

One other feature we’re particularly happy about, as a Mexico-based company ourselves, is the labor mechanisms that should help Mexico continue to lay the framework for employees here to be ensured sensible protections, incentive for professionalization and improved productivity, and ultimately, ahem, be paid more. Labor market arbitrage, contrary to many long-held practicies, is not great for trade in the long run especially among neighboring markets. This continues a pattern long underway in Mexico, notably seen in “formalization” efforts for getting small businesses into the financial system.

We’ll go into more detail on specific opportunities next week, March 9, when we present at the USMCA Workshop Series webinar on Mexico and Canada opportunities. Thanks to the US Commercial Service in Virginia, Virginia’s Small Business Development Center, and the Virginia Economic Development Partnership for inviting us to participate!

El cargo Mexico Opportunities for Small Biz Under USMCA apareció primero en Neighbors.

Las empresas de Virginia

Ofreciendo soluciones para la logística, construcción, automatización de manufactura, seguridad, seguridad informática, y defensa, las empresas de Virginia son:

Allegheny Instruments alleghenyinstruments.com Microcámaras para la inspección de condiciones subterráneas. Clientes en construcción, minería, gestión de agua. Buscan agentes representantes en México para atender estos sectores.	Sectores: construcción, minería, agua
BecTech www.bectech.com Servicios en apoyo de la ingeniería militar. Asesoría, capacitación y apoyo en el desarrollo de procesos con respecto al mantenimiento de naves marítimas y sus sistemas tecnológicos. Buscan empresas para apoyarles en la gestión de contratos y entrega de servicios a las Fuerzas Armadas Mexicanas.	Sector: defensa naval
DASCOM dascomamericas.com DASCOM destaca para la Misión VEDP sus impresoras de tarjetas de control de acceso. Para distribuidores y representantes, ofrecen esquemas y margenes atractivas para apoyo en comercializar los productos a clientes finales como gobierno, educación superior, hoteles, y conjuntos de oficinas e instalaciones industriales que manejan credenciales especializadas de ID o control de acceso con tarjetas.	Sectores: seguridad física y de identidad
Morooka morookaamerica.com Maquinaria pesada tipo orugas, para obras y trabajo sobre suelo húmedo o suave, o en otros terrenos complicados. Ya con presencia en México através de su socio Madisa, el fabricante en la Misión VEDP ofrece consultas con posibles clientes en agricultura, minería, construcción, infraestructura.	Sectores: construcción, minería, agricultura
Quality Transportation Services www.qts.com Servicios de administración y rastreo ferroviario. QTS tiene casi 40 años apoyando a empresas que mueven carga por tren en México. Como proveedor independiente, complementan e intervienen con las empresas ferrocarriles para optimizar los tiempos y costos de envíos por tren. También proporcionan servicios de gestión de flota. Pregúntales por sus referencias de clientes.	Sector: logística ferroviaria
Sentry Equipment + Erectors www.sentryequipment.com Equipos y bandas para la automatización de envasemiento (botellas y latas), incluso equipos robóticos. La empresa ya cuenta con presencia en México, y el fabricante participa en la Misión VEDP para acercarse con clientes finales en la producción de alimentos y bebidas, así como de botellas y latas y maquiladores de envasemiento. Confiada y respetada en la industria por su alta calidad y servicio.	Sectores: alimentaría, bebidas, envase
Sonaray www.sonarayled.com Fabricante de LEDs “chip on board” que busca revendedores y integradores mexicanos para atender los sectores industriales, comerciales. Sonaray ofrece a sus socios de canales de venta buenos productos en un mercado que se encuentra en alza. Destacan diferenciación para el sector marítima.	Sectores: construcción, eléctrica
Thomas Automation Management tamincusa.com TAM es el brazo americano de servicios de automatización de la empresa transnacional Tembo. Además de especializarse en instalación, actualización y modernización de lineas de producción automatizadas, TAM tiene experiencia profunda en microperforación con laser. Es su primer acercamiento con el mercado: quisieran tomar la temperatura de microperforación y la posibilidad de asociarse con empresas para ofrecer el servicio de gestión de automatización en México.	Sectores: manufactura automatizada
ThreatQuotient www.threatq.com Plataforma de seguridad centrada en las feeds de amenazas informáticas. Monitoreo personalizado, priorización dinámica, y respuesta automática a la inteligencia de ataques cibernéticas. ThreatQuotient quiere conocer a SOCs en México de clientes finales así como los de servicios administrados de seguridad como posibles socios para ofrecer su SaaS aquí.	Sectores: seguridad informática corporativa

