Investing in Mexico

INVESTING IN MEXICO 10

Investingin Mexico

Investingin Mexico

Agricultureis an importantsectorin theworld,forits imperativerolein providinghumanandanimalfeeds.Additionally, thesectorprovidesrawmaterialsto variousAgro-based industries,as wellas providingdirectorindirectemploymentto thepopulace(Villarreal2014). Theimperativeroleplayedby agriculturein worldeconomiespromptedme to starta smallbusinessspecializingin wholesaling agriculturalproducts,especiallycropnutrients suchas thefertilizers,andotherfarminputs.My businesshas considerably grown,providingits goodsandservicesin majorstatesin theUS. Thegrowthhas necessitatedthebusinessto venturein theinternationalmarket,especiallyto Mexico. My businessaimsto supplyfertilizersto Mexican farmers,helpingthem increasefarmproductivity.Despite thedecreasing contributionto theGDP andreducingagriculturallaborforce,agricultureremainsan importantsectorin theMexican economy(OECD,2013).Thesectorhademployedmorethan halfof theworkingpopulationeitherdirectlyorindirectlyby 2011, andhas significantly contributedto a reductionof povertyin Mexico. Smallscaleproducersrepresentapproximatelyseventy-three percent of totalagriculturalproduction.Hence,supplyingfertilizersto theselittlescalefarmersin Mexico will be profitableto my smallbusiness.Mexico has nonationalfertilizerproducingindustry,which makessuppliers avail their fertilizersat exorbitantprices.Farmerswhocannot affordadopttraditionalfertilizing methods,which are lessproductive(TheUS Department of Commerce, 2014).My businesswill providefertilizersat relativelylowprices,makingitaccessibleto allfarmers.

Country’sBackground

Amongthefactorsaffectingtheagribusiness venturesin Mexico is thesignificantimprovementof theeconomyin therecentpast.Thevarioustradeagreementssignedby Mexico haveopenedher to globalization of theeconomy,which has significantly influencedmy decisionto investin Mexico. Theenactmentof theNorth-American Free Trade Agreement (NAFTA) in 1994 is one of theimportantfeaturesin thebilateralcommercialrelationshipbetween my country,theUS, andMexico (TheUS Department of Commerce, 2014).Thesignedbilateraltradeagreements,tradebetween theUS andMexico has increasedfrom eighty-eight billion USD to five hundred andseven billion USD. Thishas increased,reachingtwo billion US dollarsper dayby 2014, furtherincreasingmarketopportunitiesfortheUS productsin Mexico. To date,Mexico has remainedthethirdlargesttradingpartnerwith theUS andthesecondlargestexporter of US products.On its part,Mexico exportsmorethan sixty percent of its agriculturalproductsto theUS (TheUS Department of Commerce, 2014).

Mexicoboastsadequateandmodernized transportationnetworkwith variousinfrastructurejoiningMexico to theUS. Themajorland-border crossingsbetween theUS andMexico includePiedras Negras, Nuevo Laredo, Tijuana, Mexicali andCiudad Juarez. ThoughTijuana is thebusiestbordercrossingin theworld,Laredo/Nuevo land,bordercrossingboaststransitof greatestvalueof goods.Morethan sixty percent of tradecommoditiesbetween theUS andMexico passesclearedthrough theLaredo/Nuevo boarder(TheUS Department of Commerce, 2014).TheUS andtheMexican Government, in partnershipwith theUS, are promotingtheusageof otherland-boarders to decreasepressuresfrom theLaredo border,therebypromotetrade.Thesewell-established bordercrossingswill easeandreducethecostof transportingfertilizersto Mexico. Additionally, Mexico has a well-established modernhighwaysystemthat connectscentralindustrialarea.Further,thegovernmenthas adoptedandaggressiveprogramto increaseroadconnectivity in areasoutside theindustrialarea.Theefficientroadtransportnetworkwill provevitalin reducingtransportationcosts,as I carrymy fertilizerto Mexico. In addition,thecountryhas majormaritimeportssuchas Tapico,Progress, Veracruz, Puerto Madero Cardenas andAltamira (TheUS Department of Commerce, 2014).Theseportspromoteintermodal door-to-door transportationof merchandiseandenhancecontainermovement.Theseportswill proveaptin bulk transportof fertilizerto Mexico.

Rationalefor investing in Mexico

Thesocial,politicalandeconomicenvironmentshavesignificantly influencedmy choiceto investin Mexico. With morethan one hundred andtwentytwomillion people,Mexico is themostpopulated Spanish speakingcountryin theworld.Seventy-eight percent of theselivein urbanareasandtherestin ruralareas.Ten percent of Mexicans are wealthyforty-five percent are poor,earninglessthan ten USD per day(OECD,2013).Majorityof thesepoorpeopleengagein small-scale agriculture,oftenusingrudimentaryfarmingmethods,oftenwithout fertilizerssince theycannot affordthehighlypricedfertilizerssoldby otherinvestors (Villarreal 2014). Assuch,availing fertilizersat a relativelylowerpricethan otherinvestors will ensurethatpoorfarmersaffordthecommodity,leadingto increasedagro-production. Conversely, increasedpurchaseswill translateto increasedprofitsformy business.

ThehugeMexican populationoffersa largemarketformy products,with a GDP of overone trillion USD per yearanda per capita incomeof fifteen thousand US dollars.Thepopulationhas a medianageof twenty-five years,with themajorityin their earlytwenties, a perfectpopulationstructureto influencefamilypurchasingdecisions.Additionally, totalfoodconsumptionin Mexico is expectedto growby morethan thirty percent of thecurrentconsumption,which isdrivenby increasingpopulationgrowthandprevalenceof groceryretailshops.Theprojectedincreasein foodconsumptionwill warrantincreasedagro-production, which will be madepossibleby modernmethodsof farming,suchas theuseoffertilizers(OECD,2013).Mexico sharesHispanic andWestern cultureswith theUS thereforeitwill be easierformy businessto sellmy productsthrough Mexico, devoidof social,culturaldiscrimination.

Mexicohas a stabledemocracyandan economythat has continuedto growwith four percent growthin GDP in 2011-2012 and2012-2013 fiscalyears.Themanufacturingsectorhas revamped,takingagriculturalproductsas rawmaterials,a factorthat has necessitatedincreasedagro-production. Despite interestratesremainingrelativelyhighin Mexico, thebankingsectoris showingsignsof growthafter yearsof stagnation (OECD,2013).Agrowingbankingsectorwill be aptin promotingbusinessstartups in thecountrysince SMEs will be ableto obtainfinancingat relativelylow-interestrate.Additionally, theMexican governmenthas undertakenappropriatereformsin thetelecom, educationandlaborsector,furtherproposingreformsin thefiscalandenergysectors.Implementingthesereformswill increaseMexican competitiveness in theglobal market,necessitatingincreasedagriculturalproduction(TheUS Department of Commerce, 2014).

Thegeographicalnearnessof Mexico to theUS andtherelativelywell-established transportinfrastructuressuchas portsandmodernroadshaveinfluencedmy choiceof investingin theUS. Implementation of thenewinfrastructural planafter theinaugurationof thepresidentin 2012 will furthereasetransportationwithin Mexico (TheUS Department of Commerce, 2014).Transportationlogistics in Mexico is relativelycostlyin Mexico estimatedat eight to ten percent of theproduct,as comparedto developedcountrieswheretransportationcostis five to seven percent of thecostof theproduct.However,implementation of proposeddevelopmentsof transportationinfrastructureswill leadto a significantreductionin thetransportcosts(Villarreal2014). Reducedtransportationcostswill reducemy business’operational costs,translatingto increasedprofits,which will be plowedbackto thebusinessto aidin its expansionanddiversification to otherareas.

ProbableBusiness Changes

TheMexican legalsystemlegalsystemsignificantly differsfrom theUS hencemy businesshas to consultcompetentlawyersbefore investingin Mexico. Additionally, there has beencontinuedviolencepropelledby transnational criminalorganizations,especiallyat theborders.Theincreasedinsecurityin Mexico posesdangerto my businesshenceitwill be imperativeto implementmeasuresto enhancebusinesssecurity(TheUS Department of Commerce, 2014).Assuch,thebusinesswill haveto increasethesecuritypersonnel,as wellas increasingtheescorting securityas fertilizeristransportedacross theMexican border.TheMexican marketis extremelysensitiveto marketpriceas suchmy businesswill sellits productsat relativelylowpricesthan otherinvestors, to promotetheacceptanceof our productsin themarket.Further,thebusinesswill implementwaysof developingandmaintaininggoodbusinessto clientsas wellas businessto businessrelationshipsto enhancegrowthin thenewmarket(Villarreal2014). Since Mexicans preferdirectcommunication,thebusinesswill establisha salesandmarketingdepartmentthat will betaskedwith theroleof promotingsaleswithin thecountry.Thesalesandmarketingdepartmentwill applydirectcommunicationstrategiessuchas personalselling,face-to-face meetingswith thefarmersto elucidatethem on thequalityof our products,as wellas directproductpromotionmethods.Thiswill be differentfrom normalbusinessoperationsin theUS, wherewemarketour productsthrough theinternet. Additionally, thebusinesswill establishan elaboratecustomercaredepartmentto forma platformwhereclientscallto seekfurtherclarificationconcerningour products.Establishinga goodrelationshipwith clientsthrough directcommunicationwill be essentialin promotingtheadoptionof our productsin Mexico. Increasedacceptanceof our fertilizersin theMexican marketwill increaseprofits,increasingthechanceof venturingin othersectorsof theeconomy.