Sobre Virginia, EUA

Virginia es un estado en la costa atlántica de Estados Unidos con población 8.5 millones de personas. Destacamos ecosistema económica diversa gracias a inversión robusta en I+D, tecnología, y competencias de logística, así como las industrias impulsadas por nuestros recursos naturales de las montes Apalaches y el puerto de Norfolk en la Bahía Chesapeake.

Desde el 1985, Virginia Economic Development Partnership se ha esforzado para impulsar las relaciones comerciales entre México y empresas de Virginia. Durante los últimos 7 años, Neighbors ha traído a mas de 50 compañías innovadoras desde el estado para conocer a mas de 800 empresas mexicanas como clientes y socios.

Participa con nosotros

Para mayor informes o para agendar una cita con cualquier de las empresas de la delegación 2021, favor de contactarnos por +52 55 5027 0012 o info@neighbors.mx.

El cargo Delegación México-Virginia, EUA 2021 apareció primero en Neighbors.

At the time it seemed like a pretty whole-hog bet on the CFE’s part, or a wonderful example of structural North American cooperation, or both. Mexico really needed to, and still needs to, lower its energy costs. So we realized the CFE going “all-in” was due to the lowered cost of gas thanks to US fracking. Indeed, Mexico’s gas costs are pegged to the cost of gas in the US, in dollars. However, focused on our mission of helping the Mexican infrastructure company find a partner, we didn’t stop to look at the macroeconomic picture until after the reforms went through.

From 2013 on out, in keeping with the reform and the interests of our clients, we were working with renewables companies as much as companies in the fossil fuels streams, and we started thinking in terms of decentralized energy supplies, grid stability, arbitrage and other frameworks. We didn’t cease to be impressed at Mexico’s willingness to depend on US and Canadian natural gas transmission, but we didn’t really question it either.

Last year, we did a deep dive for a Colorado engineering firm that was interested in the longer term outlook of renewables in Mexico, especially given questions raised about it by the current federal administration in Mexico. For ourselves, thanks to conversations with companies, analysts like Arturo Carranza, and our own analysis of several sources, we arrived at an understanding of the AMLO administration’s rationale, as explained by Rocio Nahle in particular, which focuses on longer-term energy stability for Mexico via correcting inefficiencies not just in production but also in transmission. After all, the 2012 Reform did seem to have passed really easily and quickly in Mexico’s legislature; in our experience, it’s healthy to question policy that appears not to have been subject to very rigorous debate. It’s not outrageous to consider that the Reform could have left out some key points for ensuring Mexico’s electrical grid operates efficiently.

It made sense, except for the appearance, which AMLO is apparently happy to own, of spurning the private investors poised to help diversify Mexico’s energy sources. Our conclusion at the time was that market fundamentals meant most of the private renewables investors should stick around. They should, in their financial due diligence, have budgeted for at least some of the changes being enacted by the government. Whether they did was confirmed in some of the subtext we got from our industry conversations and analysis last year. Many of the investors are foreign and are looking to Mexico’s Supreme Court as well as international treaty terms, including USMCA, to help protect their ideal operating scenarios. If they do decide they can remain despite the cost of adapting to regulatory changes, they should be giving Mexico not just more domestic energy choices, but also choices from a stronger variety of sources, with a more diverse spectrum of transmission and storage options. Probably not as quickly as the CFE gaslines were installed, but our hope is that what Mexico is losing in speed right now, it makes up for in a more rational transmission landscape in the future.

El cargo Another look at energy cooperation apareció primero en Neighbors.

There will always be great reasons to meet in person, but we’re really glad to see this cultural shift in favor of videoconferencing. Ask anyone who deals with Mexico City traffic why. Please peruse our presentation below and let us know if we can help you refine your approach to selling in international markets.

El cargo Virtual meetings best practices apareció primero en Neighbors.

El cargo Stuff we can’t fake: Cultural Context apareció primero en Neighbors.

However, putting aside the argument of whether beer itself is essential, especially when you compare it to other distribution networks that have stayed running in Mexico such as soft drinks, there is another critical consideration here that people in developed economies will be prone to overlook. That factor is Mexico’s informal economy.

About half of Mexico’s economy is «informal.» Companies that are not legally registered to pay taxes are informal. Mom and pop corner stores and street vendors sure, but also many, many others. Informal companies are more likely to live week-to-week or even day-to-day. They have no access to or even knowledge of risk management tools like insurance or credit.

On the other hand, even for employees of formal companies, unemployment and welfare benefits are scarce in Mexico. There are some programs at the local level especially, for example in Mexico City. But these by design are not going to cover informal workers.

These businesses and their employees are more exposed to the crisis, but they also don’t have as many leverage points pushing on them to incline them to heed government advisories to shelter in place. No threat of tax penalties, no bank accounts in which to deposit a stimulus, and no incentives to take away.

The Mexican brewers, like Constellation Brands, Modelo-ABInBev, and Heineken-Cuauhtémoc Moctezuma, are part of the formal economy. Regardless of how essential they are, ceasing operations is much more feasible for them than it is for companies in the non-formal economy. Is beer more essential than tamales? Who knows. But is a worker at the Modelo brewery going to go hungry if the operation is suspended? Likely not. Maybe so for the tamale vendor.

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A local photographer in Mexico City has been capturing photos of crowds since the COVID contingencies began. The people in this photo, taken at 6:30PM on Friday, April 17, are likely returning home from work.

Effectively, Mexico has narrowed the definition of «essential» compared to the US because it needs to create leeway for operations that, not from a macroeconomic or functional perspective, but rather from a human perspective, do have less choice in whether to keep going. They are essential for other reasons.

In addition, there is the ability of the Mexican government to motivate, influence or control the informal economy. In some ways Mexico has to be more stringent with the companies it can control– these «formal» companies that tend to have more invested in the civil system, and also more resources to work with– than into allow for movement by those companies it cannot control and who in fact have less choice.

This rationale extends to other «arguably essential» operations in Mexico, such as manufacturing. The Pentagon has recently called on Mexican aerospace manufacturers to re-open so US prime contractors (companies Boeing or Lockheed Martin) can get their air frames. While yes, achieving manufacturing supply chain coordination is essential, is US defense equipment essential from a Mexican perspective?

More essential for the Mexican government is keeping people at a social distance, of course, but also: unlike in the US– and in absence of the social spending that makes Mexican manufacturing labor less expensive– Mexico must use the formal economy to create a margin of movement for the informal economy; segments of society that are ultimately much more vulnerable, and more difficult to influence.

El cargo Why fewer businesses are «essential» in Mexico during COVID-19 lockdown apareció primero en Neighbors.

Our screens are whirling with webinars these days. Today, thanks to ANZMEX, the Australia New Zealand Mexico Business Chamber, we attended a talk with the Economist magazine’s Mexico Bureau Chief Richard Ensor. Some of the things he spoke of had been floating around our minds as well.

Let’s first alight on a fundamental of Mexico, which is its «exposure» to the United States and global economies. Macroeconomic shifts tend to buck Mexico in the same direction as the US goes, but further. We can generally think that whatever the US does on a graph right now, Mexico will do it in parallel, but more extremely.