FutureInvestments

Overtime,theMexican Government has increasedits expenditurepurchasinglargevolumesof rawmaterials,finishedproducts,andrepairpartsforothergoods.In 2013, theMexican Government spentmorethirty-one per centof in purchaseof goodsfrom thepublic(TheUS Department of Commerce, 2014).My businesswill establishan appropriateplanrequiredto obtaininggovernmentcontracts.Theplanwill includeobtainingappropriateinformationneededto preparebiddocuments.Thiswill be donein partnershipwith partnerswithin Mexico to increasechancesof attainingthegovernmentcontracts.Additionally theMexican agriculturelargelyconsists of thesmall-scale farmers,whouserudimentaryfarmingmethodsoftenusingthetraditionalmethodsof protectingcropsagainst disease.There is virtuallynonationalcompetitionin pesticide sector,creatingan investable optionformy business.Thebusinesswill establishan appropriateplanto identifythecommoncroppestsanddiseasesaffectingMexico’s plants,andestablishavenuesto supplymodernandeffectivepesticides. Thegovernmentoffersubsidiesto pesticides, a factorwill increasetheadoptionof thepesticide, furtherincreasingprofitabilityof my business (TheUS Department of Commerce, 2014).

EntryStrategies

Thebusiness will establishan elaboratedistributionsystem,which will distributeour productsin thevastregionsensureextensiveness of our productsin Mexico. In our operations,wewill utilizesomelocalMexican firms as salesagents,owingto their effectiveness in reachingeventheremotestlocationsin Mexico. Apartfrom utilizinglocalMexican firmsas salesagent,thecompanywill appointa representativeinmajorcitiesto overseethedistribution.Theserepresentativeswill provideappropriatetrainingto thefarmers,as wellas ensuringtimelystockingof our distributioncenters.Thoughthere is nostiffcompetition,thebusinesswill undertakeintensiveadvertisingto familiarize our productsto thefarmers.Theoperationlocus of thebusinesswill be at Mexico City, owingto its vastsize,economicimportance,andtheadministrativecentrality. Thebusinesswill rebrand its fertilizersto Miguel Ángel fertilizers,owingto thepopularityof thenameamong Mexicans (Villarreal 2014). Thenamewill createa senseof ownershipof thefertilizeramong Mexicans, promotingits adoption.

Conclusion

Fromtheaforementioned, Mexico is themostpopulated Spanish speaking countryin theworld,with morethan hundred andtwentytwomillion people.Thoughthecontributionof Agriculture to thetotalGDP has reduced,itremainsan importantsectorof theeconomy,employingmorethan forty percent of theworkingpopulation,eitherdirectlyorindirectly.Majorityof farmersare smallscaleproducers,wholargelyemployrudimentaryfarmingmethods,oftenfailingto usefertilizersdue to its highcost.Thebusiness,which isbasedin theUS, with an excellentrecordin sellingfarminputs,aimsat implementingin thehugeMexican market,to increaseprofitability. Mexico has stabledemocraticgovernance anda growingeconomythat is idealforinvesting.There are well-established transportnetwork,includinglandbordercrossingandports,which will easetransportationof productsfrom theUS to Mexico. Theimplementation of establishedreformsin thesectorwill improvethebusinessenvironmentin Mexico, a factorthat has motivatedme to investin thecountry.Theentryprocedureto theMexican marketwill involveestablishingelaboratedistributionnetworkheadedby representativeswhowill be responsibleforstocking andeducatingfarmerson usingour products.Thelocus pointof thebusinesswill be in Mexico, with somelocalfirms actingas salesagentsowingto their effectiveness in reachingeventheremotestregionsin Mexico. Thebusinesswill engageinvigorousadvertisementsto familiarize theproductto thefarmers,usingthebrandnameMiguel Ángel fertilizers.Additionally, thebusinesswill usepersonalsellingto promotesalesof our fertilizerto Mexican, which will helpincreasefinancialprofits.

References

OECD,(2013).OECDEconomic Surveys: MEXICO. Retrieved fromhttp://www.oecd.org/eco/surveys/Overview%20Eng.pdf

TheUS Department of Commerce, (2014)Doing Business in Mexico:2014.Country Commercial Guide for U.S. Companies. Retrieved fromhttp://www.export.gov/mexico/static/CCGFINAL2014_Latest_eg_mx_076936.pdf

VillarrealAngeles. (2014). U.S.-MexicoEconomic Relations: Trends, Issues, and Implications. Congressionalresearch paper. Retrieved fromhttps://www.fas.org/sgp/crs/row/RL32934.pdf

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