• 80% of Mexico’s exports, which are primarily machinery/vehicles, machine/vehicle parts, produce, and alcohol are sold to the United States.
• Tourism is perhaps Mexico’s most important export industry, which is not only battered by the US and global market in this case, but the pandemic situation as a whole.
• Remittances, another important source of income for Mexico, come from Mexicans living abroad.
• The suffering of all these activities then converges, on this fact of Mexico’s exposure, to drive the value of the peso down.

Next up, there’s the systemic factor of Mexico’s two economies. This was a «featured insight» of the consulting firm Mackenzie several years ago, who wrote on the subject well. The concept is a familiar one in Mexican business communities: there’s the «developed» Mexico of 700 Starbucks and the «developing» Mexico that buys piloncillo-infused coffee on the street corner.

Essentially a very small but pronounced portion of the Mexican economy, almost entirely transnational companies, experienced about China-velocity YoY growth since 2010; the rest, over 90%, experienced negative growth each year on average. That netted out nationally to growth averaging between 0 and 3% those years, roughly. Inequality, traditionalism, neoliberalism, mom and pops, family offices, transnationals, holding companies, process management, innovation, investment, and access to risk management support, or lack thereof, are all themes here.

So we need to understand how the two Mexicos will play into each other during the economic fallout of the pandemic. On one hand, transnational Mexico that had liquid assets in-country seems to have sucked them out on and around the week of March 9. Many of its employees can maintain reasonable productivity via remote work, though not all. (See: tourism, manufacturing.)

On the other hand, traditional Mexico does not generally borrow from banks or otherwise buy into financial abstractions. It has a lot of informal workers, and it often lives day-to-day or week-to-week. While the Mexican government has issued a requirement that no employers let go of their workers in the pandemic, that is tough to enforce for companies that aren’t on the books, and much tougher for companies that go out of business.

Overseeing this interplay is the Mexican federal administration.

• President AMLO seems to be willing to let the big businesses («developed» Mexico) fall on their faces if necessary, perhaps because he realizes they ultimately will catch themselves. Also because they do not generally employ the most vulnerable in Mexico.
• The government has offered a loan to the approximately 4 in 10 businesses nationwide that happen to be microcompanies (under 10 employees), 25 thousand pesos each. That amount means very little to a lot of the eligible and very much to many more.
• Companies in the middle (10-300 employees) are likely to seek support from banks, which as mentioned on today’s call, may be according to AMLO’s goals.

The President is a spendthrift and would prefer the companies who can do so hold debt instead of the government. If AMLO really does resent neoliberal policies as he claims, this is an odd way of showing it. Again, though, anyone in a position to use the banking system is not within the President’s definition of vulnerable. Starbucks problems. From our perspective, this laissez-faire attitude could, as a silver lining, stimulate the underdeveloped financial services market for small and medium companies.

Which brings us back to our key interest here, both for Mexican companies and for our international clients that export into Mexico. Those who are only lightly damaged, or are perhaps even at an advantage, in the positioning of their services and products during these shocks and aftershocks. Even the companies with severe damage but still might pivot or reinvent themselves. For them, are there any constructive opportunities in the next 6-24 months? And what are the opportunities?

The government, in its austerity and prioritization of the unbanked, seems unlikely to step in with competing investment opportunities. Committed as it is to not spending money on this crisis, it could potentially brand its already-planned infrastructure projects (the Tren Maya, the Sta. Lucia Airport, and the Dos Bocas Refinery) as its stimulus package. In that sense, short of projects that require extensive federal permitting, private capital investors may meet a very thirsty, and open, market in Mexico.

Today’s conference was under the Chatham House Rule, but the academic in us would feel remiss not to attribute Mr. Ensor here on a point he mentioned more than once: During this massive disruption driven by the SARS-Cov2 virus, some of the things that were impossible three months ago are becoming possible.

We were thinking the same, and we continue to work on this very point for several of our clients. Particularly with logistics, supply chains and digital transformation/Industry 4.0, we believe there are many Mexican companies that are also seeking to seize on the opportunities for change.

El cargo Mexico’s 2 economies in the pandemic: where do the gaps widen? apareció primero en Neighbors.